Cardano founderCharles Hoskinson has predicted a quick victory of Ethereum over Bitcoin.
Charles Hoskinson talked about cryptocurrencies and why he believes ethereum is poised to overtake bitcoin in the near future. He started by talking about the speed of bitcoin transactions. Pointing to the sluggishness of the network and how slow it is in comparison to other proof of stake networks.
Focusing on ethereum in particular, he said that the coin outperformed bitcoin in so many ways.
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Ethereum Is Superior To Bitcoin
Ethereum has been gaining popularity over the years as digital currencies become more popular. It is the second most popular coin behind bitcoin currently. With lots of investors throwing their hats in the ring with the coin. Believing that the coin is bound for greatness much higher than that of bitcoin. And Hoskinson seems to be a part of this crowd.
Related Reading | Ethereum to $20,000? Factors Behind The Bold Call
One of the ways Hoskinson said that eth was better than bitcoin was the flexible development culture associated with it. A good depth evolution was one of the advantages he referred to amongst others.
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Any faults found in the ethereum network are fixable. There are no issues that are locked into the network. This is what makes development in the blockchain so flexible.
An example of this is Ethereum 2.0. A development that has been in the pipeline for a while now. It is meant to replace the current network. And in doing so, solve the bottlenecks that come with using the network. Making it cheaper to send coins even in high traffic times.
The upgrade is also going to help with scalability and security. Making the whole network much more secure for users.
This is being developed by teams across the entire eth ecosystem.
Bitcoin Is Its Own Worst Enemy
Continuing on, Hoskinson called out bitcoin for being its own worst enemy.
Ethereum price | Source: ETHUSD on TradingView.com
The CEO pointed out that bitcoin is riddled with network effects. But pointed out that there was no way to change the system. This means that improvements on the network are not possible. This makes fixing the obvious flaws associated with bitcoin near impossible.
The high network fees associated with sending bitcoin have always been a debated issue in the crypto space. This was meant to be solved with lightning technology. But even with this new technology, high network fees continue to be the norm.
This is not to say that ethereum does not have the problem of high network fees during high traffic times. But compared to bitcoin, it still remains a much better alternative in a match between the two.
Cardano beats out both in this regard. The coin costing only about a penny or two to send on the network.
Related Reading | More Than $1 Billion In Crypto Positions Liquidated In Overnight Bloodbath
But with ethereum, these were not issues. Network flaws can be fixed in the network without a problem due to its development flexibility. Because of this, there are always improvements being carried out on the network. Developments are always underway to make the network better and easier to use.
The Cardano founder went on to say that in a battle, his money was on ethereum. As against bitcoin, ethereum is always bound to come out better 9 out of 10 times.
Closing out, Charles Hoskinson clarified that the battle of cryptocurrencies is still in its early stages. There are already several blockchains struggling for a major share in the blockchain market.
Ethereum and bitcoin lead the race in the battle. But Hoskinson noted that despite this, Cardano is still a serious competitor to all the other blockchains in the space.
Featured image from Capital, chart from TradingView.com
Cryptocurrency investors found little reprieve on June 22 as the price of Bitcoin (BTC) fell below $30,000 for the first time since January, sparking panic among less experienced market participants who have yet to experience a full market cycle.
While Bitcoin has been under increasing pressure from multiple sources since early May, the most recent bout of selling has been largely attributed to capitulation by China-based miners who have been forced to abruptly shut down their operations.
Data from Cointelegraph Markets Pro and TradingView shows that after dropping to $28,800, Bitcoin price bounced back above the $30,000 level and currently trades for $32,600.
BTC/USDT 4-hour chart. Source:TradingView
The strong bounce came after comments from Brian Nelson, the current nominee for Under Secretary of the Department of the Treasury’s division on terrorism and financial crimes. Nelson said he was going to make the implementation of new regulations around cryptocurrency a priority if he is confirmed.
Miner crackdown in China sparks market turmoil
The pressures put on Bitcoin and the overall cryptocurrency market was highlighted by Élie Le Rest, partner at digital asset management firm ExoAlpha. Le Rest told Cointelegraph that “Chinese market participants have been massively selling during the past month.”
Le Rest also pointed to the “Grayscale unlocking schedule leading to more selling pressure,” resulting in some panic selling by the less experienced traders in the market.
Le Rest said,
“With newcomers in the crypto market seeing their profit and capital getting wipe out by selling waves, newcomers are taking their loss as they can’t stomach this much negative volatility anymore.”
Due to these pressures, Le Rest believes that the market could range in the “lower tranches of $25,000 to $35,000” in July, with the low volume usually seen in August having the potential to “accelerate this downside trend or build the upside trend.”
The upside case for today’s move was provided by David Lifchitz, managing partner and chief investment officer of ExoAlpha, who stated that the activity seen in the market on June 22 “seems to have drawn the line in the sand for BTC at $29,000 and Ether (ETH) at $1,700, given the swift bounce.”
Related:Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K
That being said, Lifchitz warns against throwing caution to the wind as the volatile nature of the crypto market makes picking a bottom notoriously challenging.
Lifchitz said:
“However, it’s too early to tell if this is “the” bottom or just a temporary floor before more downside. The lack of any upside catalyst (besides some contrarian oversold metrics) remains the biggest hurdle for cryptos to bounce back… Paging Mr.Musk, paging Mr.Musk.”
Altcoins see double-digit losses
The altcoin market followed Bitcoin’s lead on June 22 with a majority of tokens seeing double-digit losses as traders ran for the safety of stablecoins.
The price of Ether managed to rebound along with the price of BTC, helping erase a 15% correction and send the price back above $1,900.
Two tokens that managed to rise above the market turmoil and see positive gains for the day were Livepeer (LPT), which posted a 15% gain and Celo (CELO), which saw its price increase by 9%.
The overall cryptocurrency market cap now stands at $1.303 trillion and Bitcoin’s dominance rate is 47.1%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
After investing $20 in the crypto markets, one crypto trader just woke up to a one-trillion dollar fortune in his Coinbase account.
Chris Williamson, a nurse from Georgia, says heinvested$20 in Rocket Bunny (BUNNY) cryptocurrency on Coinbase last week. After the trade, his portfolio balance soon skyrocketed to a staggering $1,184,154,683,482.
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On paper, this made Williamson the richest man in the world.
‘I woke up, it’s like 9:00 a.m. and I always check my phone to check how my crypto to see how it’s doing and I’m just like, ‘Naw, I’m sleeping.
I look at it again and I’m like… at that point I fall out of my bed, literally.”
Despite the big balance, Williamson says he was unable to cash out or send the crypto to a private wallet. He contacted both Coinbase and Rocket Bunny. A representative from Coinbase told him they were looking into the problem, while Rocket Bunny did not immediately respond.
Coinbase later confirmed the trader’s massive balance was a glitch, and would be corrected.
This isn’t the first time the crypto exchange giant had a glitch in its system. Back in April 2020, crypto analyst Captain Sciopointedout a massive blunder on the Coinbase Pro app, showing that someone had purchased 42,085 BTC, worth $306 million at the time, for just 18 cents.
Williamson is keeping a positive attitude on the situation.
“The ongoing joke right now between me and my friends in Coinbase and one of the emails I sent them was like: ‘Look, I need y’all to let me know what’s going on because I got a mega-yacht company ready to build me a penguin-shaped yacht.
‘So, you know, let me know.’”
BUNNY is a utility token on Binance Smart Chain. It’s used to power the broader Rocket Bunny ecosystem of dApps (decentralized applications), which includes Rocket Drop (launchpad), Rocket Swap (DEX) and Rocket Labs (testing ground).
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Glauber Contessoto put all his money into Dogecoin.
His holdings went up in value and touched $2 million.
But the volatile meme coin has since dipped—and he’s no longer a Dogecoin millionaire.
Glauber Contessoto put everything he had into Dogecoin, a highly volatile cryptocurrency that was originally invented as a joke. He rode that investment to millionaire status anda profile in theNew York Timesin May.
Then came the crash.
Contessoto, 33, invested in Dogecoin last February, according to theNew York Timesreport. The investor used all his savings and credit card debt to invest $250,000 in the cryptocurrency. Last month his holdings touched $2 million. In a tweet in April, he claimed to be the “first Dogecoin millionaireof 2021.”
But despite the surge in value of the coin, rising more than 12,000% from January to its peak in May, Contessoto didn’t cash out. Now, the price of the “meme coin” has dropped dramatically—along with the rest of the market. Today, Dogecoin was trading at $0.19, a 40% decline in value from last week.
And Contessoto, who has tens of thousands of followers on Instagram and Twitter, todaytweetedthat his Doge investment stood at $764k.
Thousands liked and responded to the investor’s tweet, with some reminding him that he is no longer a millionaire. (He could have sniped back by reminding them he’s still up 3X on his investment.)
Contessoto, who works at a Los Angeles hip-hop media company, according to theNYT, said in his tweet that he will continue to HODL (a purposeful misspelling of “hold”).
“IF I CAN HODL YOU CAN HODL!!! #DiamondHands this is the way #dogecoin we will rise again,” the tweet read.
Dogecoin was invented in 2013 to poke fun at Bitcoin. The developers behind the coin wanted to make a silly cryptocurrency with no real value—and even based its image on a popular internetmeme. But fast forward to today and the cryptocurrency is the seventh-most valuable out there, with a market cap of over $25 billion.
Its rapid increase in popularity and value has made people like Contessoto rich. Dogecoin’s rise over the last year is partly down to Tesla CEO Elon Musk, one of the richest men in the world, who has said it is his favorite crypto and hasinfluencedits wild price swings with his tweets.
One of the developers behind the cryptocurrency, Ross Nicoll, eventoldDecryptlast month that the development team is now working on making it a serious project—hoping to rival Bitcoin as a quick, cheap, and green payment method. Nicoll today updated his followers on Twitter on the team’s progress, to which Musk responded: “This is an important improvement.”
This is an important improvement
— Elon Musk (@elonmusk) June 22, 2021
Meanwhile, however, the entire crypto market is suffering at the moment. Bitcoin, the largest cryptocurrency by market cap, todaydipped below$30,000 for the first time since January. Altcoins, which typically follow Bitcoin sell-offs, have followed. Some experts have evensaidthat we are now entering a bear market.
Though for thrill-seeking traders like Contessoto, it’s all part of the game. “I STILL BELIEVE IN #DOGECOIN,” hesaidon Twitter.
Disclaimer
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
On May 29th, the world’s top 16 chess players competed in the FTX Crypto Cup. Hundreds of thousands of fans tuned in to Chess24.com, Twitch, Youtube and the Champions Chess Tour website to watch their favorite players duke it out in the nine-day event. But unlike prior tournaments of this scale, where the prize pool is almost always denominated and paid in U.S. dollars, the FTX Crypto Cup was different. Thanks to cryptocurrency derivatives exchange FTX and its CEO, Sam Bankman-Fried, the tournament’s $220,000 prize was supplemented by 2.1825 BTC, split among the winners.
Bitcoin enthusiasts have spent the better part of a decade advocating for the currency. They argue that bitcoin will transform the world, democratizing finance by mitigating and decentralizing the power currently wielded by Wall Street, politicians and technocrats. Skeptics have called bitcoin a “scam,” a “ponzi-scheme” and a “speculative bubble.” Nevertheless, over time bitcoin’s most ardent critics have slowly flipped their positions, institutional investors have bought in and the “digital gold” continues to permeate throughout our society. The FTX Crypto Cup represents just another example of bitcoin’s move into the mainstream. On the surface, that’s all the news there is to report — a crypto company sponsored a chess tournament with bitcoin.
But I think there’s a deeper story here. What else do bitcoin and chess have in common? What can chess players learn from bitcoin and what can Bitcoiners learn from chess? Is there an overlap between the two communities? Does Magnus Carlsen hold bitcoin? How good is Sam Bankman-Fried at chess? To answer these questions, I interviewed world champion and #1 rated player Magnus Carlsen, FTX Founder and CEO Sam Bankman-Fried, prominent Youtubers GothamChess and BTCSessions, Vice President at BTC Inc. Flip Abagnale and Bitcoin’s wunderkind, Jack Mallers, who plays a mean game of chess himself.
Hard Rules, Hard Money
More than 1,600 years ago, the Gupta empire reigned over a prosperous India. Trade with kingdoms in south and southeast Asia was flourishing. For the first time in human history, the number zero was incorporated into decimal place numerical systems. Scientists hypothesized that the Earth revolves around its own axis and that the moon reflects light from the sun. Great poets, sculptors and architects altered the course of art forever. Significant strides made in science, culture and technology laid a foundation for the trajectory of Indian civilization. And it was here, sometime as the Gupta empire began to wane, that two people sat in front of a board and played the first game of what would come to be called chess.
Originally known as Chaturanga, the early predecessor to chess bears a striking resemblance to its modern counterpart. Kings, generals (queens), chariots (rooks), elephants (bishops) and horses (knights) spanned the back rows of an 8×8 board, shielded by a row of foot soldiers (pawns). The rules of the game changed significantly when Chaturanga arrived in Europe. By the year 1500, the modern game of chess was capturing southern Europe by storm. That game was, barring some rule changes made in the 18th and 19th centuries, the same chess played today. How does a game born in the 6th century and solidified hundreds of years ago retain its integrity over hundreds of years? The answer is hard rules and soft forks, principals the Bitcoin world knows all too well.
As chess rose in popularity, mathematicians and theorists of the game began the slow process of introducing, advocating for,and solidifying a set of rules that all could agree on. Critically, these changes were additive optimizations rather than changes that altered the fundamentals of chess such that it became a different game entirely. This process unfolded until the 1800s, after which the rules of chess have not really changed. Now the core components of chess, the 8×8 board, the placement of pieces and their legal moves and the winning conditions, will likely not change. Balancing a rigid adherence to a set of rules while leaving room for optimizations and slight changes is what has given chess its longevity and its timelessness. According to Flip Abagnale, VP at BTC Media, this model of change is quite similar to Bitcoin’s concept of soft forks. “The whole idea is backwards compatibility”, said Abagnale. “With soft forks we’re not dramatically changing bitcoin, we’re adding optimizations. Without soft forks, we would be at a standstill. We’d never be able to learn from advancements in math and computer science.” This process is delicate, as the critical element of Bitcoin is its immutability. The decentralized network’s ledger cannot be altered, only 21 million bitcoins will ever exist, etc. Like chess, Bitcoin’s hard rules will never change, but soft forks create the breathing room necessary for optimizations. If the success of chess is any indication, then Bitcoin’s balancing act of hard rules and soft forks affords it the unique ability to persist through the ages.
Pandemic-fueled Growth
As news of COVID-19 began dominating the headlines last March, the world as we knew it came to a halt. With large portions of the economy effectively shut down, millions of people across the world found themselves at home, online and looking to kill time. These factors in 2020 and the early months of 2021 set the stage for massive booms in both the chess world and in bitcoin. The sale of chess boards rose by more than 1000%, top grandmasters raked in sponsorships through streams on Twitch and Youtube and viewership of those streams shattered previous highs. Similarly, the meteoric rise in bitcoin’s price garnered the asset increased coverage on the national scale and millions of people heard about and invested in bitcoin for the first time. As the online communities surrounding both chess and bitcoin experienced a massive influx in first-time players and investors respectively, prominent content creators shifted to capture this entry-level viewership. I sat down with two of them to talk about chess and bitcoin.
Levy Rozman is a 25 year-old chess International Master from New York. During the onset of the pandemic, he quit teaching private chess lessons and focused full time on his Youtube Channel, GothamChess. “I channeled all my energy from convincing 6 year olds that chess is important to convincing everyone from the age of 6 to 99 that chess was important and cool”, said Rozman. “The chess boom was nuts. I went from around 110,000 views every 48 hours to 1.8 million.” Rozman’s channel reached 300 million impressions in a month during the chess boom and his account now has over 1 million subscribers.
Ben Perrin, known on Youtube as BTC Sessions, is one of Bitcoin’s largest content creators. Ben struggled to find beginner level content about bitcoin in 2013 and 2014 and worked as a breakdancing instructor before deciding to work on a Youtube channel geared toward people new to the world of Bitcoin and cryptocurrencies. “The transition from teaching complex dance movements to kids to teaching complex technology to adults was actually relatively similar,” said Perrin. “I started off making one video a week that would answer a common entry-level question about Bitcoin.” The BTCSessions account has grown quickly over the years and now, with nearly 60,000 subscribers, Youtube is Ben’s full time job.
Both Levy and Ben took full advantage of their respective communities’ spectacular growth over the past year or so. “I built around the beginner audience and wanted to welcome them and make my channel their destination for all things chess,” said Rozman. Similarly, Perrin told me, “ I had a year’s worth of content before the boom, and a lot of that evergreen content helped get subs. As things took off, I shifted content to tutorials, re-did many of my basic videos on things like hardware wallets, fees, the Lightning Network, liquid and all the new aspects of Bitcoin that are relevant now. I want new people to be able to come in and have all the information they need laid out for them in playlists.”
While both communities grew independently of each other, overlaps between the world of chess and Bitcoin have grown. Rozman, who years ago “bought bitcoin at 750, sold at 900, and felt like a genius at the time,” saw the bitcoin price dip at the start of 2020 as an opportunity to “buy at a discount.” Another popular chess Youtuber, Agadmator, has been accepting donations in bitcoin and other cryptocurrencies from his 1 million subscribers for years. Magnus Carlsen, the world’s best chess player told me, “together with my father we have made some investments in cryptocurrencies over the last seven months, and it’s fascinating to watch their development.” Rozman noted, “I get asked a lot to put a bitcoin address up to accept donations…I’m working on it.”
A Global Network For Everyone
Both chess and bitcoin share a commitment to hard rules and soft forks. Both communities saw massive growth in demand for beginner-level content during the pandemic. But now, more than ever, the two groups are colliding. On his way to the Indy 500 to support the Bitcoin car he designed, Strike CEO Jack Mallers FaceTimed me to talk about chess and Bitcoin. “Both chess and bitcoin are some of the most inherently global things,” Mallers said. “You’ve got the best players spread out across the world. Anyone can participate, anyone can learn what they need to learn for free online.” Jack, who’s rated around 2100 ELO in chess, is excited about future intersections and possibilities between chess and Bitcoin.
FTX CEO Sam Bankman-Fried has apparently “never been that good at chess.” But that didn’t stop the 29 year old billionaire from adding $100,000 in bitcoin to the prize pool of an elite chess tournament. When asked why he did it, Sam told me, “For the same reason you’re writing this article. There’s a large overlap between the audiences interested in crypto and in chess, and this gave us a chance to help bring the two worlds together.” The FTX Crypto cup may have been the first major crossover between chess and bitcoin, but it likely won’t be the last. When asked about the future of chess tournaments with bitcoin prizes, Magnus Carlsen said, “Including an additional bitcoin prize fund for this tournament is a fresh element that I hope will create added attention for the FTX Crypto Cup tournament and for the Tour. I’m generally positive about innovation and testing out new opportunities in the elements surrounding chess.” While Bankman-Fried didn’t promise more prize sponsorships, he noted that “crypto-based prizes are easy and natural for chess.”
This is a guest post by David Zell. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
Blockchain Capital remains a major tech backer in the DLT space with investments in numerous crypto and DLT projects.
Fund V with $300M Funding
According to a press release published on Monday (June 22, 2021), Blockchain Capital has closed funding for its Fund V LP. The capital raise reportedly drew participation from several high-profile backers including global payment giants Visa and PayPal.
Capped at $300 million, Blockchain Capital’s latest fund was oversubscribed likely pointing to the continued appetite for DLT-related funding despite the current crypto market downturn. Apart from Visa and PayPal, university endowments, hedge funds, family offices, and pension funds also participated in the capital raise.
Bart Stephens, co-founder and managing partner at Blockchain Capital commented on the closure of the fifth VC fund, stating:
“We are incredibly honored to welcome a world class group of investors into Fund V who appreciate the value of a firm dedicated to a single industry. As founders ourselves, we know how hard it is to build companies, protocols and, indeed, a whole new industry.”
Spokespersons for both Visa and PayPal stated that their support for Blockchain Capital was part of efforts to boost innovation in digital finance. According to Jose Fernandez da Ponte, vice president and general manager of blockchain, crypto and digital currencies at PayPal:
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“Investing in Blockchain Capital’s new fund allows us to engage with the entrepreneurs driving the future of the decentralized economy and the new wave of financial services.”
Serial Blockchain Backer
Blockchain Capital is a serial investor in the crypto and DLT space. The company’s portfolio of projects cuts across several facets of the emerging industry including United States-based exchange giants like Coinbase and Kraken.
Blockchain Capital’s investment portfolio also extends to the decentralized finance market arena, backing projects like Aave, UMA, and Nexus Mutual.
Since securing about $2 million in funding from Blockchain Capital and other investors back in May 2018, OpenSea has been able to attract additional investments, including a $23 million injection as reported by CryptoPotato back in March.
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Wicked Craniums—a new collection of NFTs tied to algorithmically generated icons—launched earlier this week.
It’s generated over $4 million in two days.
The week’s hottest NFT franchise remains the Bored Ape Yacht Club series.
A new NFT collection called Wicked Craniums has generated over $4 million in secondary sales in just two days, making it the second most popular series on OpenSea’s digital marketplace this week.
It’s the latest NFT collection in the vein of CryptoPunks—the small, algorithmically generated portraits that have become pricey collector’s items over the past few years. Each portrait has a set of unique traits, some rarer and more valuable than others. The ones with icy blue skin, for example (there are only a few of them, out of 10,000 total icons), have sold for millions of dollars.
NFTs are a kind of cryptocurrency that can be attached to files on the internet and sold as proof of ownership. They’re a handy way to turn digital images and videos into discrete collectibles.
Like CryptoPunks, Wicked Cranium NFTs are tied to a group of small portraits, each with a randomized set of traits. The twist is that the art is slightly different—these are portraits of skeletons, rather than blocky, disaffected “punks.” There are 10,762 in all.
The hottest NFT franchise at the moment, and the heir apparent to CryptoPunks, is a collection called the Bored Ape Yacht Club. It’s the same deal: a limited set of algorithmically generated portraits, this time with bored-looking apes. Earlier this month, a Bored Ape sold for 49.9 ETH, or around $130,000 at the time.
Even despite theoccasional big-name NFT sale, trading volumes across the market have declined in recent months. Trades acrossNFTs tracked by nonfungible.comtopped out at around 48,000 per week in April—this week, that number is closer to 24,000.
The Wall Street Analyst’s Introduction to Bitcoin:
The Dimensions of Money
What Bitcoin Does
How Bitcoin Works
The Monetary Properties of Bitcoin
Introduction
I first discovered Bitcoin in 2015 as an undergrad, and then wrote a short essay concluding that bitcoin was a speculative asset with no fundamental value. Though I wish that were not my initial opinion, when applying the economic theory I had learned in school it was the only logical conclusion I could come to. Over the years however, reading about Bitcoin started to consume my spare time. By 2018 I came to the realization that Bitcoin was the next step in the world’s monetary evolution. By 2019 I quit my job in private equity to jump into the industry.
For me to understand the value of Bitcoin I had to change my perspective of value from the traditional cash flow-based methodology to a qualitative assessment of monetary value. This shift made me realize I had originally concluded that bitcoin was a speculative asset with no fundamental value, because I was assessing it with the wrong framework.
The following series summarizes some of the key concepts about money and Bitcoin that properly illustrate its value proposition. With this understanding, you can assess Bitcoin and its competitors within a framework of monetary value – the framework that I think is necessary for financial analysts to understand Bitcoin. This series is just scratching the surface of this information – if you want to read further on these topics, check out my book on amazon.
The Dimensions Of Money
What is money?
Why is it used?
Which money is best and why?
Who decides this for us?
Is there a way to understand money at a fundamental level so that we can choose for ourselves?
What does it mean when people say money needs to be “backed” by something?
These are important questions that can be expensive to neglect. Money is confusing because it crosses multiple dimensions. We will walk through the below graphic step by step to understand how the dimensions are distinct and related.
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The Purpose Of Money
People specialize to achieve economies of scale and scope. Specialization necessitates trade. Trade necessitates money. Before money, systems of barter were used that inefficiently required a coincidence of interests. In small groups this was possible but as organization scaled these coincidences became increasingly burdensome. As groups grew larger, those which utilized forms of money to facilitate transactions and store wealth were able to become more specialized in their productive capacities – allowing more sophisticated forms of organization to emerge and living standards to rise.
The purpose of money is to facilitate trade which allows groups to specialize and organize with greater complexity.
Defining Money
Barter systems are forms of direct trade while monetary systems are forms of indirect trade. Goods used in indirect trade are naturally converged upon (i.e., chosen freely through iterations of trade) because they have properties that most people want most often. Goods that maintain these properties are desired because they are most likely to present a coincidence of interest with other parties. In this sense, money enables a system of indirect exchange.
Carl Menger, in the The Origins of Money, defined the relative ability for a good to be sold in a given market at the time and price desired as a good’s salability.1 Market participants converge upon the most salable commodity over time, through many transactions. Eventually, the good that is most widely accepted and best maintains value over time will become money. By using money, market participants can protect themselves from depending on any coincidence of interests in the future.
Menger defined the good with these qualities as that which has the lowest rate of declining marginal utility. Meaning, each unit consumed maintains similar utility to the prior unit consumed. For example, high marginal utility decline would be a house whereas low marginal utility decline would be money.
Yakes.io
We’ve now defined the first aspect of our monetary dimensions table:
Salability can be stratified across the three dimensions of time, space, and scales2:
Yakes.io
In a free market, the most salable good will be chosen as money. Salability can be broken into three dimensions: time, space, and scales.
Defining Monetary Value
Thus far we’ve discussed how a good maintains monetary value. This is not to be confused with a good’s market value. Think of this as a good’s utility for trade vs. its utility for consumption. Market value is derived from a good’s consumption value while monetary value is derived from a good’s monetary properties. We value stocks based on the company’s cash flows which are obtained by goods and services that have utility for consumption. Money does not have cash flows, it has monetary properties that allow it to facilitate trade. Many people try to apply a consumption value framework to money when they should be viewing it through the lens of monetary value.
A monetary good obtains its value by enabling the trade of goods which have market value and need to be exchanged across space, time, and scales. The better the form of money used, the lower the costs of transacting, and the greater the ability to transfer, store, and measure wealth.
The monetary value of a good is obtained by its ability to enable trade and is completely separate from the good’s market value for consumption.
Market value is estimated by discounting future cash flows. Monetary value is estimated by qualitatively comparing monetary properties. The remainder of this essay will describe how to compare monetary properties.
How People Choose Money
The evolution of a good’s transition to becoming a monetary medium can be roughly summarized as follows. It must have properties that store value, in that one can reasonably assume its market demand will not deteriorate over time. As more market participants realize that a certain good stores value, they can then exchange it between themselves for this property, even though it may not be widely accepted yet. As more of this exchange occurs, the knowledge of it being widely accepted becomes a self-fulfilling prophecy, and its use as a medium of exchange becomes more frequent. Once it is accepted at a large enough scale as a medium of exchange, participants using it as a medium will begin to commonly quote the prices of their goods and services in amounts of the good – until finally it becomes a common unit of account. Through this process market participants converge upon a monetary good that supports these functions:
Yakes.io
The Six Properties Of Money
The monetary medium chosen by societies has differed due to availability and evolved as new materials and technology emerged which better fulfill the properties sought in a monetary medium. What is consistent across history is that goods chosen as money have maintained certain properties that enable monetary functionality.
There are six monetary properties that determine a good’s merit for fulfilling the desired functionality as money:
Yakes.io
Any good that has these six properties could be money. Goods that excel across all properties are most likely to be naturally chosen as money. Money does not need to be “backed” by anything; it needs to have these properties. Gold was chosen because it has these properties, while paper money does not. Thus, paper money needed to be “backed” by gold so that it could maintain monetary properties while also being more efficient for use in trade; more on this later.
Money Across All Dimensions
For a good to become money in a free market it must be the most salable good. Salability can be thought of in three dimensions: time, space, and scales. A good must excel in certain properties to be considered salable in a respective dimension. For example, if a good is the most salable across time, then it will be the best store of value. If a good is the most salable across space, then it will be the best medium of exchange. If a good is the most salable across scales, it will be the best unit of account. Some goods can be highly salable in one dimension while not at all in another. The good that is the most salable across all three will eventually become money through the process of convergence.
The dimensions of money. Note that the properties mapped to each function are not mutually exclusive but intended to describe the most salient properties of that function.
Yakes.io
The Evolution Of Money
Now that we have an established understanding of money and its dimensions, I’ll briefly describe the stages of money throughout history. At the end of this series, I will compare bitcoin to each of these categories of money by monetary property.
1. Primitive Money – This category includes beads, necklaces, furs, flints, etc. Primitive money emerged spontaneously in a variety of forms across every society. It generally required at least three monetary properties to be sufficient.
2. Precious Metals – As societies became more technologically advanced, precious metals were converged upon as money due to their monetary properties. Gold, in particular, emerged as the highest standard of value due to its scarcity. Historically, the inflation rate of gold supply was approximately 2% annually – significantly less than silver which was closer to 15%. Because the supply of gold increased so little, its scarcity was better than any alternative. However, silver was used in tandem with gold because it was more divisible, as it was less valuable per unit of weight.
3. Derivative Money – This form of money emerged due to the efficiencies gained from moving paper across distances as opposed to heavy quantities of metal. Further, governments eventually enforced its use. Derivative money is any sort of legally enforceable document (paper receipt) that grants the owner redemption of a defined amount of money. The paper receipt itself is useless as money, as it does not possess the necessary monetary properties. Its value is derived from the certainty that the money backing it is safely stored, and is accessible for withdrawal on demand by holders.
The custodians of derivative money eventually realized they didn’t need to maintain a full reserve but instead could maintain a fractional reserve to meet demand by receipt holders. Here I distinguish between full reserve and fractional reserve forms of derivative money:
4. Fiat Money – What was eventually reasoned by bankers and governments alike is that if you could remove the requirement to have reserves (money/gold) and simply issue paper that is irredeemable, there would be no limitation to the amount you could loan. Thus emerged fiat money, the system we are subject to today. Fiat money effectively removed the scarcity property that originally was one of most desirable properties of money.
We now have a framework from which we can assess money by property. We can look at the above categories and illustrative examples to understand how money evolved over time. The question of how banking and governments effectuated these changes over time is important, but I will not go into detail here.
The goal of this series is to compare bitcoin by each monetary property. This comparison is the necessary basis to understand why bitcoin has greater monetary value than any form of money in existence today or that has come before it. To do so, we must first understand Bitcoin at a technical level – the goal of the next two essays in this series.
References
The Origins of Money, Carl Menger, 3-4
The Bitcoin Standard, Dr. Saifedean Ammous, 4
Eric Yakes came from the private equity industry and is a CFA charterholder turned bitcoin pleb and author ofThe 7thProperty: Bitcoin and the Monetary Revolution– a comprehensive/technical resource on money, banking, and bitcoin. He is passionate about enabling the Bitcoin ecosystem through financial services – if you have similar interests send him a DM@ericyakes.
This is a guest post by Eric Yakes. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
A popular crypto analyst warns that most traders would be better off staying on the sidelines instead of trying to play the volatile Bitcoin market.
In a new tweet, the crypto strategist known as Kaleo tells his 322,600 followers to be patient as opposed to timing the choppy Bitcoin range between $30,000 and $40,000.
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“I’ll repeat what I’ve been saying – you can attempt scalp trading in this range. There are some traders killing it, but 95% of you will chop yourselves to negative PnLs (profits and losses) in the process. Or, you can buy here, hold, be patient for a bit and thank yourself later.
Bitcoin isn’t dead.”
While the overall crypto sentiment is heavily bearish, Kaleo says he’s long-term bullish on the nascent space as he sees the digital asset market following the footsteps of the tech industry.
“Being HTF (high timeframe) bearish here doesn’t make sense.
The tech market has recovered from its spring depression back to new all-time highs and is on the verge of exploding into price discovery.
Why should we expect Bitcoin to decouple and continue lower.”
Kaleo goes on to list some fundamental factors that he thinks will end up being bullish catalysts for BTC and the crypto markets at large, including inflation and the unlikelihood of higher interest rates anytime soon.
“Money is continuing to be printed at an unprecedented rate. Inflation isn’t going anywhere until the Fed decides to actually do something and raise rates. In my opinion, there’s no way that happens in the first year of Biden’s presidency. Terrible optics. When it’ll happen is when they realize the market is bubbling out of control (also known as tech bubble 2.0 narrative). Bitcoin will catch up to tech and once again will outpace it at the peak of the madness.”
Kaleo asserts that he is completely unmoved by Bitcoin’s 50% collapse and believes $100,000 BTC is still in the cards.
“That’s why I literally give zero sh*ts when we get these little dips. $100,000+ is inevitable. These LTF (low timefame) moves are just distractions to make you forget the big picture.”
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Some people seek therapy to deal with trauma. Others make sense of their experiences through meditation. Bitcoiners turn to memes.
Most cryptocurrencies are feeling bearish at the moment, but market leader Bitcoin is taking the brunt of it. The exchange price of BTC is just around $32,500, a1% losssince the beginning of the year. April, when the price reached an all-time high of $63,498, now seems like forever ago.
But Bitcoiners can take consolation in knowing their meme game is top notch.
And in true capitalist fashion, the memes getting the biggest play subtly devalue the work of service economy employees, many of whom toil 40 hours a week on minimum wage with few benefits:
“Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.”
Customer: “Right… can I get a Big Mac with fries?” pic.twitter.com/bOP87CG83V
— Ryan Watkins (@RyanWatkins_) June 21, 2021
In one, MicroStrategy CEO Michael Saylor, who led the cloud software company to buy $2.7 billion in Bitcoin in one year, is seen wearing a McDonald’s hat and shirt. As in, he’ll have to work at the fast food chain if the price goes lower.
Another imagined that McDonald’s itself took part in the McRibbing and shared job applications with crypto holders:
Not everything is poking fun at people who contribute to the fiat economy. Bitcoiners can also poke fun at themselves. Here they do it while comparing themselves to Hayden Christensen as Anakin Skywalker. Both had a good run.
Here’s another using comedian Kevin Hart’s 5’2″ stature to point out that Bitcoin’s price is, erm, coming up short this month:
But the best memes of all are about “the dip.” As any long-term crypto investor will tell you, you have to “buy the dip.” The problem, as the following memes illustrate, is that it’s hard to tell when the price has reached the bottom. (Investing! Who knew it was hard?)
So don’t worry, Bitcoiners. If crypto holding doesn’t work out, you can always apply for thememe artist positionatGitcoin. If, that is, you want to bypass McDonalds’ current $400 hiring bonus—in cash.
