Daily Ramble
There’s a danger afoot that I don’t think most are recognizing yet. National identity. It seems like a trivial idea, but the years ahead will be painful for those folks who cannot separate their personal identity from the nation they live within. Why? Because encryption technology is shifting individuals’ relationships with governments. How? By making it impossible to coerce the payment of taxes.
“Whoa! Hey there big-idea guy, I don’t see that today.” Of course not, but like horses escaping confinement, once an individual experiences the freedom of self-ownership of their wealth and the uncensorable nature of sending and receiving, the blinders fall off. It’s both a scary experience and deeply empowering making a transaction outside anyone’s authority the first time. It won’t happen all at once, but Bitcoin’s adoption comes sidesaddle with individual empowerment. Once taken, it won’t be pried out of individuals' hands easily. And by easily, I don’t see how it can be. Our minds aren’t wired to understand what it’s like to be in control of our financial destiny outside of intermediaries. It will take years for this to play out, but like toothpaste out of the tube, it just won’t go back. I cannot see anything less than a role shift with governments and individuals.
In the beginning, individuals will vote with their feet and go to governments that are more accommodating to their needs. I have friends who have already ditched their US citizenship and relocated to Portugal for this very reason. And there are companies playing matchmakers for individuals helping individuals walk the red tape tight rope of bureaucracies that best meet their needs. People are starting to run the numbers on Bitcoin’s potential and the number of billionaires it’ll create (not our little family…) and realizing there’s a lot of incentive for smaller governments to cater to this new financial class. The number of global billionaires created by Bitcoin’s inevitable swallowing of the financial universe will dwarf the dot-com boom.
There absolutely will be negative consequences — like we’ve experienced by replacing horses with cars. But in the scheme of things empowering individuals, which seems to be the genetic arc of our history, will lead to an explosion in creativity on par with the Renaissance. Like the printing press liberated the individual of the tyranny of the Catholic Church of yesteryear in Europe, encryption technology is liberating the individual of the nation-state. Unbeknownst to most, the nation-state didn’t exist as an idea until the late 1700s after the French Revolution. I have no idea what comes next, but as the early French Revolutionaries, the excitement for that change is palpable in those that have crossed the rubicon into the land of crypto.
Individual liberty is inevitable. We’re wired to choose it. The tidal wave of change is here. There’s still time to be a surfer catching it instead of being caught lying on a towel being swept away by it. Choose wisely. And remember, not choosing is a choice.
Favorite Thing on the Interwebs Today
Bitcoin, just doing its thing and sucking in the entire financial universe.
Bitcoin Price Prediction
Yesterday: $47.2k - $52.8k
Today: $47.2k - $55k
Tomorrow: $51k - $60k
Like a clock, Number Go Up technology continues to ring out higher prices at this phase in the bull market. We capped off yesterday at a high of $52.4k, and today, we’re already pushing close to $55k, where I anticipate we see some pullback and consolidation. I don’t anticipate we break directly through the $54k-$58k region without a day or two of ping-ponging. The slower we grind through this region, the more fuel we will have for the next leg. I’m anticipating we have less than a week before we see $58k broken, and most likely by the end of the week, at the current pace. What I find fascinating is watching the Bitcoin flowing into Asian exchanges and out of Western exchanges. The anticipation of inflation in the west seems to be a storyline investors have bought while Asian markets are selling into it. At least that’s my theory backed by the $1.9T stimulus all but completed in the halls of US congress.
Bitcoin Ed Bite
Q: Isn’t Proof of Stake better than Bitcoin’s Proof of Work?
A: No.
Let’s back up and first explain the difference between Proof of Work and Proof of Stake. Proof of Work is the consensus mechanism behind Bitcoin. The consensus mechanism is how, without a central authority, the network resolves conflicts. This occurs when Bitcoin miners submit valid transaction blocks to the network. Miners can’t discover valid transaction blocks without substantial work (energy consumption) to compute the solution to a cryptographic puzzle, i.e., Proof of Work.
On the other hand, Proof of Stake allows new blocks to be added to the blockchain by the amount of stake an individual posts. Individuals staking tokens will, theoretically, operate in their best interests and not harm the network. If they submit invalid blocks, their stake will be slashed, costing them financially. In essence, Proof of Stake says that staking causes users to have skin in the game, forcing them to be good actors.
Proof of Stake has not been proven. It’s theoretical versus battle-tested Proof of Work. More importantly, Proof of Stake creates an incentive for those staking tokens to collude to control the network. The more stake any individual holds, the more blocks they’ll produce and the resultant rewards reaped. This is theorized to lead to centralization over time. While Proof of Stake may sound great, until it’s been trustlessly operational for many years, i.e., no human intervention, it’s an unproven technology.
Thanks for reading,
Kent
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"People are starting to run the numbers on Bitcoin’s potential and the number of billionaires it’ll create (not our little family…)"
Personally I think it is A-OK to NOT be a billionaire. That sounds like a management nightmare, if you ask me...