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Bitcoin Network Is Here to Stay - Montreal Economic Institute

By Neils Christensen of Kitco News
Monday January 20, 2014

 

(Kitco News) -Bitcoin has the potential to revolutionize the financial sector said the Montreal Economic Institute (MEI) in its latest economic research report.

The institute, an independent, non-partisan and non-profit research organization, released a report about bitcoin Jan. 15 and has now become the latest organization to highlight the cryptocurrency’s prospects in what has become a rapidly expanding sector.

 

20140120_descoteaux.JPG

David Descôteaux, associate researcher at the Montreal Economic Institute

 

David Descôteaux, associate researcher at the MEI and author of the report, said in an interview with Kitco News, that bitcoin has the potential to completely change the financial service sector.

Descôteaux said bitcoin is already seen as a revolutionary payment transfer system and it is growing in popularity because of low transaction fees, a major issue especially in developing nations.

“The use of bitcoins therefore has the potential to improve the supply of financial services insofar as transaction fees remain low and confirmation delays for these transactions remain short,” he wrote in the MEI report.

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> http://www.kitco.com/news/2014-01-20/Bitcoin-Network-Is-Here-to-Stay-Montreal-Economic-Institute.html

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http://money.cnn.com/2014/01/27/technology/security/bitcoin-arrest/

Bitcoin exchange CEO arrested for money laundering

 

 

Well, that's a bit rich. What about all those Wall St banks? Go check out what that HSBC whistleblower had to say

http://www.greenenergyinvestors.com/index.php?showtopic=15900&do=findComment&comment=287747

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Maybe if those Bitcoins entrepreneurs were financing more Congressional campaigns, they would have been left alone

 

The way the Criminals control the USA becomes more obvious everyday

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http://www.ft.com/cms/s/0/2b25c21c-88a9-11e3-9f48-00144feab7de.html?siteedition=uk

New York finance regulator voices backing for Bitcoin

 

Benjamin Lawsky, the superintendent of financial services in New York .... has said Bitcoin has reached a “tipping point” where its potential benefits outweigh the risks of illegal activity.

 

The backing .... in a video interview with the Financial Times, comes as Mr Lawsky held a second day of hearings into how to regulate .... the growing virtual currency.

 

This week the US Department of Justice charged ... Charlie Shrem,....

 

But Mr Lawsky said the arrest suggested that Bitcoin was moving into an era where law-abiding entrepreneurs were eager to abide by clear regulations on money laundering.

 

“My hope is that Bitcoin is very much at a tipping point and is moving from an earlier phase when it was dominated by some individuals who were more interested in the illicit nature of it, and what they could hide from people, and moving into a phase where it is more mainstream and will start to realise a lot of the benefits of digital currency,” he said.....

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Why Bitcoin Terrifies Big Banks | Interview with Andreas Antonopoulos

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Ok, I'm thinking of buying some Bitcoins. As an investment to sit on for 5 years then sell. Is it possible to buy some instrument on the stock market? Not really interested in computers and passwords and all that.

 

Not looking to put in a huge amount... just on the off-chance they 'go to the moon'.

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Ok, I'm thinking of buying some Bitcoins. As an investment to sit on for 5 years then sell. Is it possible to buy some instrument on the stock market? Not really interested in computers and passwords and all that.

 

Not looking to put in a huge amount... just on the off-chance they 'go to the moon'.

 

They have already (gone to the moon.)

 

Do you think the price will hit Saturn?

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Catherrine Austin-Fitts says: Bitcoins are a trojan horse

 

Once get accustomed to using it, they will crash it, and replace it with an "official"

substitute, possibly backed by Gold

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Bit of sarcasm from zerohedge here and some background on Schrem. Looks like being a BitAngel can be very risky indeed and I'm not talking about the risk of losing your money

 

http://www.zerohedge.com/news/2014-01-27/doj-finally-going-after-criminal-materminds-arrest-24-year-old-bitcoin-exchange-foun

 

DOJ Finally Going After The Criminal Masterminds With Arrest Of 24 Year-Old Bitcoin Exchange Founder

 

Meet Charlie Shrem. He’s 23 years old and the co-owner of Evr, one of the most famous gastro pubs in Manhatan. The name might sound familiar, since we talked about this pub before, when it became one of the first establishments to receive Bitcoin as a payment for drinks and food in New York City.

 

But why is Charlie Shrem different from other crypto-millionaires? Because he is now a BitAngel, member of an investment group created to invest in Bitcoin startups.

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Bitcoins lack a catalyst now

 

Bitcoins - the sideways march continues ... on lighter volume ... update

 

2sq8.png

 

We could be seeing distribution.

The next move out of the triangle will reveal that... or a "pause that refreshed"

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Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent. The concentration of Litecoinownership is similar.

 

Source: http://ftalphaville.ft.com/tag/bitcoinmania/

 

Big questions for me:

1. Are the 47 addresses actually different individuals

2. How many need to start selling before the market tanks?

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Interesting Bitcoin Stats

 

Perhaps the distribution process is now starting, and will hasten in the next push upwards.

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Following in DRAFT:

 

(Note I say 40 rather than 47 - that is an error):

Bitcoin and the Walrus’ dilemma

 

The prisoner’s dilemma is well known. But let us recall it as the first step to introduce you to the ‘Walrus’ dilemma’.

 

In the classic prisoner’s dilemma two suspects are caught at the scene of a crime. Each is taken into a separate room and encouraged to confess with the promise of leniency if they are the first to confess.

 

The typical ‘payoff matrix’ is the following

 

 

 

Prisoner A

 

 

Confess

Stay silent

Prisoner B

Confess

3 yrs, 3 yrs

10yr, 1 yrs

Stay silent

1 yrs, 10 yr

2yrs, 2yrs

 

 

The issue with the prisoners dilemma is that either way both prisoners will ultimately end up with a period in prison – the question is just how long.

 

The Walrus’ dilemma

The role of Long John Silver is well remembered from Treasure Island – and his parrot Captain Flint. The parrot was named after the Captain of the Walrus who had buried treasure on the island.

 

Let us imagine what position Captain Flint and the crew of the Walrus or indeed any pirate ship are in. The longer they cooperate the greater the aggregated treasure that everyone will be able to share. Though individual shares will be unequal, each pirate is better off cooperating with the rest and continuing to serve. This is different from the prisoners’ dilemma because the longer the duration of cooperation the greater the individual’s returns.

 

However there is always the risk one member of the crew will jump ship taking as much of the treasure with him as he can. Thus as the ship sails each man keeps his musket near by and ready to react first should any other man go for the treasure. In this situation if you suspect another crew member is going to try to steal the treasure at midnight then your best strategy might be to steal it yourself at 10 minutes to midnight etc.

 

Bitcoin

I was recently intrigued to see an article on the excellent FT Alphaville highlighting the uneven distribution of ownership of Bitcoins with 40 people (or technically bitcoin addresses) owning 30% of all coins.

 

The current estimated market cap of all bitcoins ever produced is approximately $10bn. Thus 30% is $3bn and so each of these accounts has on average $75m worth of bitcoins.

 

This of course relies on the current valuation of 1 bitcoin equaling $1000. The question arises what happens if a number of these elite 40 (say one or two or even five) were to decide to sell their bitcoins at the same time. Just like on the Walrus, if one decides to jump ship then it might be in the interest of another crew member to jump ship first.

 

The Eagles sang about Hotel California:

‘There is always space to get in but you can never leave’.

Anyone who has had any serious experience of markets will know that exiting a large illiquid position requires skill and the acceptance of sometimes taking a haircut. One poorly executed trade can adversely move the price of the stock or commodity one is trying to exit.

 

Of course we do not know whether the 40 bitcoin addresses represent 40 individuals, or just one individual with 40 addresses or some other combination. But in some ways beyond a small very tight group that truly trusts each member the system becomes unstable. The longer the group of 40 do not swamp the market with bitcoins all of them benefit. Indeed there may be occasions where as a consortium

 

Bitcoin and the Walrus’ dilemma

 

The prisoner’s dilemma is well known. But let us recall it as the first step to introduce you to the ‘Walrus’ dilemma’.

 

In the classic prisoner’s dilemma two suspects are caught at the scene of a crime. Each is taken into a separate room and encouraged to confess with the promise of leniency if they are the first to confess.

 

The typical ‘payoff matrix’ is the following

 

 

 

Prisoner A

 

 

Confess

Stay silent

Prisoner B

Confess

3 yrs, 3 yrs

10yr, 1 yrs

Stay silent

1 yrs, 10 yr

2yrs, 2yrs

 

 

The issue with the prisoners dilemma is that either way both prisoners will ultimately end up with a period in prison – the question is just how long.

 

The Walrus’ dilemma

The role of Long John Silver is well remembered from Treasure Island – and his parrot Captain Flint. The parrot was named after the Captain of the Walrus who had buried treasure on the island.

 

Let us imagine what position Captain Flint and the crew of the Walrus or indeed any pirate ship are in. The longer they cooperate the greater the aggregated treasure that everyone will be able to share. Though individual shares will be unequal, each pirate is better off cooperating with the rest and continuing to serve. This is different from the prisoners’ dilemma because the longer the duration of cooperation the greater the individual’s returns.

 

However there is always the risk one member of the crew will jump ship taking as much of the treasure with him as he can. Thus as the ship sails each man keeps his musket near by and ready to react first should any other man go for the treasure. In this situation if you suspect another crew member is going to try to steal the treasure at midnight then your best strategy might be to steal it yourself at 10 minutes to midnight etc.

 

Bitcoin

I was recently intrigued to see an article on the excellent FT Alphaville highlighting the uneven distribution of ownership of Bitcoins with 40 people (or technically bitcoin addresses) owning 30% of all coins.

 

The current estimated market cap of all bitcoins ever produced is approximately $10bn. Thus 30% is $3bn and so each of these accounts has on average $75m worth of bitcoins.

 

This of course relies on the current valuation of 1 bitcoin equaling $1000. The question arises what happens if a number of these elite 40 (say one or two or even five) were to decide to sell their bitcoins at the same time. Just like on the Walrus, if one decides to jump ship then it might be in the interest of another crew member to jump ship first.

 

The Eagles sang about Hotel California:

‘There is always space to get in but you can never leave’.

Anyone who has had any serious experience of markets will know that exiting a large illiquid position requires skill and the acceptance of sometimes taking a haircut. One poorly executed trade can adversely move the price of the stock or commodity one is trying to exit.

 

Of course we do not know whether the 40 bitcoin addresses represent 40 individuals, or just one individual with 40 addresses or some other combination. But in some ways beyond a small very tight group that truly trusts each member the system becomes unstable. The longer the group of 40 do not swamp the market with bitcoins all of them benefit. Indeed there may be occasions where as a consortium

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(1) Sorry tables did not come out properly in above

(2) Thought of the day:

- it should be possible to identfy which bitcoin addresses have been accumulating and which have been selling over the last 3 yrs

- then look at net transactions - ie is the removal of bitcoins by the '47' greater than the creation of new bitcoins or not?

- my suspicion is that this is a big squeeze due to coins being lost or tied up so the free float - as a % of the 'interest' in bitcoins has been falling

- not sure how we measure 'interest' - perhaps # of hits on google trends?

- given people like the WInkloss twins have publically said how many bitcoins they have we might be able to extrapolate which bitcoin addresses they (and the various mining pools) are behind

- I suspect the # of individuals is much less than the 47 addresses and so it would necessary to aggregate some addresses to get the publically stated # of coins

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Global Tax Crackdown... may extend to Bitcoins

 

There's a global crackdown on offshore hidden money going on - see below -

Will it be extended to Bitcoins?

 

There are various things that governments can do (including using the NSA) to track transactions

 

British, U.S. and Australian tax authorities announced ...

that they are pursuing tax evasion investigations based on a cache of offshore documents that link to the Cook Islands, Singapore and the Cayman Islands, among other jurisdictions. The secret records are believed to include those obtained by ICIJ and that are the basis of the Offshore Leaks investigation. British tax authorities said the files “reveal extensive use of complex offshore structures to conceal assets by wealthy individuals and companies.” The three agencies plan to share the information with their counterparts from other countries in what could be the beginnings of one of the largest tax investigations in history.

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