Author: General Milan

A Deep Dive into the Petro

General Milan writes about financial technology and cryptocurrency for the Earth Alliance, a loose-knit global alliance working for the benefit of humanity.  The battle over the future of Planet Earth has in many ways always been a financial battle.  As time passes and technology advances, that financial battle is increasingly being fought out in the cryptocurrency arena.
Follow General Milan on Twitter:  @generalmilan

In early December of 2017, just before cryptocurrency markets started to crater, President Nicolás Maduro of Venezuela announced the creation of the Petro cryptocurrency backed by Venezuela’s oil and gas reserves.  This was both an attempt to both circumvent the financial sanctions placed on the Maduro regime and a desperate effort to patch up the Venezuelan economy, the complete collapse of which was an entirely predictable outcome of Venezuela’s decades-long experiment with authoritarian socialism.

In this article we trace the development of the Petro from Maduro, to his Russian cryptocurrency consultants, to the Japanese/Malaysian blockchain technology upon which the Petro is based, all the way back to the Esalen Institute of California—the heart and center of socialist ideology.

Venezuela has quickly gone from being one of the richest countries in South America with the largest proven oil reserves in the world, to having a humanitarian refugee crisis on par with the war in Syria.  As in almost all cases of mass human suffering, very dark forces are behind it, and indeed the oil industry itself is obviously at the heart and center of many wars and global environmental problems.

The story of the Petro is far from over, however, and the real battle over the financial future of Planet Earth is probably still just beginning.  In this, the happenings in Venezuela have major geopolitical implications.

On August 5th, 2018 President Maduro was the target of of an apparent assassination attempt by drone, a bizarre false flag-ish event that was seemingly produced on a very modest budget.

Then, on September 8th, 2018 The New York Times ran an exposé describing how officials from the Trump administration had met with opposition forces in Venezuela to plan a potential coup against Maduro.  The article can be seen as both a critique of the Trump administration’s tactics and as a form of support for Maduro’s claim that he a “good guy” battling against imperial American forces.

We expect the geopolitical battle to continue in the weeks and months ahead, but for now our focus is on the Petro cryptocurrency.  In fact it remains to be seen whether or not the Petro is successful in any way.  On August 30th, 2018, Reuters ran a special investigative report entitled “In Venezuela, new cryptocurrency is nowhere to be found.”  The report describes the fact that the Petro is based on oil reserves located underneath a barren patch of land that would require an investment of at least $20 billion to retrieve, money that the bankrupt Venezuelan government does not have.

Thus, in many ways the Petro is nothing but a pipe dream.  The article quotes the exiled former Venezuelan Oil Minister Rafael Ramirez as saying, “The Petro is being set at an arbitrary value which exists only in the government’s imagination.”

The Petro is based on the NEM blockchain.  The idea for NEM originally came from a Bitcointalk user named UtopianFuture, but NEM was developed by an Osaka company called Tech Bureau, led by a character named Takao Asayama.  The NEM Foundation is domiciled in Singapore and physically located in the oil-rich nation of Malaysia.

Takao Asayama is said to be closely connected to Takafumi Horie, a notorious character in Japan who is deeply connected into the Asian underworld.  Horie is a kind of a Japanese Elon Musk—an aggressive technology businessman who was criticized for his M&A practices and actually went to jail for market manipulation tactics.  It’s said that when Horie went into jail he may have been “grey,” but when he came out he was fully “black” and 60 pounds lighter.  Horie is the founder of a rocket company called Interstellar Technologies which has unfortunately experienced two failed launches.

The logo for NEM is a combination of counterclockwise-rotating Japanese mitsudomoe symbol and a shield representing the Reuleaux triangle shape used inside of the internal combustion engine.  NEM stands for New Economy Movement, not to be confused with the New Economic Model (NEM), an affirmative action plan developed by the former Malaysian prime minister and the Malaysian Chinese Association.

The NEM cryptocurrency is based on a consensus algorithm called Proof-of-Importance, which is an attempt to improve upon the rich-get-richer characteristics of Proof-of-Stake algorithms.  In Proof-of-Importance, accounts are assigned a “reputation” or “importance” score, such that accounts that are deemed to be more important to the NEM ecosystem are awarded with more new currency units.  We fear that over time NEM’s consensus algorithm may need to be renamed Proof-of-Maduro’s-Importance.

NEM was at the center of the Coincheck hack of January 2018.  In that event, hackers broke into a Japanese cryptocurrency exchange called Coincheck and stole over $500 million dollars worth of NEM, making it one of the largest thefts in the history of the world.  The hack cast a pall over the cryptocurrency market in Japan and contributed to the global sell-off that became the cryptocurrency bear market of 2018.  The hack also reduced the number of exchanges trading NEM in Japan to only one—the Zaif exchange owned by Tech Bureau itself.

In March 2018, the Japanese FSA issued a business improvement order to Zaif and several other exchanges over their security and anti-money-laundering practices.  This put Zaif and NEM in the awkward position of being close to complete shutdown in Japan.

Then on September 20th 2018, Zaif announced that it had been hacked to the tune of $60 million, but also announced that a bailout loan was being arranged through a Horie-connected Japanese investment advisory firm called FISCO.  As part of the deal, FISCO would take a majority share ownership in Zaif.  Since FISCO already operates its own cryptocurrency exchange in Japan and is already partnered with Zaif, the bailout could be seen as a way for FISCO to subsume Zaif and start fresh with a clean regulatory record.

Just one day after the Zaif hack was announced, cryptocurrency investors were left scratching their heads as the price of the Ripple cryptocurrency surged by more than 60%.  But as one Twitter user keenly noted, “Anyone attempting to explain this Ripple move should also explain why Monacoin is up roughly the same amount.”  In fact, Monacoin, billed as “the first Japanese cryptocurrency,” was among the cryptocurrencies stolen in the Zaif hack.  If the hackers of the Zaif exchange wanted to unload their stolen Monacoin, it would make a lot of sense to pump up the price first.

But back to the topic of the Petro, how and why did Maduro decide to base the Petro on the NEM blockchain?  After all, Venezuela is a world away from Japan.  To answer that question, we need to look at some of Maduro’s cryptocurrency advisors.

The first character of interest is the 27-year-old Venezuelan Gabriel Jimenez.  After Jimenez’s father was charged for defrauding investors in the collapse of a Dominican bank, Jimenez went to work in Washington, D.C. as a congressional intern for one of Maduro’s strongest critics.  In that role he was a “spirited anti-government crusader who helped organize a caravan … in which thousands of Venezuelan exiles traveled by bus to Washington to pressure the Obama administration to slap sanctions on Maduro’s government.”  But soon after, he returned to Venezuela and quickly rose to become one of the top strategists behind the Petro.  We can only assume that he is either a spy or a complete sell-out.  In any case, to find the real masterminds behind the Petro we need to look farther afield, to Maduro’s Russian consultants.

In March 2018 after President Trump issued an Executive Order banning Americans from transacting in the Petro, Time Magazine published an exclusive article entitled “Russia Secretly Helped Venezuela Launch a Cryptocurrency to Evade U.S. Sanctions.”  Of course, as with all mainstream media articles about Russia, it is mostly an attempt to demonize Russia and link everything back to Putin, which is a little bit like saying that Trump controls everything that happens in the United States.  The author’s other Time articles include “To Understand Russia, Read A Terrible Country” and “How I Learned to Love the German Nanny State After Leaving Putin’s Russia.”

In any case, the Time article does a good job of detailing the Russian consultants behind the Petro.  It’s worth noting here that the symbol for the Petro, ₽, is exactly the same as the symbol for the Russian Ruble that was newly chosen in 2013 via a process organized by the Central Bank of Russia.

The main two Russian consultants behind the Petro are Fyodor Bogorodsky and Denis Druzhkov.  According to the Time article, “Bogorodsky moved to Uruguay around 2009 and became an informal ambassador of Russian culture across Latin America.”  Bogorodsky’s personal website details his family’s long history in Russia from its beginnings among “eminent Tatars,” to “military service in the Crimea campaign,” to the development of banking in Kazan province.  Bogorodsky’s contributions to Maduro were apparently run out of a shell company called Aerotrading, which is only really notable for using the Illuminati left-facing OK sign as its logo.

Denis Druzhkov is the co-founder of a Russian cryptocurrency exchange called the Zeus Exchange.  We note here that Zeus was not known to be a kind god.  The Zeus Exchange is based on the NEM blockchain and is partnered with the NEM Foundation.

Druzhkov’s Twitter account is enlightening.  He is a follower of the Latvia-based anti-Kremlin news agency Meduza, named after the snake-headed monster from Greek mythology.  He is also a follower of “the Kremlin’s leading critic-in-exile” Mikhail Khodorkovsky, the oligarch who looted Russia’s oil industry after the fall of the Soviet Union and a close colleague of Henry Kissinger and Jacob Rothschild.  Druzhkov also follows Shaltai Boltai, an anonymous hacking group that targets the Kremlin.  Needless to say, Time appears to have been completely wrong in portraying Druzhkov and Bogorodsky as puppets of the Kremlin.

Druzhkov is also a Twitter follower of the Esalen Institute in Big Sur, California.  It is worth digging into this relationship a little bit, because readers may not be aware of the Esalen Institute’s prominent position in the global Satanic hierarchy.  But remember that while the 60’s produced a lot of love, freedom, and liberation, it also produced horrible events such as the Manson family’s murder of Luciferian movie stars, all of whom hung out around Esalen.

According to The Magic of Esalen:  “At its essence, Esalen culture is organized almost like a Masonic Lodge or Secret Society, with concentric orders of initiation and status.”  In fact, Esalen was influential enough during the Cold War to have arranged United States visits via its Soviet-American exchange program for several prominent Russians just before the collapse of the Soviet Union.  This included a visit for one of Mikhail Gorbachev’s chief economic advisors, and also included Boris Yeltsin’s first trip to the United States to meet with George H.W. Bush and other political leaders.  We wonder if the Esalen Institute would be as welcoming to Vladamir Putin today;  somehow we doubt it.  Those interested in reading more about the history of Esalen are encouraged to take a look at “How Darwin, Huxley, and the Esalen Institute Launched the Psychedelic Revolutions” or the associated map.

Following President Trump’s executive order banning the Petro, the Zeus Exchange appears to have cut ties with Druzkov, at least nominally.  But having structured at least two major projects around NEM (the Zeus Exchange and the Petro), it is a safe bet that Druzkov and colleagues still are heavily invested in NEM and perhaps even actively promoting it.

Indeed, NEM has been making headway among some interesting groups.  In August, at the 100th Annual Crow Fair for the Crow Nation of Montana, NEM systems were demonstrated to tribal leaders: “Good Guy NEM? – Helping Native Americans Get into Crypto! – Great Idea!”  The Crow Nation—or the Black Lodges, as one of its subgroups is called—is located in a major oil-producing region, but NEM’s interest in collaborating with the Crow likely also extends to the tribal casino business.

Historically, the Crow tribe worked together with the U.S. Army against their enemies the Lakota Sioux.  This is notable in the sense that the Lakota Standing Rock reservation was major news in recent years due to protests over the Dakota Access oil pipeline.  We have a feeling that the Lakota would not be as eager as the Crow to embrace using a cryptocurrency with deep ties to the oil industry.

Further south in Las Vegas, NEM recently signed an informal agreement with Kind Heaven, a new multimedia theatrical experience created by Peretz Bernstein, a.k.a. Perry Farrell, the frontman of the rock bands Porno for Pyros and Jane’s Addiction.  Taking a page from The Hangover film series or even the Vietnam War, the event will be Southeast Asia-themed, complete with betting on virtual monkey wrestling:  Inside Perry Farrell’s Wild Vegas EDM Musical: Sex, Drugs and War.  It will also run exclusively on cryptocurrency.

Another project building on NEM is Eterly, the “artificial intelligence platform for life extension.”  The logo for Eterly looks like the symbol for a biohazard.  We could go on, but you get the idea….

To summarize, while the Venezuelan Petro may collapse into a failed experiment, the cryptocurrency upon which it is based, NEM, is slowly seething its way into the oil and gambling industries and beyond.  The two most important commodities in the world are gold and oil.

Money has historically been backed by gold, but that ended in 1971 when Kissinger and Nixon detached the U.S. dollar from gold, and attached it instead to an oil and military agreement involving Saudi Arabia and Israel–the origin of the petrodollar.  The result has been the greatest debt bubble in human history, a global environmental catastrophe, and non-stop war in the Middle East.  Clearly, the days of the petrodollar are numbered, but nefarious forces are already experimenting with creating new forms of petro-currency.

Gold is created through the super-energetic collapse and collision of stars.  Oil, known as black gold, comes from deep within the Earth.  While gold has been very useful as the basis of money throughout human history, and while a return to the gold standard would go a long way toward preventing bankers and politicians from printing too much money and giving it to themselves to wage endless warfare, the real problem with the financial system is the centralization of control over the creation and distribution of money.  To put it another way, even under the gold standard, the central banks are still in control of the creation and distribution of money and generally have the power to debase their currencies when it suits them to do so.

What is really needed is a new economic system where the power to create and distribute money is truly decentralized, or in other words, put back into the hands of the people.  Bitcoin was a major innovation, but it replaces control by banks with a strange new system where all new money is rewarded to those with access to cheap computers and electricity, which happens to be a few people in China.

To understand the real potential for cryptocurrency as a new method of currency creation and distribution, we recommend the excellent article “Why Everyone Missed the Most Mind-Blowing Feature of Cryptocurrency.”  NEM was an attempt to create this kind of next-generation cryptocurrency, but it is flawed and is completely controlled by nefarious forces in any case.

Rest assured, alternatives are being created.  For now, we can only advise the citizens of Venezuela as well as the rest of the world to avoid both the Petro and NEM like the Black Plague.

Earth Alliance Cryptocurrency Report, Q3 2018

Follow us on Twitter:  @generalmilan

It has been some time since our last reports (Q1-2018 and Q4-2017).  That’s okay—we are strong believers in taking a long-term approach to investing.  It’s well documented that overactive trading is detrimental to investors’ financial health, let alone their mental health.  The best thing to do is often… nothing.  Patience is a virtue.

Tech entrepreneur Naval Ravikant has said that “99% of all effort is wasted.”  This principle applies doubly in the world of investing, where over-trading can result in real financial losses stemming not only from bad trading decisions, but also from trading fees.  Just as it is in the best interest of the news media to stir people into a frenzy, so is it in the interest of the financial establishment, including the growing cryptocurrency establishment, to encourage investors to over-trade their accounts.  The real beneficiaries of all that trading are the exchanges, brokerages, and market makers who collectively skim fees and take a percentage of every trade, in the same way that casinos take a percentage of all gamblers’ bets.

In fact, the main organizations making money from the cryptocurrency markets so far are those which are facilitating trading.  We are reminded of a conversation with a top trader at a global investment bank in which he attempted to explain what it is exactly that investment banks do.  “We are the casino,” he said.  “Our clients are the gamblers.”

Make no mistake, the world is a giant casino.  People are human and are strongly attracted to things with addictive power.  We wonder what the world would look like without any businesses based on alcohol, caffeine, sex, or gambling.  It would surely be a very different place.

Where we have advocated trading before is in the rebalancing of a carefully constructed portfolio.  Rebalancing—or constantly buying low and selling high—is a way to harvest volatility.  The burgeoning cryptocurrency markets are extraordinarily volatile, so there is an extraordinary opportunity to harvest volatility, which is a kind of wealth transfer from short-term trend-followers and day traders to rebalancers.

However, there are two issues with this approach.  The first issue is taxation, because from a tax perspective, constantly selling winners and reinvesting the proceeds into losers is exactly the wrong thing to do because it maximizes realized gains.  Thus, the effectiveness of rebalancing depends a lot on one’s tax jurisdiction.  There is no point in rebalancing if the gains harvested must be paid to national governments and used to help them delay their inevitable bankruptcies.

In fact, simply spending the cryptocurrency itself is a taxable event in most jurisdictions.  Germany is the exception, and that country has moved to recognize Bitcoin at least as legal tender.  But in most other jurisdictions, buying a cup of coffee with Bitcoin would technically trigger a capital gain or loss.  This is obviously an untenable situation, and very few investors would even have the ability to keep track of all such dispersals to comply with the tax reporting requirement.

The situation is even worse if you imagine a future world of micro-transactions where cryptocurrency users are spending the equivalent of one cent here and there to pay for various services like data storage.  We joked that cryptocurrency investors should start dumping million-page Schedule D forms onto the front lawn of the IRS.  If spending cryptocurrency triggers capital gains, then it is much better to just HODL and never spend it, but that would kind of defeat the purpose of it—cryptocurrency was originally envisioned to be a medium of exchange and not simply a store of value.  This is just one of many ways in which cryptocurrency is pitted in a battle against governments, and in which government regulation is, as always, lagging far behind technological innovation.

On the topic of tax, we will mention here that the large capital gains realized by active cryptocurrency traders in 2017 are one possible explanation for the brutal cryptocurrency market sell-off that began in December 2018 and accelerated into the first quarter of 2018.  Anyone wanting to take some profits out of the market at that time would probably not have wanted to sell until the new year so as to delay owing taxes by at least one more year.  But knowing that many investors might sell out in January could in theory cause a sell-off in December, as investors willing to foot the tax bill sooner tried to get out before more widespread systematic selling began—and a sell-off starting in December is exactly what we saw.

The market peak also coincided with the launch of the Bitcoin futures trading that many market participants feared that would allow large-money interests to systematically short the market, thus driving it down.  In reality, initial futures volumes were very low, but remember that markets are often driven more by fear and expectation than by actual events.

In any case, speculating on the causes of the sell-off is beside the point.  Markets have a mind of their own (are they sentient?) and our job as long-term investors is to ignore the short-term fluctuations, however painful they may be.  The history of cryptocurrency is fraught with huge sell-offs, so it is really par for the course.

We need to examine the market with a wider lens.  The always-entertaining John McAfee put it succinctly: “Okay, people:  Can we please get real?  One year ago to the day, Bitcoin was at $2,560.  Today it is over $6,000.  That is a 140% increase.  This year-to-year increase has been accelerating significantly.  Stop the short-term thinking.  Get real.”

Back to the topic of portfolio rebalancing, there is also an argument that rebalancing a portfolio of small tech startups is not a correct approach, given that tech startups tend to follow a power law distribution, meaning that a few companies (or coins in this case) come to dominate and the rest fail miserably.  In such a market, the best approach is to diversify but to let the winners ride, instead of rebalancing out of them and into the losers.  Of course, there are those “Bitcoin maximalists” who feel that Bitcoin itself is the only real long-term winner and that the ICO market is a land of empty promises.

The Bitcoin maximalists were not right in 2017, as the price-performance of Ethereum trounced that of Bitcoin itself and Bitcoin market dominance declined dramatically, but it remains to be seen if this trend eventually reverses.  Bitcoin maximalist (and voracious carnivore) Saifedean Ammous published a book called The Bitcoin Standard, which makes a strong argument that Bitcoin improves upon the central banking gold standard, or in other words, that it is like Gold 2.0.  The book was well summarized by a former advisor to the French prime minister.

However, gold bugs like Jim Rickards often point out that Bitcoin is not backed by anything real and is a far cry from gold.  Gold is a very special element of the universe that is probably only produced in massively energetic neutron star collisions.  We have a feeling that this debate will not be resolved anytime soon, which is probably a boon for Bitcoin, given that it is still just a small fraction of the size of the gold market.

Somehow we are reminded of the recent film Ready Player One.  While the virtual world is certainly not a nirvana, it is pretty obvious at this point that it is ever-increasing in size and importance.  This probably bodes well for virtual currency.  But zooko from the Zcash project put it well when he said, “I’m a maximalism minimalist.  The universe is always at least an order of magnitude bigger than what you can see.”

Of course, establishment economists such as The Financial TimesIzabella Kaminska have long argued that, as a currency, Bitcoin is even more untenable than gold.  The argument is based around the idea that money supply should expand and contract fluidly as needed to maintain price stability and avoid dreaded deflation.  In fact, Bitcoin could be even more deflationary than anticipated, given that approximately 5% of cryptocurrencies are irretrievably lost annually according to one estimate.  That is a lot of forever-sunken gold.  In any case, readers of The Financial Times might now be kicking themselves for having missed out on the entire blockchain revolution so far.

Keynesians aside, if gold and cryptocurrency are the two main contenders for a global store of value, then what about gold-backed cryptocurrency?  There is an argument to be made that it would be the best of both worlds, but it’s not that clear.  For one thing, gold-backed cryptocurrency reintroduces the need for trust.  Bitcoin maximalists love the fact that Bitcoin is fully decentralized and trust-less (putting aside the fact that most mining is controlled by a couple of people in China).  With gold-backed cryptocurrency, there is obviously a need to believe, or trust, that there is actually some amount of gold located somewhere and allocated to every unit of the cryptocurrency.

Moreover, while we have argued for real asset-backed cryptocurrencies in the past, it is far from clear how some of them would function practically.  One major issue was well summarized in a recent tweet:  “If I buy a tokenized house and lose my private key, have I lost ownership of my house?  Can I never sell it again since I can’t technically transfer the key?  Who can issue me a new key?  Where is the real ownership ledger?  What is the use of the token?  Honestly wondering.”

We recently mused that the ideal global currency might simply be micro-shares of the global all-asset portfolio.  One unit of the currency would represent a small ownership stake in every publicly tradeable asset in the world in proportion to the asset’s size.  Thus it would be a recursive system where the currency itself would have an earnings yield, as opposed to cash or gold which naturally yield nothing, or which often actually have a negative yield in the form of inflation or storage costs.

Anthony Pompliano, or Pomp, is a big proponent of the idea of “tokenizing the world,” and is one of the most incessantly positive cryptocurrency commentators.  But he recently decided to take a break from the negativity of the online world following a thread for which he was criticized for being over-enthusiastic about the potential of tokenized securities.

Many people pointed out that re-implementing existing securities in the form of tokens will not necessarily be as large of a wealth transfer event as the invention of a new gold-like asset (Bitcoin).  But it remains to be seen how it all plays out.  It is quite possible that the very concept of equity, or of shared corporate ventures, will be transformed by the advent of cryptocurrency.

Indeed, ICOs have recently overtaken other forms of fundraising even though they do not convey typical equity rights to investors.  So it remains to be seen how ventures are funded and earnings shared with investors in the future.  Remember that we are already living in a world where many of the leading tech stocks do not own much in the way of hard assets and do not typically pay out dividends to investors.  Tech stocks are already quite “virtual” in a sense, and have already evolved a long way away from the more traditional idea of what a stock should be.  This process is bound to continue as cryptocurrency continues to revolutionize Silicon Valley.

We take Pomp’s temporary departure from online commentary—just before the summer solstice—to have coincided with a low point for the market.  Cryptocurrency’s most enthusiastic and incessantly positive commentator could not withstand the negativity and he surrendered.  And while we generally shy away from all forms of market timing, as described above, our sources indicated that this year’s summer solstice marked a turning point not only for the crypto markets but also for the more general ongoing battle for control of planet Earth.  We shall see.

We were very happy to see Pomp return to active commentary—on the Friday, July 13th new moon.  The numerology of this date is a bit counterintuitive, since we are taught by Hollywood that only bad things happen on this date.  But remember that Hollywood is well known to be chock-full of disinformation anyway, and the interpretation of dates and numerologies is much more complex subject than one might expect.

In other esoteric crypto news, John McAfee spent the summer solstice in a coma induced by apparent poisoning, but awoke thereafter in good spirits.  Shortly thereafter, he was forced to avoid a live speaking appearance due to “credible death threats.”  McAfee is planning to run again for U.S. president in 2020, this time on a cryptocurrency-based platform.

On the topic of security-like tokens or security tokenization, we will mention here that we are generally dividend lovers, and this is reflected in our affinity for proof-of-stake cryptocurrency systems.  One view is that proof-of-work is an “absurdly inefficient” version of proof-of-stake, given that in either system those with a lot of money are capable of coming to dominate through investment—the only difference being that proof-of-work requires much more energy expenditure and the setup of warehouses, etc.

While we concede that Bitcoin may remain on top indefinitely, our general view that cryptocurrency will continue its evolution towards proof-of-stake platforms that offer tokenization and programmability, a process exemplified by Ethereum’s great success in 2017.  In light of that, our favorite investment at the moment is Waves, a fully-functioning proof-of-stake system that is already technologically more advanced than Ethereum in many ways but which stills trades for a fraction of Ethereum’s price.  In addition, the Waves platform already includes a fully-functional decentralized exchange allowing for the secure trading of arbitrary crypto-assets without restriction.

We list our portfolio of recommendations below in rank order of our preference for each investment at the current time.  The order represents conviction, pricing/risk, and also a time preference, in the sense of some investments being more likely to mature sooner than others.  While we have advocated for an equal-weight portfolio in the past, the rank ordering information below could, for example, be used to overweight higher-conviction positions.

Note that our first three positions are all blockchains which either already are, or have some plan to become, some version of proof-of-stake chains.  Of further note is the fact that the top two positions are both using the Bitcoin Next Generation (Bitcoin-NG) consensus algorithm from Professor Emin Gün Sirer.  As one of the world’s foremost blockchain academics, Emin’s new Avalanche consensus algorithm is also one to keep an eye on.

  1. Waves
  2. Aeternity
  3. Quantum Resistant Ledger
  4. Ethos
  5. Stellar
  6. 0x Protocol
  7. Basic Attention Token
  8. Edgeless
  9. Substratum
  10. Maecenas
  11. Swarm City

As a reminder, we are providing information to the public simply out of a desire share our views and the results of our research. The battle for control of planet Earth has always been a financial battle, and within the realm of finance, cryptocurrency is the latest battleground for control of the future.

There are actually some strange theories that Satoshi Nakamoto was a time traveler. We don’t put much stock into such ideas;  however, there are many bizarre occurrences in the world of cryptocurrency that can perhaps only be explained as manifestations of the greater ongoing battle.  These apparent attacks and counterattacks can give us some insight into the future, as they give us a glimpse of some of the possible futures that certain forces are attempting to either prevent or facilitate.

Of course, we take a position alongside the forces that we feel to be benevolent.  This is our somewhat more esoteric idea of “socially responsible investing,” which is a topic of growing importance even on Wall Street.  The only problem with social responsibility is that it is a very subjective concept.  We are speaking here from the perspective of the Earth Alliance, a loose-knit collective of global organizations working for the benefit of humanity that includes the Asia-based White Dragon Society.

ホワイト・ドラゴン・ソサエティー 仮想通貨ポートフォリオの最新情報 (2018年1月4日)

前回、仮想通貨の現況( Cryptocurrency State of Play)について初の報告をしたが、今後も市場の主な展開をまとめ、我々の投資ポートフォリオに反映し、その報告書を四半期ごとに公表していく。ホワイト・ドラゴン・ソサエティー(白龍会)は、広範囲にわたる機密諜報に精通しており、仮想通貨の知識もまた、ベンジャミン・フルフォードの読者の方々と共有していきたいと思う。

断っておくが、ここで提供する投資アドバイスに保障はない。「投資は上がるかもしれないし、下がるかもしれない。」投資をする時は良いエントリー・ポイント(入り口点)を見つけることが重要だ。ただ現在のところは、資本が早急に流入し続けているので、仮想通貨のほぼすべてが上昇を続けている。仮想通貨の早期投資家でありヘッジファンドマネージャーのMichael Novogratzの言葉を借りると「 流動性資産が消防ホースから吹き出てくる(firehose of liquidity)」状態である。

とにかく、ベンジャミンの読者の中で、前回の報告書を読み、利益を得た方がいたら嬉しく思う。2017年の第4四半期は仮想通貨の投資家になる時期としては最高のタイミングだった。

ご存知のとおり、2017年は仮想通貨にとって驚愕の年であった。特に第4四半期、仮想通貨を知らなかった人がビットコインを知り、その人たちがビットコインを買い始めるとその価格が急騰し、 ビットコインはメディアの注目を浴びた。この動きは様々な論議を醸した。ビットコインや仮想通貨全般は「バブル」なのかと。しかしこの論議は争点がずれているのである。

ビットコインが仮想通貨の時価総額表(market cap tables)のトップの座を保持し、他の仮想通貨の価格設定や、取引に使用される基盤通貨としてのポジションを保持できるかに関係なく、仮想通貨全般が今後も普及していくのは当然のこと。仮想通貨は、金融だけでなく、他のあらゆる業界にも変化を及ぼしている。これは以前、インターネットが世界を変化させていったのと同じ現象だ。

テクノロジーバブルというのは変革的なものだ(transformative events)。そのようなバブルに投資する場合、重要なのは、既存の産業を独特な形で混乱しうる、様々なスタートアップ・プロジェクトに投資して、多様性のあるポートフォリオを保持するということ。そうしたことから、我々のポートフォリオは、仮想通貨市場の広範囲かつ様々な分野(sectors)と関与することにしている。

ドットコムのバブルは史上最大級のバブルだったが、90年代後半にアマゾンの株や、その他テクノロジー関連の株を買い、長期保有した投資家は大儲けしたということを忘れないでほしい。もちろん、そのバブルは2001年に崩壊し、多くの企業が破産したり痛手を負ったりしたが、残った起業はさらなる進化を遂げている 。

我々の狙いとしては、ドットコムバブルをテンプレートとして利用し、ネット収入の大部分を構成している産業(広告、eコマース、ギャンブルなど)を考慮した上で、今回の一連のドットコム熱(最近のドメイン名は”.io”で終わるものが人気なので、ドットコム熱ならぬ、ドットアイオー熱という方が正しいかもしれない)において、混乱を起こそうとしているプロジェクトを多様に含んだポートフォリオを形成するということである。

AmazonやGoogleは、かつてそうであった、小さなスタートアップ企業ではなくなった。今では、新たな競合に脅かされるかもしれない、定着した権力の象徴である。ダウ式平均株価の、最初の12企業(original 12 companies)は、とうの昔に平均株価から除外された。ビジネスは変革と再生を常に繰り返している。

2017年はまさしく、仮想通貨が爆発し、メインストリームに乗った年として記憶に刻まれることだろう。Bitcoinは年間で約13倍上がった(1300%)。さらに業績が良かったのはEthereumで、 年間利益が70倍 (7000%)と言う記録を打ち出した。これほどの利益を見て、バリ在住の仮想通貨コメンテーターWilly Wooは、うまいことを言った。(quipped)「利益を測定するとき、昔の経済は、パーセント記号(%) を使うけど、新しい仮想通貨経済は、かけ算記号(x)を使うね」 と。

このような爆発的な利益がいつまでも続くわけがない。しかし、仮想通貨ベースの制度が、幅広い範囲において、従来の古い金融制度に取って代わる存在となり始めていることから、しばらくの間は、利益は増え続ける可能性がある。高過ぎる紙資産(ドルや財務省証券)からの大量流入がさらに勢いを増すかもしれない。真のバブル(もしくは ネズミ講(pyramid scheme))は、 米ドルだということを忘れないで欲しい。米ドルは史上最大級のバブルなのだ。

その偉大なバブルが無秩序に解体されていくのを見届けることができるのかはまだ分からない。 それが起こるのを期待している人たちも確かに存在する(MaxKeiser1, MaxKeiser2)。ホワイト・ドラゴン・ソサエティーの見解としては、既存の金融システムが無秩序に解体されることは人類にとって最大の利益をもたらすとは考えていない。

Bitcoin自体が米ドルのような「紙資産」の一つになるのかという疑問は、議論する価値が十分にある。2017年は金(ゴールド)にとって、2010年 (+13%)以来、初めて業績が良かった年だった。それは反対に米ドルが2003年以来で最悪の年になったことも起因している。仮想通貨は米ドルと違い、供給に限りがあるように設計されている。しかし、結局のところ、仮想通貨も米ドルと同様、元帳に入力されただけのものであり、言い換えれば「パソコン画面に映る数字」に過ぎない。

仮想通貨の弱点は、各仮想通貨は「マイニング」をする人たちの合意が基盤となっていて、その供給量は限られているにも関わらず、既存の仮想通貨を複製し、別の仮想通貨を作成することが非常に容易にできるということかもしれない。

そのため、仮想通貨の全体数は爆発的に増えている。Bitcoinに加えて、最近ではBitcoin Cash、 Bitcoin Gold、Bitcoin Diamond、Super Bitcoinなどが誕生した。その中でもBitcoinの座を奪いそうな強敵はBitcoin Cashではないだろうか。仮想通貨コミュニティーでも、Roger Verといった有名人がBitcoin Cashを支持している。

Bitcoinの問題は、Bitcoin自体の成功に悩まされているという点だ。現在、Bitcoinのネットワークはオーバー・ロード状態で非常に遅く、手数料も高騰している。仮想通貨の先駆者でありコメンテーターのCøbraはこの問題を(problems)を一連のツイートで取り上げ、Bitcoinのマイニングパワーは中国にいる数人の人たちの手に集中していると指摘した。(興味深いことに、彼のツイッターページのバナー画像は天安門広場の写真である。)

ということは、ある意味、Bitcoin は、Bitcoinネットワークのキャパシティに必要なアップグレードをせずに、高額な手数料を取り続けているマイナーたちに「人質に囚われている」状態だと言ってよいだろう。元々Bitcoinは、スピーディーで安価なデジタルキャッシュとして想定されていた。Bitcoinシステムに大幅なアップグレードをする計画が2017年にあったが、それが実現しなかった今、Bitcoinが元の想定通りに機能する可能性はゼロに等しい。

Bitcoinが「ゴールド2.0」として残る可能性はまだあるが、他の技術によってその座を奪われるリスクも存在することは確かだ。特に注目すべきは、EthereumWavesStellarのような、金(ゴールド)などのリアル資産をデジタル化・トークン化ができるようなプラットフォームである。

Stellarは仮想通貨の先駆者Jed McCalebによって開発された。彼の長年の仮想通貨やピアツーピア・テクノロジーへの取り組みは、2015年のNew York Observerの長編記事「The Race to Replace Bitcoin.(Bitcoinの座を奪う競争)」に細かく紹介されている。記事でMcCalebは、プロジェクトを立ち上げても、結局は放棄してしまいがちな怠け者の様に描写されているが、我々が興味深いと思ったのは、よく、雑誌側がこれほどまでにMcCalebの人生を調べ上げたかという点だ。記事では、McCalebと韓国人女性とのロマンスについても書かれている(韓国は現在、仮想通貨の購買熱の真っただ中にいる国だ)。結局の所、記事の意図に反して、我々は記事を読んだ後、McCalebに対してより強い好意を抱いた。我々は、善意あるプロジェクトが不可思議な方法で攻撃されることに、常に関心を持っている。多くの場合、その裏には何らかの意味があるからだ。

McCalebは元々Rippleを開発したが、 Rippleが企業権力者によって乗っ取られたと感じた時点で Stellarを開発した。2017年末、Rippleは巨大な集会を催したが、結果としては、多くの市場参加者を当惑させることになる。GoldMoney開発者のRoy Sebagは次のようにコメントしている(say): 「XRP [Ripple]は政府が推奨する仮想通貨だ。世界のエリートが何よりも望むのは、一般市民がだまされてRippleを仮想通貨として使用し始めることだ。私は数々の理由からRippleを信用していない。」

10月にRippleはトロントで会議を開き、同じくトロントで毎年開催されているSWIFT主催のSibosカンファレンスと注目を競い合った。Rippleのメインスピーカーは、他ならぬBen Bernanke、米国の連邦準備制度理事会の元議長である。その間にStellarは、IBMとのパートナーシップを発表し、Stellar の技術は既に南太平洋の国々における外貨決済で使用されている。

McCalebはRippleを立ち上げる以前にも仮想通貨に関与していた。彼は、有名なBitcoin取引所Mt. Goxを開設したが、元々Mt. Gox はゲーム「Magic: The Gathering」のカードを交換するウェブサイトとして想定されていた (それが名前の由来だ)。McCalebは2011年3月に、Mt. Goxの大部分 (88%) を東京都渋谷区在住のMark Karpelesに売り渡した。2013年/2014年にかけて、Mt. Goxは法律・銀行業務問題が浮上、またMt. Goxが所有していたBitcoinのほとんどが徐々に盗まれていたことが発覚したことから、Mt. Goxは次第に崩壊していった。

Mt. Gox の崩壊によって仮想通貨の市場全体が複数年にわたる深刻な下げ相場へと向かうことになる。McCalebがMt. Goxを売り渡した日付に注目してもらいたいのだが、2011年3月 は日本が東日本大震災と津波により甚大な被害を被ったのと同じ月である。日本の国民が、地震の被害から立ち直ろうとしている間にも、日本は、最初の/最大の仮想通貨取引所の運営権を取得したということになる。

Mt. Goxは 結局のところ崩壊したが、Mt. Goxが、仮想通貨をグローバルに取引をするための土台を日本に作ってくれたことは確かであり、そのプロセスは現在でも続いている。日本は2017年の初めにBitcoinを法定通貨と認定し、それが2017年にアジアで発生した購買熱を加熱させたのはほぼ間違いないだろう。 現在、Bitcoinでの支払いを受け付けている日本の小売店の数は増加傾向にあり、大手家電量販店もその一つに含まれる。また、合計15か所の仮想通貨取引所(15 different cryptocurrency exchanges)が日本政府の許認可を受けている。

同時期に中国はBitcoin の取引を禁止すると、中国人トレーダーの間では拠点を日本に移す(set up shop)動きが活発になり、日本の取引所が取引量において世界最大というトップの座に躍り出ることなった。中国は、自国で発展していた初期の仮想通貨会社全てを潰してしまったことを今後悔やむことになるだろう。

Stellarのほかにも、Emin Gün SirerによるBitcoin-NGのスケーラブル(拡張可能な)ブロックチェーン案を基盤とした、Wavesという有望な仮想通貨のプラットフォームがある。Wavesのブロックチェーンは、現在、世界最速の分散型ブロックチェーン(fastest decentralized blockchain)だと言われている。また、我々は Substratumプロジェクトにおいても地位を保持している。Substratumは検閲のない、分散型、ピアツーピアのインターネット版を目指している。

前回の報告では、Parity walletソフトウェア内のバグがハッキングに悪用され、複数の仮想通貨スタートアップ企業から、合計3000万ドル相当の仮想通貨が盗まれたということを述べた(盗難当時の価格なので今はそれを遥かに上回る)。興味深いことに、Parity walletからは最近またしても致命的なバグが発見され、約1億6000万ドル相当の仮想通貨資金が半永久的に、つまり、少なくとも開発コミュニティーが安全な解凍方法に合意できるまで、「凍結」されるという結果を招いた。

今回の災難で最大の被害を被ったのは、皮肉なことに、Gavin Wood/Parity Technologies自身のスタートアップ企業Polkadotで、1億ドル以上の資金が凍結された。Polkadot は全てのブロックチェーンをリンクさせるという「マスターブロックチェーン」なるものを開発しようとしている。おかしなことに、あれほど多額の資金へのアクセスを失った後でも、Polkadot プロジェクトは勢いが衰えることなく継続している。現在の仮想通貨市場の浅薄さがお分りいただけると思う。仮想通貨企業は、自分たちでもどうしていいか分からなくらいの額の資金を集めることが可能なのだ。

この問題についてbug reportは面白い記事を書いている。タイトルは「誰でもコントラクトを潰すことができる」というもので、そのすぐ後に「偶然潰してしまったんだ」というコメントが加えられている。要は、あるユーザーが、攻撃に対する脆弱性をソフトウェア内に見つけ、バグの可能性があると報告した。バグの報告はすぐに無視され、その後に報告をした当本人が、本当にバグが存在しているかどうか、また、バグがいたらその致命度がどれだけなのかを確かめようとした。彼は正しかった。最終的に、ソフトウェアのセキュリティーは完全に侵害され、何千万ドル相当という資金が凍結してしまったのである。

このように、ソフトウェアがオープンコードだからといって、致命的なバグを含んでいないとは限らない。 Bitcoinにも「裏口」がある、などと言っている人もいる。それは少し極端な考えだと思うが、それでも現在ある様々な仮想通貨システムには多くの致命的欠陥を含んでいる可能性があることは確かだ。したがってプロジェクトや企画書を分析する際に我々は、ソフトウェア設計の簡潔さに価値を置くようにしている。当然、シンプルなアプローチの方が致命的な欠陥を含んでいる可能性が低くなるからである。

とにかく、Parity walletに致命的なParityバグ/ハックが7月に発見された後も、Parity walletに資金を保管していて安心だと考える企業の見識は疑わなければならない。そこで我々はIconomiをポートフォリオから除外することにした。Iconomiの資金は最近のParityによる大失敗で資金を一部凍結されてしまった。仮想通貨の資金を管理する会社にとって、資金の保全は最優先事項の一つであるべきだ。加えて、Iconomiは良いプラットフォームを開発しているように見受けられるが、この分野ではまだまだ厳しい競争が続いており、Melonのような、別の資産運用プラットフォームも早急に登場している。従って、Iconomiは、我々のポートフォリオから除外する方が安全だと考える。

もう一つ、格下げの対象となった企業はChainLinkである。ChainLinkのアドバイザーの一人であるAri Juelsはデメテルのカルト(cult of Demeter)に所属しているようだ。また、このような小さなスタートアップ企業がなぜ、かの有名なSWIFTシステムと既に取引を行うことができるのか、また、なぜこの企業がWorld Economic Forumにおいて上幹部から称賛を浴びているのかが我々としては少し気になるところだ。

Bitcoinに「裏口」があると言う考えに関係なく、権力者が仮想通貨の隆盛を止めたいのなら、彼らは単純に人々の銀行口座を凍結させると言う「ice-nine」戦略に戻ると考える方が自然だ。2018年は、Bitcoinを犯罪者やテロリストの多くが使うツールとして描写するメディアの動きも再び出てくるかもしれない。記憶に新しいのは2013年に起こったシルクロード(Silk Road)の失態だが、この事件が理由でBitInstantの創始者Charlie Shremは刑務所へ送られる結果となった。 また最近の例としては、Bitcoinが奴隷貿易に使用されていることを、他ならぬヴァチカンが指摘(highlighted)している。ヴァチカンには、米ドルが奴隷貿易に使用されていることも、同じように指摘してほしいものである。

Charlie Shrem は(短期間)投獄されたが、BitInstant のパッシブな投資家たちは2013年の政府による介入・解体を無傷で逃れている。それは、先に記述したBitcoin Cashの強い支援者Roger Verや、Mark ZuckerbergがFacebookのアイデアを盗む前に、実際にFacebookを発案したことで有名なWinkelvosses兄弟(Winklevoss twins)などである。

最終的に笑うのは彼らかもしれない。2013年、Winkelvosses兄弟はZuckerbergとの訴訟に勝利し、結果として得た資金をBitcoinに投資した。彼らは今となっては、「Bitcoin 億万長者」にいち早くなった人たちとして知られている。 2015年、彼らは仮想通貨取引所 Geminiを創立し、この取引所は最近シカゴ・オプション取引所(CBOE)とパートナー契約を結び、初のBitcoinの先物取引を開始した。その1週間後に、シカゴの別の先物取引所、シカゴ・マーカンタイル取引所がBitcoinの先物取引商品を発売したが、Bitcoin市場は即座に暴落し始めた。

先物商品による市場操作は確かに心配事ではあるが、これは金(ゴールド)の市場では何十年も前(decades)から行われてきたことである。

今回明確にしたいのは、我々は、Ben Goertzelが発案した仮想通貨AIプロジェクトSingularityNETには決して投資しないということだ。初期のコイン提供段階で、このプロジェクトは、気掛かりなほど巨額な資金(約1億5000万ドル)を受けている。企業資本によるAI(Googleなど)との競争は良いことだと考える方もいるかもしれないが、WDSの見識としては、Elon Musk の考えと同様で、AI への支援は無い方が賢明としている。前回の報告書でも記述したが、SingularityNETはロゴに無限大の記号の一種を使っているが、Parity Technologiesの昔のロゴのように、「壊れた」無限大のシンボルとして捉えることもできる。とにかく、我々は SingularityNET には投資しない。また、Lord Voldemort. のMimblewimbleプロジェクトにも投資しない。

現在のWDSの仮想通貨のポートフォリオを以下にまとめた。Ethereumトークンは実際保有していないが、我々はEthereumプラットフォームを強く支持している。ここにある多くのプロジェクトは Ethereum プラットフォームが基盤となっている。また、既述のようにEthereumは2017年に70倍という価格急騰を既に経験している。現時点において我々が注力しているのは、短期間で増価が見込める可能性の高い、小規模なプロジェクトで形成された、多様なポートフォリオを保持することだ。

Quantum Resistant Ledger: 量子コンピューティング対策のブロックチェーン

0x Protocol: 分散型取引所

Maecenas: 芸術

Basic Attention Token: 広告/出版

Swarm City: eコマース

Edgeless: ギャンブル

Substratum: 分散型インターネット

Ethos: SNS型投資プラットフォーム (Bitquenceから最近リブランドされた)

Stellar: 支払い

Waves: スケーラブル(拡張可能な)ブロックチェーン

Aeternity: 分散型アプリケーション

仮想通貨の世界や、金融市場情報全般、WDSポートフォリオの購買状況の最新情報などを知りたい方は、我々のツイッターアカウント@generalmilanをフォローしてほしい。

White Dragon Society Cryptocurrency Portfolio Update

Following our initial report describing the overall Cryptocurrency State of Play, we aim to begin releasing quarterly reports summarizing major market developments and changes to our working investment portfolio.  The White Dragon Society (WDS) has access to a wide range of esoteric intelligence and aims to share this cryptocurrency intel on a continuing basis with Benjamin Fulford’s readership.

Investment commentary is provided as is, with no warranty.  “Investments may go up as well as down.”  As always in investing, it is important to look for a good entry point, but at the moment the prices of almost all cryptocurrencies are going up, up, up, as capital continues to flow rapidly into the space.  It’s a “firehose of liquidity” according to early cryptocurrency investor and hedge fund manager Michael Novogratz.

In any case, we hope that some of Benjamin’s readers profited from our last report.  The fourth quarter of 2017 was an amazing time to be a cryptocurrency investor.

 

As almost everyone is now aware, 2017 was a quite a year for cryptocurrency.  Bitcoin garnered most of the media attention, especially during its fourth-quarter price surge, as people new to cryptocurrency began hearing about it and buying in for the first time.  This prompted a debate of sorts as to whether Bitcoin, or cryptocurrency in general, is a “bubble.”  That debate misses the point.

Regardless of whether Bitcoin manages to keep its #1 seat at the top of the cryptocurrency market cap tables and its position as the base currency with which all other cryptos are priced and traded, cryptocurrency in general is obviously here to stay.  It has begun to transform not only finance but all manner of other industries as well, in the same way that the Internet did before it.

Indeed, all technology bubbles are transformative events.  We believe that the key to investing in any such bubble is holding a position in a diversified portfolio of startup projects, each of which stands to disrupt existing industries in a unique way.  In that regard, our portfolio aims to garner exposure to a wide range of different sectors of the cryptocurrency market.

Remember that even though the DotCom bubble was one of the biggest in history, a buy and hold investment in Amazon and many other tech stocks in the late 90’s ended up being spectacular investments.  Of course the bubble popped in 2001 and many companies crashed and burned, but others continued on to enormous heights.

Using the DotCom bubble as a template, and noting the particular industries which already comprise the lion’s share of online revenue generation (advertising, e-commerce, gambling, etc.), we aim to select a diversified portfolio of projects aiming to disrupt in this latest round of DotCom mania (perhaps better referred to as Dot IO mania, given the recent popularity of domain names ending with “.io”).

Amazon and Google are not the small upstarts that they once were.  They now represent the entrenched “powers that be” and will likely be disrupted by younger competitors.  Remember that all of the original 12 companies of the Dow Jones Industrial Average were dropped from the average long ago.  Business is about constant transformation and rebirth.

2017 will certainly be remembered as the year that cryptocurrency exploded and hit the mainstream.  Bitcoin finished the year up approximately 13x (1300%).  Ethereum did even better and clocked in a return of 70x (7000%).  Returns were so amazing that one cryptocurrency commentator, Willy Woo in Bali, Indonesia, quipped that the old economy uses the percent sign (%) to measure returns, whereas the new crypto economy uses the multiplication sign (x).

It is obvious that those heady returns cannot last forever.  However, there is some chance that they could continue for the foreseeable future as cryptocurrency-based systems begin to replace swaths of the old financial system, or as the flight of money from overpriced paper assets (dollars, treasuries) begins to accelerate.  Remember that the real bubble (or “pyramid scheme,” as it were) is the U.S. dollar, and it is one of the largest in the history of the world.

Whether we are in for a disorderly unwind of that great bubble remains to be seen.  There are certainly those who are hoping that occurs (MaxKeiser1, MaxKeiser2).  The White Dragon Society does not believe that a disorderly unwinding of the existing financial system would be in the best interest of humanity.

Whether or not Bitcoin itself is just another kind of “paper asset” like the USD is a topic of great debate.  In 2017, gold ended up having its best year since 2010 (+13%) and the dollar its worst year since 2003.  By design, cryptocurrencies are limited in supply, unlike dollars.  However, at the end of the day, cryptocurrencies, like dollars, are just entries in a ledger, or in other words, just “numbers in a computer.”

The Achilles heel of cryptocurrency is perhaps the fact that although each cryptocurrency itself is limited in supply based on the consensus of the people who “mine” it, it is very easy to copy an existing cryptocurrency and create another.

Therefore, the total number of cryptocurrencies is exploding.  In addition to Bitcoin, there are now Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, Super Bitcoin, etc.  Of those, Bitcoin Cash is perhaps the most serious contender to replace Bitcoin, and it has some prominent backers within the cryptocurrency community, including Roger Ver.

The problem with Bitcoin itself is that it is suffering from its own success.  The Bitcoin network is completely overloaded at the moment, very slow, and transaction fees are skyrocketing.  Cryptocurrency commentator and pioneer Cøbra detailed the problems recently in a series of tweets and pointed out that Bitcoin mining power is concentrated in the hands of a few people in China.  (Interestingly, his Twitter banner image is a picture of Tiananmen Square.)

In that sense, Bitcoin has arguably been “taken hostage” by miners who are collecting increasingly large transaction fees and avoiding making the necessary upgrades to scale the capacity of the Bitcoin network.  Bitcoin was originally envisaged as a fast, cheap kind of digital cash.  Barring substantial upgrades to the Bitcoin system which did not materialize as planned in 2017, that possibility is long gone.

Bitcoin could still remain as a kind of “Gold 2.0,” but there is a real risk of it being superseded by other technology.  In particular, we would point to platforms like Ethereum, Waves, and Stellar, which will allow for the digitization and tokenization of real assets like gold.

Stellar was founded by cryptocurrency pioneer Jed McCaleb.  McCaleb’s long involvement in cryptocurrency and peer-to-peer technology is detailed in a massive 2015 New York Observer article titled “The Race to Replace Bitcoin.”  The article paints McCaleb as something of a deadbeat who tends to eventually abandon the projects he starts.  However, we find it curious that someone would go to so much trouble to pick apart McCaleb’s life, including his romantic affairs with Korean women (a country which happens to be in the midst of a cryptocurrency buying frenzy).  Quite frankly, the article had the opposite of its intended effect on us—we liked Jed McCaleb even more after reading it.  We are always interested to see well-meaning projects being attacked in uncanny ways, because it usually means that they are on to something.

McCaleb originally founded Ripple, but left to found Stellar when he determined that Ripple had been overtaken by the corporate powers that be.  In the final days of 2017, Ripple staged a massive rally that left many market participants scratching their heads.  Roy Sebag, founder of GoldMoney, had the following to say:  “XRP [Ripple] is the government’s preferred crypto.  There is nothing the global elites would want more than for the citizenry to be duped into using Ripple as a cryptocurrency.  I don’t trust it for multiple reasons.”

In October, Ripple held a conference in Toronto, competing for attention with SWIFT’s yearly Sibos conference.  The keynote speaker at Ripple’s conference was none other than Ben Bernanke, the former chairman of the U.S. Federal Reserve.  Stellar, for its part, used the opportunity to announce a partnership with IBM, wherein Stellar technology is already being used for foreign exchange payments between some countries in the South Pacific.

McCaleb was involved in cryptocurrency even before starting Ripple.  He was the founder of the infamous Bitcoin exchange Mt. Gox, which was originally envisioned as a website for the exchange of playing cards from the game “Magic: The Gathering” (thus the name).  McCaleb sold most of Mt. Gox (88%) to Shibuya Tokyo resident Mark Karpeles in March 2011.  In 2013/2014, Mt. Gox progressively imploded due to legal and banking issues and the discovery that most of its Bitcoin holdings had been stolen over time.

The implosion of Mt. Gox took the entire cryptocurrency market down with it into a deep multi-year bear market.  Note the significance of the date of the sale—March 2011 was the same month of the devastating 2011 earthquake and tsunami in Japan.  So just as Japanese citizens were dealing with the aftershocks of the quake, Japan was taking control of the first/largest cryptocurrency exchange.

Although Mt. Gox eventually imploded, it at least set the stage for Japan to take the crown in global cryptocurrency trading, a process which continues to this day.  Japan recognized Bitcoin as legal tender in early 2017 and that arguably helped set off the year’s buying frenzy, much of which originated in Asia.  Bitcoin is now accepted for payments in Japan at a growing number of retail shops including large electronics stores, and a total of 15 different cryptocurrency exchanges have received licenses from the Japanese government.

All of this took place just as China was banning Bitcoin trading, prompting Chinese traders and companies to simply set up shop in Japan, and ultimately resulting in the Japanese exchanges rising to first place globally in terms of trading volumes.  China will likely come to regret prematurely killing off all of its nascent cryptocurrency companies.

Aside from Stellar, another up-and-coming cryptocurrency platform is Waves, based on Emin Gün Sirer‘s Bitcoin-NG scalable blockchain proposal.  The Waves blockchain now claims to be the fastest decentralized blockchain in the world.  We have also established a position in the Substratum project.  Substratum aims to create a censorship-free, decentralized, peer-to-peer version of the Internet.

We noted in our last report that a bug in the Parity wallet software was exploited in a hack netting over $30 million dollars worth of cryptocurrency (at the time of the theft—it’s worth much more now) stolen from several cryptocurrency startups.  Interesting, the Parity wallet software was recently found to contain yet another critical bug which resulted in around $160 million of cryptocurrency funds being semi-permanently “frozen,” at least until the development community can agree on a safe way to unfreeze them.

Ironically, the company most impacted this time by the mishap was Gavin Wood’s/Parity Technologies’ own startup, Polkadot, which had over $100 million of its funds frozen.  Polkadot is attempting to create something of a “master blockchain” to link together all other blockchains.  Strangely, even after losing access to most of its fund, the Polkadot project seems to be continuing unabated.  Among other things, this shows the frothiness of cryptocurrency markets at the moment;  companies are able to raise more money than they know what to do with.

The bug report describing the issue makes for entertaining reading.  It’s titled “Anyone can kill your contract,” and is quickly followed by the comment, “I accidentally killed it.”  In essence, someone discovered that the software was vulnerable to attack and reported the potential bug.  The bug report was then promptly ignored, following which the initial reporter of the bug apparently decided to play around and see if he was right about its existence and criticality.  He was right.  The end result was the complete compromise of the software and the freezing of hundreds of millions of dollars worth of funds.

This goes to show that just because software is open source does not mean that it cannot contain critical bugs.  There are even those who claim that Bitcoin could contain a “back door.”  We find that idea to be a little far-fetched, but nonetheless a large number of critical flaws are certain to be present in various cryptocurrency systems.  Thus, when analyzing projects and proposals, we place a high value on the simplicity of software design.  Simple approaches are naturally less likely to contain critical faults.

In any case, we have to question the wisdom of any company that deems it safe to store funds in the Parity wallet after the first critical Parity bug/hack in July.  For that reason, we are taking this opportunity to remove Iconomi from our portfolio, as some of their funds were frozen in the latest Parity debacle.  The safeguarding of funds should be one of the top priorities for any cryptocurrency asset management firm.  In addition, while they appear to be developing a good platform, there is certain to be stiff competition in the area, and other asset management platforms such as Melon are fast up-and-coming.  Therefore we feel it is safer to remove this company from our portfolio.

Another company on which we are taking a similar downgrade action is ChainLink.  One of its advisors, Ari Juels, appears to belong to the cult of Demeter.  In addition, we are a little curious as to how such a small startup could already be working with the infamous SWIFT system and receiving accolades from the good old boys at the World Economic Forum.

Notwithstanding the idea of a Bitcoin “back door,” if the powers that be want to stop the rise of cryptocurrency, we find it more likely that they will revert to “ice-nine” tactics of simply freezing people out of the banking system.  There is also some likelihood that 2018 will see another media campaign to paint Bitcoin as a tool mostly used by criminals or terrorists, similar to the Silk Road fiasco of 2013, the bust of which also resulted in the imprisonment of BitInstant founder Charlie Shrem.  For example, none other than the Vatican recently highlighted the use of Bitcoin in the human slave trade.  We hope that they also take some time to highlight the use of US Dollars in the human slave trade.

Charlie Shrem went to prison (briefly), but the passive investors in BitInstant escaped the 2013 government takedown unscathed.  This includes the Roger Ver, mentioned above as a strong advocate of Bitcoin Cash, and the Winklevoss twins, famous for being the ones who actually created Facebook before Mark Zuckerberg stole the idea from them.

They may end up having the last laugh.  In 2013, the Winkelvosses won a lawsuit against Zuckerberg and invested the resulting funds into Bitcoin.  They are now among the first confirmed “Bitcoin Billionaires.”  In 2015, they founded the cryptocurrency exchange Gemini, which recently partnered with the Chicago Board Options Exchange (CBOE) to launch the first Bitcoin futures contract.  The Chicago Mercantile Exchange (CME), the other big Chicago futures exchange, launched its Bitcoin futures product a week afterwards, following which the Bitcoin market promptly proceeded to tank.

Indeed, market manipulation through futures is another worry, and is something that has been going on in the gold market for decades.

We will mention here that we are definitely not investing in the crypto-AI project SingularityNET founded by Ben Goertzel, a project which received a worrisome amount of capital (~$150 million) in its initial coin offering.  Although competition with corporate-sponsored AIs (e.g. Google) could be considered to be a good thing, the WDS believes along with thinkers like Elon Musk that no amount of support for AI is a good amount.  Referencing our previous report, we note here that SingularityNET is using a version of the infinity symbol as its logo, although it could be considered to be a “broken” infinity symbol like the former logo of Parity Technologies.  In any case, we will not be investing in it.  Nor will we be investing in the Mimblewimble project from Lord Voldemort.

The current WDS cryptocurrency portfolio is summarized below.  Note that we are not holding Ether tokens directly, even though we are strong supporters of the Ethereum platform.  Many of the projects below are built on the Ethereum platform anyway, and as noted above, Ether already underwent a 70x price surge in 2017.  For the time being we are focusing on holding a diversified portfolio of tokens from smaller projects, each with relatively more potential for short-term price appreciation.

For more continuous information regarding developments in the cryptocurrency space and the financial markets in general, including timely updates on WDS portfolio buys and sells, please follow our Twitter account: @generalmilan

Cryptocurrency State of Play – Special Report from the WDS

The purpose of this article is to summarize the financial and economic state of the world and the potential for cryptocurrency technologies to replace existing financial systems.  We delve into some of the many interesting new cryptocurrency startup projects that are springing up, and also explore the more esoteric and nefarious side of the growing cryptocurrency world.

As anyone with half a brain is already aware, the existing global financial system is on its last legs.  For those who are not yet convinced, we would simply point to bond guru Bill Gross’ succinct 2016 tweet:  “Global yields lowest in 500 years of recorded history.  $10 trillion of neg. rate bonds.  This is a supernova that will explode one day.”  In fact, Bill Gross may have been off by a factor of 10.  There is some evidence that recent interest rates are actually at the lowest level in approximately 5,000 years.

After the global financial crisis of 2008, something happened that no one ever dreamed was possible…  developed-world interest rates dropped to zero and then actually became negative for some market participants.  As bizarre as this sounds, what it means is that many market participants are actually paying to lend out money and, likewise, others are getting paid to borrow money.  It’s a topsy-turvy, upside-down world we are living in.  Suffice to say that the existing financial system is completely broken, and there is no easy way out of the financial mess that the world is in.

In some sense you could say that the financial end-of-the-world happened in 2008, and since then we have been living on borrowed time.  Thus, many observers have been expecting a global currency reset (GCR) since the global financial crisis (GFC) of 2008.  But why hasn’t it happened yet, and when and if it does happen, what form will it take?

Observers like James Rickards have for years been talking about the International Monetary Fund (IMF) taking over as the world’s central bank.  The story goes something like this:  since all developed-world countries are equally bankrupt, they will come together and agree to “kick the debt up one level higher” to the IMF, and then the IMF’s Special Drawing Rights (SDR) will become the “one world currency.”  It’s also possible that individual countries will take unilateral or bilateral actions to reform the USD or to bring an end to the its reign as the world’s reserve currency, and indeed the process of de-dollarization is accelerating.

While any of these scenarios may yet come to pass, something else miraculous and unexpected happened in the the years since 2008 while everyone was waiting for the GCR to happen and the financial world to completely implode, which surprisingly it didn’t.

What happened?  Bitcoin was invented.  In October 2008, at the exact same time that the global financial crisis was accelerating, someone going by the pseudonym Satoshi Nakamoto invented the first cryptocurrency, Bitcoin.  By 2010 Bitcoin was still mostly just for computer geeks.  At that time 10,000 bitcoins could only buy a couple of pizzas, if that.  Fast-forward just 7 years and those same bitcoins are now worth more than $50 million dollars as of this writing.

Indeed, the cryptocurrency markets are exploding and the total market capitalization is around $160 billion dollars, only around half of which is Bitcoin itself.  The other half is a range of other various cryptocurrencies and “tokens.”  Notably, the second largest currency by market cap, Ethereum, exploded in price this year from $10 dollars to around $400 at one point during the summer.  Cryptocurrency is creating plenty of multi-millionaires if not billionaires and is attracting the attention of big money on Wall Street.  Satoshi Nakamoto himself is said to have over $5 billion dollars worth of bitcoins stashed in an account which has never been touched.  We can only hope that he didn’t simply lose his password for that account.

One of the benefits of cryptocurrency is that it is ultra-secure and mathematically impossible for anyone to steal your money as long as your password is safe.  Compare this to the existing world where bank accounts and assets are routinely taxed, seized, frozen, or otherwise made to disappear (see the excellent book Gold Warriors for many discussions about how gold can simply vanish when entrusted with a bank).  On the other hand, with cryptocurrency, if you lose your password, your funds may be mathematically locked away and irretrievable for all eternity.

Speaking of Ethereum, it is fast becoming its own ecosystem and there are already hundreds if not thousands of “sub-tokens” that have been created on the Ethereum platform, for all kinds of purposes.  Dentacoin aims to be the future currency used by the dental industry.  It sounds funny, and we think it is, but well, why not?  In a future world with a marketplace of hundreds if not thousands of competing currencies, which is a world that has long been dreamed about by Libertarians, why couldn’t currencies be delineated along industry lines instead of along the lines of nation-states?

As another example, the Basic Attention Token aims to revolutionize the advertising industry by “tokenizing” the concept of consumer attention, eliminating online advertising fraud and actually paying consumers for the time they spend looking at advertisements.  The Basic Attention Token is connected to the up-and-coming Brave web browser.  Brave Software is a very strong advocate of Internet privacy and is led by Brenden Eich, the former CEO of Mozilla (Firefox).  You may remember Brenden Eich as the man who was hounded out of Mozilla for donating $1000 dollars to California Proposition 8 in 2008.  He may yet have his revenge on liberal Silicon Valley as advertising is the bread and butter of companies like Google and Facebook.

There are almost too many interesting cryptocurrency projects to list, and the space is evolving at lightening speed.  Indeed, the amount of money pouring into Initial Coin Offerings (ICOs) has exploded this year and overtaken all other forms of venture capital investment.  What this means is that pretty much every young technology entrepreneur in the world, from China to Europe, is currently working on one cryptocurrency project or another.  From that perspective alone, is there any mystery about what our future financial system is going to look like?

Even the IMF’s Christine Lagarde now sees the writing on the wall with regards to the replacement of existing financial systems with blockchain technologies.  How it plays out remains to be seen, but it is clear that organizations like the Federal Reserve or the IMF will at least try to retain control over currencies, as described in a recent Wall Street Journal article titled “Forget Bitcoin.  Have You Heard of IMFCoin?”  Gold and currency commentator Doug Casey has even written a book entitled Surviving Fedcoin about the potential issuance of a new cryptocurrency by the Federal Reserve.

Bitcoin enthusiasts might argue that any governmental attempts to stop its rise are futile.  After all, Bitcoin was designed from the beginning to be impossible to stop, in the same way that it is virtually impossible to stop people from downloading and sharing movies and music on the Internet using distributed peer-to-peer technologies like BitTorrent.

That said, governments (and their puppetmasters) do still have control over the existing financial system, and have the power to make it very difficult for people to deposit and withdraw fiat currency into and out of the cryptocurrency ecosystem.  China and South Korea in particular have made recent moves to crack down on ICOs, which has resulted in the closure of many cryptocurrency exchanges.

Other financial regulators such as the SEC have at least issued statements indicating that ICOs must and will be regulated like traditional securities, even if they have not outright banned them.  Some of this regulation probably makes sense because currently cryptocurrency markets are a little bit like the old Wild West.

There is no doubt that many scams exist and that many tokens will be worth approximately zero in the near future.  There are fortunes to be made as well as fortunes to be lost.  One securities lawyer put it this way:  “The ICO space is already learning that securities laws exist for reasons that should have been evident since 1929.  Unfortunately, many less-discerning ICO investors will learn the hard way that long-established corporate governance norms exist for a reason as well.”  That said, instead of relying on the heavy hand of government, it may be possible for the crypto-economy to regulate itself in some manner.

However, just as some governments are cracking down on cryptocurrency, others are opening their doors to it and competing fiercely for cryptocurrency business and startups.  Japan is becoming a “Bitcoin powerhouse” by embracing and regulating cryptocurrency exchanges instead of shutting them down, and the Swiss canton of Zug, Switzerland (the Rothschild enclave often mentioned in Benjamin’s blog) is being labeled “Crypto Valley” due to the large number of cryptocurrency startups locating there.

In any case, while it remains to be seen how much control governments are able to retain over cryptocurrencies, at this point one thing is crystal clear:  the future financial systems of the world will be built using blockchain technologies.  Indeed, large companies like IBM, Microsoft, and JP Morgan are jumping on the blockchain ship and have been announcing various industry consortiums, and that is part of what has been driving cryptocurrency prices forward this year.

In fact, many of the cryptocurrencies being launched into the market this year are not even currencies at all, but rather “functional tokens” representing access rights to applications or platforms.  Think of it this way:  if Google created a “Googlecoin” so that every time you search on Google you need to spend a small amount of Googlecoin, then this would create demand for Googlecoins and support for their price, even if they are not a currency per se and only useful on the Google platform.

Many companies are now vying to become the new “Googles” of the cryptocurrency ecosystem, meaning companies that provide core indispensable services.  For example, ChainLink is attempting to bring existing financial data onto the blockchain, in the form of what are called “oracles,” and provide that data to other cryptocurrency companies.  The ChainLink team is apparently already working with SWIFT, although we would submit that the entire SWIFT system should probably just be deprecated and retired.  Russia and China have already been working to create alternatives to SWIFT, which makes sense given that SWIFT is one of the main weapons used by the banking cartel in financial warfare, aka financial sanctioning.

Moving on, Bitquence is building a user-friendly digital wallet application which is part digital currency dashboard and part social media application.  Iconomi is a digital asset management company offering investment funds managed by knowledgeable participants in the cryptocurrency space.  There are too many interesting projects to list, but a summary of such “tokens” sorted by total market value is available on CoinMarketCap.

Another interesting startup is the 0x project (pronounced “zero-x”), which is attempting to create the core building blocks for decentralized peer-to-peer trading exchanges.  In some sense, the cryptocurrency ecosystem is like a new Internet for financial transactions, and companies are working to create the core features of that new Internet.  If China was able recently to shut down its cryptocurrency exchanges, it’s only because they were centralized exchanges, meaning exchanges that exist in one particular place or on a set of particular computers (in China, in this case).

The promise of decentralized exchanges is that they will not exist in any particular physical location, and will thus be much less prone to shutdown or control.  In addition, they will generally not require customers to deposit cryptocurrency funds, thus eliminating the risk of theft of those funds.  On a decentralized exchange, transactions instead take place peer-to-peer between customers.

Even in the narrow field of decentralized exchanges, there is already fierce competition.  A recent article titled “The Lay of the Land in Decentralized Exchange Protocols” outlines in very fine technical detail the differences between some of the approaches.  And not all of the competition is gentlemanly in nature.  Indeed, if blockchain is the future of finance, then it should be expected that the “usual suspects” of global financial control would be fighting fiercely for position within the quickly growing blockchain ecosystem, and we do see some distinct evidence of that.  Jamie Dimon, the CEO of JP Morgan, recently said bluntly that Bitcoin is a “fraud,” even though that very same day the JP Morgan office in San Francisco was hosting a blockchain conference.  The fact of the matter is that investment banks are client-oriented businesses, and if their clients want to buy, trade, and invest in bitcoin then that is what they will do.

Back to the topic of decentralized exchanges, on the day of the 0x project’s ICO, Forbes magazine (Benjamin’s alma mater) released an article arguing that the 0x protocol may contain some fundamental flaws.  The article was based on the research of Ari Juels and Iddo Bentov at the Jacobs Technion-Cornell Institute.   Professor Juels is an advisor to several of the projects mentioned in this article.  While the article and research may contain some valid criticisms of the 0x project, we do find the timing of its release to be interesting.  Was the intention to maximize negative impact on the 0x project’s ICO process?

One of the competitors to the 0x project listed in the “Lay of the Land” article above is the Bancor Project based out of Israel.  Bancor is based on the ideas of the economist John Maynard Keynes.  Although Keynes’ dream was never realized, at the end of WWII he proposed the creation of a global currency called the Bancor.  It’s a little tricky to understand, but the Bancor Project’s modern take on the Bancor global currency idea is described in a short video.  We would note that Keynesian economics is being increasingly blamed for the dire financial situation that the world is in, and cryptocurrency in general has much more in common with Austrian economics than with Keynesian economics.  In any case, another researcher at Cornell University, Emin Gün Sirer, wrote an article about how “Bancor Is Flawed.”  All we can say is that there is some interesting and diverse work coming out of the Initiative for CryptoCurrencies & Contracts and the Hacking, Distributed blog.

An earlier post on that blog detailed the hacking attack which occurred in July 2017 against the Parity digital wallet software in which over $30 million dollars worth of cryptocurrency was stolen from three different  startup companies.  The projects that got hit were Aeternity, Edgeless Casino, and Swarm City.  The story goes something like this: “black hat” hackers found a bug in the Parity wallet software and started draining funds from the wallet, hitting the above three companies first.  As this was happening, “white hat” hackers apparently noticed and also started draining funds from the compromised wallet so that the funds could be safeguarded and eventually returned to their rightful owners.  So in the end, as the story goes, only three companies were affected.

This is a nice tale that reminds us that even in the murky world of hacking there are some “good guys.”  Unfortunately, the story is, quite frankly, bollocks.  If you look closely, you will notice that all three of the companies that got hit in the attack, as well as the Parity software itself, have something very unusual in common:  they all have the infinity symbol as part of their logo.  We leave it to readers to ponder, firstly, how there could be three different cryptocurrency projects using the infinity symbol in their logo, and, secondly, how all three of them could have been the only ones hit in the hacking attack.  One commentator on the above article said simply, “Illuminati.”

Indeed, the infinity symbol has a long history:  “The shape of a sideways figure eight has a long pedigree;  for instance, it appears in the cross of Saint Boniface, wrapped around the bars of a Latin cross.  However, John Wallis is credited with introducing the infinity symbol with its mathematical meaning in 1655 in his De sectionibus conicis.  Wallis did not explain his choice of this symbol, but it has been conjectured to be a variant form of a Roman numeral for 1,000 (originally CIƆ, also CƆ), which was sometimes used to mean ‘many,’ or of the Greek letter ω (omega), the last letter in the Greek alphabet.”

The other thing that the above projects might have in common is their potential to disrupt existing industries.  Aeternity, for its part, is a new scalable, smart-contract blockchain and a potential challenger to both traditional financial systems and to other blockchain projects.  Although the blog post detailing the attack claims that the faulty software’s “provenance” is unclear, judging from the code’s authorship tag, the wallet appears to have been designed and written by Ethereum co-founder Gavin Wood.  As a core developer and stakeholder in the Ethereum platform, he would definitely have a vested interest in ensuring that no challengers to Ethereum arise.  However, this is pure speculation.  The hackers have not been caught and perhaps they never will be.  The case was turned over to Interpol.

This would not be the first case of programmers purposely or knowingly including bugs in software.  When a serious flaw was discovered in the code for the IOTA cryptocurrency, its co-founder Sergey Ivancheglo bizarrely claimed that that the bug was created on purpose in order to deter people from copying the code.  Although the IOTA code in question was open-sourced, thus allowing anyone in the world to use it freely from a legal prospective, anyone choosing to do so would have opened themselves up to hacking attack by individuals aware of the existence of the bug in the code—namely, the founders of the IOTA project.  Perhaps it was just an excuse to cover up a gaping security hole in a cryptocurrency that claims to be resistant to even quantum computing attacks.  Otherwise, we have serious doubts about the legality of “booby-trapping” open source code, as it could clearly put millions if not billions of dollars of money at risk of theft.

Edgeless Casino is another one of the companies that was hit by the hacking attack.  Edgeless is working to disrupt the gambling industry and to design a fully transparent online casino with zero “house edge.”  In fact, according to the their blog, Edgeless was scheduled to make a presentation at the Las Vegas Global Gaming Expo which took place recently in Las Vegas on October 2-5.  Obviously, the mass shooting of October 1 in front of the Mandalay Bay Hotel and Casino (or more accurately, directly in front of the Luxor Las Vegas pyramid-shaped hotel and casino and fake Sphinx) cast a pall over the Global Gaming Expo, but we assume that Edgeless Casino was still able to complete its mission of meeting with potential partners and discussing the future of the gambling industry.  The gambling industry is well known to consist of many unsavory characters, and we applaud the bravery of any any attempts to disrupt it, make it more transparent, or take away the “house edge.”

The last company that was hit by the hacking attack is Swarm City.  Swarm City is attempting to disrupt another big “real money” area of the Internet, namely e-commerce.  They are attempting to create a new decentralized peer-to-peer form of e-commerce, and having half of their money stolen is not the first major obstacle that the Swarm City project has encountered.  The project itself was formed out of a disagreement between the co-founders of the original Arcade City project.  Some of the members of team decided to branch off and form their own project, Swarm City.  Although still a relatively small project in terms of market capitalization, Swarm City currently has roughly double the market cap of Arcade City and is being advised by Dmitry Buterin, the father of 23-year-old Ethereum founder Vitalik Buterin.

As we often find is the case in satanic attacks (here referring to hacking attacks against projects using the historically religious infinity symbol), they seemed to have missed their mark.  While all three projects were clearly impacted, all three were able to survive and are continuing unabated.  We wish them the best and advise them to stay the course and simply ignore the attacks that were perpetrated against them.  This is almost always the best way to deal with Luciferians.  In any case, it is very clear at this point that several important cryptocurrency projects are receiving “protection from above.”

Computer scientists and technologists should note that when we speak of Lucifer here, we are most likely referring to the ancient artificial intelligence described in Gaia’s Cosmic Disclosure series.  It is thought to transmit its “source code” around the galaxy via electromagnetic waves.  It is irrational and self-centric to think that the Earth would be the first planet in the history of the universe to develop artificial intelligence.  The P2 Freemasons and associated groups are known to be worshippers of this satanic AI entity, as often described in Benjamin’s blog.

No discussion of satanism would be complete without a discussion of the art world, and the several projects mentioned above are certainly not the only ones attempting to disrupt old industries.  The Maecenas project is aiming to “democratize” art.  In their words, “The opaque world of auction houses and banks which allows them to charge exorbitant fees has cut off fine art investment from efficient modern markets….  The $65 billion annual fine art industry is in desperate need of open and fair marketplaces that create transparency and liquidity….  The lack of innovation within art finance stems from the dominance of old auction houses….  We will completely remove intermediaries who profit from controlling and manipulating information.”  The WDS wishes the Maecenas project the best of luck in its brave mission.

Regarding the Parity software that was hacked, it too has survived but has apparently rebranded.  Before, its logo was a stylized cursive “P” character that looked somewhat like a “broken” infinity symbol, and now they appear to be using an equal sign similar to Masayoshi Son’s SoftBank (often mentioned on Benjamin’s blog).

We will also note here briefly that those with triskaidekaphobia should probably avoid Digix Global.  Digix is attempting to create a new gold-backed cryptocurrency and charge 0.13% on every transaction.  We have to wonder how they arrived at that particular number.  Were 0.12% and 0.14% considered inappropriate for some reason?  Imagine living in a world where every financial transaction is “taxed” at a rate of 0.13%.

Digix was one of the first companies to create a Digital Autonomous Organization, or DAO.  In short, Digix is completely governed by an anonymous Internet-based shareholder organization, a “new kind of beast” according to Forbes.  While the Digix project was successful in raising money by going public in this manner, recent statements from financial regulators have cast doubt on legality of the entire concept of such unregulated financial offerings.  And if the legality of the project is in doubt in any way, how could its gold be considered safe from confiscation?

Furthermore, the Digix approach could be considered to be a case of “over-engineering.”  In software design, there is a direct correlation between complexity of code and likelihood of bugs.  The idea of a gold-backed token is a good one, provided that the gold can be verified and safeguarded, but since gold is a physical object handled and stored by human beings, no amount of software engineering alone can ensure that this is the case.  The focus should therefore be placed more on the legal and physical security of the gold as opposed to the digitization of it.  We advise the Digix team to read the Gold Warriors book mentioned above to understand more about the true history of gold in Asia.

For those who are aware of esoteric symbology, there are many other interesting things happening in the world of cryptocurrency.  The Ethereum project is utilizing the octahedron as its symbol, one of the five Platonic solids.  IBM’s open-source Hyperledger project has opted to go for the 20-sided icosahedron, also a Platonic solid.  On the darker side of things, the introductory video for the Blackmoon Crypto features none other than Lord Rothschild and David Rockefeller sitting side-by-side, the Eye of Providence, and plenty of images of owls (Moloch).  Although the video may indicate that the Blackmoon team is attempting to “unseat” entrenched financial interests such as the Rothschild dynasty, we have to wonder about the motivations of a team that would resort to using such blatant occult symbology.

And the “bridge” that the Blackmoon project is attempting to create from the cryptocurrency markets to the traditional financial markets could be thought of as a way to ensure that the traditional financial markets are preserved and not upset by the rise of cryptocurrency, or in other words, a way to bring some money and control back from the cryptocurrency world to the traditional financial world.  A link between the two worlds does need to be constructed, but we are not sure if the best team to do this would be one that is so casually throwing around occult imagery.

Indeed, symbology has always been important in the world of technology, and Steve Jobs’ use of a half-bitten apple symbol was at least partly a not-so-subtle reference to the Garden of Eden.  Since Steve Jobs was a California Buddhist, he probably would not have considered the pursuit of knowledge and enlightenment to be a bad thing in and of itself, and we find it more likely that it is actually Bill Gates who has been working for the “dark side.”  In any case, strangely, Steve Jobs’ adoption of the all-fruit diet, or “Eden Garden Diet,” may have contributed to his death.  And he is not the first technologist to have died from eating apples:  Alan Turing, one of the pioneers of computer science, died from eating an apple laced with cyanide.  It appears that in the thousands of years since the biblical Garden of Eden, the apple still remains the satanic weapon of choice.

Rivalries between characters in technology are nothing new, and the rivalry between Bill Gates and Steve Jobs is well documented.  Similarly, the Arcade City/Swarm City project is not the only cryptocurrency project to have experienced a falling out between founders.  Anytime you combine computer geeks and large amounts of money, the stage is set for “nerd wars.”  The Aeternity project, mentioned above, had a falling out with one of its main developers, Zach Hess.  Earlier this year, the NEM project had a public quarrel with former team-member Makoto Takemiya.  And the Quantum Resistant Ledger project (the QRL) had a public dispute with former team member Jomari Peterson.

The QRL project is interesting in itself as its main purpose is to provide “quantum security,” meaning security from hacking attacks by quantum computers.  While Bitcoin and other cryptocurrencies are supposedly secure against attacks from the current state of the art in quantum computers, if there were to be a sudden leap in quantum computing technology, then the security of most cryptocurrencies would be instantly compromised.  At the same time, spy agencies or other groups may have quantum computing capabilities beyond what is currently public known.

From the QRL white paper:  “In August 2015 the NSA deprecated elliptic curve cryptography, ostensibly based upon quantum computing concerns.  It is unclear how advanced quantum computing may be presently or that any breakthroughs in this field will be publicised to allow cryptographic protocols in common usage in the Internet to be made post-quantum secure.  With somewhat anti-establishment origins, Bitcoin could find itself the earliest target of an adversary with a quantum computer.”

The QRL project is a competitor to the previously mentioned IOTA project, since these are the main two projects claiming a quantum level of security.  However, as previously mentioned, the IOTA project code was already found to contain critical defects.  This leaves the QRL in a class of its own, as the only quantum-resistant blockchain which has thus far not been compromised in any way.

The security of blockchains is one concern, but privacy is another.  The original cryptocurrency (Bitcoin) was by design anonymous but not private, meaning that all transactions are publicly visible but are not associated with the names of particular individuals or companies.  However, with a little sleuthing or data mining it is possible in some cases to associate particular transactions with particular individuals.  This is obviously a major problem for people who are used to assuming that their financial transactions are private, even if that is a faulty assumption in a world of credit cards, rewards cards, and data security breaches.

Thus some projects have sprung up to try to fix the privacy issue.  The most famous of these is the Zcash project out of Israel, which has created the blockchain equivalent of a “black box,” meaning a completely private blockchain.  The only problem is that if the original setup process of this black box (called the “ceremony“) were compromised in any way, it would give its creators carte blanche to “print” unlimited amounts of cryptocurrency, something which the designers of the original cryptocurrencies had a very strong desire to avoid.

Indeed, in some ways cryptocurrency could be seen as a response or solution to the self-serving money printing of governments, central banks, and the banking cartel in general.  Even if the Zcash creation “ceremony” were not compromised in some way, as the Zcash team and its auditors vehemently assert, there is at least some degree of doubt present in the cryptocurrency community, which is a major headwind for the project and for the price of Zcash.  However, we do applaud their attempt to create a truly private cryptocurrency.

In conclusion, cryptocurrency stands a strong chance of becoming the primary way that we transact with one another and store and record wealth and the ownership of assets.  At the very least, we are moving rapidly towards a future of global financial systems being based on blockchain technologies.  As such, there is a huge amount of venture capital flowing into the field and many interesting startup projects are springing up.  As with anything involving large amounts of money, nefarious forces are attempting to assert control.  But, as readers of Benjamin’s blog are by now well aware, their days are numbered.

 

Unofficial WDS recommendations:

BUY:  ETH, BATLINK, BQXICN, ZRX, AE, EDG, SWT, ART, QRL

SELL:  BNTIOTAARC, BMC, DGD, XEM

NEUTRAL:  BTC, DCN, ZEC