Category: Cryptocurrency

Earth Alliance Cryptocurrency Report, Q3 2018

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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

(Some sections translated from Chinese)

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.

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