SharperDingaan

Welcome to the CBDC - the real question is whether e-Krona will also have interest bearing possibilities (I-CBDC). We would suggest that the hangups are how interest on the token would affect the payments and banking system, how taxation on the token interest earned by non Swedes will be processed, and whether the token can be issued with interest switched 'off'. ie; At a rate of 0% but with staged integration. It isn't choice of technology, it's can it be integrated with what already exists - and how. SD

The major 'investables' are IBM - offering scaleable (DB) block chain on the cloud, and Etherium offering blockchain on a distributed ledger. Most of this is done via joint ventures, not using outside money. SD

I thought you first entry point was $7000 for bitcoin, why $500-1000? Why not $100 or $10? While I agree that a lot of money can be made playing the rallies or the busts, the lack of intrinsic value for any crypto currencies makes it hard to get entry or exit pointe for three tokens. There's no real entry 'price'. All you can do is try and guess if the current price is low enough to draw in sufficient numbers of bargain hunters, willing to drive the price up - in the belief that the current price is cheap. The entry point could just as easily be $5,000 or $10,000. Value investing is also quite good practice for it - as supposedly we are better at 'seeing' value where others do not. SD

No. You have to decide if you need the 'super security' of Bitcoin. If you do need it, pay up for the product offered - 'super security'. If you don't need it - why are you in Bitcoin? If Bitcoin is a 'investment', this is just the transaction fee. No different to the realtors commission when buying a house. SD

Rework the numbers when the value of the token is FALLING, and this falls apart rapidly. Even if you've paid for your rig, the incremental electricity cost of running it will exceed the value of the token earned. You would stop mining and enjoy some awesome video instead. We know that Bitcoin has long-term value, the market will be volatile, and that 'mania' is a limited term engagement. Perhaps the smartest thing is to simply sell it into the rallies, park the proceeds in treasuries, and buy it back < 500-1000? SD

USDT isn't backed by anything - if it were it would be fully exchangeable into fiat USD, on multiple exchanges. The fact that they have to give you a token (USDT) that is supposed to be the same as a fiat USD, versus the actual fiat USD, is hard evidence of that. You can give me fiat USD for a token, but you're never getting your fiat USD back - just another token. A matryoshka doll. SD

We have a similar issue with CAD/USD. There are times when CAD is clearly overvalued against USD, but they are maybe once/decade events. For us, once CAD starts getting > 85c we start moving to USD ADRs. Why 85c ? - it's just a number that has worked well for us. SD

Interesting. Based on your thoughts, I may give it a shot too. Just be mindful that today - much of the reason for selling you a rig; is because the seller expects to make MORE from you - than he would had he simply kept the rig, & mined for himself. It's OK for a hobby and experimentation, but it's not what it seems. Obviously, not a popular view among many! At the aggregate: 1) Only the fastest miner gets paid. New rigs are always faster than yours; meaning that over time you progressively earn less, and more & more of it is in less desirable token. Rigs have a short economic life. 2) Appearance of distributed security. The more rigs sold outside of the 'tech' community, the more diverse the aggregate mining network 'appears' to be, and the more real distributed security 'seems' to be. Problem is that its a 70% layer of very fast computers in mining consortia, and a 30% layer of much slower computers spread throughout the world, with hash rate controlled by degree of hash complexity. A small drop in complexity, and the faster computers win - erasing distributed security. 3) Capital cost downloading. Every utility downloads the capital cost of producing its product onto its customers, most often by the customer paying a 'debt service' charge on their bill every month. An alternative is to simply have the customer build their own generation facility (take on the capital cost) and buy their net output. See any difference between this and a mining rig? SD

This is really the bull case. If the economy for criminals, terrorists, tax evaders, and money launderers is large enough (and it is), some of these tokens might actually have value as currencies. But which token will become the fiat currency of the underworld? There is a pretty good chance it hasn't even been invented yet. Are we still at the Napster stage of digital currencies? This is why I don't think there will be a Fedcoin. If there is a Fedcoin then politics means that eventually the government drug dealer and terrorism ops will come out just like we are now finding out about ISIS. I think instead there will be private cryptos, some of them set up by intelligence agencies or their friends. It is part of the trend of changing from the public wave to the private wave. When computers record everything it is no longer possible to have big government with big secrets. It will be much safer to have small government and big secrets hidden among millions of private companies. The beauty of the Bitcoin is that nobody could possibly have come up with a better 'store of value' for the underground economy; and the more distrusted 'big brother' is, the better this works! (the libertarian dream). The more 'mainstream' it becomes, the more valuable it becomes as well - as the greater variety and quantity of 'scum' produce network effects. http://www.starwars.com/video/my-kind-of-scum. The more obvious 'containment' is the creation of ONE single direct CB competitor to Bitcoin, that 'rules them all' (other private currencies). Fearless and inventive! SD

This is really the bull case. If the economy for criminals, terrorists, tax evaders, and money launderers is large enough (and it is), some of these tokens might actually have value as currencies. But which token will become the fiat currency of the underworld? There is a pretty good chance it hasn't even been invented yet. Are we still at the Napster stage of digital currencies? Amusingly they have the same problem as you and I. You and I know that the fiat currency in our hand is devaluing all the time - because more bills are being printed. The underground can only buy certain currencies, but if the price of those currencies keeps falling over time - their holdings become worth less and less. 'Devaluation' by another means. SD

The HD wallets like Jaxx follow a standard. You can take your 12 word backup phrase from your Jaxx wallet and restore it on Exodus for example. Also you can list all of the private keys in Jaxx and write them down and restore them on any wallet software. Your Jaxx and wallets like it interact with the blockchain, but they don't store your Bitcoin. Your Bitcoin lives on the blockchain and any software can be used to access them. Jaxx can disappear tomorrow and I would not lose any of the Bitcoin that I have stored in my Jaxx wallet. The particular software you use to view your bitcoins or to spend them doesn't matter. What matters, and the only thing that matters, is that you know either your 12 word backup phrase or all of your private keys. The smartest thing you can do with these is write your code on a slip of paper, store it in your safety deposit box, and ensure that you clear your browser every time you finish accessing your digital wallet. The easiest way to steal token is to simply read (electronically) your device, the easiest way to do that is via malware you've accidentally downloaded. SD

Read from around page 12 onwards. The inference is only buy in a collapse, only buy Bitcoin, and it'll be your kids who collect https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor%27s+Take+on+Cryptoassets+v6.pdf SD

Is this correct ??? https://blockchain.info/pools?timespan=4days The big ones are mining pools, some have tens of thousands of members each of whom can switch pools or start mining on their own with a couple of keystrokes. They also all know each other. Distributed 'security' as advertised doesn't really exist; you're really relying on 'inertia' and self interest ( the fact that the 'craze' is worth much more to everyone if nobody screws the pooch, and the 'ethos' that you don't take your money out). Nothing wrong in that (everyone eventually grows up), but it's a different way of thinking. SD

It's useful to take a page from the project managers playbook, where 'potential' projects are rated red, yellow, green. Red being low probability or distant; green being the reverse. EV's would be red, tending to yellow. There is also cyclical versus disruption. Trump canceling NAFTA is cyclical; NA integrated auto producers would take an immediate and hard hit, local unemployment levels would spiral, current leaders would be replaced in the next political cycle, leading to implementation of NAFTA2. Automating the plants and warehouses with 90% robotics is disruptive, as the jobs are never coming back. An investor would either go long the robotics immediately, or long auto producers 2 years after NAFTA withdrawal (after the bankruptcy's have already happened). Marketers refer to 'product life cycle', industries are similar. Time on the 'X' axis is just replaced with 'innovation'. Incorporating the small innovations will improve your product and extend its life cycle; the big innovations rapidly put you out of business (motor car replacing the horse and buggy). The take-away's here are be strategic, and be patient. Which very few will do in today's age of instant gratification. SD

Do you have any thoughts on the energy consumption and transaction speed (7-10 per second) that are often cited as reasons that blockchain will not be able to scale? More specifically, is it possible for blockchain to achieve mass adoption for various use cases with those two hindrances core to the protocol? Thanks A blockchain will run on EITHER a database OR a distributed ledger. 95% of applications do not need the distributed ledger. Furthermore; energy consumption, and slow transaction speed, is only an issue for the distributed ledger. There are no scale issues with databases, and they are used extensively in the D5 nations where scaled blockchain solutions are widespread. The simplest analogy is to look at the manufacturing supply chain. Pre-blockchain we used an ERP system running on a database, and it served our functional requirements very well. Blockchain on a database would just address the functionality in a different way, but with about the same transaction speed. Blockchain on a distributed ledger would also do the same thing, but it would make each transaction 'super secure' at the cost of a major reduction in processing speed. Most folks would argue that the value proposition doesn't warrant it, and that the customer would not pay for the 'super security'. Therefore no distributed ledger. Smart contracts run 'on top of' both databases and distributed ledgers. The manufacturer just needs to set up as the Oracle, provide a smart contract writer, list their product via customized offers, and integrate it with their existing ERP system, and collection facilities. As soon as 'offer' becomes 'contract' - either manufacturing commences, or inventory flows out the warehouse against guaranteed payment - with most of the 'back office' processing eliminated. When you're working on JIT, you cant afford the uncertainty as to whether it might take 10 minutes or 7 hours+ for a miner to verify your block on a distributed ledger. Therefore no distributed ledger. Needles to say 'not popular among the developer community'. SD

That's part of it yes. But also TD is more focused and has better risk management. Until a couple of years ago they had a great CEO which didn't hurt either. Generally you'll see all around the world that retail banks with good risk management tend to outperform. .... Also because both TD and RBC are paid up partners of the R3 Consortium - with ownership access to the pipes of the blockchain based Corda ledger. They will not be doing anything 'stupid' under OSFIs oversight, and how they 'do'/'report' will give some insight as to how the technology will be implemented. SD

For example gold and human beings coexisted on this planet a long time before gold was used as money. What happened? Gold didn't change, but all of the sudden it had value where it previously did not. Technology (long distance travel, sail, etc.) brought locals into trading contact with 'outsiders'. For locals the volume of trade changed the 'store of value' from the light and transportable sea shells & beetles - to the gold that outsiders wanted. Adoption 'events' changed the store of value; not much different from the Bitcoin versus Gold substitution argument we hear of today. We just don't want to hear it. SD

"So you should ask yourself, what has changed to cryptos in the span of 12 months to justify such move?" Four major things changed for Bitcoin during 2017: 1) Attained critical mass. Coming together of enough early adopters outside of the IT/developer community, for social media to take it main stream. 12 months ago it was just a 'thing', now everyone wants to know how to buy/sell them. 2) 'Asset' recognition. Individually, we may be positive that Bitcoin is a 'tulip'; but if the folks that matter declare Bitcoin to be an 'asset', our opinion really doesn't matter. 3) It became credible in NA. Bitcoin was the example, that moved business conversation onto the blockchain technology that runs it. 4) It became mainstream. R3 Corda ledger tests were successful, providing the pipes to enable financial regulators/institutions to 'safely' participate in crypto currency investment. The outcome has been derivatives on Bitcoin, that enable institutions to control risk. Given the large quantity of really bad ICO's issued in 2017, & the bad taste they are leaving; most would expect 2018 to see some of the air leave the bubble. The point here is that adoption 'events' are determining the valuation, not the technology itself. SD

These things have a fine line between junkie and investor; and why, in part, we are no longer in them. There is still a lot of money to be made, but we think that today it's largely a bet against the tide going out. Nothing wrong in that; we just prefer not to hold melting ice cubes. SD

Not popular .. but simply learn how to be 'idle'. Only buy when quality is available and cheap, and sit in treasuries when it isn't. You'll always be loading up a little after the cycle has turned up, and selling a little after the cycle has turned down. Worst case you suffer some opportunity loss from late buys & sells, and have to put up with a high cash position through the downturn. SD

Some clarifications ... We would would not mortgage a house paying 'X' % on the mortgage, to buy an investment with a higher cash yield and the possibility of a gain. We raised the point .. because until your mortgage is paid off, this IS what you are doing. If your 10% going to saving is expected to earn less than you're paying on your mortgage - it should be going to debt repayment. With concentrated portfolios, the initial investment in 'XYZ' equity is often > annual income; in these instances the sale point is 3x the value of the house you live in. In most cases it will give the equity significant room to run, and it will force the conversion of 'paper' wealth into 'money in the bank' on a systematic basis. Paper wealth is nice, but it's typically not liquid; partnership interests, and restricted shares being prime examples. $ today (for spending) are worth more than $ tomorrow (for wealth). Family that are house rich but cash poor, aren't going to be producing grand kids or moving forward anytime soon. But use an estate to buy a % of the house for cash that repays the mortgage, tie that equity to grand kid inheritance, and require that 100% of the saving go into additional investment; and it will materially, and permanently, change the equation. You will also optimize the 'opportunities' of wealth, and significantly reduce the current tax bill. Ultimately it comes down to what you see 'wealth' as, and its purpose. Just different strokes for different folks. SD

AUM. There are very real differences between retail/institutional behaviour, and retail that does/does not use a financial adviser. It's also useful to think of a pyramid, where height is a function of financial sophistication, and width is a proxy for % of population 'universe'. For most people the $ invested in savings (equity) competes against a $ invested in either debt repayment, or living costs. Initially we borrow/invest simultaneously, in the hope that our investment upon disposition will have earned more than the total interest paid on the debt. We borrow to go to university to get a 'sheepskin' and a job that pays enough for us to retire our debt. We borrow to buy a house to live in, that we pay off over a 25 year amortization. Per Clason's The Richest Man In Babylon; after-tax cash flow should be allocated to 10% investment, 20% debt repayment, and 70% cost of living. It's pretty hard to justify continued participation in an investment, when the unrealized gain is larger than your mortgage. You could sell tomorrow, pay off that mortgage, and reinvest the net proceeds in a zero risk T-Bill - BOTH earning interest AND saving on the mortgage payment every month. The solution is either 1) a bigger house, & a bigger mortgage (the unrealized gain isn't big enough yet - so stay invested), or 2) reduce the AUM that were available to make the investment (you've ALREADY taken $ off the table to repay your debts). The difference is risk management. Bankers will typically lend up to 3x after-tax income when buying a house. If you've already paid off your debt, this suggests that an equity should start to be sold off when its value exceeds 3x after tax income. Ignoring tax, and simplifying; if portfolio income is 100K/yr, XYZ equity should start selling off when the value of the position exceeds $300K - with the proceeds going to T-Bills. The portfolio continues to grow over time, but T-Bills make up a larger & larger portion of it - reducing portfolio return. The easiest way to raise portfolio return is to remove the T-Bills, & spend the proceeds on something else (new businesses, real estate, etc). Simplifying it means a portfolio has an optimal size, and its biased towards the smaller end. When it's getting too big, you need to return capital. Same as you read in the textbooks. SD

I don't understand what point you're trying to make. I don't think it can be disputed that $1 will buy you far less milk or eggs or bacon or subway rides or movie tickets today than $1 would have bought you 100 years ago. See, e.g., https://www.bls.gov/opub/btn/volume-2/average-food-prices-a-snapshot-of-how-much-has-changed-over-a-century.htm The link illustrates why I think USD is not a good store of value. If you think it's a good store of value, then I suspect we're using "store of value" to mean different things. The store TODAY is the claim on TODAYs tax stream of sovereign X. Tomorrow the value may be lower because there are more claims ($ bills) on the same tax stream, or a lower tax stream;either of which would 'devalue' the claim. Fiat currencies devalue because we increase the money supply (number of claims) every year. Gold devalues as well - by the new amount mined plus the net change in inventory reserves (bullion+jewelry+industry). But as it typically devalues at a slower rate than fiat does, it appears to increase in value over the years. SD

I have to ask what you mean by "store of value". Has fiat really been a good "store of value" over decades? Even the fiats that are seen as generally stable like the dollar have not retained their value in real terms in the 20th century, e.g., look at the change in the nominal price of a gallon of milk or a subway ride in NYC. EDIT: I do note that you didn't say fiats were a "good" store of value. So, to the extent a "store of value" is anything that allows at least some preservation of value over time, then fiats would qualify, even if they're not great at it. Technically a $1 bill is a bearer bond issued by the central bank, backed by the full faith and credit of the sovereign. The credit being supported by the sovereign ability to charge and collect on taxes, rents, etc. The store of value is 'dynamic', rather than a 'static' asset either sitting in a vault, or in the ground. SD

Fiat is a unit of account, medium of exchange, and store of value (guaranteed by the issuing CB); a Bitcoin is exactly the same thing. And you CAN use it to pay your taxes - as is commonly done in Estonia. Crypto as a payment system runs far more effectively and efficiently on a database. Until you do your own DD on how the technology works, no one can help you. SD