Bitcoins, Bancors, Battlestar Galactica

This post is a bunch of generalizations wrapped up in a clouded, fragile opinion which has a high propensity to be proved wrong. In the time since I began writing this to the time I published it there have been many more public disputes over the issue of Bitcoin and whether it is a bubble, the future of currency, both, or neither. In addition, the price of one Bitcoin increased from the equivalent price of about two ounces of gold to three ounces and back down again. In my opinion, Bitcoin isn’t worth one dollar, definitely not worth multiple ounces of gold, but it could, hypothetically, be worth an undetermined number of Bancors.



Bitcoin is a digital currency which was created in 2009. The creator of Bitcoin is still officially unknown although it is attributed to an individual named Satoshi Nakamoto. Bitcoin is a type of cryptocurrency where balances are kept using public and private “keys,” which are long strings of numbers and letters linked through a mathematical encryption algorithm. The public key serves as the address which is published to the world and to which others may send bitcoins. The private key is intended to be a secret which is used to authorize Bitcoin transmissions. In this way there are no physical bitcoins, only balances kept on a public ledger where all Bitcoin transactions are verified by computers.

The computing power required to broadcast and verify Bitcoin transactions is given by “miners” are motivated by the release of new bitcoin and transaction fees paid in bitcoin. These miners can be thought of as the decentralized authority enforcing the ongoing stability of the Bitcoin network. Bitcoin mining is the process through which bitcoins are released to come into circulation. Basically, it involves solving a computationally difficult puzzle to discover a new block, which is added to the blockchain, and receiving a reward in the form of few bitcoins. As more and more bitcoins are created, the difficulty or the amount of computing power involved increases. The mining difficulty began at 1.0 with Bitcoin’s debut back in 2009 and as of November 2017, the mining difficulty is over one trillion. New bitcoin is being released to the miners at a fixed, but periodically declining rate, such that the total supply of bitcoins approaches 21 million, which creates a finite bound on the monetary supply.

To transact in Bitcoin, a transaction needs to be digitally signed using a the private key. While there are preventative measures one can take to protect their Bitcoins, if the private key is lost, there is no backup and the coins are essentially lost. Although the private key is digital it is susceptible to loss in a physical sense since it is private and maintained on a physical computer.

Bretton Woods and Bancor

In July of 1944, although things are winding down, the world is still at war. A conference was held at the Mount Washington Hotel in Bretton Woods, New Hampshire. Representatives from forty-four Allied countries met to plan how the worlds financial system would function after the war. It was at this conference that organizations like the International Monetary Fund were created. There is a well publicized dispute between the representative from the United States, Harry Dexter White, and the representative from the United Kingdom, the ubiquitous John Maynard Keynes, over specifically what currency should be used for international exchange. 

Keynes proposed the world adopt a new currency called Bancor which could only be exchanged through the International Clearing Union. When a country exported goods Bancor would be added to its ICB account, and when a country imported goods Bancor would be subtracted. The goal was to prevent countries from racking up too large of a trade surplus or deficit. If these grew too large the countries currency would be appreciated or depreciated as needed to rebalance trade. In other words, countries could exchange gold for Bancor, but not Bancor for gold.  

In this way Bancor was a precursor to Bitcoin in revolutionizing the accountancy for currency. It essentially was a centralized ledger for managing a statement of accounts, and while not backed by any underlying asset, would have an agreed value by all market participants. Long story short, White won the argument and the US Dollar is the reserve currency of the world.

Dollars Make Sense

Ever since the United States dropped the gold standard beginning with FDR and culminating with Nixon, the U.S. Dollar has been a fiat currency, or currency not represented by an underlying commodity. Although these fiat currencies have no intrinsic value, they are backed by the full faith and credit of their issuing government. In most financial theories there is a concept called the risk free rate which is the theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. In most cases the three-month U.S. Treasury bill is a useful proxy because the market considers there to be virtually no chance of the government defaulting on its obligations. While this is not really risk-free, U.S. debt is the commonly accepted vehicle of the least risky asset you can own, which means that a currency backed by the full faith and credit of the U.S. government is a relatively safe asset.

Another simple example of the benefits of fiat currency is damage. In the case of U.S. currency damaged bills can be easily replaced at a financial institution if they clearly represent more than half of the bill. Even if the bills are further damaged or mutilated, such as in a fire or flood, there is a process to replace them at the Treasury’s Bureau of Engraving and Printing.

Unlike fiat currencies and commodity currencies, digital currencies are backed by nothing but belief. Commodity currencies have a value which is determined by a belief in the value of a scarce resource. This same scarcity is created with digital currencies, but there is no underlying tangible asset. Gold can make overpriced Monster cables sound better since it has superior conductive properties. Bitcoin cannot be built or manufactured into anything.

Many feel that fiat currencies are only backed by belief, but the distinction comes in what the belief is in. Fiat currencies are backed by belief in law and government, and are a universally accepted means of exchange. Yes, it is possible that the fall of a country’s currency can occur with hyperinflation, which was witnessed in Zimbabwe, but these occurrences are rare and typically surrounded by a larger turmoil in which case access to electricity or the internet which are required for Bitcoin to function would also most likely be scarce to acquire.  

iOS 12, Now With Asbestos in the Filter

Phone Warning

Earlier this week Apple announced iOS 12 with a new feature called Screen Time which tracks how much you use your phone and apps. This follows in the steps of Google whose Android P contains a similar set of tools to help users track and limit the time spent with their apps and devices.  Both have been promoted as features meant to benefit their users in the wake of the discovery of the negative mental health effects of the notifications and constant connection to social media that our phones provide.  There has been much coverage in the media recently about children being addicted to their phones and the negative effects of social media consumption.  A 21st century problem with a 21st century solution.  Now is where I start the history lesson.  

In 1952 the Lorillard Tobacco Company released Kent Cigarettes which were the first popular cigarette to feature a filter.  This was around the same time that the popular series of articles were featured in Reader’s Digest titled “Cancer by the Carton”.  Kent cigarette sales skyrocketed, and they touted the health benefits of their filtered cigarettes as “the greatest health protection in history”. The sad backlash of the story is that the Kent Micronite filter contained asbestos, which is now known to be one of the leading causes of mesothelioma, a type of cancer. 

Even without placing additional carcinogens directly between your lips, cigarette filters are not exactly what they have been purported to be.  In some ways, they work. Filters do reduce both the amount of tar and nicotine in the smoke of the cigarette. Less tar was originally thought to be beneficial to the health of the smoker.  A healthy smoker is a long-term smoker. Take it one step further and ask your drunk uncle if switching to the lower ABV of beer will stop him from getting as drunk as liquor. Coincidentally it appears that both benefits of the cigarette filter have a strong correlation to increased cigarette sales. 

I’m not expressing this to be a conspiracy theory.  More than likely, you discovered this post though Facebook or Google. I would correlate the new iOS and Android features to be in line with the broader trend of corporate social responsibility. These features are being rolled out to correct a previously unknown health risk of our phones. It was just an oversight in thinking by corporate officials.  It certainly is not related to Google’s burying of the phrase “Don’t be Evil” deep into its code of conduct. It’s not.  

Did the McCain Dissenting Vote Save the GOP?

While his no vote on the senate healthcare bill ruined the Republican attempts to repeal the Affordable Care Act, it may have saved their chances of maintaining congressional majorities in the mid-term elections.

Obamacare protesters in 2009. (Source:
Obamacare protesters in 2009. (Source:

In a highly dramatized moment, on July 28, 2017, John McCain gave a deliberate thumbs down and ended the nearly eight year quest for Congressional Republicans to repeal Obamacare. It was a wincing blow to the GOP who has made Obamacare one of their rallying cries for the better part of a decade. On that note, it is also worth noting that McCain was not alone, with Senators Susan Collins of Maine and Lisa Murkowski of Alaska expectedly voting against the bill.

In my opinion, this was a good move for the American healthcare system. The so-called “skinny” repeal bill would have still left sixteen million less people with insurance in ten years. The Obamacare debates and town halls which took place throughout 2009 were some of the most divisive moments in recent American history. Turnout at these events was unbelievable for a largely uninvolved public.

These events led to a “shellacking” in the 2010 midterm elections as then-President Obama described it. A common joke among liberals is the protester holding a sign stating, “Keep Government out of my Medicare”. To be honest it still makes me laugh a bit, but I feel it serves as a sign of the broader misunderstanding of the American healthcare system.

This broad misunderstanding of healthcare creates and inherent resistance to change. It is scary, the possibility that you may need to change doctors, or will somehow receive less adequate care. In an already extraordinarily polarized moment, had one of the GOP healthcare bills passed, they could have been in for a shellacking come 2018. With his thumbs down John McCain may have saved the GOP hold on congress in 2018.

The Right Man For The Job

He begins with a bit of subtle humor, “It’s good to be back with you. Apparently I was a little missed.” A slight grin on his face as he chuckles and reviews the notes neatly assembled on his podium. The President recently fired the giant who was in charge of the investigation against his campaign and his latest scrawlings on the internet take us back to a time when uncertainty over the future of the office was at it’s peak. When guests in the oval office were subject to being put on the record. Not of the public record, but one inevitably of evidentiary purpose.

It’s his first day back on the job. There are already talks of permanent replacement candidates for the position. Will they replace him? In this inexperienced administration is it not fitting that the right man for the job is the butt of the most widely covered segments on SNL? Will they make the Governor’s daughter permanent or are they going to go to the administration’s favorite news channel archives to find a suitable replacement? Hopefully the other candidates wont bring up the Fuhrer in the job interview.

He’s going to start by introducing the General who will discuss the boss man’s upcoming trip with an ostensibly religious pretext. The goal of fixing centuries of damaged relations with a trip to three countries is almost laughable, so the expectations need to be downplayed. At lease the General will serve as a significant reprieve for today since his comments will fill half of the allotted time.

On to more serious matters… Wheres the beef? China. The good news of the day is that these American cows will finally be allowed to reach their final destination on Chinese soil. Thank you, Mr. Kissinger. Let’s not forget to mention enhancements to the war on drugs and healthcare. Just the war on drugs, there is no war on healthcare, is there? That will get everyone’s mind focused on the important topics. A few more updates and it’s on to the daily interrogation. As he clears his voice based on his posture you can tell he notices some moisture accruing around his shirt collar, but anyone would feel the same under these lights. At least they make for good TV  

After the first question, he sets the stage, “I assume you’re referring to the tweet.” Dammit, the first question! All of the preparation and updates and this is where their attention is? Those poor cows are never going to get to China with an attitude like that.  Now, it’s time to come up with an authoritative and clear answer to the question. After all, this is obviously an important topic to rise to the top. “The President has nothing further to add on that.” A well crafted answer which would make the strongest litigator red in the cheeks.

“As I mentioned, the President has nothing further to add on that. As I’ve said for the third time, there is nothing further to add on that.” Nothing but the approved line. Don’t give them an inch or they’ll crucify you. “I’m moving on.” That will show them.

Next up he’s served a question on internet publishing and cold war adversaries. Not quite the change of pace he was hoping for, but afterall, he’s the right man for the job. Stick to the script, these wonks will retreat soon enough. Maintain eye contact; don’t give them anything.

They move along quickly with the third degree and the most feared matter, the giant whose term was recently adjourned, seems to be adorning the line of questioning like the bread in a club sandwich. Then they sneak it in like a pickle; a question on whether or not this regular lambasting will continue. Finally he will get his chance to retaliate, to throw it back like a record breaking home run ball. “And I think that’s where there’s a lot of dismay, and I don’t think it’s something that just alone the President feels.” Don’t smile, that’ll show them.

Most would think that a title like the right man for the job would be bestowed on the most talented, qualified, and experienced candidate. Maybe for your job, but not this one. For this job there is no qualifications list. This job requires the patience of an angel and the backbone of a mollusk. The strange mixing of characteristics which make for such gripping cable news footage and entertaining parody on the regular. The questioning continues at a feverish pace, each either seeming to build like a combination on the last or to spin you around like a roundhouse you don’t see coming. The final blow is dealt swiftly, “You don’t have the full picture when you stand at that podium?” 

White House Podium

Happy Millennial Day

Certain phrases and terms tend to make my skin crawl when I see them in a news or blog headline. Where I have seen the term ‘Millennial’ most commonly used is in the context of tapping into a group of young consumers to find the best method extract funds which they seem to have no idea how to spend effectively, or recommendations on how to ‘deal’ with millennials in the workplace. A faceless and seemingly illogical demographic with a potentially large wallet if marketing firms and human resources departments don’t act immediately to shrink it.

At the time I’m writing this, today is April 25, 2017. This date marks one year since Pew published its research indicating that Millennials have surpassed Baby Boomers as the nation’s largest living generation. Roughly a year before this research was published, Millennials overtook Generation-X as the largest generational segment of the U.S. labor market. Although the specifics of these stats can be disputed on the basis of there being no official Census Bureau generational boundaries, there is no disputing this generational change in populations and the labor force, will, or has already occurred.

This trend is genuinely great news if you are a Millennial, but these gains in population distribution have little to no bearing on representation as Millennials are appallingly underrepresented in government. Currently, Millennials are represented by only five of the 435 members of congress whereas Boomers occupy a whopping 270 seats. So, while Millennials are the largest generational segment of the country’s population, it translates into little in terms of material impact.

Source: Associated Press, data compiled by Bloomberg
Source: Associated Press, data compiled by Bloomberg

One way this ‘maturity’ of congress can be explained is the inherent nature of career experience and the incumbent’s inherent advantage. Another more concerning explanation of how we arrived at this predicament is due to a terrible divergence in voter turnout. The Baby Boomer voting-eligible population peaked in size at 72.9 million around 2004 and in that same election year, voter turnout among eligible Baby Boomers was about 72%. By comparison, voter turnout among eligible Millennials peaked in 2008 at an abysmal 50%, and dropped in 2012 to 46%.

While voter turnout has historically always been worse among younger generations, the drop in recent years is particularly concerning as it appears this is a trend which will not be corrected in a linear way. Let us not forget that, issues aside, we just elected the oldest president in history.