How many cryptocurrencies will survive the infancy period?

Reposted from Quora:

The best way to estimate how many cryptocurrencies will survive the infancy period is to look at other markets.

For example, how many social networks survived the infancy period?

Facebook has 63% market share:

If you use a stricter definition of “social network” to mean “feed-based platforms based around personal profiles” Facebook has over 99.8% market share. Google+ and Diaspora are well under 1%.

What about Search Engines? Google has 87% market share.

What about Desktop Operating Systems? Windows has 82%.

What emerges from looking at these and other markets is that network effects lead to a dominant player, a secondary minor player, and about three competitors with marginal market share.

However, if you expand the definition of the market, the picture can change dramatically. For example, if you include mobile device in the “operating systems” market, Android is #1 at 41. Likewise, Facebook’s dominance varies from 60% to 99.8% based on how strictly you define “social network.”

Let’s apply these insights to cryptocurrencies:

A single dominant cryptocurrency is likely to emerge with 90%+ market share. Given the strong network effect of money and the probable lack of nation-state restrictions on adoption (unlike the USD), the dominance may be over 99%.

However, if we expand the market definition to “cryptographic assets” or “digital assets” then we need to include tokens and securities such as Ethereum and ERC20 tokens. This expanded definition may see the leader’s share drop to 60–70%.

Why the US desperately needs open borders to avoid economic disaster

Reposted from Quora:

I would argue the USA desperately needs open borders to avoid economic disaster.

Consider that:

1: There are 11 million ordinary, hard-working people willing to risk their lives and prison time to create a better life for their families.

2: There are 11 million American business owners who need hard-working non-professional workers desperately enough to break the law

3: US immigration law makes it nearly impossible for honest, hardworking non-professionals to become Americans legally.

Why are American businesses so desperate for workers that they are willing to break the law? There is a record number of unfilled positions in small businesses. America’s population is aging, and this will cause severe economic problems due to the unsustainable nature of our welfare programs.

The chief problem is the USA has been surviving on IOUs for decades, funding wars and welfare programs with debt. Trump’s budget means the welfare-warfare state is more unsustainable than ever, and within a decade, baby boomers will bankrupt social security and other programs.

The USA must have young, hard-working immigrants to avoid economic collapse. Illegal immigrants are even better since they pay into social security and Medicare/Medicaid taxes, but are ineligible to collect benefits.

The free movement of labor across borders is the single most beneficial variable in the US economy:

“According to the paper Economics and Emigration: Trillion-Dollar Bills on the Sidewalk? (2011) by Michael Clemens at the Center for Global Development, open borders could lead to a one-time boost in world GDP by about 50-150%.

Want a global economic boom? Open the borders

” typical workers in developing countries would see annual wages more than double, from an average of $8,903 today to $19,272 with open borders. That is, the typical worker in the third world would end up making about double the individual poverty line in the United States today. “

A world of free movement would be $78 trillion richer

Capitalism is (mostly) made from love

A car drove by today with the words “wealth is just stuff” plastered all over it. There is nothing wrong with “stuff” but this claim is wrong. Wealth is mostly made of love.

Most wealth is business ownership, not iPhones, Porsche, and private jets. Rich people stay rich because they invest the majority of their wealth in companies rather than fritter it all away on material possessions. Most business value comes from the relationships and goodwill it generates, not “stuff.”

For example, why is Apple worth $500 billion?

If you sold all the land, buildings, and computers that are the property of Apple Inc, you will not get back 1% of Apple’s value. The “stuff” behind wealth isn’t worth much.

Apple is valuable because of the relationships that its employees have with each other.
Apple is valuable because its employers love their jobs and the company they work for.
Apple is valuable because its customers (like me!) love its products.

Without loving employees or loving customers, Apple would be worthless – just a pile of “stuff” on dirt lots.
Capitalism is (mostly) made from love.

How FEE is responding to Facebook’s algorithm changes

In January 2018, Facebook announced major changes to the algorithm which decides what stories appears in users News Feeds. These changes have substantially affected the visibility of content from online publishers on Facebook. While Facebook has always updated the algorithms behind the News Feed on a regular basis, the recent changes have dramatically affected the visibility of publishers with a substantial amount of visits from Facebook (such as FEE.org) and driven some of them bankrupt.

While part of the impetus for the changes is the “fake news” scandal, much of it has to do with the rise of “clickbait” publishers which profit from low-quality, sensational or salacious stories which get high visibility and are highly addictive but do not result in an enjoyable or informative experience overall. The battle between content discovery platforms (i.e. Facebook) and publishers who try to game the rules is currently playing out on Facebook just as it did on Google in the early 2010s.

Facebook’s 2017 – 2018 changes can be summarized as:

  1. The visibility of activity from friends and a user’s community is prioritized relative to online publishers. Also, content which sparks conversation and reactions from friends is prioritized.
  2. “High quality” stories are prioritized over “clickbait.” Quality stories include longer videos, comments, web pages with substantive content and other criteria.

(Source: Bufferapp.com)

Buffer has a detailed timeline and overview of these changes and a detailed analysis of the algorithm changes.

Many publishers who formerly received a large percentage of traffic from Facebook have seen significant drops in traffic. FEE was especially affected as we received nearly 43% of our traffic from Facebook in early 2017 and subsequently saw that drop to 23%.

Are these changes bad for publishers?

While sites like FEE.org have been somewhat unfairly punished as a publisher of “quality” content rather than “clickbait,” it is overly simplistic to see Facebook as the “bad guy” taking away traffic from publishers. Facebook has made a business decision to prioritize content from friends and family. They want to be a social network, not a news discovery platform. It is up to the market to decide whether Facebook becomes more or less valuable as a platform as a result.

Furthermore, in general, publishers of “quality” content will tend to compete in a meritocratic fashion with publishers for users’ organic reach. There are a lot of disclaimers here, but people generally accept that Google’s algorithm is mostly fair (and I believe it is) despite many claims of bias and ruined business models when Google had to adjust to “black-hat” SEO tactics. I believe that Facebook News Feed algorithms will probably come to be seen the same away some years from now.

The impact of social media on FEE.org

FEE.org saw substantial and highly volatile growth in social traffic starting in early 2016. This growth continued until late 2017 when it fell to 2015 levels. Facebook’s algorithm seems to have been responsible for nearly doubling social traffic, before falling back to the 2015 baseline. In other words, Facebook giveth and Facebook taketh away. FEE.org’s success with Facebook was largely due to its popularity with younger audiences that tended to push stories to go viral by repeated sharing. However, the “quality” of this engagement was low: for example, FEE.org’s bounce rate for Facebook referrals was 90%. As of October 2017, the bounce rate has been under 4%. It’s likely that many people who shared or liked our stories did not actually read them.

3-year sessions vs bounce rate for Facebook.com referrals:

(Note: The changes are not as stark as this graph shows due to measurement changes but the overall trend is valid.)

If we look at sessions which came from Facebook.com, we saw fee.org sessions grow from 159K in December 2015 to a peak of 386K in February 2016, before falling back under 100K in September 2017. We speculate that this drop is in part because Facebook lowered the value of sharing posts relative to the value of genuine reactions (likes/comments). (Note: Facebook implements strong and ever-adapting anti-cheat measures to ensure the integrity of “genuine” reactions.)

Traffic Notes:

  1. FEE.org saw a long-term lift of about 300K sessions per month from all sources from 2015 – 2018 — such as external referrals, organic search, and email.
  2. FEE.org traffic follows a strong seasonal pattern (much of our traffic is from students performing research during the school year).

Illustration: 3-year performance — social versus all traffic:

How FEE is Responding to Facebook Rule Changes

The loss of FEE’s #1 traffic source requires adapting our strategy to maintain our business goals. Our primary means of doing so is to replace lost organic reach with paid reach (ads). The team at FEE has learned to do this with some effectiveness, despite ongoing algorithm changes:

Organic vs Paid Reach: January 2017 – April, 2018:

We believe that paid reach should have different business goals than organic reach. In other words, we do not believe in merely paying to replace organic readership with paid readership. This is both expensive and does not generate returning traffic. Instead, FEE’s marketing team had focused our paid reach on specific business goals that serve our organizational priorities, such as email leads, event registrations, market research, and new audience outreach.

Finally, while Facebook has moved away from a focus on publishers, there are other platforms which are focused on story discovery. FEE has experimented with Apple News, Quora, Flipboard, Medium, Reddit and other platforms which may surpass Facebook as content discovery mechanisms.

Reacting to Facebook Ad Strategy Changes

We’ve also had to adapt to ongoing changes in Facebook’s ad platform in response to events such as ads by alt-right extremists, the Cambridge Analytica leak, and intense competition from other businesses who were “exiled” from organic reach by algorithm changes in 2018.

We’ve noticed a significant change in the effectiveness of our paid lead generation ads. We ran the same ad for our Essential Guide to Health Care Reform in November and April and had wildly different results. In November 2017, we paid on average $0.72 per email address. In April 2018, the cost per email rose to $5.07.

Our current strategies include:

  • Experimenting with landing page view ads instead of lead gen ads.
  • Relying more on popups than Facebook ads to collect email addresses.
  • Boosting content that gets great organic reach (>80% usual reach) to try to “ride the wave” of the organic traffic.

Focusing on Quality of Interactions vs Quantity

As explained above, in the last two years, both Facebook and Google have made efforts to limit content reach to the subset of users with “genuine” engagement or interest. The downside for us is that fewer people see our content. The upside is that the people who do see our content, are more likely to pay attention to it. Furthermore, we have a chance to be rewarded for more meaningful and useful content.

To measure meaningful engagement, we will try to prioritize meaningful engagement: active time on page (provided by Parse.ly analytics), longer video views, email captures on FEE.org, Facebook Ads, and landing pages, and Facebook/YouTube subscriptions. We will also try to improve the quality of our content by sharing fewer stories from other sites on FEE.org and writing more in-depth analysis and practical career/life guidance.

Reposted from FEE.org

America’s Deadliest Drug Addiction Affects Everyone

Today, my *web browser* is insisting that I “can help curb opioid abuse.”
Here is my contribution:

Stock photos in the West universally use the presence of a mug in the shot to connote work, just as the presence of soda or alcohol drunks connote fun. The mug presumably contains coffee, a psychoactive compound which may enhance mental performance. What is shocking is that we not only sanction a chemical dependency on caffeine but celebrate not just the coffee, but our very dependency on it.

Americans see no contradiction with celebrating their own drug addiction to coffee and alcohol while jailing millions of their neighbors who happen to use a different plant for entertainment because of a different economic and cultural context. Cannabis, methamphetamines or cocaine may be stronger per coffee per dose — but make no mistake — if coffee were made illegal, the caffeine density of a single dose would increase to those of banned drugs. Keep in mind that cocaine, heroin, and other banned drugs started out as additives to health tonics and soda drinks, while the THC dose in cannabis rapidly increased after the U.S. banned it in 1937.

I have no problem with coffee as such. I drink it most working days specifically for its psychoactive properties and as medication for occasional tension headaches. However, I would be ashamed to be addicted to caffeine and would consider it a moral failure and a threat to my health. Caffeine addiction is a real health threat, though surprisingly little studied given that perhaps hundreds of millions of Americans suffer from it.

While excess caffeine usage is only mildly harmful, there is a far more serious substance addiction which even more Americans suffer from: sugar. Excess sugar consumption is a primary cause of metabolic syndrome, which is a leading cause of obesity, heart disease, type 2 diabetes, heart disease, and mental illness, including schizophrenia, bipolar disorder, and Alzheimer’s, as well as many types of cancer.

Virtually all Americans consume unhealthy amounts of sugar, and 70% of U.S. adults age 20 years or older are overweight or obese.  Sugar kills more people than all other psychoactive drugs combined. Excess carbohydrates in the diet are the primary cause of obesity, and bad diets rather than genetics or lack of exercise are the overwhelming cause of obesity.

There is sufficient evidence to link excessive sugar intake to the pandemic of obesity and cardiovascular disease. – AHA

The growth of sugar in American diets is primarily linked to U.S. agricultural policy and regulatory capture of agencies by the farming and food industry. This (not our prosperity or sedentary lifestyle) is why obesity is strongly linked to income levels, as wealthier Americans are less affected by sugar additives in food influences by agricultural policy.

Metabolic syndrome is the result of a dangerously addictive diet, just as addictive and difficult to break as heroin or methamphetamines. “Hard drugs” do kill people faster, but only addiction-vulnerable members of society tend to become dependent on them, whereas sugar is a low-level high which has nearly completely infiltrated the American food supply. One big secret of the War on Drugs is that vast majority of people are unlikely to ever become addicted to hard drugs (whether prescription or illegal) because addiction is the result of certain genetic, social, and psychological attributes.

The *primary* cause of any drug addiction is not the pleasure of the high or the pain of withdrawal, but the lack of mental and social structure to provide healthy alternatives to addictive behavior. This is equally true of cocaine, meth, alcohol, pornography, coffee, or sugar. Drug addicts of all kinds universally suffer from a lack of a social support network which advocates and enables healthy dopamine-generating activities.

Is Bitcoin being used to spread “child abuse imagery”? Not really.

Yesterday, the Guardian wrote that “researchers have discovered unknown persons are using bitcoin’s blockchain to store and link to child abuse imagery, potentially putting the cryptocurrency in jeopardy.”

Is that true? This is a serious allegation. Unfortunately, both the Guardian story and a Bitcoin.com article which rejects these claims make grossly inaccurate statements. Furthermore, the cited study makes false statements about Bitcoin in its abstract. Aside from the sensational claims in the abstract, and the even more sensational claims in mainstream media articles about it, the paper is fairly thorough and accurate – but contains no new insights or discoveries, and duplicates prior work without credit. This is a common pattern: researchers make modest claims about something, an editor exaggerates them in the abstract to get attention, and then allows ignorant journalists to make an even more dramatic exaggeration in the press.

So does the Bitcoin blockchain contain illegal content? Not really.

While the media and the public like simple and definitive answers, getting to the truth of this claim requires understanding something about how Bitcoin works.

Bitcoin is a payment network. For the most part, the network itself only records the destination addresses of payments and the amount sent. There is no need for the network to store any arbitrary information which is not specific to a transaction. For example, unlike bank wires, there is not “memo” field in Bitcoin for adding “for pizza, love mom.” Aside from an 80 character field available for miners who sign blocks, the primary way to store non-payment information in the blockchain to use fake destination addresses for transactions. It’s kind of like one of the crank calls in The Simpsons:

Moe: Hello, Moe’s Tavern. Birthplace of the Rob Roy.
Bart: Is Seymour there? Last name Butz.
Moe: Just a sec. Hey, is there a Butz here? Seymour Butz? Hey, everybody! I want a Seymour Butz! [the entire bar laughs; realizes] Wait a minute… Listen, you little scum-sucking pus-bucket! When I get my hands on you, I’m gonna pull out your eyeballs with a corkscrew!

As you might imagine, this is a very inefficient way to store information. Bitcoin transactions have size limitations, so one can either send very small files or split files among many transactions. Since the Bitcoin network charges senders based on transaction size, sending large files is expensive, and much more so with the increase in the price of Bitcoin. The more popular Bitcoin becomes, the more expensive it becomes to insert non-trivial amounts of information.

This is why most images stored in the Blockchain so far were placed there when Bitcoin was cheaper and are tiny, low-resolution images (sample embedded “image” follows):

---BEGIN TRIBUTE---
#./BitLen
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::TTXWWi,_  Xll :..
=-=-=-=-=-=-=-=-=-=
LEN "rabbi" SASSAMA
     1980-2011
Len was our friend.
A brilliant mind,
a kind soul, and
a devious schemer;
husband to Meredith
brother to Calvin,
son to Jim and
Dana Hartshorn,
coauthor and
cofounder and
Shmoo and so much
more.  We dedicate
this silly hack to
Len, who would have
found it absolutely
hilarious.
--Dan Kaminsky,
Travis Goodspeed
P.S.  My apologies,
BitCoin people.  He
also would have
LOL'd at BitCoin's
new dependency upon
   ASCII BERNANKE
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----END TRIBUTE----

Here’s the address for the above tribute. It cost 1 BTC to send or $8500 at the current price of Bitcoin. Not a very cost-effective way to share illicit files, is it?

Still, based on the above, it seems like it would be possible to store illegal information on the Blockchain if one were able to make it very compact and spend enough money on it. Even if there is nothing illegal in the Blockchain yet (and the study presents no evidence of such information, despite articles which state otherwise), it could always be added in the future.

However, here is an important point: arbitrary information in Bitcoin can only be included by steganography, and cannot be read without tools which have nothing to do with the primary function of Bitcoin. Steganography is “hiding data in plain sight” – in other words, using information flows in ways other than they were intended to and that are not visible to normal users without special tools. Steganography has been known since 440 BC when Herodotus mentioned two examples in his Histories.

There is no way to prevent information from being hidden in any communications channel. For example, two criminals could conduct a series of bank transfers where the monetary amount itself encodes a message with illegal content. There is no way to detect or prevent such a message. However —  the payment network itself has no capability to decode such a message and is not designed for such a use. It’s actively hostile to such a use since all transactions (whether we’re talking about Bitcoin or bank transfers) incur a cost and can store very limited data.

Here is a screenshot I took of a Bitcoin transaction which contains the entire whitepaper where Satoshi Nakamoto presented Bitcoin:

As you can see, the output (aka destination) field contains a hex-encoded alpha-numeric string, which no Bitcoin client can convert into a human-readable message – because that is not their purpose. Furthermore, using Bitcoin to share secrets is a terrible idea. Not only is the amount of information that can be stored very limited, but the information is public for the world to see. Worse, Bitcoin transactions require spending Bitcoin and have the potential to trace back the transaction to a real-world Bitcoin purchase.

A final note: a major inaccuracy is the paper’s claim that “clearly objectionable content such as links to child pornography, which is distributed to all Bitcoin participants.”  The paper provides no such evidence, and only mentions that it found unspecified “nudity of a young woman.”  More importantly,  99.9% of Bitcoin users use a “light” client, which does not contain the full blockchain. Light clients defer blockchain validation to online servers which store the full node.

Here is an earlier and more accurate paper which contains a more fair analysis of the possibilities for data insertion on the Bitcoin blockchain.

 

The Internet Did Not Kill the Music Star

For decades now, we’ve been hearing how file sharing, cheap iTunes singles, online radio, and stream ripping “killed” the music industry. In 2014, Taylor Swift wrote about the future of the industry in a Wall Street Journal article.  Her fantastic economic claims have been debunked elsewhere, but one of her basic criticisms was that Internet streaming is challenging the traditional revenue model of the music industry.  However, Taylor’s own career demonstrates how the Internet and digital technology have lent themselves to a creative renaissance of the music industry, in part due to her own leadership.

Rather than the death of the music industry, we are seeing a glorious revival of music, and nowhere is that more evident than the top music videos on YouTube, which has become one of the primary ways that young people listen to music. The YouTube “music” channel has almost 100 million subscribers, with over 4 billion views for top videos. Nearly all of the top 100 videos on YouTube are music videos.

Here are five videos which demonstrate how the Internet is enabling a glorious revival of the music industry:

1: Taylor Swift – Shake It Off

Shake it Off seamlessly blends Taylor’s “dorky dancer” style with some of the world’s best dancers, combining hip hop, ballet, modern dance, jazz, breakdancing, and even a cheerleader performance. The video makes dozens of pop culture references while mocking Taylor’s competition and inspiring dozens of articles about her feuds with other celebrities.

When it rocked the charts with 2.4 billion views, Shake it Off was one the biggest pop music videos ever. Released for her 1989 concert tour, the video helped Taylor make over $250 million, making hers the highest grossing concert tour ever, and making Taylor one of the world’s highest-paid celebrities.

Taylor used the demand for her album to force Apple to change its policy of not paying artists during free trials of its music service. While Taylor often denounced streaming music on the Internet for not paying artists enough, it’s clear that she (or her publicity team) is a clever negotiator, and skillfully used the audience made possible by the Internet to achieve massive success.

2: Fifth Harmony – Work from Home ft. Ty Dolla $ign

With 1.7 billion views, Fifth Harmony’s hit music video Work from Home shows that the girl group still has massive appeal.

Fifth Harmony rose to stardom through effective social media marketing, with billions of YouTube views and over 10 million followers on both Instagram and YouTube.

In “Work from Home” the group mixes R&B hooks with hip-hop and minimalist synth beats to create a sexy, modern neo-feminist take on the relationship dynamic.

The song features “…slinking beats and playfully sexy lyrics about convincing your partner to skip the boardroom for the bedroom.” Numerous double entendres are present in the lyrics and the music portrays “freaky bedroom fun as glorious mostly in the bounds of a relationship.”

While a previous generation of R&B and pop music presented women as sexual objects, this song and video flips the dynamic and presents men in hard hats with bulging muscles as the object of desire. The women in this video “appear to now be in full control of their collective sexuality and [are] wielding it as they choose.”

The audio and video editing on the music video are impeccable. Before digital editing, music videos like his would have been prohibitively expensive to produce for all but the biggest stars. Modern digital video editing tools have allowed little-known groups like Fifth Harmony to rocket to stardom by releasing tracks and videos that are just as polished and thought-out as Hollywood blockbusters.

The music in Work from Home was digitally produced by two artists, while other groups recorded the vocals, and yet another company mixed the vocals and audience, and incorporated samples from other songs. The digital nature of modern music and video production allows the entire process to be distributed across a complex global supply chain.

Similar videos have led to great success for other girl groups: see G.R.L.’s Ugly Heart and Little Mix’s Black Magic.

3: Cher Lloyd – Want U Back

Cher Lloyd’s track Want U Back is one of my favorites for the playful and creative way she uses her voice:

The track is produced by Shellback, a musician and record producer (with four Grammys) who is responsible for several songs on this list. Cher’s vocals span from low note A3 to high note F#5, and Shellback uses Cher’s vocal dexterity to “give the song an almost caricature quality.”

While digital audio processors such as Auto-Tune are often known as cheap gimmicks, modern pitch correction tools are much more subtle and were creatively used to mix LLoyd’s vocals, including a recurring hook from the sound of her ‘frustrated grunts.’

4: Logic: 1-800-273-8255

American rapper Logic often writes about his drug use and issues facing African-American communities. His song 1-800-273-8255 referrers to the phone number for the National Suicide Prevention Lifeline.

This track shows the remarkable merger of rap and hip-hop with pop music culture, both musically and socially. Here is Logic’s explanation of his song:

So the first hook and verse is from the perspective of someone who is calling the hotline and they want to commit suicide. They want to kill themselves. They want to end their life. When I jumped on a tour bus that started in Los Angeles, California and I ended in New York City and did a fan tour where I went to fans’ houses and shared meals with them, hung out with them, played them my album before it came out. Them along with other people on tour, just fans that I met randomly, they’ve said things like, “Your music has saved my life. You’ve saved my life.” And I was always like, “Aw so nice of you. Thanks.” And I give them a hug and s**t but in my mind, I’m like, “What the f**k?” And they’re really serious. And they tat s**t on their arms and get s**t like lyrics that save their life and in my mind, I was like, “Man I wasn’t even trying to save nobody’s life.” And then it hit me, the power that I have as an artist with a voice. I wasn’t even trying to save your life. Now what can happen if I actually did?

Rap music has evolved from boasting about women, drugs, and money to awareness of greater social issues. Logic’s music video features a young black man who struggles with his sexuality and considers suicide. Following the night of the 2017 MTV Video Music Awards, the NSPL experienced a 50% surge in the number of calls to their hotline.

For a similar video in the electronic music genre, check out Clean Bandit’s Symphony, which merges classical opera and electronic music.

5: Sia – Chandelier (Official Video)

Sia’s “Chandelier” is brilliant on several levels. On first listen, the song appears to celebrate binge drinking culture. However, a closer look reveals that Sia is really diving into her experience with substance addiction and the culture of binge drinking. The music video reinforces the message with a stunning dance performance by 11-year-old Maddie Ziegler. Maddie’s performance is an “interpretive dance in a deserted, dirty apartment ‘while spinning, kicking, leaping, crawling, falling, twirling and hiding herself behind window drapes.’”

I am no fan of contemporary dance, but Maddie is clearly a highly skilled artist who integrates movements from ballet and gymnastics into a sequence which deftly visualizes the mix of ecstasy, escapism, and – ultimately – the self-loathing and desperation of Sia’s lyrics.

While Chandelier is lyrically and visually simple, it also highlights cultural assimilation at its best. It is an electropop song that features electronica, R&B, and reggae influences. Sia is an Australian whose career took her to London and ultimately Southern California, where she met local choreographer Ryan Heffington on the set of her music videos. Their collaborations have “done more to raise the standards of dance in pop music than nearly any current artist integrating the forms.” Ryan has since choreographed several hit music videos, tv shows, and even the film Baby Driver.

One unique aspect of Sia’s performances is that she chooses not to reveal her face, and even faces away from the audience during live performances. With 5 billion views, the success of her YouTube videos has been essential in taking her career from a music writer for other musicians to a successful performer, despite her unconventional performing style.

While musicians and music industry executives have often criticized the impact that the Internet and technologies are having on music, several tech innovations are in fact enabling a creative renaissance in music. These include:

  • Digital audio processing innovations such as Auto-Tune and pitch correction have opened up new harmonic and compositional possibilities and created stars from singers with less-than-pitch-perfect voices.
  • Digital video production and editing tools that have dramatically lowered the cost of producing quality videos.
  • Social media allows artists to reach fans on an unprecedented scale and bootstrap themselves to massive success.
  • Instant global communications have allowed artists to collaborate in new ways, sourcing the best talent from around the world, and inspiring the synthesis of cultures and genres.

The Internet and tech aren’t killing music, they are driving its creative explosion.

Can DAG-based cryptocurrencies like IOTA scale better than the blockchain?

Some people claim that DAG (directed acyclic graph) technologies like the IOTA’s Tangle or Byteball will be able to scale (process large transaction volumes) better than blockchain-based technologies like Bitcoin and Ethereum.

Let me start by saying that only a few people in the world are qualified to offer an expert opinion on the question of whether a blockchain or DAG perform better. They make a great deal of money, and their time is generally too valuable to comment on Internet forums. This is why you see a lot of DAG advocates claim that it is superior without informed counterpoints.

I will admit that I’m not qualified to offer an expert opinion on this either.

However, the claim that a DAG scales better than Blockchain should not be accepted at face value. A number of people smarter than I have said that validating a DAG is far more labor intensive than a block.

There no magic solution to the problem of keeping thousands or millions of nodes synchronized, and DAG based networks like IOTA actually rely on a single Coordinator node which keeps the network from fragmenting. This is the very thing that cryptocurrencies were created to avoid!

While some see the need to put transactions in a block as a negative, the blockchain is actually a very efficient, market-driven way for the users of a network to bid on processing capacity. Transaction fees ensure that the network is always capable of processing the most valuable transactions, whereas a DAG-based network may be overwhelmed and fail if load gets too high. Centralized “coordinator” nodes may solve this problem, but if so, DAG advocates cannot claim that they are necessarily more distributed and scalable than Bitcoin.

Furthermore, with second-layer technologies like Lightning Network, Bitcoin has explicit and unlimited scaling options. The scaling potential of coordinator/master node model in DAG-based currencies is far less clear.

How Easy Money Is Rotting America from the Inside-Out

The Federal Reserve has been the main cause of business cycles in America since 1913. For several decades, it has tried to hide the consequences of its policies by enabling easy credit during each recession. As Jonathan Newman wrote yesterday, pouring trillions of dollars into the financial sector obscures the external signs of the recession such as low asset prices and high unemployment and promotes economic malinvestment.

This malinvestment creates the conditions that cause the next recession. Some of the consequences of the Fed’s policies, such as stock market and housing bubbles can be directly attributed to its policies. In other cases, the artificially low interest rates and other “easy money” policies foster an “infrastructure rot” that erodes the efficiency of the American economy, the standard of living of consumers, and eats away at American infrastructure. These effects are difficult to trace back to the Fed’s policies, so let’s concretize some examples to understand how Federal Reserve policies affect America.

At the city level, low interest rates allow cities to fund new public projects such as parks and bridges. While this may seem fine and dandy, all infrastructure projects have a maintenance cost. It’s not sufficient to build a park. One must also have the money to maintain it every year. If there is not enough revenue to pay for maintenance, the park will literally rot until the playgrounds fall apart, the lawns are overgrown, the lights fail, and the park becomes too dangerous for families to play in.

The same thing will happen to streets, bridges, and plumbing. This is one of the ways urban decay happens: easy money policies fund unsustainable urban infrastructure projects which make politicians look good, but end up crumbling a few years or decades later. The Flint water crisis happened in large part because the Federal government funded infrastructure projects that were not sustainable by the incomes of the people of Michigan.

Easy money from the Fed also rots the guts of American corporations. New money goes to the most politically-connected businesses first, and funds projects that would not be possible in a free market. Because private investors haven’t actually saved enough to see the projects through to completion, and consumers don’t value the product enough to cover production costs, the companies getting free money from the government either fail or receive endless bailouts. For example, easy money encouraged unsustainable commitments like high union wages and pensions, forcing US automakers to sell cars for prices that consumers could not pay given their actual savings rate. When sales dipped in 2009, the government was forced to bail out GM, Chrysler, and Ford in 2009.

While small businesses are the last to get access to the Fed’s easy money taps, big banks received over $700 billion in TARP bailouts and even more selling U.S. Treasury bonds to the Fed under the QE program. Such subsidies signal to banks that their primary customer is the government, not consumers. As a result, financial services have stagnated, and banks have fought rather than embraced genuine innovations like the blockchain.

The 2009 crisis made banks cautious of making mortgages to people who clearly could not afford them. But the Fed kept giving away free money and enabled a new phenomenon: zero-interest auto loans. While this may seem like a good deal for consumers, the Fed’s credit expansion has created an auto-credit bubble worth 9.2% of all household debt. Consumers are buying and leasing cars that they would not normally be able to afford.

Instead of being taught to save, millennials are learning to have a negative savings rate (acquiring more debt than assets) and trust their future entirely to the government. If a recession happens, millions of people will suddenly find that they are unable to keep their cars and lack any emergency savings. When millions of unwanted cars are dumped back onto the market, automakers will again be unable to keep up with their inflated liabilities, requiring another bailout.

Perhaps one of the most destructive products of easy money has been the War On Terror. The U.S. has spent about $5 trillion on this seemingly endless war, and most of the money has not come from higher taxes, but from selling bonds to institutions like pensions funds, and especially foreign countries such as China and Japan. American citizens have gained nothing of value, while our government has been spreading death, destruction, and revolution abroad.

While the national economy has gotten away with federal deficits and a $20 trillion dollar debt for decades, this trend is only sustainable as long as the rest of the world keeps lending the U.S. money. When they decide to stop funding our wars and financial irresponsibility, Americans will suddenly be faced with paying trillions of dollars in liabilities. This overdue correction will likely come with dramatic reductions to Americans’ standard of living.

My point in writing this is to help you visualize the destructive effect of the U.S. government’s easy money policies from an abstract harm to the practical harm: collapsing bridges, kids poisoned from lead plumbing, millions of cars rotting in junkyards, scandalous bank services fees, bombs falling on innocent people all over the world, and widespread poverty once the easy-credit party ends.

Originally published on FEE.org

Is the value of Bitcoin based solely on speculation?

Is the value of Bitcoin based solely on speculation?

No. Bitcoin has a use value which would exist even if all the speculators vanished.

I know a Latin American company that pays their employees in Bitcoin – not because they think its value will go up, but because it’s cheaper than the transaction costs involved in fiat-denominated payments. I know a lady in Zimbabwe who is using Bitcoin because she does not have access to a sound currency.

These people are not speculators: they may prefer to trade their Bitcoin for a fiat currency at the first chance. However, their ongoing usage provides a demand for Bitcoin and thus establishes a price floor. The price of Bitcoin is the combination of current non-speculative usage and expectations for future non-speculative use cases for the Bitcoin network. This is different from a purely speculative asset like rare stamps or baseball cards, which have no practical use value.

With time, there will be more and more business cases where Bitcoin provides a superior business model. Bitcoin is like an iceberg which is slowly emerging from the water: we can already see the very limited applications where it already the best currency, but we can only imagine its potential after the crypto asset ecosystem matures and cryptocurrencies become a superior option for the majority of financial transactions.

Like any startup company, the valuation of Bitcoin today is driven mostly by the expectation of future market share. The difference is that the profit will be captured by the network’s users, and not by any central entity.