Steemit logo

Steemit, a fresh breath of hot air

This post is an edited collection of my responses to James Corbett’s presentation on the social bookmarking site Steemit.

A new social bookmarking site, Steemit, has been taking off recently, in libertarian and anarchist circles, promising decentralized, uncontrolled publishing via blockchain technology.  However, on closer analysis, Steemit does not look decentralized at all. It looks like a standard social bookmarking site, with the added feature of paying for tokens to increase your post/comment ranking. It seems like interest groups with deep pockets could easily game the ranking system, moreso than other sites. In fact, this operation seems more like a scheme to sell digital currency than a publishing platform.

As for the blockchain, besides the nice buzzword, I’m not sure what it solves in terms of preventing censorship, besides providing a public cache. This function is performed now by image-hosting sites, private websites, archive.org, as well as the social network platforms themselves. The big problem is discovery and ranking, how people actually communicate and find out about stuff, which Steemit is still very vulnerable to.

It’s very odd that Steemit requires a Facebook or Reddit account to function, with plans to add SMS verification, but no stated plans to remove these restrictions. I’m not sure what permissions they ask for, since I haven’t signed up, but it certainly opens the possibility of those social networks reading your Steemit posts and punishing you on their platform. In any case, it’s a big hint that this is not a decentralized system and is doubly strange because most platforms do not have such a restrictive requirement. A truly decentralized system would not have a spam/fake account problem, except as DDoS, since it would not rely on a central index.

Steemit does not look like any better of a solution than Facebook or Twitter at this point, except to the extent that you trust the people running it more. The links to the User Agreement and Privacy Policy are broken and there is no ownership information about the company on their website. Caution!

newsbud

Is Newsbud an activist group or a news organization?

This post is an edited collection of my responses to James Corbett’s article about Newsbud’s “Confront NBC” campaign in New York.

I thought Newsbud was to be an independent news organization with no political agenda. But it seems to be turning into a political activism organization. Analysis is one thing, but lobbying a foreign government to make demands of an American media company?

And this “confront NBC” protest seems like overkill. A tiny handful of protesters that will be ignored or, God forbid, arrested if they take it too far. These resources could be spent for research and reporting on many other issues. I would be livid if I was a Newsbud donor. I hesitated to donate precisely becuase I did not see their editorial policy as transparent.

It really seems to be driven by Sibel’s emotions and passions, which is good for an activist group, but not what I think of as a credible news source.

My question is only about Newsbud’s mission. In the KickStarter campaign, it was billed as an independent media organization with no political agenda. Now, it is behaving as an activist organization with a clear political agenda, to the point of lobbying foreign governments.

It is not ethical to raise funding for one type of project, but afterwards switch it to a different type of project. You may be okay with it, but others who donated may not be. So, the ethical thing to do would be to either 1. stick to research, investigation, analysis, reporting, as Sibel is excellent at all of that, or 2. refund the KickStarter money to donors and start a new KickStarter making it clear she intends to fund a political activism group.

Sibel had her Twitter followers pressure the Turkish embassy to demand an apology from NBC. I was actually shocked she did this. It has the appearance of partisanship with the Turkish government, even if that was not her intention.

I have nothing against activism at all. I just think this all-consuming focus to “confront NBC” over one lie of many lies in the media is a quixotic errand. Beating a dead horse. I’m not sure what it’s meant to accomplish, even if successful, and why it is of overriding importance. It seems petty, and not in her stated goal of being a no-agenda news organization.

It’s not just reporting, she’s flying to New York with her crew to “confront” NBC, I guess hold a protest and make demands? Seems excessive for this one issue and it does seem like a political agenda.

growing stages

WANTED: Liberty entrepreneurs

Money is a dirty word in the liberty movement.  Ironic, for a pro-free-market and free trade ideology.  But when theory becomes reality, many recoil at the idea of bloggers doing sales or advertising.  Why?

Spending time to make content or technology means taking time away from other activities, whether business or leisure.  That time has to be compensated.  Yet some act like entitled socialists, expecting this work to be provided for free!

To be fair, some monetization strategies are obnoxious or spammy.  But all that means is we need better monetization options.  Better technologies.  Better feedback and suggestion from audiences of what works and what doesn’t.

For the liberty movement to survive, much less thrive and change the world, it must be economically self-sufficient.  If you can’t feed yourself, you can’t change the world.  If our activities in pursuit of liberty are not profitable, but only financial drains, we will never grow and advance.

We need more business models around advancing liberty.  We need more content, more media platforms, more technologies.  With the fake news media collapsing before our eyes, there has never been a better opportunity than now.  There is so much pent up demand and very little supply.

We need more liberty entrepreneurs.

Not just from an economic perspective, but from a psychological one as well.  It can get depressing focusing only on what the poweful are doing to us.  Who wants to be on a constantly losing team, with a victim mentality?  It’s time we recognize our own power, take responsibility, and become agents of change.

I am working on several media technology projects with a group of liberty-minded developers and creators.  Want to join the effort?  Email me at apollo at apolloslater dot com and let’s get to work!

South Park - La Resistance

“Fake news” hysteria is a huge opportunity

It is an auspicious time for independent media.  The Fake Media’s “fake news” hysteria has capped off this year’s apotheosis of undisguised propaganda.  Now we learn that the US government will directly fund domestic pro-government propaganda in the press and on social media, with $160 million.  Let me explain why this is amazing news for independent media.

The media world has supply and demand, just like any other market.  There is a demand out there for real information and it is up to the media to satisfy that demand.  The more the media avoid this, and publish lies and hoaxes instead, the more business opportunity there is to fill the void.  This is how Fox News became such a cable news powerhouse.  Due to the “fake news” hysteria, the big platforms Facebook, Google, and Twitter are censoring alternative voices.  This creates an opportunity for a Fox News of social media (perhaps many!).

The government’s funding of propaganda reflects a fundamental misunderstanding of media.  It is treating the internet as an “enemy weapons system“.  But media consumption is not a win-lose, zero-sum game.  All this does is crowd out existing journalism and reduces the supply of real information.  But the demand remains the same.  That means there is now an even greater business opportunity for free speech advocates than before.

We have a real, tangible, action plan to dismantle the establishment’s hold on power: Start new media platforms and especially new media technologies.  Let us create independent media content, independent social networks, independent ad networks, independent video sharing, … independent everything!  The opportunities are boundless.  I myself am working with a group on such a project in the media tech space.  If you are interested in learning more about our effort, please email me at apollo at apolloslater dot com.

Vive la resistance!

Facebook groups by political group

Is Facebook censoring right-wing groups?

There’s been a lot of talk recently about Facebook and Twitter censoring conservative and libertarian groups and personalities, such as Milo Yiannopoulos and Lauren Southern.  While this is undoubtedly true in many specific instances, how big of an issue is this overall?

One thing we can look at is the number of left- or right-leaning groups.  I did a quick search for Facebook groups containing popular political keywords.  It seems that the right-wing is much more active, at least measured by number of groups:

Republican 141 Democrat 108
Conservative 178 Progressive 112
Libertarian 103 Socialist 93

Caveats:

  • I used Facebook’s Graph API to conduct searches. You may get different results using the browser or app search.
  • These are only the most popular keywords, but there are many more specific keywords, with more groups.
  • These numbers do not reflect group membership counts or engagement levels. Perhaps that’s a future post!
chase-fire

What now Bitcoin?

Bitcoin & other cryptos have taken a sharp nosedive of ~33% from peak.  Although it may rally short-term, let’s take a look at the internals of what’s going on and where this is all heading.
People are parking Bitcoin profits on Bitfinex (biggest bitcoin exchange) into tethers, the fake token people think has 1:1 USD backing (but doesn’t). Tether will push the printing press into overdrive to try to pump Bitcoin price once again.
 
If this fails, there will be a run on Tether as people try to realize profits in USD. This can’t be done — the money isn’t there. At that point, holders of Tether have only one choice: buy crypto, anything, and try to transfer out to exchanges that support USD withdrawals (Bitfinex does not).
 
This could be the biggest spike crypto has ever seen. It’s uncertain which cryptos will spike most. For example, Bitcoin has well-known transaction problems, so would not be the transfer mechanism of choice. Probably Bitcoin Cash would be preferred, since that is relatively fast, cheap, & supported on GDAX (USD exchange).
 
That would mean the evisceration of the Bitfinex exchange and a sharp drop in aggregate trading volumes. The owners may opt for a big gamble to retain their profits — look for claims of a huge “hack” on Bitfinex.  This lets the Bitfinex operators steal customer funds before the collapse, Mt Gox style.  An alternate scenario is a “hack” on Tether to prevent a run on Tether in the first place. This actually happened about a month ago, 30 million Tether stolen, from a 3/4 multisig wallet (likely inside job).  Something of this magnitude may trigger government involvement.
If the crypto in Bitfinex does make it into the other exchanges, you’ll see the huge spike I mentioned.  But, since Bitcoin price will now be un-tethered from the Tether printing press, it will be very short lived and collapse once former Bitfinex customers try to realize USD profits.  Then Bitcoin could fall way below the levels we are seeing today.
monopoly-money

Economics of merge mining

A common argument for the unique value of bitcoin is its hash power, meaning the amount of computational power (miners) dedicated to mining bitcoin. But, with merge mining, another blockchain can potentially capture the entire hash power of bitcoin with no impact on bitcoin’s network. That means that, although independent cryptos may eventually be swamped by a bitcoin monopoly, the value of bitcoin will be diluted by other chains piggybacking on its network.
 
The way bitcoin is mined is by miners “hashing” the existing blockchain with a random number. Hashing is a one way function that takes in some content and spits out a result. If the result meets certain “difficulty criteria”, it is accepted by the network and the miner is rewarded a coin. It is impossible to ever derive the original content from the result, which is why it’s called one way.
 
Merge mining works by combining the random number guesses from one chain, with those from another chain. The result will be valid on both chains. If it meets the criteria for both chains, the miner will get rewarded for both. The miner loses nothing by mining both, but gets more reward.
 
The economic effect of this is to increase the miners available to mine alternative chains. Since profits go up, the number of total miners goes up, which will push profits for a particular chain down. This should mean lower transaction fees for any particular chain. It also means that no chain holds a monopoly on being a transaction mechanism.
 
The lack of a potential monopoly means that bitcoins should be treated as a competitive payment mechanism, instead of as a monopoly. Many coins will be able to process payments, with the same hash power, even if most miners mine the bitcoin chain.  Some may be superior to bitcoin in their payment processing capabilities.
Bitcoin pipes

Bitcoin’s dubious utility value

Bitcoin fanbois point to bitcoin’s utility as a payment network. But, unlike Visa, holders of bitcoin don’t get any of the mining revenues, so there is no revenue stream on which to value a bitcoin.
 
Participants do need to have bitcoin to transfer funds, but they don’t need to hold it for longer than the transaction itself. Since bitcoin is limited to ~3 transactions per second, and average confirmation times are several hours, depending on network congestion, there is no need for more than a few bitcoin to accomplish all payments across the network. As an example, assuming 1 bitcoin per transaction, 3/sec * 3,600 sec/hr * 3 hr/confirmation = 32,400 bitcoin to execute all payments on the network.
 
Also, since bitcoin can be divided into satoshi, hundreds of millionths of a Bitcoin, there is no need to hold a particular amount of bitcoin to accomplish a transaction. The bitcoin itself just represents the transaction record, not the value of the contract, just as a record in Visa’s database represents the transaction, and is not in and of itself valuable, beyond the market price of the transaction mechanism (about 1%).
 
Even if holders of bitcoin shared in the mining revenues, the competitive mining market produces a flat fee per transaction, not a percentage fee, which allows the transfer of massive fortunes for a tiny fraction of a percent. It would be a much worse value proposition, for investors, than Visa.
 
The fiat price of a bitcoin arises from an artificial restriction on bitcoin supply & mining, and people’s expectation that these restrictions will entice others to buy their bitcoin in the future at a higher price. The “greater fool” theory. But this is separate from bitcoin’s utility as a payment network.
 
It is no different from other speculative phenomena such as Beanie Babies, baseball cards, and other artificially restricted commodities. People misinterpret the restriction as an ipso facto justification for a high price. Once all available cash & credit has poured into the commodity, there are no further buyers, the mania ends, and the price drops to the utility value of the commodity.  In bitcoin’s case, its utility value is close to zero.
Tether collapse scenario hindenberg style

Tether collapse scenario

Current situation with dumb money buying BTC:

  • Tether prints tethers to buy bitcoin
  • BTC-USDT price skyrockets
  • Arbitrage bots buy BTC-USD, because everyone assumes 1 USDT = 1 USD
  • BTC-USD price matches BTC-USDT price
  • Price increase brings in more dumb money USD to buy BTC, skyrocketing price further
  • Arbitrage bots sell BTC for USD, profit
  • Tether sells BTC for USD
  • Tether is now “backed” by USD — can afford to redeem tethers for the small number of people who convert USDT to USD
  • Tether pockets USD, prints more tethers …

What if the flow of dumb money slows down or stops? (due to higher prices, and simply no more mattress cash to dump into BTC)

  • Tether prints tethers to buy bitcoin
  • BTC-USDT price skyrockets
  • Arbitrage bots buy BTC-USD
  • No more dumb money = no more USD arbitrage profit
  • Less arbitrage = increasing gap between BTC-USDT and BTC-USD prices
  • Now there is arbitrage opportunity the other direction
  • Buy BTC-USD, sell BTC-USDT, sell USDT for USD
  • Tether now has to redeem tethers for USD
  • The bigger the gap, the more tethers they have to redeem
  • If they stop printing tethers, the BTC-USDT price collapses
  • If BTC-USDT price collapses, arbitrage bots buy BTC-USDT and sell BTC-USD, further collapsing BTC-USD
  • If they keep printing, the gap widens and they have to redeem more and more tethers for USD
  • At that point, the game is up and Tether will have no incentive to continue redeeming tethers.  The tether market collapses.  You can redeem 1 USDT for 1 cent.  BTC paper profits are wiped out.  Tether is left with >600 million USD in the bank.

The phenomena to watch out for in this scenario are:

  • Increasing gap between BTC-USDT and BTC-USD prices
  • Increasing volatility of USDT-USD price, followed by collapse

Bitcoin’s paper price bump

What’s behind Bitcoin’s recent price increase? I’ll tell you — and it’s not Bitcoin’s utility as a currency, or wonderful investment opportunity.
 
Bitfinex accounts for the largest share of BTC trading volume. Yet they stopped accepting USD deposits back in April. This inevitably spilled into restricting USD withdrawals.  After that, BTC price on their exchange went up. Why?
 
If you were an account holder, what would you do? I’m not able to withdraw my USD. Therefore, I’ll buy BTC so I can move it to another wallet. Hence, increased demand for BTC on their exchange, and increased price AND volume.
 
Other exchanges did the same; there are not many that allow USD deposits & withdrawals now.
 
This recent BTC price increase is caused by the fact that no one can withdraw USD!
What happens when this bottled-up demand to withdraw finally moves into USD, other fiat, or other crypto?
Updated on 10/20/2017 to reflect USD withdrawal restrictions and supporting link.