Removing the Volatility From Bitcoin

A common and valid criticism of using Bitcoin as a currency is its volatility. Volatility will decrease over time as liquidity improves, but in the meantime it makes Bitcoin difficult to use as a day to day currency. A service like BitReserve will allow using Bitcoin without the volatility. It will allow you to denominate your Bitcoins in any one of 5 major currencies: USD, EUR, CNY, JPY, GBP. They will do this by holding Bitcoins and those currencies in reserve. It is strictly a Bitcoins in/out service. The service never touches your bank account or the traditional banking system.

Regardless of whether the price of BTC goes up or down, you could still send that fiat value of BTC to anyone. Let's say BTC is at $1,000 USD. You would send BitReserve 1 BTC and denominate it as USD. They would sell your BTC and hold USD in reserve. BTC then drops to $500. You could still get your $1000 USD in BTC because they would buy 2 BTC with their USD reserves and send it to you, minus fees. Similarly, if BTC went up to $2,000, they would send you 0.5 BTC. They are able to do this because they hold both BTC and USD in reserve. However, all trades are settled via BTC. This would allow you to hold your Bitcoins and eliminate all volatility. The only issue is can you trust BitReserve? They intend to address the trust issue by transparency to show that they hold all the reserves they claim by independent audits.

A service like this will allow us to have all the benefits of Bitcoin without the volatility.

http://blogs.wsj.com/moneybeat/2014/05/15/bitbeat-bitreserve-vows-bitcoin-like-costs-no-bitcoin-like-risk/

http://www.coindesk.com/cnet-founder-halsey-minor-launches-low-cost-bitcoin-payments-platform/

Multi-sig Bitcoin Wallets Now Available

Multi-sig is an important step towards making Bitcoin both convenient and secure to use. Before multi-sig, Bitcoins were stored in a “hot” wallet for ease of use, and “cold” storage for security. A hot wallet is one where the private keys are stored on a computer connected to the Internet. This makes it easy to use your Bitcoins. However, as we all know, computers connected to the Internet can and are hacked. Many businesses, exchanges, and people have lost their Bitcoins due to being hacked.

Cold storage is where the private keys are not stored on anything not connected to the Internet. It could be an offline computer or printed on a piece of paper. Since the private keys do not exist on the Internet, it is impossible for hackers to get to them. While cold storage is secure, it’s extremely inconvenient to use. In order to spend them, these coins must first be transferred to a hot wallet. Also, you must maintain physical security of the device storing the private keys. That’s difficult to do over a number of years for a typical user. Hard drives crash and paper can be lost, stolen, or destroyed. Private keys are usually also encrypted with a password and can be easily forgotten especially if they haven’t be used in several years. People have also lost their Bitcoins due to forgotten passwords and lost keys.

Multi-sig addresses are a solution to this problem. A multi-sig address is a Bitcoin address that requires 2 or more signatures to initiate a transaction. A typical setup is a 2 of 3 address. To initiate any transaction, 2 out of the 3 private keys must be used. One key is stored with a 3rd party service provider. Another key is stored on the user’s computer. The third is kept in cold storage, as described above. The 3rd party does not control the Bitcoins because they only have 1 out of the 3 keys. But they can provide services such as fraud protection and enabling the user to recover their Bitcoins if they lose 1 of their 2 keys using their key. In normal day to day use, the user spends their Bitcoins like any normal address. The 3rd party signs every transaction they see by the user. However, if a suspicious transaction occurs, the 3rd party can stop the transaction by not signing it. They can then contact the user for further verification. Also, if the user loses his key or his computer is hacked, he has a backup key. If the 3rd party is compromised, the user still has 2 of the 3 keys to get to his Bitcoins. This makes Bitcoin far more convenient and easy to use while maintaining security, and not requiring to trust a 3rd party to secure your Bitcoins.

There are 2 multi-sig wallet providers online GreenAddress.it and Bitgo.com. I’m going to give both of them a try. Multi-sig addresses are far superior than the normal Bitcoin addresses. I believe they will become the standard way of using Bitcoins in the future.

Car/Ride Sharing Economy

Uber, Lyft, Sidecar, car2go, Zipcar, etc. are doing incredibly important work. Imagine a world where a car is a service everyone uses, not something everyone owns. It solves traffic, parking, urban development, and environmental problems all at once.

Public transportation policy has failed in America, and once again it's technology, and apps coming to save the day.

http://www.bloomberg.com/news/2014-06-06/uber-sets-valuation-record-of-17-billion-in-new-funding.html

Bitcoin and Intrinsic Value

A common argument you’ll hear about Bitcoin is that it has no intrinsic value. I agree with that statement. But I will also make the argument that NOTHING has intrinsic value because there is no such thing. Value is a concept that exists only in the human mind. Things have value because people place value on them. What most people mean by “intrinsic value” is really universal value; things that all people recognize as having value such as food, shelter, water, etc. But even those have value only because they’re valuable to people. There’s nothing intrinsically valuable about anything. I will argue that gold does not have universal value because you can’t sell a 1 oz gold coin for $50 to random people on the street.

Is money a universal human need like food or water? Yes, money is a critical part of human life; as critical as food, water, or shelter. It enables us to trade with each other without having a coincidence of wants. It allows us to save the excess value we generate today, and redeem that value in the future when its needed, even at a different location. It allows us to take a large amount of value, and divide it into smaller units we can use over time. Or it allows us to accumulate small amounts of value over time to redeem for a large amount of value all at once in the future. It allows us manage risks in ways that would not be possible otherwise (e.g. insurance). Civilization would simply not be possible without the concept of money.

If we understand the purpose of money and its historical context, then it becomes easy to see why Bitcoin is revolutionary. Money has historically been used as a lever of power, control, and abuse by governments. Bitcoin is the first decentralized currency with no central authority that is based solely on consensus, and mathematically enforced in a completely neutral way to remove the possibility of abuse.

For the first time in history, we have the ability to send any amount of value, to anyone in the world, instantly, at near zero cost. No one can stop anyone from sending or receiving that value because of its decentralized, peer to peer design. The implications of this can’t be overstated. It is programable money; “smart money” that will allow us to move value efficiently across the globe in ways we can not even imagine today, in the same way the Internet is now used for things no one could have thought of. If you recognize money as a universal need, then it’s not hard to recognize Bitcoin as a superior form of money because of its intrinsic PROPERTIES that make it valuable because it enables people to do things they would not otherwise be able to do.

Should Apple Make Cheaper Products?

No. Those that think Apple should come out with a cheap or budget product don't understand who they are. It would be like saying Ferrari or McLaren should come out with a cheaper sports cars so more people could have them. That's missing the point of what they are. Apple has always been at the premium segment of the market. Apple is about making the best product, so they can charge a premium, make the most profits, so they can continue to spend lots of R&D to continue making the best product that they can. They are not about market share. Does Ferrari ever look at their market share? Ferrari only sells ~7,000 cars year. Yet those ~7,000 cars earn Fiat more than the other 4.2 million cars COMBINED (€2.3B Euros out of €3.8B).

Apple is a similar though less extreme situation. Although Samsung sells twice as many phones as Apple, they make half the profit.

Profitability is extremely important to any business. It allows a business to invest in risky and speculative R&D to create better products, pay their employees more, return capital to their investors so they can invest in other ventures, etc. It is the fuel that powers human progress, both as an individual and as a company.