“Central banks increasingly are under pressure to keep ‘their’ currencies attractive. They should let the general public access electronic central bank money, not just financial institutions ( Niepelt 2015). To do this, they should embrace the blockchain.”
By now, most Bitcoin and Blockchain enthusiasts are aware of four looming issues that threaten the conversion of Bitcoin from an instrument of academics, criminal activity, and closed circle communities into a broader instrument that is fungible, private, stable, ubiquitous and recognized as a currency—and not just an investment unit or a transaction instrument.
These are the elephants in the room:
As an Op-Ed pundit, I value original content. But the article, below, on Bitcoin fungibility, and this one on the post-incentive era, are a well-deserved nod to inspired thinking by other writers on issues that loom over the cryptocurrency community.
This article at Coinidol comes from an unlikely source: Jacob Okonya is a graduate student in Uganda. He is highly articulate, has a keen sense of market economics and the evolution of technology adoption. He is also a quick study and a budding columnist.
What Happens When Bitcoin Mining Rewards Diminish To Zero?
Jacob addresses this last issue with clarity and focus. I urge Wild Ducks to read it. My response, below touches on both issues 3 and 4 in the impromptu list, above.
Sunset mining incentives—and also the absence of supporting fully anonymous transactions—are two serious deficiencies in Bitcoin today.
I am confident that both shortcomings will be successfully addressed and resolved.
Thoughts about Issues #3 and #4: [Disclosure] I sit on the board at CRYPSA and draft whitepapers and position statements.*
Blockchain Building: Dwindling Incentives
Financial incentives for miners can be replaced by non-financial awards, such as recognition, governance, gaming, stakeholder lotteries, and exchange reputation points. I am barely scratching the surface. Others will come up with more creative ideas.
Last year, at the 2015 MIT Bitcoin Expo, Keynote speaker Andreas Antonopoulos expressed confidence that Bitcoin will survive the sunset of miner incentives. He proposed some novel methods of ongoing validation incentives—most notably, a game theory replacement. Of course, another possibility is the use of very small transaction fees to continue financial incentives.
Personally, I doubt that direct financial incentives—in the form of microcash payments— will be needed. Ultimately, I envision an ecosystem in which everyone who uses Bitcoin to buy, sell, gift, trade, or invest will avoid fees while creating fluidity—by sharing the CPU burden. All users will validate at least one Blockchain transaction for every 5 transactions of their own.
Today, that burden is complex by design, because it reflects increasing competition to find a diminishing cache of unmined coins. But without that competition, the CPU overhead will be trivial. In fact, it seems likely that a validation mechanism could be built into every personal wallet and every mobile device app. The potential for massive crowd-sourced scrutiny has the added benefit of making the blockchain more robust: Trusted, speedy, and resistant to attack.
Transaction Privacy & Anonymity
Bitcoin’s lack of rock-solid, forensic-thwarting anonymity is a weak point that must ultimately be addressed. It’s not about helping criminals, it’s about liberty and freedoms. Detectives & forensic labs have classic methods of pursuing criminals. It is not our job to offer interlopers an identity, serial number and traceable event for every transaction.
Anonymity can come in one of three ways. Method #3 is least desirable:
and earnest but misguided attempts to create a registry of ‘tainted’ coins.That’s my opinion on the sunset of mining incentives and on transaction anonymity.
—What’s yours?
* Philip Raymond is co-chair of the Cryptocurrency Standards
Association. He was host and MC for the Bitcoin Event in New York.
I was pointed to this article by Jon Matonis, Founding Director, Bitcoin Foundation. I was sufficiently moved to highlight it here at Lifeboat Foundation, where I am a contributing writer.
On Fungibility, Bitcoin, Monero and ZCash … [backup]
This is among the best general introductions I have come across on traceability and the false illusion of privacy. The explanation of coin mixing provides and 
excellent, quick & brief overview.
Regarding transaction privacy, a few alt-coins provide enhanced immunity or deniability from forensic analysis. But if your bet is on Bitcoin (as it must be), the future is headed toward super-mixing and wallet trading by desgin and by default. Just as the big email providers haved added secure transit,
Bitcoin will eventually be fully randomized and anonymized per trade and even when assets are idle. It’s not about criminals; it’s about protecting business, government and individuals. It’s about liberty and our freedoms. [Continue below image]
The next section of the article explains the danger of losing fungibility due to transaction tracing and blacklisting. I can see only ONE case for this, and it requires a consensus and a hard fork (preferably a consensus of ALL stakeholders and not just miners). For example, when a great number of Etherium was stolen during the DAO meltdown.
My partner, Manny Perez, and I take opposing views of blacklisting coins based on their ‘tainted’ history (according to “The Man”, of course!). I believe that blacklists must ultimately be rendered moot by ubiquitous mixing, random transaction-circuit delays, 
and multiple-transaction ‘washing’ (intentionally invoking a term that legislators and forensic investigators hate)—Manny feels that there should be a “Law and Order” list of tainted coins. Last year, our Pro-&-Con views were published side-by-side in this whitepaper.
Finally, for Dogbert’s take on fungible, click here. I bought the domain fungible.net many years ago, and I still haven’t figured out what to do with it. Hence this Dilbert cartoon. smile
____________
Philip Raymond is co-chair of The Cryptocurrency Standards Association.
He also presents on privacy, anonymity, blind signaling & antiforensics.
“That contemporary artists are exploring blockchain further suggests the technology has reached a level of cultural significance beyond bitcoin’s initial hype.”
Article repeats a lot of the knowns on QC such as bit v. Qubit; and finally provides some good info on pros and cons of Bitcoin and Lamport signatures technique with QC. However, the author didn’t seem to mention any of the work that D-Wave for example is doing with Block chaining. Also, I saw no mention of the work by Oxford on the logic gate which improve both the information processing performance and the security of information transmissions.
In a classical computer bits are used that can either be 0 or 1. In a quantum computer these bits are replaced with Qubits (quantum bits). These Qubits can be 0 or 1, or both at the same time. This is caused by a phenomenon in the quantum realm called superposition. At scales the size of an atom and small molecules, the spin of particles is not determined until it is observed. A pair of Qubits can be in any quantum superposition of 4 states, and three Qubits in any superposition of 8 states. In general, a quantum computer with n Qubits can be in a superposition of up to 2^n different states simultaneously (this compares to a normal computer that can only be in one of these 2^n states at any one time). Because of this, a quantum computer is able to perform computations at the same time, while classical computers perform computations one at a time.
This effectively means that the computing power grows exponentially for each Qubit you add to the system. A quantum computer will be able to make really difficult calculations all the classical computers in the world together would not be able to do before the end of times, in a relatively short amount of time. This opens to world of computing to be able to perform amazingly complex calculations, such as weather or large scale quantum mechanics, with extremely high precision. Unfortunatly, it will also be great at cracking certain types of cryptography.
I was asked this at Quora.com, where I answer questions under the pen name, ‘Ellery’. But the query deserves a companion question, and so I approached the reply by answering two questions.
You might have asked “Why was Bitcoin designed to have a cap?” But, instead, you asked “Why is the cap set at 21 million bitcoins”. Let’s explore both questions starting with the choice of a circulation cap…
Why set the cap at 21 million BTC?
The choice of a cap number is arbitrary and in fact, it could be 1 or it could be 1 hundred trillion. It makes no difference at all and it has no effect on the economy—even if Bitcoin were to be adopted as a currency all over the world. If it were set to 1 BTC, we would simply discuss nano-BTC instead of 1 BTC for amounts of about $650.
In fact, we already do this today. For many purposes, people are concerned with very small payments. And to best discuss these payments, we have the Satoshi. There are 100,000 Satoshi to each bitcoin (BTC).
What is important, is that the total number of bitcoin (regardless of how many units there are) can be divided into very tiny fractions. That way, the total worldwide supply can be divided into smaller and smaller slivers as market adoption gains traction. Everyone needs to earn, save, spend or pay with a piece of the pie. All users need to know is what fraction of the pie do I control? and not how many ounces, pounds, Kg, or tons is the pie. That is just a number.
Incidentally, the same could be said of gold (it can be shaved very thin), but gold is not quite like computer bits. It has industrial and cosmetic value, and this intrinsic demand for gold (beyond it’s role as a pure monetary instrument) has an effect on supply and demand along with the influence of investment, circulation, savings and reserve.
Why is there a cap at all?
At the beginning of this answer, I suggested another question: Why is Bitcoin capped at all? After all, the monetary supply in every country grows. Even gold production is likely to continue for centuries to come. Why not Bitcoin?
Satoshi designed Bitcoin to eventually become a deflationary currency. I believe that he/she recognized inflation is an insipid tax that constitutes an involuntary redistribution of earned wealth. With a firm cap on the total number of units that exist, governments can still tax, spend and even enforce tax collection. 
They can go about business building bridges, waging war and providing assistance to the needy. But without a printing press in the hands of transient politicians, they can only spend money with the consent of their constituents and residents.
Of course, they could borrow money by issuing bonds. But with a capped currency, each creditor would earnestly believe in the will and ability of the country to repay its debts.
In effect, monetary policy is restricted to the business of the governed, but the money itself is not coined by a domestic treasury. It is the province of something that is far more certain than a human institution. It arises from pure math. It is open and transparent. In effect, everyone is an auditor. That’s because the bookkeeping is crowd sourced.
For prescient legislators and national treasurers, Bitcoin presents far more of an opportunity than a threat. It is good for both government, business and consumers, because it forces everyone to be open and honest. Ultimately, it builds trust in government, because no one can cook the books, water down wealth, or print their way out of debt.
What about recession. Isn’t it a result of deflation?
Deflation doesn’t lead to recession. Rather, it sometimes accompanies a recession. Recession is caused by an uncertain job market, war, a massive supply chain interruption or political upheaval. In one way or another, it boils down to a lack of confidence sparked by one of the economy’s core foundations: consumers, investors, business or creditors.
Bitcoin as currency removes a major impediment to confidence. By creating a system that cannot be rigged, it fosters trust in government along with an open and transparent treasury.
Philip Raymond co-chairs CRYPSA and was MC at The Bitcoin Event in New York. He writes for Quora, LinkedIN, Wild Duck and Lifeboat Foundation, where he sits on the New Money Systems Board.
Last week I dipped my toes in the waters of the Lifeboat blog and shared a link about blockchain technology. If you haven’t heard about blockchain technology yet, you can read about it here, here, here, here, here…you get the picture. Blockchain has tons of potential, and appears to also attract hype and money. All which goes to say, there has been a lot of buzz about its social and economic potential. But there is another aspect of blockchain that deserves some futurist exploration, which is that it signals we live in Postnormal Times.
Postnormal Times (PNT) is a fantastic foresight concept that I will focus on in my upcoming Lifeboat posts. There is an underlying theory to it; Ziauddin Sardar explains the entire idea and how it fits into futures studies. Ziauddin Sardar with John Sweeney have expanded the work into a futurist method called The Three Tomorrows of Postnormal Times. It’s well worth reading up on if you enjoy a futurist approach to your work and studies.
I’m still a beginner, but essentially the idea is that we are now in time is a period best characterized as “postnormal,” meaning that the usual ways of solving problems and making progress have stopped working. Our go-to responses, based on all the previously reliable ways of being in and understanding the world are becoming irrelevant and dysfunctional. The simplest way to introduce Sardar’s concept is the three C’s: complexity, chaos and contradictions. These are the key characteristics of postnormal times which I will be exploring in my posts about technology and humanity. I believe the PNT perspective leads to some useful observations about the direction of society over the next decades.
Back to my blockchain example: the Raketa watch company is implementing blockchain in manufacturing, which will protect inventory from counterfeiting. This development signals PNT because it speaks to the complexity of globalized financial and consumer markets. In this case, so intricate as to require a new, high-tech, largely automated and seemingly fail-proof technology. PNT is evident when previous methods of running a company are no longer sound. Enter blockchain to navigate this new business condition.
The PNT characteristic of chaos is also present—the networks of users necessary to have a blockchain at all is a network that behaves as a chaotic system, one that seeks a common goal of verifying blocks in the chain (see links above for more detail on how blockchain works, or read /listen to our chapter in The Future of Business ). Sardar suggests that in PNT terms, all networks are chaos: “Since everything is linked up and networked with everything else, a break down anywhere has a knock on effect, unsettling other parts of the network, even bringing down the whole network.” This is an apt characterization of blockchain technology and why it makes a great counterfeit-detection system.
And, of course, the contradictions of blockchain technology are undoubtedly many, but as we discussed in our chapter in The Future of Business, there is an insistence by its supporters that blockchain is a pure and corruption-free alternative to banks, judges, legal systems and all sorts of oppressive authorities while the truth about blockchain’s origins (i.e. the identity of its inventor, Satoshi Nakamoto ) remain elusive. That’s hardly the most important aspect of the technology’s potential, but it is one of the more intriguing aspects, and something that keeps it firmly in “postnormal” territory.
I hope to explore many more examples of Postnormal Times on this blog.
Exponential Finance celebrates the incredible opportunity at the intersection of technology and finance. Watch live as hundreds of the world’s leading investors, entrepreneurs and innovators gather in New York to define the future of the way we do business.
In Bitcoin’s early years computer scientists and early adopters were running the show. Now, a new community of academics, entrepreneurs, and economists, are working with cryptocurrencies and blockchain to bring the technology to a new set of diverse applications.
From building peer-to-peer networks for secure data computation and storage to decentralized content management systems that give patients access to health-care records across hospital databases, blockchain and digital currencies are starting to rewrite the rules of the 21st century transaction.
“In an obscure corner of the internet, an anonymous person or persons published a math paper — the “Bitcoin white paper” — that solved a problem that had until then stumped computer scientists: how to create digital money without any trusted parties.”
