Category Archives: economics

My Theories On How To Fix Healthcare In America

It’s common knowledge that healthcare in America is unaffordable, and politicians are always talking about ways to fix that. Unfortunately, their plans are always confusing and often misleading. The problems isn’t that complicated though, and there are some relatively simple solutions that deserve to be discussed.

The root of the problem (that politicians almost never mention) is that hospitals price gouge their customers. This is the only reason health insurance is necessary. If prices weren’t inflated beyond affordability, there would be no reason to pay insurance companies to protect you from them.

The reason politicians never promise to simply make price gouging illegal is because hospitals would immediately point out that they have to pay ludicrous prices for medical equipment, and doctors have to pay unreasonable prices for medical school. This raises the point that medical equipment and medical schools are also price gouging their customers.

If we passed a law that prevented those businesses from price gouging, they would point out that the businesses they depend on are price gouging them. If we follow the rabbit hole all the way down, we’ll have to admit that the entire economy revolves around businesses gouging their customers.

You could take this as evidence that humans are inherently greedy and evil, or you could take it as evidence that the standard business model is inherently flawed.

The purpose of owning a business is to make a profit, and the formula for profit is “revenue minus costs.” So to make the most amount of money, you have to provide your customer with the cheapest goods and services possible while charging them as much as possible. And we justify gouging customers for cheap goods and services by saying that the value of goods and services is equal to whatever a person is willing to pay for them.

This is easily true when determining the price of bananas or a piece of modern art, but it becomes a recipe for exploitation when determining the price of cancer treatment.

If you need a good or service in order to survive, then of course you’re going to pay whatever you have to. But if you have to pay $3,000 for insulin that costs $50 to produce, and you don’t have $3,000, you’re going to die because your ability to pay didn’t meet your provider’s ability to exploit your need. The value of insulin wasn’t really $3,000. That was just the value your provider could get away with exploiting you.

Fixing this problem would require putting profit caps on businesses or income limits on business owners, but that’s never going to happen in my lifetime because predatory businesses have the money to legally bride politicians with campaign donations and lobbying to prevent comprehensive anti-price gouging laws from getting passed.

Ultimately, profit/income caps are the truest solution to the root of the problem of unaffordable healthcare. Short of that, there are other second-tier solutions.

Adding more regulations to private insurance is not one of those solutions. Insurance companies are required by the law of supply and demand to provide the least amount of benefit to their customers while simultaneously charging the highest prices people are willing to pay to survive. So they will always try as hard as possible to do what’s in their best interest, which is inherently in the worst interest of their customers.

If health insurance must exist, the best course of action is to nationalize the insurance industry completely. In other words, the government is the only insurance company, and they only have one plan that everyone can afford. They don’t need to make a profit, and whatever profit they do make can go directly into the government coffers to be spent on public services. You could even just roll the cost into basic taxes so you don’t even have to apply for it or have an insurance card.

In America, this is basically “Medicare for all.” Granted, I don’t trust the American government to implement this system as simply and efficiently as it could be. Having said that, you should be asking, “If you don’t trust the government to do this right, then why trust the government to do it at all?” My reply would be that I trust private predatory insurance companies (whose profit margin depends on providing life-threateningly poor service) even less.

In a perfect world, we would just nationalize the entire medical industry and take away the need for health-related businesses to make extravagant profits. But we live in a bureaucratic world where egos, careers, and paperwork are more important.

Most Americans don’t know this, but New Zealand found a decent compromise. They don’t have “socialized healthcare” per se. They have “subsidized healthcare.” This means doesn’t totally control the healthcare industry. You pay a little extra in taxes, and the government uses that to cover the costs of the inevitable markups doctors and hospitals are going to charge. In practice, this means seeing a doctor always costs $30-$50, and your prescriptions always cost $5-$15. Healthcare providers always make a profit, but they never eat you alive.

In New Zealand, you can still buy private insurance and see more expensive providers, but due to how the whole subsidized medicare system works, millionaires in New Zealand aren’t going to get as good of healthcare as millionaires in America, and New Zealand medical centers don’t make as many medical research breakthroughs as America’s over-funded hospitals because even though most of America’s healthcare funds get funneled into hospital owners’/investors yachts, a lot of that money still manages to find its way to research.

So if we have to make the most of a broken system that favors the rich, then perhaps the best course of action is to admit and embrace the fact that we have a classist system.

People who make less than $70k per year need reliable access to basic healthcare. So give them (which includes me) nationalized, socialized, or subsidized access to relatively shitty healthcare with (possibly) long wait times that guarantees we get can at least get something we can afford, and then make overpriced first-class hospitals mandatory for rich people where they don’t have to be inconvenienced with the presence of the poor. That would be a better and more honest system than America has now.

This isn’t the solution I want, but it’s one I’m willing to accept if we have to balance the needs of the many (surviving) with the needs of the few (profit). But I’d rather use this compromise to point out the absurdity of having to balance the needs of the many with the needs of the few.

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Wise Sloth Video List: Predatory Capitalism

This list comes from my essays on economics.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Wise Sloth Video List: The Life Of The Working Poor

This list comes from my essays on economics.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Wise Sloth Video List: Mortgages, Taxes, And Crypto Currency

I prefer watching educational videos on YouTube more than watching television, but it’s tedious digging for good content, and I’ve already seen most of the good stuff while searching for videos to put in my blogs. In case anyone else is looking for entertaining educational videos on YouTube, I made a series of posts with all the ones I’ve used on The Wise Sloth, organized by topic, with links to the posts they appear in. You’re bound to be enlightentained, and if you need help exploring the 600+ essays on The Wise Sloth, these video lists offer a quick overview that practically summarize my philosophies.

This list comes from my essays on economics and focuses on the housing market, taxes, and crypto currency.

The housing market is a crime against humanity

 

 

12 Things wrong with America’s tax system

 

 

 

 

 

 

 

 

A novel approach to taxing the rich

 

 

Introduction to cryptocurrency

 

 

 

 

The most important factor in the value of cryptocurrencies, and how it applies to STEEM

 

 

 

 

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How To Invest In Cryptocurrency

Note 1: I wrote this guide on January 7, 2018. At that time, most of what I had to say about cryptocurrency was pessimistic, but I believed at least one of them would last forever, but we had to wait for the market to decide which one it wanted. I’m no longer have any confidence in the cryptocurrency market at all, but I’m leaving this post up for posterity. Look, 99% of of cryptocurrencies are scams, and I believe the 1% that aren’t will be replaced by some kind of new block chain that will solve all the old cryptocurrencies’ problems and make them obsolete. I don’t know what this hypothetical “Bitcoin 3.0” will be or who will make it, but in order for it to be accepted by mainstream businesses, it must have a stable price. So it will just be a medium of exchange, not an investment vehicle. Anyone holding old crypto coins when “Bitcoin 3.0” is invented and released, will be holding a wallet full of digital beanie babies. That’s my opinion. I could be wrong, but at this point I wouldn’t advise “investing” in cryptocurrency because I believe every existing coin will be worthless in a few years.

 

 

Note 2: There are about 115 cryptocurrencies listed on this page. These are all the coins that have sold over $1 million dollars as of January 7, 2018. It doesn’t include tokens. Any coin not listed on this page isn’t strong enough to raise $1 million. So betting on them to become the next Bitcoin is like betting on an ant to eat an elephant.

If you don’t know what cryptocurrency is, read my post, “Introduction To Cryptocurrency” or watch this short video:

 

 

Where to buy cryptocurrency:

You can buy cryptocurrency from the following sites.

CoinBase (Buy, sell, and trade)

Kraken (Buy, sell, and trade)

BitStamp (Buy and sell)

Bitfinex (Buy, sell, and trade)

Gemini (Buy, sell, and trade)

GDAX (Buy, sell, and trade)

More…

 

Where to trade cryptocurrency:

These sites specialize in trading cryptocurrencies. So if you want to access the newest, cheapest coins, you’ll need to buy some Bitcoin, Etherium, or Litecoin from one of the sites above and transfer them to one of the sites below.

Bittrex

Poloinex

Cex.io

More…

 

Where to sell cryptocurrency:

These are more sites where you can sell cryptocurrency for cash. Regardless of where you bought or traded your cryptocurrency, you can transfer it between any of the sites listed on this page in a few clicks.

BitSquare

Coinbase

Paxful

Bitquick

 

Where to hold cryptocurrency:

If you plan on holding onto your cryptocurrency for a long time without daytrading, you should keep it in a wallet instead of letting it sit in your account on one of the trading sites because if the government ever shuts those sites down or they get hacked, you’ll lose all your assets.

BlockChain

Jaxx

Trezor

LedgerWallet

 

Where to monitor cryptocurrency

These sites allow you to look up prices in real time, find information on coins, and set up portfolios that show the current price of the coins you own.

Cryptocompare

CoinMarketCap

CoinTracking

CoinRanking

CoinCap

AltPocket

 

Where to mine cryptocurrency:

You can “print” your own cryptocurrency coins by dowloading software from the links below and running it on your computer. It will take a long time to make a significant amount, but you won’t lose any money other than the electricity it takes to keep your computer on.

 

SlushPool

AntPool

BTC

F2Pool

Minergate

More…

 

Where to find cryptocurrency news

These are some of the biggest sources of cryptocurrency news.

CoinDesk

CryptoCoinNews

CoinTelegraph

The Merkle

Bitcoinist

Bitcoin Magazine

CryptoCurrency Reddit forum

 

The 5 legitimate cryptocurrencies:

The only factor that gives a cryptocurrency real value is merchants accepting it as payment for real-world goods and services. The most widely used currency, and the only one accepted by major businesses, is Bitcoin. So Bitcoin is the only cryptocurrency that truly deserves to be called a legitimate currency… for now.

Bitcoin became the leading cryptocurrency because it was the first, and still is, the most widely used cryptocurrency on the darknet, which if you don’t know, is a collection of encrypted websites where you can buy illegal products like guns, drugs, child pornography, and much more. The stores on the darknet were the first businesses to accept Bitcoin as payment for real-world goods and services, which is how Bitcoin proved itself as a real-world currency. As long as the darknet exists, there will always be a need for cryptocurrency. So the first rule of investing in cryptocurrency is, you’re gambling with your money if you buy coins that can’t be traded for child porn.

After Bitcoin, the only other cryptocurrencies you can spend on the darknet are ZCashDashMonero, and Ethereum. The reason blackmarket merchants adopted these in addition to Bitcoin, is because Bitcoin leaves a digital trail that can be traced. There are ways to cover your tracks, but the whole reason the darknet started using Bitcoin in the first place, is because it was more anonymous than a bank transfer. ZCash, Dash, and Monero were designed specifically to be anonymous and untraceable. Ethereum wasn’t, but it has smartcontract technology that allows you to use digital wallets that can cover your tracks.

 

 

Merchants on the darknet probably still accept Bitcoin even though Monero fits their need better because Bitcoin is accepted by the most legitimate businesses. There’s no point selling heroin for money that can only be spent on more heroin. If Amazon starts accepting Monero or Ethereum, there would be no reason for black market merchants to risk accepting Bitcoin anymore. If they stop accepting it, then Bitcoin will lose its safety net. But if Amazon accepts Bitcoin, it won’t need the darknet to survive.

Monero is the most secure cryptocurrency, which means it’s in the best position to become the next king of the darknet, but legal companies like Amazon don’t need to hide the identity of their customers. Ethereum’s versatility fits the needs of legal businesses much better. If a nerd can use Ethereum’s smart contracts to build the ultimate anonymous digital wallet, it would make Monero obsolete.

Below is a list of other cryptocurrencies that claim to be designed with security in mind. They would be a solid investment if the black market merchants started accepting them, but that need has already been filled. If these coins’ home pages are any indication of the quality of their product, they’ll never be accepted by anyone. The only coins on this list I find remotely interesting are Komodo, Storj, and Maidsafe due to their versatility, but why bet on a latecomer that hasn’t proven itself yet if you already know you can win by betting on one of the big 5?

 

Komodo (KMD)

Storj (STORJ)

MaidSafe (MAID)

Verge (XVG)

ZCoin (XZC)

NavCoin (NAV)

ByteCoin (BCN)

Quoine Liquid (QASH)

DigiByte (DGB)

Private Instant Verified Transaction (PIVX)

ZenCash (ZEN)

 

Below is a list of other currency-centric coins that aren’t security-based. To the best of my knowledge, none of these do anything better than the big 5 established cryptocurrencies. Even if they did, they’re still missing the only factor that really matters. No major businesses accept them as payment or are even talking about considering them. If they’re not on big business’s radar, then they shouldn’t be on yours.

 

Veritaseum (VERI)

UCoin (U)

AutumnCoin (ATM)

Bitcore (BTX)

Clams (CLAMS)

ViaCoin (VIA)

HiCoin (XHI)

Exchange Union (XUC)

Bitcoin Cash (BCH)

Bitcoin Gold (BTG)

Bitconnect (BCCOIN)

Stellar (XML)

IOTA (IOT)

NEO (NEO)

NetCoin (NET)

Vechain (VEN)

OmiseGo (OMG)

FirstCoin (FRST)

Naga (NGC)

Decred (DCR)

HTML5Coin (HTML5)

ReddCoin (RDD) Currency, Wallet

 

Before you buy any of the cryptocurrencies listed above, be aware that they all share a fundamental flaw. The only thing that gives a currency value is that it’s accepted by merchants as payment. However, consumers are motivated to not spend their cryptocurrency in the hopes it will increase in value 200,000% in two years. If consumers don’t spend their money, then merchants will stop accepting it. If the currency can’t be spent, it loses all its value.

There is definitely a need for a decentralized cryptocurrency, but in order for it to be useful for merchants, its price must be stable, which means “The Next Bitcoin” can’t be an investment vehicle. It’ll just be the medium of exchange. When the need for that kind of cryptocurrency is filled, then all the currencies that behave like stocks will become obsolete… and anyone who invested in those currencies will lose their money. Think about that.

There are currently a few cryptocurrencies that are designed to be pegged to the U.S. dollar, U.S. penny. I’m sure every month, more cryptocurrencies will come out that are pegged to other paper currencies. The more stable currencies there are, the more demand there will be for one standardized coin. It may be the best coin standing, or the American government may create and enforce its own official coin.

The point is, the world is changing fast, and we don’t know where it’s going. Nothing is predictable. Bitcoin might not be worth a penny five years from now, and Dogecoin could be accepted on Mars. Frankly, it might be more secure to gamble your money on a marijuana mutual fund than cryptocurrency.

 

The other 3 most popular cryptocurrencies:

Litecoin (LTC) is sold everywhere Bitcoin is, and it does everything Bitcoin does a little bit better. It also costs a fraction of the price, but almost nobody accepts it as payment. Until they do, it will be effectively worthless. There are a few niche shops that take Litecoins, but none that are big enough to count, and I haven’t heard any of those express any interest in adding Litecoin as a payment method. If you simply have to bet on an underdog, this is the only one running with the big dogs.

Dogecoin (DOGE) is one of the oldest, most recognizable coins. Despite the fact that it freely admits it serves no purpose, its value is still going up. There are even a few gaming and gambling sites that accept it as payment, which makes it more usable than 99% of cryptocurrencies. I wouldn’t be surprised if Dogecoin hits $1 by 2019. Feel free to gamble on that prediction, but don’t bet more than you can afford to lose, because Dogecoin will never truly be worth a penny.

The problem with Dogecoin is that there are already almost 1 trillion coins in circulation, and its blockchain will continue to produce 5 billion more every year forever. The whole premise of a currency is it has a finite supply, and Dogecoin is infinite. Demand can never outpace supply, and all of its value will be lost to inflation eventually. So the only way to make money off Dogecoin is to buy a ton, wait for idiots to drive up the price, and sell before the bubble pops.

Ripple (XRP) has been getting a lot of media attention lately, and a lot of people are buying into it, pushing the price up. I even bought some and sold it at a profit. I didn’t hold onto it for three reasons. First, it’s not decentralized. It’s servers are all owned and operated by a private business in San Francisco. If the government decides to shut it down or the owner decides to run off to the Bahamas, Ripple will disappear. Nobody can shut down Bitcoin because its technology is spread all around the world on private individual’s computers and mining rigs.

Ripple’s second red flag is it’s designed to destroy a fraction of itself every time it’s spent. This makes it look good on paper because scarcity raises value, but it will just eat itself from the other direction. When there’s not enough left to spend, nobody can or will buy it. This could take a thousand years, but it’s still a scammy feature I’m not comfortable investing in.

My third problem with Ripple also applies to every other coin listed below. Ripple isn’t just a currency. It’s also a business platform. A lot of other coins also have a business baked into them like digital wallets, cloud storage, web hosting, virtual real estate, or insurance document management. So basically, these are businesses that are unofficially selling stocks in their company and calling it “cryptocurrency,” but it may be more accurate to call them “fraudulent stocks.”

This is even more true for the ones that had an initial coin offering (ICO). They’re raising investment capital and selling shares on a cryptocurrency exchange, sidestepping the laws they would have to follow to launch an initial public offering (IPO) to sell shares on a stock exchange. Technically they’re not breaking the law, but the government could reinterpret, rewrite, or ignore those laws and shut down these fraudulent stock issuers at any time. This is my biggest fear about investing in Ethereum, becuase they had an ICO, but some major banks, including JP Morgan Chase, have endorsed Ethereum, and banks always get what they want, even if it’s illegal.

 

Cryptocurrencies that have sold over $1 million in coins, and may have exciting products, but act like companies issuing fraudulent stock:

Tether (USDT) Currency/Wallet

Stellar (XML) Currency, Wallet

Loopring (LRC) Wallet

Waves (WAVES) Wallet

TenX (PAY) Wallet

Request Network (REQ) Wallet

Kyber Network (KNC) Wallet

Cryptonex (CNX) Wallet

Open Trading Network (OTN) Wallet

Metal (MTL) Wallet

Santiment (SAN)

PacCoin (PAC) Wallet

Monaco (MCO) Wallet

NXT (NXT) Wallet

Bancor Network Token (BNT) Wallet

Propy (PRO) Wallet

Eidoo (EIDOO) Wallet

Change (CAG) Wallet

Centra (CTR) Wallet,

CapriCoin (CPC) Wallet

Metaverse (ETP) Wallet

CoinDash (CDT) Wallet

BitBoost (BBT) Wallet

Pluton (PLU) Wallet

CloakCoin (CLOAK) Wallet

TokenCard (TKN) Wallet

Cardonix Blockchain application development platform, currency

NEMBlockchain application development platform, currency

EOSBlockchain application development platform, currency

Qtum (QTUM) Blockchain application development platform, currency

Status Network Token (SNT) Blockchain application development platform, currency

Lisk (LSK) Blockchain application development platform, currency

Stratis (STRAT) Blockchain application development platform, currency

Ox (ZRX) Blockchain application development platform, currency

XtraBytes (XBY) Blockchain application development platform, currency

Streamr DataCoin (DATA) Blockchain application development platform, currency

BitBay (BAY) Marketplace

Bytom (BTM) Data sharing, mindsourcing

SmartCash (SMART) Humanitarian aid

SysCoin (SYS) Proprietary marketplace

VertCoin (VTC) Decentralized

ClubCoin (CLUB) Decentralized, transparent

SONM (SNM) Processor sharing

iExec (RLC) Processor sharing, Storage

Cindicator (CND) A.I.-driven financial analysis

Numeraire (NMR) A.I.-driven hedge fund

BitClave (CAT) Incentivized internet search engine

Guppy (GUP) Incentivized social interactions

FunFair (FUN) Online casino

Gnosis (GNO) Crowdsourced statistical predictions

Augur (REP) Crowdsourced statistical predictions

SingularDTV (SNGLS) Multimedia production

Revain (R) Online reviews

DigitalNote (XDN) Wallet

GreenCoin (GRE) Trade carbon credits

Expanse (EXP) Boiler room

United Traders Token (UTT) Boiler room

Melon (MLN) Boiler room

OpenANX (OAX) Boiler room

PeerCoin (PPC) Wallet, Mining

Emercoin (EMC) Wallet,

Crown Coin (CRW) Boiler room

Groestlcoin (GRS) All-in-one,

Shift (Shift) Web hosting

Rise (RISE) Wallet

MobileGo (EMGO) Gaming platform

Quantum (QAU)

Tronix Data storage

ICON Project (ICX) Data storage

DomRaider (DRT) Auction record management

Humaniq (HMQ) Charity scam

Bitshares (BTS) Exchange

8 Circuit Studios (8BT) Video game tipping

Edgeless (EDG) Online casino

Decentraland (MANA) Virtual real estate MMORPG

Deep Gold (DEEP) Virtual real estate MMORPG

Enjin Coin (ENJ) Video game microtransactions

Gamecredits (GAME) Videogame microtransactions

AB-Chain (ABC) Puts advertisements in blockchains

Basic Attention Token (BAT) Advertisement tracking

AdToken (ADT) Advertisement tracking

Ethereum Classic (ETC) Application development

Civic (CVC) Password management

Zeusshield (ZSC) Insurance record management

DentaCoin (DCN) Dental record management

Tierion (TNT) General record managment

Golem (GNT) Processor sharing

Substratum Network (SUB) Web hosting

Bitshares (BTS) Exchange

TrustCoin (TRST) Lending platform

Aragon (ANT) Organization management

Ambrosus (AMB) Product/transaction tracking

iXledger (IXT) Insurance record management

Agrello Delta (DLT) Legal agreements management

Viberate (VIB) Musician booking agreements, marketplace

 

Some of these fake-stock coins might survive, and they might have really cool products, but before you buy their coins, ask yourself honestly, can you see Walmart ever accepting it as payment? If not, consider investing in one you can.

Sooner rather than later, the American government is going to shut down all the weakest cryptocurrencies and make it much more difficult to create new ones. There are already almost 1,400 coins, and more are on the way. Right now, the best way to get rich quick from cryptocurrency isn’t by investing in the next Bitcoin, but by creating and selling the next shit coin like Bitbean (BITB). Look at the screenshot of Bitbean’s home page below. There’s nothing behind this “currency” except a couple of guys on cocaine… who are getting rich.

 

 

Bitbean isn’t even the worst or most useless. SmurfCoin (SMF) uses a copyrighted image for its logo. I’ve found shit coins that don’t have home pages or their home page is broken. One of them said they were mentioned in several major newspapers, but when you click the links, it just takes you to the newspaper’s home page. Half the shit coins’ home pages are just boiler rooms that use flashing numbers, bright letters, and frantic language to excite or scare you into buying their coin now. Half the companies that offer a new and exciting product or improvement to blockchain technology don’t have a working product yet. It’s “coming soon” or “in development.” If they do have a product, like a groundbreaking crypto wallet, it looks and works just like a hundred other wallets that were probably made from the same code they all downloaded off of Github. There are at least 300 shit coins with home pages that look so similar, I’m convinced they were made by the same person cycling through six templates. Some of these ultra scammy sites have sold over $100 million in coins. So, don’t assume a cryptocurrency’s market cap is always evidence of  strength, and always look at its home page before buying.

If the crypto community won’t self-impose new standards to prevent me from creating and selling Dickpickcoin (DCK), then governments will have to step in. When either of those things happen, all the shit coins will become worthless, and all the coins that include products and services, will have their heads on the chopping block. I don’t know when this will come, but I know it’ll be when the cryptomarket gets out of control, and it already jumped the shark with Trumpcoin (TRUMP).

If you simply must gamble on coins that have a market cap of less than $1 million, it doesn’t matter which one you choose. Their value is only based on how many other people are buying it. You may as well buy Dogecoin or the newest, cheapest shitcoin and wait for more idiots to do the exact same thing. Since it’s completely random which will attract the most fools, your safest bet is to buy 50 knowing enough will skyrocket to mitigate your losses.

…Or you could just give your money to me instead of a Russian hacker.

 

 

 

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Introduction To Cryptocurrency

Cryptocurrencies are like stocks. None of them have any inherent value. The only reason they’re worth money is because people have enough faith in their percieved value to trade real money for them, which isn’t so crazy, because money has no real inherent value either. Money, stocks, and cryptocurrency are all just tokens we assign a value to on faith.

The value of these tokens is based on two things: scarcity and the reputation of the person issuing them. For example, the U.S. government says, “We’re putting 10 trillion dollars into circulation. You can trade 1,000 of them for a cow. The more stable our economy is, the more our dollars will be worth. Trust us.” IBM says, “We’re putting one billion stocks in circulation. You can trade ten of them for a cow. The more profitable our business is, the more our stock will be worth. Trust us.”

 

Note: The video above says stocks represent ownership of assets in a company, which isn’t always true.

 

These promises are worthless until someone actually accepts these tokens as payment for real-world goods. Bitcoin was just an empty promise until people started accepting it as payment. Once other people saw that happening, they said, “Holy cow! This is worth real money!? Let’s buy and sell it too.” The more demand there was for it, the more money people would pay to get it, and the more it became worth, just like stocks. So you can think of Bitcoins like stocks in Bitcoin Incorporated. It’s even sold on cryptocurrency exchanges that work like the stock market.

The difference between cryptocurrencies and stocks is that there is no Bitcoin Incorporated. There’s no head office, CEO or profit margin because there’s no product being sold. Bitcoin is like a stock in a company that doesn’t exist. There are just a bunch of servers all over the world owned by volunteers, which run programs that were originally invented as a way to back up digital files in multiple locations simultaneously and securely.

Hospitals and big businesses used this technology so they could guarantee they’d never lose important records, and those records could never be tampered with. So employees couldn’t go back in and cook the books to cover up their mistakes or hide fraud. The system works sort of like Utorrent. There are a bunch of people all over the world running a program that allows their computers to collaborate with each other to write chains of data. Unlike torrent programs though, the data isn’t copied. Each server just shares the responsibility of creating and hosting a set amount of data.

The value of a Bitcoin isn’t backed by this data. The data is the money. So a Bitcoin mining machine is like a money printing press, but no matter how many mining machines are online, they collectively only create a set amount of data every day, which is distributed between all the printing presses. Ultimately, the Bitcoin printing presses will produce 21 million bitcoins, and then they will stop producing new ones. I’ve heard the number 21 million is supposed to reflect the amount of gold in the world, which is, in theory, should make Bitcoin the gold standard of cryptocurrency. The last bitcoin will be generated sometime around the year 2040. This system makes inflation impossible, but while Bitcoins are still being created, the more miners there are, the less each person gets to keep.

 

 

If this sounds ridiculous, think of Bitcoins like digital diamonds. Diamonds have no inherent value either. They’re just common rocks. The only reason they seem scarce is because DeBeers has a monopoly on the diamond supply and only lets out a few at a time. Plus, they’ve hyped up the value of diamonds so much that people believe they’re worth money.

 

 

If DeBeers flooded the market with all the diamonds they’ve hoarded, the price of diamonds would plummet, and your warehouse would become full of stupid, worthless rocks. Bitcoin miners can’t flood the market with Bitcoins and crash their value like DeBeers could with diamonds. They can’t split or reverse split a number of Bitcoins it has issued like IBM can. They can’t print 10 trillion more Bitcoins tonight and crash its value like third world countries sometimes do with their money supply. A foreign country can’t overthrow Bitcoin and crash its economy like America did to Iraq. In a crazy, turbulent world, cryptocurrencies like Bitcoin will always be stable… as long as the internet exists. That’s more than most currencies can boast.

If you enjoyed this post, you’ll also like these:

Predatory Capitalism Creates Poverty
Socialism and Communism
The Life of the Rich
The Life of the Poor
Oppression in the Workplace
Success and Retirement
The Housing Market
Healthcare in America
The Stock Market
Banks
Taxes
Cryptocurrency
Fixing the Economy
My Tweets About Economics

The Most Important Factor In The Value Of Cryptocurrency And How It Applies To Steemit.com

If you haven’t heard of Steemit.com, it’s a blogging platform that pays you to post blogs with the site’s proprietary cryptocurrency called STEEM.

 

 

I made an account in August 2016, and one of my first posts was “An Introduction to Cryptocurrency and Steemit for Minnows.” It explains what cryptocurrencies are and what gives them value, but after reading a post today by the user, aaagent, titled, “My journey through the Matrix and how I found the red pill (gold, crypto, politics, economics, & geopolitics),” it made me realize I didn’t stress enough the most important factor in why/how cryptocurrencies gain value, which is:

 

How many people accept it as payment for goods and services

 

There are hundreds of different types of cryptocurrencies, and they each have a gimmick. Some are centralized. Others are decentralized. Some have more transparent histories. Others are more secure and untraceable. DogeCoin is just a generic coin that isn’t backed by anything and has a joke for a name. STEEM is backed by the popularity of its social media platform, which is a cool gimmick, but ultimately won’t determine whether or not STEEM succeeds or fails.

 

 

Even if Steemit becomes a great site, people will stop investing in STEEM eventually if they can only spend it on one or two websites. Even if the Steemit admins never make another improvement in the social media platform, if they focus all their energy on getting businesses around the world to accept STEEM as payment, the price will go up and never come down.

Compare STEEM to Bitcoin and Gold. Most of the people who buy Bitcoin probably don’t understand how it works. All they know is that a lot of people accept it as real money. Therefore, it must be real. It’s like gold. Gold is useful in the real world, but most people won’t use gold for anything other than buying things with it. Very few people know why gold is so universally accepted, and they don’t need to. All they need to know is, they can buy anything with it, anywhere in the world.

This leads me to the number one reason I haven’t invested money in buying STEEM yet. Steemit practically forces you to keep your STEEM tokens locked up in Steem power, and it takes months to turn your power into tokens and sell them. The official reason Steem power exists is the admins want to keep timid investors from crashing the price in a panicky sell-off.

This is true, and it works, but it also makes the price of STEEM look stable on paper, which impresses speculative investors. The problem is, if everyone’s STEEM is locked away, then nobody is buying anything with it. The fewer people who spend STEEM, the fewer people will accept it as payment… because they’ll have nowhere to spend it… because nobody else uses it. When intelligent investors realize they can’t use STEEM for hardly anything except selling it to speculators, they’ll probably stop buying it, which will make its price go down until it dies a slow penny stock death.

When it took two years to power down your account, I had zero faith in Steemit, but I knew the program was in its beta phase. So I used it hoping the problems would get fixed. When they lowered the time to three months, it restored some of my faith. However, it’s all for naught if more businesses don’t start accepting STEEM as payment for real-world goods and services. If anyone can share some links to articles of STEEM catching on with merchants, it will make me more of a believer.

You can use this concept to predict the future of other cryptocurrencies too. Dogecoin is doomed to fail, because it’s not based on anything, and nobody is seriously trying to convince businesses to accept it. However, it is popular, and if a profitable business ever accepts it as payment, its value could spike.

There will always be a real-world need for hard-to-trace currencies like Dash and Monero on the darknet, but the value of privacy-centric currencies are likely to stay pegged to the size of the black market. It is possible another Bitcoin could break out of the black market though. So investors should keep an eye on which currencies are growing in popularity there.

The cryptocurrencies with the most potential are ones like Etherium, Zcash and Ripple, because they’re designed with business in mind, and they’re focused like a laser on getting their currency into circulation, unlike Steemit, which is more focused on manipulating the appearance of its value.

That’s harsh, but I’ll be fair, Steemit did take a step in the right direction by lowering the time it takes to power down your account. If they just do a little bit more to improve the circulation of STEEM, I’ll put my money where my faith is.

 

If you enjoyed this post, you’ll also like these:

 

Cryptocurrency
Fixing the Economy
My Tweets About Economics
Success and Retirement
The Stock Market
Banks
Taxes

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