Tag Archives: Money

Bitcoin, what’s the point?

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Digital currency is the biggest new thing on the market. It’s not a new idea at all, however the fact that someone was able to get it up and going is something new. The first time I’d heard of a cyrptocurrency and the potential impact it could have on the economy was in the Cyrptonomicon a 1999 book written by Neal Stephenson, but the idea is clearly much older than that. In fact, Paypal likely was something of a precursor itself to cryptocurrency. It filled a whole for money transferring on the internet, which was difficult in many cases. Paypal and eBay co-evolved as Paypal became the default transaction tool on the site – otherwise every seller would have needed to be able to accept credit cards. Paypal offered a safe way to transfer money directly from one account to another without messing with banks or credit card companies.

After the crash in 2007 and Paypal and other services refusing to transfer funds to Wikileaks people felt it was important to have another option. Fortunately, for those folks Bitcoin was already on the market, having been created in 2009. Bitcoin is essentially a digital version of gold in that users of the currency mine the coins and there is a set limit of 21 million Bitcoins. This has lead to a massive explosion in both awareness and usage of the currency. Currently, many locations accept Bitcoin as a currency so you can buy stuff with it.

Yesterday, Paul Krugman, wrote an op-ed arguing that Bitcoin, like gold, is a foolish standard to adhere too. Essentially, we mine gold and then bury it in a safe and never use it. According to Krugman, Keynes argued that the government should bury printed money and then let private enterprise mine the money – as it’s more desirable to allow private enterprise to spend money rather than government. However, in times where demand is low there’s no incentive for private enterprise to spend that money, unless they can spend it to pull it out of the ground. He then goes to argue that we’re essentially doing the same thing with a Bitcoin mine in Iceland.

This got me thinking a little bit last night. I’m not really sold on Bitcoin, I think that if anything it really points out that the only value in any thing is what people assign to it. Either paper currency, digital, or “precious” metals. Diamonds are artificially high in price because of a cartel. For instance, you can buy a set of lab created diamond earrings weighing in total 2.5 carats for $482 (12/24/2013) but if you were to buy two 1.25 carat diamonds to make those earrings it would put you back over $30,000. There’s a lot of diamonds out there and it’s impossible to tell the difference between lab created and those pulled out of the ground. Yet we put more “value” on the “real” diamonds from the ground. There is nothing intrinsically valuable about diamonds or gold. What both of them are though, are standards for trade, similar to the dollar and Bitcoin.

There is one cyrptocurrency that does have a more altruistic motive though. That one is called Primecoin and it’s encryption algorithm is based upon prime numbers. As the number of Primecoins increase in the market the number of prime numbers eventually discovered will increase. However, this was is mined differently from the other cryptocurrencies so it’s not as easy to switch to this cyrptocurrency. This coin does have an underlying value as every new prime number discovered typically has some sort of prize associated with it as it provides value to the mathematical and scientific communities. What they do with it from there is anyone’s guess. However, it provides value completely disconnected to it’s “value” in the market place.

Could we develop a cryptocurrency that instead of requiring increasingly complex solutions to an encryption key, but one that solves difficult problems at the same time? There are a large number of places where this would be useful such as SETI, Fold.it (folding proteins for science), and researching molecules for big Pharma. I’m sure there are many more options. However, then we take Bitcoin a digital gold and convert it into something more useful to everyone than Primecoin and potentially solve problems as well as mine usable moneys.

Edit: Originally said 40 Million Bitcoins, actually 21 Million

Upholding of Citizen’s United

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Today, the Supreme Court of the United States (SCOTUS), upheld the controversial Citizen’s United ruling of two years ago. I’ve written about some of this in the past and I’ve talked to many people about the implications of this. However, there are two major tenets in this ruling that matter. One: that you cannot limit the amount of money spent during a campaign because that restrict free speech. Two: that two separate groups can raise funds and use their right to speech without corrupting the political candidate. Additionally, there were some ground rules that were established as to when you are considered breaking this ruling and in violation of the law. One of these is that the two groups cannot coordinate their strategies and that the two groups must remain independent of each other. 

In this most recent ruling, the SCOTUS essentially has stated that there hasn’t been any reason to revisit their previous ruling and that it now also applies to states. This is important as Montana had laws on the books that limited the amount of money that could be donated. This law was put into place to fight corruption in 1912.

This ruling is difficult because on one hand, at what point can you limit the amount of money someone wants to spend of their own money on political speech without restricting freedom of speech? If someone is willing to let you put ads up and pay money for it, isn’t it your right to do so? That part of the ruling is really difficult to argue with. However, The part that isn’t hard to argue with is the lack of independence. This has been pretty well displayed during the Republican primary. Without some of the mega funders campaigns effectively folded. Santorum is a prime example of this where his primary doner pulled out and that ended his campaign. Was this person willing to fund him because their views aligned extremely well or was Santorum changing his views to align more closely with the doner? We’ll never know to be sure, but it’s likely that there was conversations between parts of the campaigns and the doner.

In the US we will likely continue to have huge doners and this will likely continue unabated until we are able to pass a law or constitutional amendment to make this sort of donation illegal. Many liberals argue that the 1st amendment for free speech wasn’t designed to allow the wealthy to say whatever they want. That it was to give an equal voice to everyone. Sadly, media is run by people that wish to make a lot of money. Until we figure out a better way to disseminate political information that is unfiltered, we will likely continue to have the same unbalanced views portrayed.

Ethics in Politics?

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“Who put the question mark there, you all know he’ll read whatever is on the prompter!” Mostly a quote from the movie Anchorman. The point is, should that question mark be there or not? In the US, the STOCK Act, designed to prevent insider trading by Congressmen, is moving forward for debate in the Senate. This type of law, even if there are debates about the need for this specific law because it should already be illegal, really drives the point home. Clearly, this is something that the majority of us would consider unethical. In business ethics courses (heh), this type of action is typically considered a big no-no and at many work places is considered very bad as well.

A personal example for me came from working at Verizon Wireless. My first co-op rotation there I was an equipment engineer, where I bought equipment and work with companies to build cell sites. For a Sophomore in college this was pretty awesome. I was buying stuff that was worth something like $40,000 like it was nothing. Pretty cool stuff right? Well, I started to deal with vendors and learned that no vendor was allowed to buy any of us lunch. Not even lunch. If anything was worth more than $25 as a gift, we had to return it.

Now, if you put this into perspective of what insider trading or campaign contributions, we can see where there’s an ethical problem. I was making $16/hour at the time, so $25 bucks was almost a quarter of a work day’s salary. Pretty big deal. Insider trading has made congress members a much higher return on their salary than that 25 bucks was for me. The perks provided by Lobbyists are even worse than lunch. They’ll buy you lunch, but it won’t be at Primanti Brother’s, it will be at some place that’s $100 a plate plus wine, then take you golfing later.

So where does this disconnect come from? If this is something that I knew was wrong when I was 20, why don’t these Congress members understand that at 50 and older? One of the problems are social norms, if everyone is doing it, why aren’t you? These social norms can be extremely powerful, as teenagers we were always warned about peer pressure to do drugs and stuff, cause drugs are bad, m’kay? The problem would become when everyone around you was doing this, and it was the only way to survive the situation there are powerful urges to conform.

Once someone has conformed, these social norms become their own self reinforcing type of “ethical” behavior. This begs the question if the end justify the means? Well, we also need to be aware if the ends are justified at all. I think in many cases, the ends are so influenced in both conscious and unconscious ways, that we don’t even know what the ends the politician set out to achieve are any more.

This is why it is important to have independent watch dog organizations and an independent judicial system. It is also why it is important to get money out of politics. Once money is out, the choices aren’t captured by the interests of the people paying you. Independence allows impartial review and a manner to determine which course is actually best for the whole.

Americans prize their rights, however, rights are threatened whenever there are powerful interests that want to limit those rights. Despite the fact that I talk about the US on here a lot, these ideas are transnational, and all citizens need to work to remove the influence of money from their political system. There are ways to do it. For the US Lawrence Lessig has proposed one idea in Republic, Lost and Reddit is working on their on PAC and Free Internet Act as another solution.

When I finish with my thesis I plan to become active in both Reddit activities and I suggest you look to find something similar.