The Lightning Network, now coming online, is being touted as the savior of the increasingly sclerotic Bitcoin infrastructure. It is not a new coin, but rather a way of using Bitcoins, and purports to solve, or at least mitigate, several of the most grievous problems Bitcoin is exhibiting as it matures: rising transaction fees, agonizingly slow transaction confirmation, severely limited scalability, and exponential growth in the cost of maintaining the blockchain.

I’m only going to summarize enough here to make some points about the project. You can get a nice rundown in layman’s terms from Wired.  Probably the best source, if you have some technical background and not much time, is the Lightning Network’s page, which has a recorded presentation that summarizes the underlying mechanisms at a level somewhat above the cryptography. If you really want to understand the gruesome details, try the original paper. The cryptography is not developed from the ground up, but if you have the basics already, it’s very readable. There’s also a brief piece in Bitcoin News about the first real-world purchase using Lightning Network, which happened earlier today (January 21, 2018.) Continue reading “The Lightning Network” →

I was just (January 3, 2018) checking on today’s price for Bitcoin—what can I say, I’m morbidly fascinated by the spectacle of thousands of people shooting craps with their retirement savings—and was once again struck by the sheep-like acceptance of the term “market cap” by financial wonks. Does nobody else object to the crypto-currency mafia appropriating this term and using it in a wildly misleading way? It is the miracle of decentralization that nobody is legally responsible for the sales pitch.

First of all, the idea of market capitalization applies to equities. It is the number of outstanding equity shares in a company multiplied by the current price of a share. Its main use is for sorting companies into buckets by size, with the aggregate value of the shares being a rough proxy.

Continue reading “Bitcoin Market Cap” →

The previous long post about the Bitcoin bubble was already going out of date by the time I spell checked it. I was inspired to write it a week ago when the price was almost $17,000, but by the time I finished it, spell checked it, opened a WordPress account, and posted it, a week had slipped by, and the price had gone up to almost $20,000 and then dropped to it’s current $13,500. It dropped by more than $400 just while I was writing this—what, 20 minutes? It’s December 23 2017 at 2:58 PM.

In an abstract way, I hope it collapses to the ground before even more sheep transfer their hard earned money to whales, but I don’t have a dog in the fight. That must sound mean spirited, given all the people who will get hurt, but every hour it lives, the number increases only increases. It’s mathematically impossible for the total amount of pain to go down or even stay the same. Continue reading “Update” →

A couple of people asked me this week if they should be investing in Bitcoin. I didn’t quite know what to say but I get why they’re asking. The price of a Bitcoin jumped from $1000 to $17,000 this year. It was up almost 20% last week alone. (I wrote that a couple of days ago, and today it’s almost $19,000.) If you Google Bitcoin you’ll see a ton of links celebrating its arrival as a serious investment, telling you how to make millions on it, imploring you to shift your IRA to Bitcoin, etc.

The short safe answer to the question is, if you have to ask someone like me, then don’t do it unless it’s a pure lark—a trip to Vegas. The long explanation is below. Meanwhile, for God’s sake, don’t bet the retirement account.

Continue reading “The Bitcoin Frenzy” →