A reminder of high fees
This morning, while I ate breakfast, I noticed that Wimbledon was on ESPN. One of the commercials was for eTrade, which prominently stated that they charge just $7.95 for "US equity trades."
Trades in stocks should be relatively expensive to execute because of the number of laws involved. Names of stockholders need to be registered with the company in order to vote and receive dividends, and there is a system that reconciles all the titles of who owns what stocks every day. There are laws against insider trading and other actions that add compliance costs to ensure the trader is not party to a violation. Prospectuses and company materials need to be issued to the shareholder, and the broker is required by law to provide extremely detailed tax forms to clients.
Yet, in one of many purchases a month and a half ago, I bought eight bitcoins for $439 each, and paid a fee of $44.02. Coinbase isn't required by any laws to do any of the things listed above; all they have to do is collect proof of identity (which stock brokers also have to do). These guys are raking in big money and this should serve as further confirmation of what I said about excessive costs involved in trading bitcoins.
NXT and the 1MB transaction limit
The overview of features that I read still doesn't provide me with a compelling case as to why people are devoting so much effort to NXT. I might even agree that many of these features are better than bitcoin's features. The question I ask is why it is necessary to start from the ground up creating an entirely new system.
NXT states that they have solved the 1MB transaction limit. That's great. But why couldn't people have used the bitcoin network as a starting place for the project? There are many ways to integrate many of NXT's features into bitcoin. It might not be as easy as starting over, or even as elegant, but there are millions of people using the bitcoin network already. The amount of good that could be done by focusing attention on improving the bitcoin protocol is many times higher than what can be accomplished by creating a new protocol.
This focus of energy on the wrong place is the major problem I have with many altcoins. The bitcoin deveopment team remains small, and yet there are many developers who are spending time working on altcoins when it is now almost definitive that bitcoin is going to be the dominant currency.
On the contrary, working on altcoins undermines the entire premise of cryptocurrencies. Consider if somehow NXT were able to take the lead over bitcoin. Were that to happen, nobody would invest in any cryptocurrency again, because the precedent would be set that perhaps litecoin could supplant NXT a few months later. Merchants can't adopt point of sale systems when the currency is possibly going to change tomorrow, and people would see cryptocurrencies as a joke. For that reason, I see altcoins as a danger to bitcoin and people who are working on altcoins that hope to replace bitcoin fail to understand that if their altcoins win, all cryptocurrencies would likely fail.
PayPub
PayPub (http://www.wired.com/2014/06/paypub/) is a tool designed to compensate people who leak classified information to people who want to pay for it. This is one of the most dangerous apps I've ever seen, and if it comes into wide use, would bring negative attention to bitcoin in an unprecedented way.
The authors seem to be naive that the people wanting to pay for classified documents are going to be journalists. Newspapers have nothing on foreign governments when it comes to money. The Chinese would be more than willing to relocate new American spies to China and pay them $10m for plans for a missile. And this software would allow them to do it anonymously. Were this to happen, the negative attention would trump anything that happened before with Mt Gox and the various thefts before that.
Edward Snowden, regardless of whether you believe he did the correct thing or not, went through a media organization that sanitized the documents to remove critical information. Julian Assange, who rightfully is being treated as a criminal locked in an embassy, did no such thing. Assange left names in his documents that put lives in jeopardy. This stuff isn't a joke; when you release documents like that, people die. The authors of the PayPub app seem to have lost the concept that what they are doing is to promote indiscriminate leaking of highly sensitive documents to foreign governments, which will cause retaliation that results in the death of some named people, or worse (like torture).
Stagnant transaction volume continues to be a problem
Many people are overly concerned about external events like China or government bans, but I am more interested in why the transaction volume has remained steady for many months. Subpar transaction volume is a significant issue that could be a danger signal.
There's an article about this at http://www.businessinsider.com/tim-swan ... omy-2014-6. While the writing quality won't win a Pulitzer, the issues of many companies not having decent business models and how much non-productive activity like crime is occurring on the network are real.
The transaction volume increasing is one of the fundamentals of the bubble cycle that I talked about earlier. During previous bubbles, transaction volume continued to increase. What has happened with transaction volume is that, even though bitcoin is clearly a superior product to what is offered by many existing businesses, people still aren't using it widely. You can buy almost anything with bitcoins now. For example, few would argue that using Western Union to wire money internationally (or even nationally) is better than bitcoins, yet the vast majority of people are willing to pay hundreds of dollars more to use Western Union. That implies that there is something wrong with the network that makes people willing to pay $100 more to avoid it, which is of huge import.
There are many examples of technologies that are clearly superior to existing products that have failed and the world regressed (DVD Audio and the fact that Wimbledon, which I mentioned above, is not broadcast in 3D this year are some examples). One can't look at a technology and say that it will succeed simply because it is better, because there are many counterexamples. This auction is going to be interesting becuase I don't see any way that the price remains stable much longer. Either banks, as I predict, will be willing to pay a lot for those auctioned bitcoins, or it may turn out that others see this transaction volume and have similar concerns. If the winning bids are below market price, then I would expect a large crash, as that would be a clear indicator that Wall Street has concerns about the future.
If the banks are confident that bitcoins have a future, then it certainly doesn't seem like it yet. Every day before this auction the price fails to rise, a crash that goes through the lower boundary and breaks the bubble cycle becomes more likely.
Other
- Days until the auction: 3
- Days until July 24: 30