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Why is bitcoin superior to gold as a new standard of value?

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This material is a review of the book by economist Seifedin Ammus “A Brief History of Money, or Everything You Need to Know About Bitcoin”.

After reading the title of the book “A Brief History of Money, or Everything You Need to Know About Bitcoin,” you might think that it will deal with Bitcoin . A person who is alien to the topic of cryptocurrency and who knows only that the price of Bitcoin has fallen from $ 20,000 to $ 4,000 is unlikely to consider this work worthy of his attention and would prefer to buy a volume of Tony Robbins in order to “wake the giant in himself”. And it is in vain.

Seyfedin Ammus decided not just to tell the story of Bitcoin and describe the ideology of the people who stood at its source, but to follow the development of money from primitive societies to this day and answer the question of how and why we came to Bitcoin.

Many representatives of the academic community in the economic sector are usually very distant from objective reality, creating theories for theories and fitting facts to hypotheses, and not vice versa.

This is explained as follows :

  • They really do not understand that the basic tenets of their science in practice lead to the most dire consequences [incompetence].
  • They depend on government budgets and are forced to defend the Keynesian economic model, which in practice is contrary to common sense [self-interest].

However, academics have an undeniable advantage: they know how to structure large amounts of data and build them into a logical chain (even if the data is false). Ammus demonstrated this virtue in all its glory and abandoned the traditional pomp of scientists, which is expressed in the complexity of the wording.

Money is a medium of exchange, a means of accumulation and a unit of account. If these things seem obvious to you, then you will probably be surprised when you realize that the advocates of the current economic model pervert this extremely simple paradigm.

There are two types of means of payment or money: hard and soft. The ratio of two simple indicators helps to determine the hardness and softness of any means of payment:

  • reserve [how many units there are],
  • inflow [how much will be manufactured].

And it so happened that the whole history of money revolves around this simple formula.

Most modern economists refuse to understand a very simple fact: the state can oblige all citizens to use a certain means of payment, but cannot make it a firm decree of parliament. For thousands of years, mankind has determined the best means of payment, whose inflow is low enough so as not to depreciate savings. And so it happened that a long search by trial and error led society to the answer that it was gold.

All beads, stones, shells, coins from other metals and pieces of paper lost the monetary battle to gold. Silver held the longest, but it eventually fell. The period when Europe moved to the gold standard was characterized by unprecedented economic prosperity, the rapid development of new technologies and art. Currencies were backed up by reserves of gold, which simplified the conversion and favored free trade.

Society accumulated capital to invest in the future, because the higher the standard of living, the lower the temporal preference: people are willing to limit themselves to something in order to get more in the future. This is possible only when hard currency is in use.

Unfortunately, even a prosperous society is not immune from unforeseen events. Until now, historians [one more theorists] cannot thoroughly explain why the conflict between Austria-Hungary and Serbian nationalists turned into a world war, but this is no longer so important.

It was then that the very clever people who decided to reshape the economic system for themselves and their beliefs appeared, which naturally led to the catastrophe. When gold in the form of money was in the hands of the population, the government could wage war only at the expense of its own treasury and additional taxes. But the abandonment of the gold standard, the creation of central banks and the transition to monetary nationalism allowed the powers that be to print money, up to the complete impoverishment of the population to maintain their aggressive adventures. And now we are not talking about history, but about the current state of things, since the theater of the absurd has been going on for more than a century.

More than a hundred years ago, the government turned on the printing press, Europe found itself in ruins, the population lost almost all the savings in a war that did not have any clear reason. But instead of recognizing the rejection of the gold standard as a mistake, the authorities blamed the economic collapse on this standard, and the British economist John Maynard Keynes managed to turn this insanity into a science that is being taught at universities around the world today.

Keynes quickly realized that politicians and bureaucrats wanted to hear, and he developed a doctrine that said that the state of the economy was determined by the level of total expenditures. The more expenses the better. If you spend nothing, then you need to print more money. Thus, in the hands of the states turned out to be the apparatus that made them virtually omnipotent – the printing press. The fact that real life has repeatedly proved the inconsistency of this doctrine still does not bother anyone.

Modern educational programs claim that the cause of economic crises lies in the late or improper intervention of states in the life of the market, but they overlook one simple axiom: it is government intervention in market relations that is the cause of any crisis, the root of all problems.

“Seriously to believe that the central bank can overcome or curb the recession is as naive and dangerous as putting the pyromaniac at the head of the fire brigade ,” writes Ammous.

In the West, the communist planned economy was constantly ridiculed as untenable, but all central banks are planning on the most important market — the capital market. Thus, the interest rate is not determined by the natural balance between supply and demand in the investment market, but imposed by a group of bureaucrats and academics who think that they should know better how the market should work.

Now, instead of producing goods and engaging in productive economic activity, enterprises are forced to follow fluctuations in floating rates and analyze possible actions by governments and central banks. Thus, a small group of people took from society a solid means of payment, which is necessary for prosperity, and created a system where banks make a profit, but do not bear any risks.

The emergence of Bitcoin in this context, Ammus believes, was a turning point. Despite the frank hostility of the traditional system, he managed to survive because he was chosen by society and not imposed from above. This is the first and only asset whose ratio of reserve and inflow exceeds gold due to strictly limited emissions and dynamic changes in the complexity of mining. The latter does not increase the supply with a sharp increase in demand, which indicates the phenomenal hardness of the first cryptocurrency.

At the same time, Bitcoin is a real scarce resource, the first after time. The lack of other resources is relative, because you can always get and produce more if you invest more man-hours. In this sense, Bitcoin once again proved its uniqueness.

Bitcoin is a distributed system, no one can manage the offer or withdraw it from use, as was the case with gold. If you join a network, you voluntarily agree with its rules. It’s like the rotation of the Earth, since you can only agree with that.

The rules can be changed only if the nodes supporting the functioning of the network that are interested in its prosperity agree with this. Thus, all changes are aimed only at its strengthening. Arranging attacks on the network is unprofitable for the attackers, since the loot will immediately lose its value, which guarantees the safety of the savings.

Thus, Bitcoin not only has all the advantages of gold, but also offers previously inaccessible options to society – a completely new standard of value that can fundamentally change the economy of the world, currently working in accordance with the insane doctrine of John Maynard Keynes, who claims that politicians and bureaucrats have magical abilities.


Seifedin Ammous is a professor of economics at the Adnan Cassar Business School at the American University of Beirut. He is also a foreign representative at the Center for Capitalism and Society at Columbia University.

Ammus has a doctoral degree in sustainability from Columbia University in New York and a master's degree in management systems from the London School of Economics.

Publication date 15/04/2019
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Bithumb Cryptocurrency Exchange intends to enter the markets of the USA and Japan

Bithumb, one of the largest Bitcoin exchanges in South Korea, in the foreseeable future, may begin to offer services to residents of the United States and Japan. About this in an interview with Cointelegraph said BC Kim, CEO of the Blockchain Exchange Alliance (BXA), which owns the controlling package in Bithumb. According to him, the BXA strategy consists in the so-called reverse merger, involving the purchase of a company whose shares are already […]

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Bithumb, one of the largest Bitcoin exchanges in South Korea, in the foreseeable future, may begin to offer services to residents of the United States and Japan. About this in an interview with Cointelegraph said BC Kim, CEO of the Blockchain Exchange Alliance (BXA), which owns the controlling package in Bithumb.

According to him, the BXA strategy is the so-called reverse merger, involving the purchase of a company whose shares are already being traded on one of the major exchanges. Among those, Kim names the Nasdaq and the New York Stock Exchange (NYSE).

Such a path may be faster than a traditional IPO, and will also help to significantly reduce the cost of listing on the stock exchange, which can reach $ 6 million.

As Kim says, BXA has already applied for legal support in the United States, and a lawyer from an unnamed firm said that the current regulatory environment allows the company to implement the stated plan.

BXA is also looking for partners in Japan, where it wants to create a joint venture to launch a officially licensed cryptocurrency exchange.

In addition, BC Kim said that he could potentially increase the share of BXA in Bithumb by buying up to 70% of the shares of BTC Holdings, the current operator Bithumb.

Additionally, he touched on the issue of the BXA's own token, which is already traded on the BitMax exchange, noting that its potential listing on Bithumb requires additional legal assessment.

Earlier this week, the Blockchain Exchange Alliance received funding in the amount of $ 200 million from the Japanese blockchain fund ST in the framework of the investment round of series A. As stated, investments will be directed to expanding the geography of Bithumb services, as well as adding new trading pairs to the site.

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The US government plans to increase spending on the blockchain technology 10 times.

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Blockchain will become the main technology for the work of American civil and military government agencies.

The US federal government intends to increase spending on the blockchain 10 times – such data is contained in the report IDC Government Insights. According to the authors of the study, the amount of spending on this direction will increase to $ 123.5 million by the end of 2021, while in 2017 only funds worth $ 10.7 million were allocated.

It is also expected that spending on the implementation of distributed registry technology will also grow at the state and municipal level: in total, they will invest $ 48.2 million in this area over the same period, which is also about 10 times more than in 2017, when these goals were spent 4.4 million dollars.

If we talk about the structure of spending, then at least four times the costs of federal civilian authorities will increase, from less than 20 million to more than 80 million dollars over a specified period. The US Department of Defense will spend up to $ 40 million instead of $ 20 million, as in 2017.

As the head of the IDC research unit, Sean McCarthy, notes:

“We are confident that blockchain solutions will dominate in such issues of government functioning as state property management, identification of citizens at the border, as well as government procurement, when in the latter case everything goes from paper workflow to smart contracts .”

In the near future, much attention will be paid to investment in blockchains to improve logistics, including the deployment of new US military units in the EU countries. In addition, the distributed registry technology will continue its intensive distribution in financial transactions.

Publication date 20/04/2019
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The State Duma and the Central Bank of the Russian Federation proposed to replace the reserves of the US dollar by a cryptocurrency

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Russian commodity companies have appealed to the State Duma and the Central Bank with a proposal to implement in the country the concept of steylcoin – cryptocurrency , the value of which is tied to real assets. This was announced by the head of the Duma Committee on the Financial Market, Anatoly Aksakov, during a plenary session at the Yalta International Economic Forum.

Aksakov told :

“Serious Russian resource companies have turned to us in the State Duma, to the Central Bank with a proposal to implement the idea of steyblockcoins – these are cryptotools based on a real asset. And so, in the opinion of these serious businessmen, the stableblocks will just allow replacing the dollar in mutual settlements. So we are moving towards this. ”

Aksakov noted that there is no need to set guidelines for the time period for the refusal of the dollar in international settlements, but it is necessary to create conditions for this.

“Calculations in national currencies are growing, of course, not as fast as we would like. But, say, with China, they are already close to 25%. More recently, it was almost zero. In the Eurasian Union, calculations already exceed 80%. ”

He added that in Russia the structure of international reserves has changed significantly.

“The structure of international reserves has changed significantly: if dollar assets accounted for about 60% of our international reserves, now they are 22%. On the other hand, the share of yuan, gold has significantly increased – this is just the answer to the fact that sanctions have been taken against our country. ”

As he wrote, in January 2019, Bloobmerg reported that the Russian Central Bank, actively selling dollars from its reserves and “shifting” to other currencies, bought a quarter of all world reserves of the yuan.

The politically determined course of dedollarization led to the fact that Russia began to get rid of American securities, which were previously regarded by Russian financial officials as highly liquid and minimally risky. Already in the middle of 2018, Russia got rid of half of US debt, selling them for yuan.

The problem, however, is that in the same year of 2018, the yuan devalued against the dollar by 5.7%, so the dollars sold for the yuan supported the Chinese financial system, but eased Russian reserves by 670 billion rubles. According to Bloobmerg, the Russian Central Bank lost exactly that amount in rubles on exchange differences between the yuan and the dollar last year. The United States did not lose a cent.

Today, no country in the world has such a share of RMB in its reserves as Russia, because, despite the size of its economy, China remains a developing country with not the most reliable currency, which the yuan demonstrated in 2018.

As for the national steyblekoinov, tied to the real assets, which spoke Aksakov, this idea, of course, is not new. In February 2019, he voiced the opinion of the head of the Energia corporation, former Energy Minister Igor Yusufov, who is in favor of creating the Russian “oil cryptocurrency” .

According to the ex-head of the Federal Securities Commission of Russia Igor Kostikov, not only oil and gas, but also any resources that are exchangeable can be connected to cryptocurrency.

Oleg Abelev, Associate Professor of the Department of Economic Theory of the Financial University under the Government of the Russian Federation, agrees with them. According to him, from a technological point of view, Russia has not yet matured before introducing cryptocurrency for oil and gas into its calculations, but from an economic point of view, this thesis is not without reason.

However, Abelev notes :

“We run into the fact that digital financial assets in Russia are outside the law. But sooner or later, the existence of such assets should be recognized and the legislation regulating the life of cryptocurrency must be adopted, ”the economist is sure.

Publication date 20/04/2019
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