All posts by Thomas L. Knapp

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Cryptocurrency Will Survive And Thrive, But Will Bitcoin?

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The bitcoin logo
The Bitcoin logo (Photo credit: Wikipedia)

March 2017 came in like a lion for Bitcoin as, for the first time ever, one Bitcoin sold for more than one ounce of gold. As I write this, the Bitcoin currently in circulation, if sold at current prices, would bring in more than $20 billion US (that’s nearly 12 times the market capitalization of its closest competitor cryptocurrency, Ethereum). As it enters its ninth year,  the future looks very bright for an idea that many have spent the previous eight years scoffing at and predicting the imminent demise of.

But this time they may be right. Bitcoin is in crisis, and the crisis could kill it.

A few days ago, I confided into my CFD trader friend, who advised me to spend a small amount of Bitcoin (in the range of $5 US in value). The transaction took nearly 30 hours to confirm. This was because I elected to pay only the minimal “miner fee” (about 25 cents, or about 5% of the amount I wanted to spend — 1% would be a better target in my opinion).

To survive and thrive over the long term, a cryptocurrency is going to have to be used as a medium of exchange by regular people buying regular things at regular stores. This means that transactions have to be confirmed quickly and that the fees involved have to be attractive versus PayPal and credit cards.

Recently, transactions on the Bitcoin blockchain have slowed waaaaaaaay down for people who are unwilling to pay fairly high “miner fees.” The (as non-technical as possible) explanation of that term:

Bitcoin is created (“mined”) by people (“miners”) who run computer software that keeps track of Bitcoin transactions (“updates the blockchain ledger”). The miners are rewarded with a bit of the newly created Bitcoin and with miner fees.

As more and more people use Bitcoin, more and more computer power is required to update the blockchain ledger. Transactions with the minimum fees included go to the back of the line and are taking longer and longer to process.

If this isn’t fixed, Bitcoin will become nothing more than a store of value for people who move it around in quantities big enough to justify large fees and long waits. If that happens, the value of Bitcoin will plummet back toward a famous early transaction in which someone paid 10,000 Bitcoins for two pizzas. No customer or shopkeeper is going to pay a dollar in fees and wait 30 hours for confirmation to buy or sell a can of cola.

Two proposals for improving the system, “Bitcoin Unlimited” and “Segregated Witness,” are under consideration by the Bitcoin developer and miner communities.  I’m not the guy to ask about the technical virtues of each proposal, but my sense is that Roger Ver, the main evangelist for Bitcoin Unlimited, has a better understanding of what needs to happen and why. That is, he sees that small, fast, low-fee transactions are the future of cryptocurrency.

If Bitcoin developers and miners don’t get that fact through their heads, and soon, cryptocurrency as such won’t die — but Bitcoin will cease to be people’s cryptocurrency of choice.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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Budgets, Taxes, Deficits and Debt; or, Mulvaney Versus the Math

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English: South Carolina State Senator Mick Mul...
South Carolina State Senator (now director of the US Office of Management and Budget) Mick Mulvaney speaking in front of a crowd in Newberry, SC, in August of 2010 during his run for the U.S. House of Representatives. (Photo credit: Wikipedia)

“What you see in this budget is exactly what the president ran on,” US Office of Management and Budget director Mick Mulvaney told George Stephanopoulos on ABC’s “Good Morning America” in late February.

The president’s overall budget proposal is still under wraps and hasn’t been sent to Congress yet, but Mulvaney was making the media rounds to flack for its first big component: A $54 billion increase in military spending.

Mulvaney’s claim is true as far as it goes. Donald Trump ran for president on a promise to “rebuild” the most expensive war machine in the world, a “defense” establishment that hasn’t missed a meal since World War Two and that, if cut by 90%, would still be the first or second largest in the world (depending on what China spends from year to year).

Mulvaney didn’t look very happy about it. I don’t blame him. As Stephanopoulos pointed out, Trump made a few other promises, too — and those promises represent an insoluble math problem for the numbers guy.

On one hand, in addition to the increased defense spending, Trump wants a $1 trillion infrastructure program and he’s pledged not to touch Social Security or Medicare spending.

On the other hand, he’s promised to cut taxes.

Even if his hands weren’t so famously small, they’d have trouble holding on to both sets of promises while juggling two more in the air: He’s promised to reduce the federal government’s annual spending deficit and pay down its gigantic debt.

Yes, the “Laffer Curve” predicts the possibility of increased government revenues from general economic growth after tax cuts,  but those numbers still just don’t add up. It’s not possible to spend more, and tax less, and pay down crippling debt, and bring a runaway budget into balance.

Unless Trump and Republicans in Congress are willing to buckle down and get serious about spending cuts (if you’re not serious about cutting military spending, you’re not serious about cutting spending) Mulvaney’s real job for the next four years won’t be balancing budgets, it  will be making excuses.

Fortunately for Trump, he has considerable relevant business experience that he can bring to bear on the problem.

Unfortunately for the rest of us, that experience is in the casino industry where, no fewer than four times, he spent enterprises into insolvency then left his partners holding the bankruptcy bag.

I predict that his presidency will bring that number to five.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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The War on Marijuana is Ending. Disarm Jeff Sessions.

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FreeImages.com/Mateusz Atroszko
FreeImages.com/Mateusz Atroszko

Jeff Sessions doesn’t “think America is going to be a better place when more people of all ages and particularly young people start smoking pot.” He’s worried about the possibility of “marijuana being sold at every corner grocery store.” Because, you see, “good people don’t smoke marijuana.”

America disagrees.

A majority of US states (28) have modified their laws to recognize the medical benefits of cannabis over the last two decades. More recently voters in eight of those states, representing 25% of the population of the United States, have chosen to substantially legalize recreational use as well, and a solid majority of voters in the other states support the idea of doing likewise.

The writing is on the wall: The war on marijuana is ending, and freedom won. Sessions can’t undo that any more than the Ku Klux Klan was able to undo Appomattox.

Unfortunately, as the newly confirmed Attorney General of the United States, he does enjoy a great deal of Klan-like power to continue terrorizing the millions victimized by his side during its 80-year war on a benign and useful plant.

It’s time for Congress to take away that power.

In an ideal world, doing so would entail the repeal of all federal narcotics laws and the elimination of the Drug Enforcement Agency and Office of National Drug Control Policy.

Realistically those developments are probably decades away, but there’s a bare minimum baseline of acceptable congressional response to the will of the people and the prerogatives of the states:

First, Congress must remove marijuana from the DEA’s “scheduling” of drugs under the Controlled Substance Act.

Secondly, Congress must use its power of the purse to de-fund, prohibit, and if necessary punish, any future DEA/ONDCP enforcement or propaganda activity relating to marijuana.

And there’s no time like the president: The new president claimed on the campaign trail to respect the states’ decisions on the matter, and he’s also calling for cuts of “waste, fraud and abuse” from federal discretionary spending. The war on marijuana clearly answers to all three descriptions.

Four US Representatives — Dana Rohrabacher (R-CA), Don Young (R-AK), Earl Blumenauer (D-OR) and Jared Polis (D-CO) launched a “Cannabis Caucus” in mid-February to begin the urgent task of winding down the failed federal war on marijuana. That’s four out of 435. If your alleged representative hasn’t joined the caucus yet, maybe you should call his or her district office and ask why.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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