As investment advice, this post represents rumor, speculation, and incomplete information. Keep an eye on the bad weather I speak of, and make your own judgment about the storm. I have lost a great deal of money, and made a great deal of money. Future performance may not reflect past performance.
I am long on land, stocks, and crypto currency. Will soon no longer be long on stocks.
We are now a time of high inflation, though the CPI and general public are still in stubborn denial. To accurately assess real inflation, look at the prices of spot traded base commodities: Oil, natural gas, copper, silver (not gold, it is demonetizing) wheat, soybeans, corn, coffee, cotton, rice, cocoa, and the used vehicle index. The apartments for rent index is not useful, as it differs radically in different locations as order and safety collapse in some locations far more than in others.
Commodity prices are soaring, and they are all soaring in roughly the same way at the same time
It looks like the underlying inflation rate for commodities is around fifty to a hundred percent. Commodities are the primary leading indicator for inflation. List prices are a lagging indicator, reflecting the inherent detachment from reality of book keeping denominated in fiat currency.
Last time we had high inflation, stocks were an absolutely terrible investment. Once Reagan checked inflation, they were a terrific investment.
It is difficult to operate a business during rapid inflation. A business is built on its books, and when you have rapid inflation, the books are meaningless. It is like trying to build a house using rubber tape measures and silly putty set squares. This is another issue that future crypto currency wallets must address.
Businesses were an accounting fiction before they were a legal fiction, and they still are primarily an accounting fiction imagined into reality, rather than a legal fiction pretended by the state.
Normality bias is built into the way a business operates, so they get hit first and hardest when the seigniorage tax approaches and exceeds the Laffer limit.
Last time we had high inflation, you should have invested in gold. I was late into gold.
This time, crypto currency. Gold is being spontaneously demonetized as silver was. In a time short as measured in decades, will fall to its value as an industrial metal, as silver did. Though if the grid goes down and you are stuck in an area where the grid has gone down and stayed down, and have no plans to move, being nestled with like minded and like armed people, gold will be mighty handy. On the other hand, the situation may well arrive when it is move or die, in which case gold will be useless, and crypto currency mighty handy.
But which crypto currency?
The nature of the Cathedral is to assimilate, rather than to intentionally destroy, though they usually wind up unintentionally destroying. And they are assimilating crypto currency, or attempting to, for example WBTC, an enemy institution run by people who hate us and intend us harm.They are assimilating through KYC, with the result that the KYC exchanges are suffering a downturn, which will eventually be fatal. The KYC exchanges will die with fiat.
KYC exchanges are, and will remain, the path from fiat to bitcoin, but in order for this to work for our enemies, they have to demonetize “dirty” bitcoins. Some of our enemies have made a start on this, and I am becoming very worried, but Shaniqua is in charge, the game plan remains assimilation. The threat looms, but is likely to go on quietly looming for some time.
Because miners are few, well known, and immobile, the blood diamonds attack (demonetization of “dirty” bitcoins) is likely to work. I am writing code for preparations for this eventuality, for the use of crypto currency in a considerably more hostile environment, but my preparations are very far from ready. For the moment, safe harbor from the blood diamonds attack is Monero. Not moving into Monero yet, but getting ready to jump. Probably going to jump soon, depending on how the wind blows. Some people are jumping already, and this may be behind the recent rise in Monero. If you jump late, you will be buying Monero at a higher price, but if you jump early, you are acting on rumor, speculation, and incomplete information, which is always bad.
When allocating capital to its highest and best use it is generally wiser to jump in late, and miss out of some of the appreciation that you wisely anticipated, rather than to jump in early and be totally wrong.
Monero faces even worse scaling problems than bitcoin. It is not going to be the one. The one will have the capacity to scale to being a world currency, and will have its privacy system and most of its contract system in the lightning layer, not in the primary blockchain. Monero has inherent problems implementing a contract system and a lightning layer. But Monero may well be a safe harbor in the coming storm.
The one will have a sophisticated and flexible lightning contract layer, and simple, inflexible, and seldom changing contract system in its primary layer.
The bitcoin lightning layer is theory capable of being a better shield than Monero, but we will have to see how things develop. It does not seem adequately weaponized to resist the blood diamonds attack, though it can be and should be.
Weaponization means you don’t just have to worry about individual bad apples and screwups doing bad things out of self interest or incompetence, but brigading, entire highly organized groups saying “we are your side, we are here to help”, with the intention of doing you harm, even at their own expense, as for example WBTC.
The chief flaw in all existing crypto currencies, including Monero and Grin, is that the metadata about a transaction goes through outside your wallet, and, of course, gets integrated with blockchain analysis data. Which blockchain analysis causes considerably less damage to fungibility in Monero and Grin, but does not do zero damage. We need a system where the social net through which you transact, and the reputations of business and financial institutions, are inside the wallet. The wallet has to be a chat and messaging system, in which messages can carry money, but do not need to. So when you pay someone, your data about the transaction and his data about the transaction are rendered immutable and linked to each other, but linked only by hashes existing in your wallet and his wallet, which therefore has to be frequently backed up, and therefore can contain no secret keys, just the information about how the secret keys are derived from the master secret. It should be possible to enter additional master secrets and secret keys, but they should be used once, then the wallet immediately discards them.
This means that the wallet is potentially capable of being a business book, in which which case we will eventually have to separate the value of transaction at the time it was made from the current value of the currency in which it was made. Bitpay does this by representing everything in American dollars at the time of transaction and Bitcoin beach wallet gives you your choice of fiat currency to represent the value of a transaction, a solution that with rapid inflation now, the likelihood of hyperinflation looming, and the role of the dollar as an international medium of exchange, measure of value, standard of value, and store of value collapsing, is no longer satisfactory and likely to rapidly become less satisfactory. Some people are proposing a commodity index as a replacement for the measure and standard of value roles of money, separating those two roles from the medium and store roles of money. Thus one should have the option of representing transactions and making promises of transactions in terms of the commodity value that the crypto currency had at the time of the transaction.
If we rely upon the existing eco system of networks, it is likely to be applied against us as it was against Russia. All existing networks will be weaponized, resulting in fragmentation. The internet is becoming the splinternet. When blood diamonds attack comes through, lightning servers that do not comply are going to lose their domain names. So, we have to have a reputation system where a server’s reputation is attached to a public key, whose master secret is not hot anywhere, and similarly, a proof of stake has to function as a replacement for the corporate form, or else we get what happened to bitpay
Bitpay did great work of immense value to all bitcoiners by making it easy for a business to accept payment in bitcoin. Unfortunately it organized itself as a limited liability corporation, and the state became pissed when people used bitcoin to do what bitcoin was designed to do, and the boot of the state is now on Bitpay’s back.
Crypto currency corporations, to resist the kind of pressure that crippled Bitpay’s functionality, need to be organized as sovereign corporations, with a proof of stake blockchain in place of shares. And they need to support a lightning wallet with a lightning wallet style transaction that exchanges their shares for lightning layer bitcoin off chain.
We will likely see what happened to SWIFT – as existing networks become weaponized against privacy and freedom, demand for alternatives will rise. There has been a big rise in bitcoin-ruble transactions.
Russia was utterly unprepared for being thrown out of SWIFT, and still has not organized any satisfactory replacement, but as people and governments found ad hoc, messy, complicated, and unsatisfactory workarounds, this is having an effect less and less damaging for Russia and Russians, and more and more damaging for the US dollar and the international banking system. The ruble has now recovered against the US dollar, while the US dollar is falling like a stone again commodities and losing primacy as the currency in which goods and services are valued internationally.
If all goes well, by the time that existing networks are fully weaponized against crypto currency and blockchain based technologies, we will manage to stumble our way to bringing up a counter system of networks, and something similar will happen. By weaponizing the network, the state will bring about splinternet, and thus makes its networks less useful, as it has made SWIFT less useful.