Could Blockchain Be Used More Appropriately To Facilitate Cashless Society?

Thinking out loud is often done in a haste hints the nature of it.  Thus my thinking out loud in this post isn’t solid, but I like to dabble on here.  One thing people fear about a cashless society is that once the digital numbers are being erased somehow, their worth would be gone without any trace for recovering.  Thus, people are definitely still preferring cash as a mean for emergency backup.  After all, if their digital world is being shut down, they got cash to help them survive daily such as buying foods and whatnot.

Bitcoin is probably going to be an enemy of the banks since banks want to be the middlemen of the transactions.  Bitcoin takes out the middlemen role and allows people to have a direct transaction between the two parties.  In order for the bank to receive commission and gain liquid fund, the bank needs to be able to insert itself into the deal.  Simply put, Bitcoin is against a traditional bank which isn’t accepting Bitcoins!

Banks can accept Bitcoins, but people won’t use banks as of how they would use a traditional bank.  Bitcoin users may want a bank to behave as a trustful Bitcoin exchange to facilitate the Bitcoin transactions in safety manners.  This way any Bitcoin bank can still insert a banking role in a non-traditional way into the deal.  Since Bitcoin will be more transparent — plus demoting a traditional banking role somewhat, I don’t think the banks will be able to create more creative derivative means for creative investments.  I could be wrong since this is thinking out loud session.

Bitcoin is also very similar to a cashless society because it isn’t cash and it’s digital medium.  Taking away Bitcoin, underneath it all is the technology itself which is the blockchain.  The blockchain technology is more important than the clothes it is wearing such as a crypto coin (i.e., Bitcoin).  Why?  I think blockchain technology is good at keeping transactions honest.  This honesty is rather important for cashless society don’t you think?  Nonetheless, current Bitcoin way isn’t helpful for blockchain technology since the implementation is rather crude, allowing people to hack and steal each other Bitcoin without a clear way to trace back to the original owner of the lost Bitcoins.

If I’m not wrong, a will be successful cashless society could use the blockchain technology to keep cashless money honest so the original owner of the money won’t fear the tyranny of a cashless society shutdown event.  By that I mean the only way for a person in such a society to lose wealth is being incriminated with evidence and wealth get confiscated by a court of law.  In such an orderly way the blockchain technology could be used to keep track what money belongs to whom before the exchange takes place and long afterward so a cashless society shutdown event which occurs by any other mean besides the legal ones such as the one I stated just a moment earlier would be a futile effort.

I think people would be able to accept a cashless society when their wealth won’t be suddenly disappeared overnight in a mysterious event.  Of course, people are still going to fear that if they’re innocent and being convicted wrongly; their wealth got confiscated in such a rude event — they could be helpless as they would not be able to survive daily when their digital wealth got shut down in a cashless society.  I think once one accepts a cashless society, one has to accept such possibility as there won’t be any legal cash laying around to act as a legal tender for acquiring daily things.

By writing this blog post, it doesn’t mean I support a cashless society!  I just merely thinking about the possibilities and effects of it all when such a society occurs.  Although China isn’t a purely cashless society, because paper money is still going to be a legal tender within China.  Nonetheless, China is one of those countries that is leading the race in facilitating the use of money through digital devices such as the smartphone.  I think once the money becomes digital numbers, money is indeed facilitating a cashless society.  A cashless society is definitely taking some shapes or forms around the world, and so I’m writing this to amuse myself with both negative and positive possibilities of such a phenomenon.

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Feeling Like A Broken Record, But I Admit Cryptocurrencies Are Really Broken! I Don’t Trust Bitcoin!

Why I trust the bank and not Bitcoin or any other cryptocurrency?  Simple!  Origin’s traceable trail!  What do I mean by this?  The time you deposit your money into the bank either through electronic means such as mobile or you could deposit your money in person, a third party, in this case, the bank is there to take the responsibility of safekeeping your money.  Sure, the bank could have a system hiccup where your bank account would show up with a wrong value, but the bank has the responsibility to generate other traceable trails of your money such as paper statement, online bank statement and so forth.  Bitcoin or any other cryptocurrency is a different matter because there is no third party that is responsible for your money!  When something goes wrong with your electronic wallet such as corruptive memory on your device would destroy everything you store!  Cryptocurrency exchanges could be the third party to be responsible for your crypto coins, but these are new institutions that you could not trust and they got hacked too often!

In China, people are going cashless by using their mobile phone as the main medium to pay for things.  Still, their digital currency in their electronic wallet is tied to a medium of cash and a whole lot of other mediums such as check and so forth that could eventually generate into very noticeable trails of origin.  With such noticeable trails of origin, the owner of the money could always demand some sort of compensation when everything goes wrong such as the value of money is suddenly being misreported somehow.  These people, although in cashless society (almost), would be able to morph their medium of payment effortlessly — cash to check to digital numbers on their mobile to whatnot — with some sort of confidence that some sort of traceable trails of origin would back their transaction up clearly.

Although cryptocurrency’s blockchain is very rigid and vivid in showing transaction trails, the sender and receiver of the crypto-coins could hide behind the transaction which in the end could hurt their claim of the transaction.  What’s worse is that they could face a perfect storm when their device got corrupted or hacked and their wallet somehow was rendered broken — they won’t be able to open their wallet to show that they got the traceable trail of origin to back up their transactional claim so they could receive any compensation from whatever party that they’d dealt with.  As of now though, even if they’re proving that they’re the owner of a crypto wallet that sent out the crypto-coins, they mostly like are going to face anger and confusion as once the crypto-coins leave their wallet — these crypto-coins are gone forever and nobody would be able to compensate for the lost crypto-coins.

I think until the cryptocurrency tech could address the worries and weaknesses of the transactions that are being made by the blockchain and the frontend technology such as the cryptocurrency tech (e.g., Bitcoin, Litecoin, Namecoin) itself, nobody could fully feel comfortable of using such tech as a replacement for traditional forms of currencies.  I hate the feeling of being a broken record, but let’s be clear cryptocurrencies are facing real hurdles such as hackable, not widely acceptable, not being supported by the governments, relying too much on an electronic wallet as the trail of origin, facing corruptable electronic memory (i.e., RAM/hard-drive), no mean of compensation once crypto-coins got loose from the crypto-wallet, too much saturation as too many cryptocurrencies are in the existence, and so forth.

One more thing!  If someone stole the medium that you store your crypto-coins on such as your smartphone, you will never get these crypto-coins back!  Traditional forms of money such as the digital numbers that represent the dollar amount you got in your smartphone app would still be yours if your smartphone got stolen!  After all, the app on your smartphone is probably connected to your bank account and the app could once again be re-download and reconnected to your bank account. Perhaps, you’re using an app such as Starbucks app which requires you to preload the number of dollars before you could use it to pay for coffee — even a stolen mobile phone won’t be a problem since you could always re-download Starbucks app and reconnect to Starbucks’ server which got the proper dollar amount in your Starbucks account as before!  Crypto-wallet?  I don’t think so!

I Believe Bitcoin May Not Survive Outside China In The Long Run!

I just checked the Bitcoin price and saw Bitcoin dropped down to $3,806.93.  It is a steep drop from when I saw Bitcoin was up near to $5,000.  This has happened because Chinese government is stepping up in regulation for Bitcoin.  Rumor or not, Chinese government is banning several major Chinese Bitcoin exchanges and stopping groups in China to create new virtual currencies.  Since such news have come out of China, Bitcoin has continued to slide downward.  It got rebound a bit, but it’s not yet over $4,000.

People are believing in Bitcoin for several reasons.  One important reason they believe in is that other governments won’t ban Bitcoin and so Bitcoin could survive outside China and around the world.  Other reasons are that Bitcoin won’t be controlled by governments, and so people can actually surpass the governments’ scrutiny when making financial decisions.  Unfortunately, Bitcoin has too many reasons for the governments around the world to step up to regulate.

I believe that China is a very powerful market factor, because China has the power to persuade other governments to step up their own Bitcoin regulations.  This is why I think Bitcoin won’t survive in the long run!  Of course, that’s my belief, and so I could be 100% wrong!  Don’t take my belief as fact, because you need to do your own research and soul searching whenever it comes to financial decision.  If you’re investing in Bitcoin and believing in Bitcoin, then you should just do what you think it’s best for you!

Anyhow, I like the idea of Bitcoin, but Bitcoin has several weak points that make me feel so uncomfortable about it.  Two most important weak points about Bitcoin are governmental factor which I had mentioned, and the other one is how easily Bitcoin could disappear.  What do I mean by this?  Well, let’s say I believe that Bitcoin coins are not actually safe on your devices.  Computers’ storages could get corrupted and poof your Bitcoin coins would disappear.  Hackers could just hack into your network or your smartphones and poof your Bitcoin coins would disappear.  No electricity or battery power, well you can’t really use your Bitcoin coins until the power is back.

In short, Bitcoin is much harder to get refund or recover once the coins leave you for good.  There is no institution to make sure the transaction is just, and the transaction always depends on pure trust without any insurance.  Once the governments start to ban Bitcoin together at large (i.e., worldwide), it makes Bitcoin users to lose the ability to appeal to the authorities for transactions gone wrong.  This weakens the Bitcoin’s appeal by a lot I think.  The things that make gold, hard physical asset, more appealing are values that can be verified and redeemed in the eyes of the world.  Bitcoin lacks the redeem attribute!  In my eyes, Bitcoin does not have the shine of gold, because you can’t redeem Bitcoin on justification but on pure trust!

 

 

Why I Think Bitcoin Is Not Ready For Prime Time

So Bitcoin becomes the rage again for unknown reasons.  Today Bitcoin price is going through the roof.  As of this writing a single Bitcoin is equating to $2251 (US Dollar).  I can see the allures of Bitcoin, but I can also see so many drawbacks.  Let’s talk about the drawbacks shall we?

First, one of the biggest drawbacks of Bitcoin for me is not be able to sell Bitcoin anonymously through an exchange.  Instead, the exchange requires you to send your info includes your social security number before you get verified and be able to do any trading of Bitcoin.  This means if an exchange gets hack, all of  your info is going to be shared or be sold to any unknown parties.  Of course you can argue that lot of your information is already in places that are being stored online and can still be hacked easily.  I argue that at least the government agencies and banking institutions are perhaps more willing to protect your information than some Bitcoin exchanges.  Thus, hacking into these institutions may not be easily done, and once it is being done the government would definitely go after such hackers in a big way.  So, at least you know you got huge resources to look after your information in a more serious manner.

Second, another biggest drawback is that many Bitcoin exchanges cannot be trusted, because not only they’d gotten hacked way too many times before but some of them also run away with your bitcoins.  This means if an exchange decides to stop doing business and just run away with your bitcoins, you’re basically losing all of your bitcoins on a specific Bitcoin exchange.  This is why I don’t think it’s wise to store any of your bitcoins on a Bitcoin exchange besides just enough bitcoins for selling purpose.  Once buying a bitcoin on an exchange it’s wise to transfer the bitcoin out of the exchange immediately and into your more secure Bitcoin wallet that stores on your local machine/computer.

Third, another biggest drawback is that you can lose all of your bitcoins easily if a computer that you’re using to store all of your bitcoins got corrupted hard drives.  This means if you cannot rescue a specific corrupted hard drive that stores all of your bitcoins, you basically lose all of your bitcoins forever.  Thus, I think some people may adopt storing their bitcoins on multiple machines in multiple wallets, so they don’t have to worry about having all of their eggs in one basket.  Some people also do backups for their Bitcoin wallets’ data to ensure that Bitcoin wallets’ data won’t get corrupted easily.  It is also wise to encrypt the partition or partitions that you store your Bitcoin wallets’ data, and only this way you can protect your bitcoins from being stolen easily.  Basically, encrypting a partition on top of already encrypted Bitcoin wallet’s data is like having one more security layer.

Fourth, another biggest drawback is that Bitcoin is still not being accepted widely.  Sure, there are many places that may accept Bitcoin, but there are also so many many places that do not accept Bitcoin.

Fifth, another biggest drawback is that Bitcoin can be confusing for people who have no experiences with computer.  Some people in older generations will not be able to understand how to use Bitcoin, and so it’s going to be exotic and hard to use for them.  To use Bitcoin, one must know how to securely protect your bitcoins in a Bitcoin wallet and on a secure machine, but these measures are probably just gibberish for people who do not have the ability to use computers correctly.  Especially, if they do not know how to use computer in a secure manner, they are going to get hack easily and lose all of their bitcoins.

Sixth, another biggest drawback is that many governments are not recognizing Bitcoin as currency, and so Bitcoin is in a grey area in which so many different laws are being applied to Bitcoin.  This means you have to use Bitcoin differently in each country, and so laws that regulate Bitcoin in one country doesn’t behave similarly to laws in another country.  Of course you can argue that cash are not the same in all countries, but cash are legal tender — thus there are specified laws that may apply on the usage of cash even though such cash are not printed in the specific country or countries.  Some governments are outright hostile toward Bitcoin, thus they’re banning Bitcoin outright.

Seventh, another biggest drawback is that some governments are making you as a target of investigation for using Bitcoin, because they think Bitcoin is a way to facilitate dirty money.

These are the drawbacks and other drawbacks that I may not have stated that prevent me from seeing Bitcoin as a sure way that can replace the traditional money.  Furthermore, I like to have the option of Bitcoin and digital currencies and traditional currencies in digital forms, but I also like even more to see that traditional currencies in the form of cash that do not go away.  Why?  Anything that is tangible is definitely harder to be erased and made disappear.  This means your wealth can be protected better even it means securing them under your mattresses.  If your wealth can just go poof in an instant, it means your wealth is not being secured in a correct form or forms.  Because Bitcoin has so many weaknesses, I think it’s not wise to convert a huge portion of your wealth into bitcoins at all.

People’s Bank of China Creates Chinese Digital Currency To Hedge Against Upcoming Collapses of Fiat Currencies

According to various news sources and Simon Dixon, People’s Bank of China has announced China’s own digital currency.  According to Mr. Simon Dixon, China is buying up gold and announcing digital currency to hedge against the upcoming biggest collapse of most fiat currencies in the world.  Near the end of his video, Mr.  Simon Dixon says people may adopt China’s digital currency, but this will encourage many more people to use Bitcoin.  Mr.  Simon Dixon thinks that Bitcoin is more attractive to people since it got no governments’ censures.

In my opinion, any government has the ability to outlaw Bitcoin.  I think Bitcoin might not have such a bright future when China herself is creating a brand new digital currency.  If China is going to be successful in convincing her own people and other peoples to use her digital currency, she can totally outlaw Bitcoin.  Once Bitcoin is being outlawed in China, China’s own digital currency will continue on to be one of the future, central crypto currencies.

Of course, any other government besides Chinese government can follow China’s playbook and come up with another government’s digital currency.  Thus, I don’t think China will be the only country that would create a government sanction digital currency.  I guess it would be fun to see a government sanctions another with outlawing another government digital currency within one’s own territory.

In the video, Mr.  Simon Dixon suggests that China may use the brand new digital currency to implement quantitative easing.  Instead of printing more fiat currency, China may as well create the second tier monetary system such as digital currency to help ease the many debt related bubbles that fiat currency has been creating.  It’s an interesting idea for sure, but I think only China would know what she will do with her brand new digital currency.  I guess time will tell.

Check out Mr.  Simon Dixon’s video on People’s Bank of China creates a Chinese digital currency in the video right after the break.  Enjoy!

Stanford Seminar’s YouTube Video On Bitcoin

Bitcoin is a new phenomenon for currency in general, and so people will definitely have all sorts of beliefs about it.  Obviously, some people have already thought that Bitcoin is a newest hoax yet that is out to get peoples’ money.  Some other people think Bitcoin is like a hybrid of ponzi and pyramid schemes where the ones who played with Bitcoin first would be the only ones that got all the profits and benefits, the ones who come in now are going to go broke as they will lose their money.  Some other people though think Bitcoin has the potential of becoming the global currency where there are pockets of regulations in corresponding governments, but the Bitcoin’s true values will lie with the people (hence how some people proclaim that Bitcoin is paupers’ money or poor peoples’ money).  Regardless of peoples’ different views on Bitcoin, in the end we have to wonder will Bitcoin be around for another 100 years?

My honest thought on Bitcoin is that I’m not sure Bitcoin could be around for another 100 years since someone might be able to break its’ encryption algorithm which is there to protect Bitcoin’s inherent values.  Nonetheless, I do think that paupers’ money in the electronic/digital form will be around for another 100 years and beyond unless the people of the world in whatever timeframe, beyond now, decide that they rather do business and communicate through media that aren’t Internet/digital things.  Imagine how the world will change radically when paupers’ money suddenly become the reality, because money will be changed hand much easier and globally.  Just like how the Internet had transformed commerce, information, business, retailing and whatever else that the Internet has had and will be transforming next; paupers’ money will probably transform many things on such a manner and scale.

Anyhow, I thought I would share with you guys a Stanford seminar’s YouTube video on Bitcoin.  In this video, a BTC China Bitcoin exchange’s CEO, Bobby C. Lee, shares his thoughts and beliefs on Bitcoin and the future of Bitcoin.  Anyhow, check it out right after the break!