FTX Con and Bitcoin Musings

Like many others I watch the FTX and Crypto Theater with my jaw dropped and my poor brain in muddled confusion.

Questions going through my little brain are why so many folks think something printed out of thin air by those sitting offshore without regulation is better than fiat backed by the Federal Reserve and the credit of entire US of A ‘s land, labor and resources (not to mention military).  But Bitcoin is better they say-I’ll get to Bitcoin later.

How can Musk get away with saying SBF funneled 1 billion to the DNC without proof [I wont try to answer this, its obvious, its what people want to hear, for some reason this society worships psychopathic billionaires]

How could large investors believe FTX was valued at 32 billion?  Since it is not publicly traded surely they would have looked at his books. The Crayons used to keep these books might have been a clue? Duh.

FTX’s list of investors spans powerful and well-known investment firms: NEA, IVP, Iconiq Capital, Third Point Ventures, Tiger Global, Altimeter Capital Management, Lux Capital, Mayfield, Insight Partners, Sequoia Capital, SoftBank, Lightspeed Venture Partners, Ribbit Capital, Temasek Holdings, BlackRock and Thoma Bravo.

https://www.nytimes.com/2022/11/11/technology/ftx-investors-venture-capital.html

They cant be that stupid, can they?  Of course not, they were all in on the racket.

Here is how the game is played.   They print up 1 million tokens or shares.  Sell a small number at 1000 times their true value, lets say $30,000 a share, which gives FTX $2 billion in play money to market their product with commercials, stadium naming rights and celebrities like Tom Brady, and claim their market value is 30 billion by assuming their can unload the other 90+% of their shares at the same price.

Sorry, it doesn’t really work like that in real life, but the little guy doesn’t know any better.  He is like a sponge and soaks up whatever his favorite politician,  social media hero, athlete or news station says.

Then they go to a Direct Listing when the time is right and unload those shares to the publics unwitting investors who bought the hype, and they sell it to them at multiples of its already overhyped $30 billion market value.  FTX big Investors know how this game is played , so thats why they were in on it, they were going to be selling their shares too.  They never for a second believed FTX was worth $30 billion, it was all about convincing gullible guppies like ourselves.

Since Wall Street and the Billionaire Elites control MSM they never have to worry about the whistle being blown on their game until the cashed in.

So what happened here?  Somebody blew the whistle.  My guess is SBF threatening to spend $1 billion if needed to help defeat Trump had something to do with it.  Like it or not their is a faction of the Global Billionaire Elite who want Trump in. Especially now that Bibi is back in the saddle in Israel.   Trump is Bibi’s poodle. Woof Woof.

So Musk allows his Binance parter to start a run on FTX’s FTT token using Twitter, much like JP Morgan started a run on banks so he could rescue his buddies banks and eliminate a lot of the competition and gain support for the idea of a Central Bank (aka Federal Reserve which took 6 years to get done).  And boom, SBF got caught short.

CZ 🔶 Binance @cz_binance

As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4

Too bad for the Big Investors but this is chump change for them.  It was throw away money that bought them a lottery ticket that didn’t pay off. Easy come, easy go.   The depositors, going after what looked like easy money and high promised returns are feeling some pain. They wont be consuming much in the near future.  WEF and Net Zero Malthusians cheer St Bankman Fried for helping Save the Planet and 80 trillion future Transhumans

SBF might have saved FTX using the loot he had stashed away in various offshore vehicles, maybe as much as $3 billion which is how much he borrowed from Alameda,  but he probably figured the game was up - he crossed the line.  He might do a bit of easy time, but will have billions waiting for him, or at least hundreds of millions.

His loss (or gain) was for the Greater Good, screwing the little guy to save the planet. As an Effective Altruist and Long Termer advocate he knows the best hope for 80 trillion more worthy and advanced humans is getting the 8 billion humans today locked up in a Digital Gulag and Culled or put on strict rations to preserve resources.

Part of that Digital Gulag will be Programmable Central Bank Digital Currency which will need protection from Crypto competitors and need the protection of Crypto Regulations, much like the Federal Reserve Act protected the Federal Reserve Noted (aka as the almighty dollar).

Another key part of the Digital Gulag is the “Everything App” and Digital ID but Elon Musk is working on that. Elon Musk is a Transhumanist Effective Altruist. He is on the same team as SBF, just not politically.

Sadly, people don’t realize both parties at the top levels are onboard with this ideology.  Republicans have to hide their support because their base is against it, but the money backing them dictate their actions if not their rhetoric.  Thats why people are fooled by Trump, he whispers sweet nothings in your ear and behind the scenes allows what you hate to happen,  and he blames the Deep State and Liberals for his failure knowing most will accept this excuse.

So at this point people should realize Crypto is Crap.  Many do. But the Bitcoiners will tell us that Bitcoin is different from the others.  I agree.  Its different crap, not as smelly and limited in size. Little Shit (my dogs name, in truth a small Cujo).

Before I proceed, I am not a Bitcoin expert.  I don’t have any problem with Bitcoin either, if people like it then buy it and use it. Why do I care?

My only problem is those Bitcoin users who claim it is a solution to fiat money and an alternative to fiat for those who want to opt out of the system.  This is fantasy, promoted by those who want to push the price up so they can exit Bitcoin and exchange for fiat.  How many of you ‘bought the dip” as they asked of you as it fell from its highs of 60,000 to its current $17,000. You can be sure many of them were selling as you bought the dip.

The simple fact is Bitcoin road the Fiat Wave. As the Fed pumped money into the economy using Black Rocks “Go Direct “ Plan,  housing , stocks and Bitcoin inflated.  Once the Money Pump stopped, and interest rates increased, the party was over.  The big money started pulling out of Crypto, almost 2 trillion dollars in value since November 2021 now went poof. It disappeared.    For every dollar lost somebody gained by cashing out early or betting on the drop.  Some of that helped maintain real estate and stocks, but unless interest rates drop soon they will all crash.

First a bit of Bitcoin history , at least what little that I can gather

In 1997 a white paper published by three employees of the National Security Agency (NSA), titled, How To Make A Mint: The Cryptography Of Anonymous Electronic Cash. Yes, that National Security Agency. It laid out almost all of the major requirements and problems of a cryptographic currency that later turned up in Bitcoin. The point of the paper was “electronic cash” which was “an attempt to construct an electronic payment system modelled after our paper money system”.

At around the same time you have Wei Dai at Microsoft

Wei Dai is a Chinese computer engineer and University of Washington alumnus who worked for the Cryptography Research Group at Microsoft in the late 1990’s and early 2000's.

Two different cryptocurrencies have been named after him, the “Dai” coin used by the Maker organization, and the “Wei”, which is the smallest unit of the Ether currency. While at Microsoft, he was involved in the study, design and implementation of cryptographic systems. Prior to that he was a programmer at TerraSciences in Massachusetts.

In 1998 he released an informal whitepaper titled “B-money, an anonymous, distributed electronic cash system”, on his personal website WeiDai.com

Just like under Cynthia Dwork’s system, B-money requires a complex mathematical equation to be solved in order to generate the value token implemented by the system. The value of one unit of B-money created is equal to the cost of the computing time required to solve the equation. For example if the equation takes 100 hours of computing time to solve, and it takes $6000 to purchase 100 hours of computing time on the open market, then the first person to find the solution is credited with $6000 worth of b-money.

Unlike Cynthia Dwork’s “Pricing via Processing” proof-of-work system, in which she suggested that the work calculation should serve some additional purpose (such simulating the formation of protein molecules) Wei Dai determined that the solution must have no practical or intellectual value.

If the calculation wholly served some additional purpose, then the computers would be incentivized to perform the calculation entirely for that purpose only, and the b-money would be generated as a free by-product.

Dai’s B-money still relied on a central authority to verify transactions and prevent fraud. He didn’t have the necessary marketing budget to pitch the idea to a large number of companies to gain wide acceptance, so his idea remained just a theory on paper. All previous attempts at patenting a proprietary technology and marketing it to enough companies had also failed. Companies only co-operate with each other for profit, and digital currencies had failed to make a strong business case.

https://medium.com/the-capital/history-of-blockchain-part-3-wei-dai-1998-1195ab5a4e08

Bram Cohen is an American computer programmer who invented BitTorrent, the decentralized digital file distribution system that was the inspiration for Bitcoin. Satoshi Nakamoto chose the name “Bitcoin” so that people familiar with BitTorrent could intuitively grasp that his new technology was a decentralized, digital money distribution system.

Cohen studied at New York State University in the early 1990’s and then worked for several internet companies during the dot-com boom, the last being MojoNation, a company developing software to break confidential files into chunks to distribute the pieces across a computer network. For security reasons each user was required to download the file pieces simultaneously from many other users, known as “Seeds” because they are the original sources for the file. Users were encouraged become Seeds and upload to others in exchange for payment of a digital currency called “Mojo” which was issued by the company.

Cohen adopted the basic idea for his BitTorrent system

https://medium.com/altcoin-magazine/history-of-blockchain-part-4-bram-cohen-2001-5092e43a9bf6

Satoshi Nakamoto is the founder of Bitcoin and the second most famous member of the Cypher Punks- a shadowy online group of economists, privacy advocates and anarchists who engineer software to promote their goals. (The most famous Cypher Punks member is Wikileaks founder Julian Assange).

The group describes themselves as “anarchist” but do not promote chaos. They advocate replacing legal guarantees with mathematical proofs in order to expand the private sphere and limit the role of government. They have already caused several revolutionary changes in society, including the exposure of US military murders of civilians via Wikileaks, heavily influencing the outcome of the 2016 presidential election, and reinventing the world economy via blockchain.

What little is known about Nakamoto comes from the information he provided on his account at http://p2pfoundation.ning.com/profile/SatoshiNakamoto

He claims to be a 43 year old male residing in Japan.

However, analysis of his activity on the website shows he is most active during the hours of 11 am to 10pm Greenwich Mean Time, the timezone used in the United Kingdom, which suggests he is geographically much closer to his friend Julian Assange in London, and not in Japan. Since he gave fictitious information for his location, it should be assumed that his name and the implied Japanese ethnicity is most likely fictitious too. On the website he speaks perfect English, and never uses Japanese

His Bitcoin software contains notes written in English (with no Japanese) which indicates that English is the language he is most comfortable using, even for his own notes. He uses exclusively British spelling for words which have different spelling in American English, and often uses British slang such as “bloody hard”. He embedded the following headline in his Bitcoin software to prove the date of the first transaction:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

https://medium.com/the-capital/history-of-blockchain-part-5-satoshi-nakamoto-2008-3ca42b8c33dc

In 2008 as banks crash due to sub-prime mortgage/MBS collapse. Satoshi Nakomoto released a  paper outlining a working decentralized cryptocurrency process based on Microsofts Wei Dais paper on centralized b-money creation in 1997 (MS owns patents) using BitTorrent idea for decentralized digital file distribution . Nobody knows who Satoshi is (perhaps Wei Dai?)

https://news.bitcoin.com/many-facts-wei-dai-being-satoshi/

In 2009 Bitcoin is launched as Fed begins creating helicopter money to bailout banks. How convenient for those looking for an alternative to laundering the flood of central banking money as a crackdown on money laundering in tax havens begins and FSU wealth transfer trickles to a fraction of its peak

The open-source software for Bitcoin, freely available to the entire world for examination, was originally released.

Bitcoin is considered to be the first so-called “decentralized” cryptocurrency. Transactions are generally anonymous, but their details are recorded in a packet of data called a “blockchain” and stored in a digital “wallet”.  Yet its inventor seeks to be anonymous. Thats suspicious as hell.  Maybe because if folks knew this was a NSA-Microsoft collaboration they might not be so eager to jump on the bandwagon

Furthermore, the blockchain itself is encrypted, but don’t get too excited, there is a catch that i will discuss later. Bitcoins are “mined” digitally as computers around the world compete to solve complex mathematical equations that are increasingly more difficult as more coins are generated.

Bitcoin “miners” have set up computer centers all over the world. Specially designed computers are custom-manufactured costing thousands of dollars each. As faster computer chips become available, many miners must replace all of their computers in order to compete with other newly-established miners. The amount of energy consumed by mining operations is staggering and growing at a geometric rate.  The days when those living in Moms basement can make pizza money on their old laptop are over.

One expert calculated that in 2017 global mining operations consumed as much energy as the entire nation of Ireland. Consumption in 2018 was expected to rise to one-half percent of all energy produced on earth!   Bitcoin is 100 percent digital. There is no physical “coin” and any printed representation of a coin is merely an artist’s idea of what they could look like. Something of a physical nature could be stolen by burglars, but traditional thieves are out of luck with Bitcoin. This gave rise to a new generation of cyber-thieves, or hackers, who have been able to worm their way into computers and steal the contents of Bitcoin wallets. In fact, hundreds of million of dollars worth of Bitcoin have been stolen this way from both individuals and trade exchanges. Since Bitcoin’s inception, over 4,000 other cryptocurrency variations have been programmed and put into play around the world.

It has been carefully documented that Nakamoto’s personal ownership (assuming he is a person) of Bitcoins that he mined was worth over $ 60 billion at the peak of the market in November 2021. The fact that it is hard to conceal this amount of wealth only adds to the mystery surrounding the origin of Bitcoin. Nobody is taking credit for it! Who would not want to be hailed as one of the world’s greatest and wealthiest programmers?

So besides its shady past, what else do I think is wrong with Bitcoin for those wanting to live off the grid.

First off, how in hell is Bitcoin a hard asset as some claim? Sure,  a Hardware wallet can be offline but to complete any transaction requires online access. What happens when you are denied online access?

Soon to come is Digital ID for online access that will remove anonymity.

Cash and gold are hard assets, even if cash can be inflated away. You can use both without online access anonymously.

Frankly, for those wanting to live off the grid in a community of like minded individuals, just use regular coins once the government eliminates cash and confiscated cash and coins. Start collecting them know.  Coins are not easily counterfeited and unlike cash is durable. Like Bitcoin they can be cut into pieces only instead of digital bits you have something you can put in your hand and weigh. Value is subject to supply  and demand like all currencies, and its value is what people will accept as a medium of exchange.   If a quarter can buy 1 apple today it could easily be agreed to be enough to buy a house if there are not too many coins floating around. Heck, sea shells used to be currency enough to buy anything thousands or years ago. If you want to buy something smaller deposit the quarter in a community bank and get the bank to give you script in smaller denominations (paper money) that others in the community will accept. The point is you don’t want to be online or need lots of power if you want to live off the grid. You cant do that with Bitcoin.

What if Bitcoin was the only currency ? Since the currency is limited to 21 million BtC you face deflation of your hard assets since there will not be enough currency in circulation. The rich will lock up most of the currency reducing the available supply on main street . The greatest depressions in history have occurred due to insufficient money supply in circulation and the only way out is increasing the money supply.  Of course bitcoin can be subdivided into nano-bits, but that leads to price deflation. Once prices start deflating people stop spending and the economy crashes

Of course the solution to that would be some bank using Bitcoin as its assets to loan you Paper or Bitcoins on a Digital Ledger and at interest.  The bank would use fractional reserve banking and loan more “paper” bitcoin than it had on Deposit, and it would require collateral before it loaned you the money. How the hell is this different than the current system

Bitcoins main value today seems based on its reliance of free exchange with  fiat currency in the hope it will appreciate agains fiat currency with which it can be exchanged. Once fiat currency is eliminated and CBDC comes on line and does not allow exchange with Bitcoin, Pop goes the weasel

Then there is the issue of security. From day one it has been very clearly delineated that a majority (51%) or more of the Bitcoin hash rate can act maliciously in a way that severely degrades or entirely breaks the security of the entire system.

I warned of this when Chinese miners controlled more than 50% of the hash rate.   The CCP had itself a great weapon. Why they banned bitcoin mining and surrendered this weapon is a mystery to me.   

If you control 51% of the hash rate you can orphan blocks from other miners, preventing them from even participating in the system to earn revenue in Bitcoin. You can exclude transactions from parties they do not wish to transact, again orphaning the blocks from any miners processing such transactions from the blockchain.

Miners have to set up their operation somewhere, which means — unless they are able to successfully operate illegally and invisibly off-grid, which is not practical at scale — they have to subject themselves to the laws and regulations of the jurisdiction they set up in. Too much of the total network hash rate being in a single jurisdiction represents a security risk to the network as a whole.  Thanks to China the US now has a significant share of the hash rate

As of December 2021 the Cambridge Bitcoin Electricity Consumption Index shows 38% of the network hash rate as located in the United States. That is 13% shy of the bare minimum necessary to engage in disruptive activity on the network. Bitcoiners should not be encouraging action and legislation to tip this even closer to that inflection point.

All of this hash rate is subject to enforcement action from the U.S. government with varying degrees of difficulty.

In 2016 MIT designed a system called Chain Anchor. The entire goal of the system is literally performing a 51% attack to permanently neuter Bitcoin's censorship resistance:

Read all of that carefully. Now consider the FATF regulations that have been dragging and slowly being rolled out over the last few years. The Travel Rule. Almost every big exchange in this ecosystem is actively working on protocols to allow them to exchange personally identifying information with each other, or at least commitments to it, whenever they engage in a transaction on behalf of one of their users that goes directly to another exchange. That wouldn’t be opt in — that's a mandate, even worse than the proposal in Chain Anchor. European politicians have even danced on the line with proposals publicly to extend such KYC requirements to non-custodial wallets.

Now consider the current dominance of ESG narratives in relation to Bitcoin mining. There are talks of (and literally regulations enforcing it in some places) preferential treatment of renewable energy powered mining. In general, these involve economic incentives in the form of tax breaks/subsidies for operations. These types of non-Bitcoin economic deals, and in the future even outright payments potentially, are an exact form of bribing miners. They are economically incentivizing them to act in a specific way outside of the Bitcoin protocol itself.

These actions are slowly normalizing the idea of miners acting with such protocol-external incentives in mind. Public mining companies don't get such deals without identifying themselves, consumers don't get rack space at a co-hosting facility without KYCing themselves. All of this is the requirements for Chain Anchor creeping in slowly.

All that's left is the necessary hash rate required to entirely enforce whitelisted use of Bitcoin and exclude non-compliant miners from the system, and bam, Chain Anchor' has effectively neutered and turned Bitcoin into a whitelisted and permissioned system. At that point there is no option except hope that new miners can be produced and brought online to overwhelm this attacking majority, which is a long shot given how centralized ASIC design and production is in reality.

https://bitcoinmagazine.com/business/bitcoin-mining-concentration-in-america

Thats not very comforting is it?

One thing thats always bothered me is not knowing more about the miners and the holders of Bitcoin.  Its quite expensive now to mine Bitcoin and since Bitcoin is in fact a currency those big capitalists would no doubt seek to control Bitcoin and its mining since they have plenty of money

The top 10,000 individual investors in Bitcoin control about one-third of the cryptocurrency in circulation, according to a study by the National Bureau of Economic Research.

However, by using a data collection method that differentiated between addresses belonging to intermediaries and individuals, NBER researchers were able to find the former controlled about 5.5 million Bitcoin at the end of last year while the latter controlled about 8.5 million. Additionally, the top 1,000 individual investors controlled about 3 million, and the concentration could be even greater.

“This measurement of concentration most likely is an understatement since we cannot rule out that some of the largest addresses are controlled by the same entity,” researchers Igor Makarov and Antoinette Schoar wrote.

The concentration of miners is even more profound, data show. NBER found that the top 10% of miners control 90% of the Bitcoin mining capacity, and just 0.1% (about 50 miners) control 50% of mining capacity.

Such a high concentration could make the Bitcoin network vulnerable to a 51% attack, where a colluding set of miners or one miner is able to take control of a majority of the network. NBER found the concentration also decreases following sharp increases in the Bitcoin price, meaning the probability the network is vulnerable to a 51% attack is higher when Bitcoin’s price drops sharply.

“Our results suggest that despite the significant attention that Bitcoin has received over the last few years, the Bitcoin ecosystem is still dominated by large and concentrated players, be it large miners, Bitcoin holders or exchanges,” the researchers wrote. “This inherent concentration makes Bitcoin susceptible to systemic risk and also implies that the majority of the gains from further adoption are likely to fall disproportionately to a small set of participants.”

https://time.com/6110392/bitcoin-ownership/

Having only 50 miners in control of 51% of the hash rate is in redline territory.  Collusion becomes much easier the fewer players you have. While collusion is much more likely with only 5-15 players,  they are not far away from this.  Indeed one of the likely outcomes of this latest crash, like many banking crisis in the past is the smaller banks (miners) fail and get picked up by the remaining and bigger banks (miners).

Thats really all I got to say about Bitcoin.  Like I said, I am no expert and might be wrong on some of this.  If you got some excess cash you don’t mind risking play the markets, its better than wasting it at a Casino.  But don’t fool yourself that your building a better world with crypto and not just gambling to make money without having to work for it. Easy money is fools money.  Fools money if fine if you have it. If you have it ,enjoy it. Just don’t count on it being there when the hammer hits and the Digital Gulag is complete