What's the monetary policy?

Lets take a moment to remember that the great advantage to a public coin is that the monetary policy is public.  This means we don't have to take somebody's word for how much currency is being issued and at what rate, but we can verify it ourselves.  The idea is that this can help eliminate monetary supply fraud also known as counterfeiting or inflation or quantitative fleecing.

This stuff being plain as the nose on the face of SirNose, we would expect that every cryptocurrency website and team would highlight the monetary policy of their coin.  After all the value of a coin is only that of people's future willingness to use the coin, and without a reasonable monetary policy - well who is going to want to use this coin in the long term?

And yet despite this, so many teams - with amazing ideas and abilities in blockchain mechanics, privacy, memeology and chumpotronics - don't even give a second thought to the monetary policy of their coin.

"Oh the monetary policy?  It's a 100% premine step function.  Very energy efficient"

It's a take-the-money-and-run policy.  "Check this amazing new money out!  Totally decentralized, bulletproof cryptography, infinitely scaleable, quantum resistant, and it cures cancer.  You can't mine it and I have all of them".

We expect this to be attractive to people ten years from now?

To be fair the step-function monetary policy might be the right one for some applications.  Issuing a stock for example is usually done in this manner.  It makes sense that the company will start with all of them.  A buyer here is not solely looking for value from the future exchangeabilty of the token - they are also expecting a dividend or a buyout.  Bus tickets is another nice example.  The company might issue a fixed number of tickets (no standing).  It makes sense that they start out with all the tickets - after all they are the ones selling them.  Again here we aren't only buying bus tickets hoping that people will want them in the future as exchange tokens.  We actually want the service provided by the company.  We buy the tickets even though we know they will eventually be worthless.


Satoshi's bitcoin has a very interesting monetary policy that captured the imaginations of millions.  Its is a geometric series in which the total new currency issued drops by a factor of two every 210000 blocks.

This geometric series approach was adapted by many other coins (LTC, XMR, BCH, DASH), sometimes shortening the "halfing time" and sometimes adding an additional element of linear inflation (DOGE, ETH?).

Some proof of stake coins have also offered a different monetary policy, one of a fixed percentage growth of the money supply over time.  This is more like what most fiat currency issuers aim for.

To make a long story short, we really should be looking at the monetary policy of our cryptoeffectivo... and we probably should be very hesitant to use company coins.



There can be only one

Hello everyone!  Today's post is mostly about the psychology that might lead one to such a broken conclusion.

The concept that every object has a use value and an exchange value was described and expanded upon by various philosophers like Aristotle, later Adam Smith and Karl Marx, and so many others who seem to have differing viewpoints (from Carl Menger to Joel Kovel).  It's kind of a basic place to start with monetary or economic theory.  So we see quite clearly that every object has an exchange value, and we can also remember that the world contains different classes of objects.

The conclusion should be obvious here, yet somehow, totally in contradiction with these basic facts, one can be tempted to imagine that there's a single real bitcoin or that one currency somehow will triumph over all the others.

"The three enemies of the people are hegemony, monogamy and monotony.”

Terence McKenna

It's not just the theory but direct observations.  There were different kinds of cowrie shells.  There are different kinds of precious metals.  There are different varieties of stamped metals, and of paper currencies, and of digital currencies.  We see with our eyes that there have always been more than one, and there still are more than one.  And yet still our minds take us down a path imagining a monopoly in money.


(XKCD cartoon)

Perhaps it's because we are just annoyed that many types of standards exist; different languages, different units, different football leagues, different climbing difficulty grades, different musical temperaments, and different block chains.  We just want things to be simple, as we are not self confident enough to learn new things.  Perhaps it's because there are so many terrible currencies out there and we don't wish the trouble of wading through them all.

We'll get over this monopoly money nonsense eventually.  Sometime I think Elizabeth Magie chose the name "monopoly" for her Atlantic City board game so that the phrase "monopoly money" would come into common parlance as pretend money.  This is a lovely commentary on how Congress gave the Federal Reserve a monopoly on money printing making the US dollar officially monopoly money.

One other reason is that we like to think in a single primary unit.  Even if we are trading our labor for cannabis or for litecoin or for 人民币 or rent, we might convert in our head to BTC.  Does this mean that for us BTC is the one true coin?  No, it means we have chosen for the context at hand to use this standard as a tool in assigning quantitative value.  Maybe because it is easier for us to convert units when doing calculations, we assume the whole world needs to also simplify.

There's also the nature of having one king or one nation that we may have grown up with, propaganda pushed by the king or national agents, which might affect how we think.  In fact there have always been many kings and many nations, some even active over the same areas.

Perhaps the problem is that we are plagued by our reliance on the simplest of categorizations of the world around us: the dichotomy.  Things are either black or white.  You are with us or against us.  Are you Chinese or not?  Is that alcoholic or not?  Such questions can have important use, but they do not show us the real picture of continuity and variation which the world presents for us.

What do you think?  What reason is there for us to look into the growing tree of a million coins, the continuous forking and cloning, the variety of hash functions and public key systems, and to somehow come up with a statement like the title of this post?





The greatness of a nation

"The greatness of a nation and its moral progress can be judged by the way its [trees] are treated."


-- Mahatma Gandhi

The problem that blockchain solves

Something worth saying is worth repeating.  A quick read through the bitcoin obituaries shows that this is a difficulty in proceeding.  For example we have a piece by Kai Stinchcombe here in which he claims:

There is no single person in existence who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it, and therefore became a blockchain enthusiast.

Well I can prove that there is at least one such person (me) and that in fact most bitcoin enthusiasts match that description.  Don't worry, there are plenty of idiots promoting blockchains for various broken reasoning, myself at times included.  But lets stick to the topic: the problem solved by blockchains.

The problem quite simply is counterfeiting.  To phrase it more scientifically, we can refer to it as private issuance.  As the user of a privately issued currency, you don't know how many new units are being issued.  While you might work and make a million shekels, others might simply create a million shekels from nothing with the push of a button.  We're not talking about who does it or how much here, just that it's possible.

Does that sound like a sound system with no problems to solve?  Or is there perhaps a problem here which at least might be a tiny little bit useful to solve?  We're not just talking about paper money being created (sure that happens) but bank accounts and various digital payment systems (wechat, paypal, alipay, m-pesa, ...).

It's important to stop right here and acknowledge that it's possible.  People just creating money from nothing in private.  Acknowledge that this is in principle possible and that this is a problem at least with some potential to be worthy of our attention.

“It had been justly stated by a British writer that the power to make a small piece of paper, not worth one cent, by the inscribing of a few names, to be worth a thousand dollars, was a power too high to be entrusted to the hands of mortal man.” [John C. Calhoun, speech, U.S. Senate, Dec. 29, 1841]

You see plenty of people have recognized that this is a problem..

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” [Henry Ford]

Plenty of people understand it.

“By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft." [John Maynard Keynes]

Public currency is a solution to this problem and public blockchains are a way to implement a public currency.

The problem (once again here, remember we are repeating ourselves) is monetary supply fraud which has potential to lead to gross malinvestment, inefficiencies, and even in some circumstances the empowering of psychopaths and mental midgets to cause great harm.  A solution to this potentially serious problem is public currency.


How is using a public ledger "a bad vision for the future"?  Anti-fraud is a bad vision for the future?  Bitcoin and blockchain are about limiting any criminal monetary supply fraud which as so many have pointed out, has plagued us for centuries.  When you use a public coin, nobody can create public coins in private and thus defraud the system.

Of course there will be charlatans and fraudsters using coins, this is always the case from gold to cowries to yap stones and LOGs.  The issue we are addressing with our solution is not all kinds of fraud, it's not the institutions of nation-state or capital, practices of taxation or remittance.  It is only about preventing monetary supply fraud.  The solution to that one specific problem is public currency and that is why I became a bitcoin enthusiast.  It could even be an important step on the way forward out of the dark ages towards rational management of resources.



satoshis per joule 2018

Hello everyone!

Ok ok, we'll do the energy analysis again.

Lets start with the Antminer-S9 with a claim on their website of 0.1 J / GHps.  Well they mean to say 0.1 J/s / GH/s which is the same as a .1W / GHps.

What does this get you for your tenth of a joule?  Well let's see.  BTC diff is at about 30 EHps, and that is worth a coinbase of:

total coinbase reward   R = 12.5 / 10 / 60 = .021 BTC/sec (we'll leave fees out for now).

Your piece of this pie for .1 J/s is 1GHps worth:

r = .021 * 1GHps / 30EHps = 7 * 10^-12 BTC / sec

thus 1 J = 7E-11 BTC = 7E-3 sat = 0.007 satoshi per joule

Eneregy cost C = 7 msat/J  (2018)

OK lets check our work from a couple years ago here.

We came up with

E-cost = 13 msat/J (2015)


The cost of Energy has gone down by a factor of two or so.  Another way to look at it is that we are getting less BTC per joule with our miners than we were a couple years ago.


Now let's calculate the cost of a Joule another way.

We'll start with gasoline at 7.5 RMB / L, a popular price to pay in early 2018 I am told.  Arthur Nommensen tells us there are 34 MJ in a liter of automotive gas, which would work out to 150 MJ per gallon which is 25% higher than the figure we used in 2015.  We'll use the old figure anyway for comparison, which is 120MJ/gal or 26 MJ/l.  Keep in mind you might be able to get as much as 25% more joules for your satoshi.

This works out to 26 MJ / 7.5 RMB = 3.5 MJ / RMB  [人民币]

Now all that's left is for us to convert from RMB to BTC.  We can find a figure for this from our wechat trading groups or from bitkan.com/price :

58000 RMB / BTC  or 0.00058 RMB / sat

This means that our energy cost was

C = 3.5 MJ / RMB * 0.00058 RMB / sat = .002 MJ / sat

C = 2 kJ / sat

C = 2000 J / sat    lets invert this to sat / J

C = 5 E-4 sat / J

C = 0.5 msat / J (2018)

Wow, that's only half a millisat per joule!  You can recall from 2015 that this came out to:

C= 5 millisat / J (2015)

That's a factor of 10 more Joules for your sat.



Well energy is worth about 0.5 msat per joule or 7 msat per joule depending on how you make the trade.  The arbitrage opportunities and volatility here have gone up it appears.  The price of these things is still mostly driven by how many fiat currency units issuers are willing to throw at these assets, so don't bank on these things normalizing any time soon.

Lets look at the arbitrage here just for fun.  Suppose you start with 1 J of energy and use a mine to get 7 msat with it.  You're rich!  Now you can turn around and buy 14 Joules of energy with it!  Rinse and repeat.

Wouldn't it be kinda funny if oil refineries were like, f this, we're not going to bother selling to motorists when we can just power our mine?!

Of course this won't work that well because we've left out the inefficiencies required in converting gasoline Joules to mining rig Joules.  Just for fun we can do one more version of the calculation:


Start with 10 USD cents per kWh, a common low end figure for regulated AC power in much of the world.

0.1 USD/kWh * 1 hr/60 min *  1 min / 60 sec = 2.8 E-5 USD/kWs

= 2.8 E-5 USD/kJ

Use today's exchange rate 9000 USD / BTC to convert ->

= 2.8 E-5 USD/kJ / 9000 USD/BTC  = 3.1 E-9 BTC / kJ

= 0.31 sat / kJ

C = 0.31 msat / J

[Edit - an earlier version of this section contained an error of a factor of 60]



The prices of energy in gasoline and mains power form are remarkably similar.  At current prices and difficulties, minus overhead (including here in overhead the cost of the mining hardware, do your own calculations here please), it looks like paying normal prices for electricity and mining with an antminer will get you a profit.  Notice "at current prices and difficulties", for we also can expect these to change.  Difficulty will go up and/or energy prices (in BTC) will go up.

Lets recap our May 2018 energy calculations:

Earnings per joule with the s9:   7 msat / J

Cost per joule to buy gasoline:   0.5 msat / J

Cost per joule to buy regulated AC power:  0.3 msat / J

Mining still a growth industry.

Have a nice weekend 🙂







no-fork native tokens

In case you missed it token fever is upon us.  Easy-issue tokens have driven the rise of ETH and other coins.  Coingeek offered some kind of a cash prize for building a native token system for BCH (which likely would work for other satoshi-codebase coins).  This is what they want:

o Securely create tokens;
o Issue tokens to user’s wallets;
o Redeem tokens from users; and
o Securely destroy tokens back into the originating cryptocurrency at the end of that token’s life cycle

This is solved with a simple no-fork wallet protocol, which can be built into a satoshi-codebase wallet, consisting of three RPC calls:

1 - watchtoken <txid> <utxo-index vout> <label> [rescan=true]

2 - sendtokentoaddress <amt> <address> <label>

3 - gettokenbalance <label>

The first "watchtoken" marks an individual UTXO (from transaction txid and output index vout) as a "genesis" token.  This is a lump of coin that will be marked and watched and counted as a separate asset than the underlying coin.

The rescan then needs to take place, now checking to see if the wallet owns any of this asset or not.  The procedure of determining what addresses control tokens when scanning the blockchain is as follows.  A given UTXO is either of this token_label type (lets call it FU) or it is not (lets call these not-FU).

The only UTXO which is of type FU is at first the one pointed to by the watchtoken(<txid>,<vout>,"FU") call.  After that, other outputs will be of type FU only if they are outputs of a transaction exactly formed as follows:


Inputs                      Outputs

type - FU                      ?
type - FU                      ?
...                           ...
...                           ...
type - NOT-FU                 ...


The only way that any output of a transaction can also be labelled "FU" is if these conditions hold:

a)  All inputs except one must be of type FU
b)  Either all outputs are of type FU and the NOT-FU is exactly the fee,  OR all outputs but one are of type FU, in total equal to the total amount of FU input to the transaction, and one other output is not-FU (the not-FU change).

Wallets will create FU transactions with all outputs FU if possible, but sometimes when one doesn't happen to have an exactly current-fee-sized not-FU UTXO lying around, one will want to include a not-FU change output.

There is one possible edge case which might confuse a wallet implementation, which is if there are multiple outputs of exactly the same amount and so which one is non-FU change and which one is FU is unclear.  One simple way to avoid this is to mandate that in such a case there are no FU outputs, and so any wallet making a transaction needs to make sure the not-FU change is not exactly equal in amount to any of the intended FU outputs.  Once this is taken care of it is always clear which single output is not-FU.

If the transaction does not pass these requirements then the outputs are all considered not-FU, and any FU input to the transaction is "destroyed" (or rather, is now considered only the underlying coin).

This simple protocol allows us to securely create tokens, by placing some number of satoshi in a UTXO and labeling these as our token.  This allows us to issue tokens to users wallets, as any wallet which can receive coin can now receive tokens (it us up to the wallet to recognize them, so the user must tell their wallet to watch for that token).  Redemption can be done with any transaction, the user is able to sign that they control the tokens or move them as the redemption-giver sees fit.  Destroying tokens can be done by making an unbalanced transaction not obeying the above strict rule for transactions that allow passing of token type.

One nice thing about this token system is that there is no need for any software updates for miners or nodes.  To a miner, these token transactions proceed as any other transaction proceeds

The rest is very self explanatory.  Gettokenblanace returns the total of any type FU coin on the chain controlled by the keys in the wallet.  Sendtokentoaddress creates a transaction with enough FU inputs for the receiver, any FU change if necessary, and enough non-FU coin to pay the network fee.


But how will people know that my token is called "BADASS" and not FU or c74d8fce1b3d488d17b4dc92c61600ae26f7ebf1ab3e144d8014a6614b340ad2,3  ?

You can ask people to use any label for your token that you like.  In the end the token will be defined by that first TXID, vout combination.

How can I issue more of my token later on?  

You can add a new token FU2 with a new genesis UTXO and tell people this will be redeemed just like FU1 by your company or redeemer-cat.

Can this work on an SPV wallet?  

It will be a little slow to scan the chain when a new "watchtoken" is issued.  More likely people will use some trusted servers which list token UTXOs for mobile tokening.

What if I want to use 1mBTC to create 1 million tokens?  

You can't.  1mBTC creates only 100k tokens and they are indivisible.  Yes this means no token will be worth less than 1sat.

What if I want to move tokens without having any coin (non-FU coin)?

You can't.  Just like Ethereum's "gas price" you need some underlying coin to pay the network fee.

What if I want to muve a bunch of coin to several addresses and a bunch of token to several addresses at the same time?  

You can't.  Token movements in this protocol need a dedicated transaction, there can be at most ONE non-token output to a valid token transaction.

What does it take to update the network?  

Nothing.  Your network is ready to roll with this token system already.




Celebrating indigenous peoples effort to protect forests, and the planet

From If Not Us Then Who: Indigenous peoples live and work in the lands they protect–and have been found to be the most effective guardians of the world’s forests. This International Day of Forests, we are taking the opportunity to celebrate their work they’re doing globally to protect our forests, and, in turn, our planet.

If Not Us Then Who

When we think of ‘saving the rainforest’, we might think of tree-planting, buying less and recycling more. But these important actions are just part of the picture. Indigenous peoples live and work in the lands they protect – and have been found to be the most effective guardians of the world’s forests. This International Day of Forests, we’re taking the opportunity to celebrate the work they’re doing globally to protect our forests, and, in turn, our planet.

Pressures on the world’s forests continue to build. From palm oil and soy plantations, to timber logging, cattle grazing and mineral mining, our growing population is demanding more and more from these resource rich areas. And while legislation is keeping some of the threats at bay, the majority of the world’s forests are continuing to face challenges to their existence.

Amidst these pressures, some areas of land are being razed to the ground while others are still standing. Why? Deforestation has been found to be five times higher outside of indigenous territories and conservation units, according to a recent study by RAISG (The Amazon Network of Georeferenced Socioenvironmental Information). In other words – the indigenous communities living and working within the forest are proving to be the best line of defence against deforestation.

Using their extensive knowledge of the forest ecosystem, these communities are using sustainable practices to live in a way that protects – and even regenerates – the land. Although they account for just 4% of the global population, they protect more than 80% of the world’s biodiversity (source: World Bank). By cultivating clean waterways, tackling forest fires, and restoring the habitats needed for rare species, they bring the land back into balance – and keep it that way.

This work doesn’t just protect the forest – it supports the planet. Forests act as a carbon sink – absorbing and holding on to carbon, preventing it entering the atmosphere and contributing to climate change. This stored carbon is released into the atmosphere when trees are logged and burned, making it all the more critical that forests are left standing.

As much as 24% of the carbon stored above ground in the world’s tropical forests – an amount that is more than 250 times the global air travel emissions of 2015 – is found in indigenous territories. Thanks to indigenous communities, this carbon is being kept in the ground, and complex ecosystems and rare species are being given a chance to thrive.

Indigenous peoples continue to defend and protect this land, but it’s coming under increasing threat from land thieves, agribusiness and mining companies. As pressures mount, and we race to prevent a catastrophic 2 degree temperature rise by 2100, there’s a growing sense of urgency to safeguard the earth’s forests.

Indigenous peoples continue to work tirelessly as the most effective guardians of the forest. These communities may be small in number, but their positive impact on the earth’s forests – and its future – is huge.

Charlie Lee Nails It

“It’s hard to say what will happen when it starts reaching the limit. Right now, the coin is working, Bitcoin and Litecoin are working because the mining reward is paying for the security… When you rely on fees and if the fees aren’t enough because the block size is constrained, then what happens? The security will drop. Is it better to have some small inflation every year and have that fixed and have that pay for the security or can transaction fees pay for security?”

-- Charlie Lee in https://www.youtube.com/watch?time_continue=98&v=aHOcTllK1_c





The Importance of the Monetary Supply Curve

Well that's a rather imposing title isn't it.

If you're going to talk about exchange commodities, you probably ought to consider how they are being issued.  A lot of cryptographic assets are issued today like type "D" in the above diagram, a standard ICO or full premine.  The trouble is that this puts all the coins in some small number of hands, which makes for unstable markets dominated by whales.  It's a top-heavy structure and while it can be propped, and perhaps grow some understory via trickle-down and some good marketing to adoption, this is probably not where you want to be in the long term.  Unless of course you got in at the very beginning, in which case: good luck finding the top.

The curve "A" sure looks a lot better at the start, as miners are able to generate coinbase transactions that keep the market from overheating and put coins in new participants hands.  However you can see from the plot that after enough time (by 2030 or so), the economy looks from a distance very much like curve "D".  The coinbase is nearly gone and now you have an entrenched whale class who moves markets at will, and little to give incentive to miners apart from a fee which drives away users.

Curve "B" solves this problem neatly but with one aesthetic flaw, namely that it has no cap to the supply and thus appears to not be a great long-term store of value.  Sure the miners are taken care of and the economy can grow in a relative stable manner but still the competition of less inflationary coins will drive the value down.  A lot of satoshi codebase coins leave this as the endstate after various early distribution schedules.

Curve "C" leads to large interest rates and hyperinflation, which could be desirable in certain situations but not for the long term wealth management crew.

This leaves us with curve "D", hastily drawn on in crayon.  This one is the logarithmic supply curve.  As you can tell it is capped, allowing for avoiding runaway inflation, and yet there is substantial coinbase reward to issue new currency for a very long time.  This should keep the price relatively stable by avoiding shocks and finding a balance between inflation resistance and coinbase incentives.

What do you think, which supply curve would you rather have in your coin and why?


Bitcoin as a Matriarchal Economy

Start at around 50:00 or so for the two minute version 🙂

WATCH: Vin Armani on Cryptosavagery, Patriarchy vs. Matriarchy And Culture