Welcome to the “It’s All About Attitude” Book Series. The series began in 2001 with the publishing of Net Attitude: What It Is, How to Get It, and Why Your Company Can’t Survive Without It. All the books in the series are available in paperback and Kindle. Election Attitude and Health Attitude are also available in Audible. Please visit the book series pages on Amazon: one for the Kindle versions and one for the paperback versions. On this page you will find sample chapters of all the books. You can find reviews of the books here. As you will find in all my books, I believe most big problems and big solutions involve Attitude. I hope you enjoy reading the It’s All About Attitude Series. See a description of each book and comments from thought leaders here.
Reflection Attitude Sample Chapter
Foreword – July 2022
There are more than 80 articles on johnpatrick.com about Bitcoin and cryptocurrencies. I have selected a handful of articles for Reflection Attitude to share how I got interested in the subject in 2013 and my views about the future of the technology.
Written: January 2014
Electronic money is not a new idea. The Electronic Fund Transfer Act was passed by the U.S. Congress and signed by President Jimmy Carter 35 years ago (1978).[i] Other forms of electronic money include payment processors, direct deposit, and digital currencies such as Bitcoin. What distinguishes Bitcoin from other electronic money is it is a cryptocurrency.
Cryptocurrencies are a type of digital currency created on an infrastructure relying on cryptography, decentralization, no central bank, and peer-to-peer networking. Wikipedia lists 47 cryptocurrencies. Bitcoin, established in 2009, was the first. Will Bitcoin replace the dollar, euro, yen, franc, kroner, et al? I believe it is possible, but most authorities say it is doubtful. Will Bitcoin dominate as a new method of payment, replacing Western Union, PayPal, credit cards, and various banking services? I believe it is very possible.
Alan Meckler, chairman and CEO at Mediabistro, recently said Bitcoin has “all the trappings of the web circa 1995”.[ii]
Alan and I met at Internet World in 1994 and we both had a bullish view of the future of the Internet. We were not alone, but there were many naysayers at the time, including Bill Gates. More than a few bank and insurance executives told me the Internet was interesting, but they would never connect their company to it. The web lacked good security, had no authentication, was slow, not always reliable, and was missing the many supporting services needed to make it feasible for electronic commerce. The rest is history.
In the early days of the web, Internet World, created by Alan Meckler, was a thriving tradeshow which attracted thousands of attendees and vendors, attendees to find out if the web was real, and vendors to share their vision and demonstrate their products. Mediabistro, a public company in New York (MBIS) is a provider of jobs, news, education, events, and research for the media industry, has created an Internet World-like tradeshow called Inside Bitcoins, which was launched in December 2013. The main purpose of the show is to allow Bitcoin and the related virtual currency industry to share their vision. The conferences provide the latest information on government compliance, marketing, managing, and launching new businesses in the world of virtual currency.
The WSJ provided a good overview of the conference. Banks, credit card companies, and money transfer companies do not like Bitcoin because the new digital currency model threatens the status quo and related fees. In the early days of the World Wide Web, there were similar views to what we hear about Bitcoin. Music and book publishers did not like the idea of seeing their business model disrupted. Technology companies, including IBM, with large investments in dozens of different proprietary networking software did not like the Internet protocol, TCP/IP, which was a fraction of the cost of their offerings. Many derided the Internet as being slow, insecure, not scaleable, unreliable, not enterprise-ready, etc.
What about the other 46 cryptocurrencies and others likely to emerge? It is certainly possible a superior alternative to Bitcoin may emerge. From my perspective, based on the history of the web, it is all about the grassroots. There is a grassroots movement underway with Bitcoin. You can see it in the blogs and Twitter.
The infrastructure of Bitcoin is built on open-source software, visible for all to inspect and contribute to. It is already evolving. It will get better and better. There are currently more than one million Bitcoin wallets and more than 2,000 vendors who accept Bitcoin. I would never bet against a grassroots movement.
I became an instant believer after attending Inside Bitcoins last month. I purchased two BTC for $568.62 each. I was sure it had nowhere to go but up.
A couple of weeks after the conference, a friend and I were having breakfast at Funky Pelican at the Flagler Beach Pier in Florida. Our discussion made me think of other similarities between the early days of the web and the current early days of Bitcoin.
In the beginning, the web was created to make it possible to share documents on any kind of computer. Scientists at CERN in Geneva and around the world were interested in sharing technical documents about particle physics research. The problem was the thousands of scientists and students had many kinds of incompatible computers. To solve the problem, the web provided a way to make the world’s documents compatible by using a markup language called HTML, which made the documents compatible on any kind of computer connected to the Internet.
Many pundits asked questions in the early days of the web about the purpose of the web. Only documents? No one I knew thought of the web as legitimate information technology. There were no Amazon, eBay, Google, or any other e-business. These things and many more evolved over time.
Today, people are asking similar questions about Bitcoin. Is it just money, a global currency, a platform for payment, or just an investment vehicle? As with the early web, there are many supporting services for Bitcoin not fully developed yet or don’t exist at all. To reach its potential, Bitcoin will need reliable and robust merchant services, hedging, futures, insurance, and many other things. Most important, the evolution of Bitcoin will require adoption by users and merchants. This is beginning to happen.
The only threat I see is from politicians who may want to “protect” us with some legislative or regulatory schemes. I always worried about the potential of political intervention in the early days of the Internet. For this reason, a few of us formed the Global Internet Project (GIP). I served as chair of the GIP for about five years. With support from Harris Miller and the Information Technology Association of America (ITAA), my colleagues and I travelled around the world to convince political leaders to resist the temptation to regulate the Internet.
In 2003, the Federal Trade Commission proposed legislation to stop the proliferation of unsolicited commercial e-mail known as “spam”. I testified as Chairman of the GIP and presented the minority view of why legislation would not work. A video of the hearing is on C-Span.[iii] My testimony began at the 34-minute mark of the video.
Fortunately, most politicians did not understand enough about the net to introduce controls. They were afraid the rapidly growing popularity of the net might lead to something good. What an understatement.
My Reflections – 2022
As of July 2022, there were more than 20,000 cryptocurrencies and tens of millions of digital wallets.[iv] The price of one Bitcoin on December 15, 2014, was $320. As of November 2021, a Bitcoin was valued at $65,000. The Global Internet Project declared victory and ceased operations around 2005. Over the next eight years since I wrote this article, Bitcoin and other cryptocurrencies grew rapidly as did the various ancillary services and relationships I mentioned. Mediabistro no longer exists.
My First Purchase Using Bitcoin
Written: January 2014
Bitpay is an Atlanta startup which says their mission is to make Bitcoin every merchant’s favorite form of payment. They claim more than 20,000 businesses use their services. The official merchant count on Bitcoin Pulse is approximately 2,800 merchants. Whichever number you believe, adoption is clearly rising. Perhaps like others, I was curious about how a Bitcoin transaction would work, so I visited overstock.com, an early e-commerce website and Bitcoin believer.
The unusually cold weather in Florida had caused me to look for a long-sleeved shirt. I found a nice steel blue canvas thermal shirt for $22.99, and I got a 10% discount for opening the Overstock account. At checkout, I was presented with several payment options including credit cards plus PayPal and several other newer payment methods including BillMeLater, RewardsPay, V.me, and Bitcoin. Overstock clearly doesn’t want to lose a sale for a buyer’s lack of ability to pay. The only thing they don’t take is fiat currency cash.
I selected Bitcoin and clicked the Submit Order Now button. I chose to pay with Bitcoin using my Coinbase digital wallet. The dialog presented the details: $23.64 purchase price after discount and shipping, which would result in a debit to my digital wallet at Coinbase of .02862804 BTC, based on the current price of Bitcoin of $825.76. I am not sure of the exact timing used to lock in the price and convert the payment to U.S. dollars for Overstock, but I am sure it works for them, or they wouldn’t accept BTC.
The bigger question one might ask is why would anyone want to buy something with BTC when they could just use their credit card? I think there is more than one reason. The folks at Bitpay say credit cards were not designed for the Internet. True. They further say merchant websites can reach 200 countries, but credit and debit card payment systems reach far fewer.
Anyone with a bank account can create a digital wallet at Coinbase or other cryptocurrency exchange and convert currency to BTC. I predict people anywhere in the world will be able to go to a physical exchange, a dealer, and deposit their fiat currency into a BTC digital wallet using their smartphone. The difficulty of getting and keeping a credit card is well known to millions of people. In theory, a debit card should be easy for anyone to get, although some have hidden fees and restrictive policies of use.
From a merchant point of view, BTC will provide a larger reach, fewer restrictions, and lower fees. Banks collect tens of billions of dollars in fees from credit and debit cards. Merchants face surcharges for Internet transactions, surcharges for rewards cards, surcharges for high-risk cards, and surcharges for cross-border transactions. Bitpay has none of these and in fact has no transaction fees at all for their merchant customers. They charge a flat monthly fee for operating the BTC services.
The billions in fees charged to merchants become part of their cost of business and are passed on to the consumer. The inefficiency of credit cards for online commerce provides a strong motivation for the adoption of BTC. Jamie Dimon, CEO at JPMorgan Chase, said, “I personally think that Bitcoin is worthless.”[v] He further said the question is do we even participate with people who facilitate Bitcoin? Sound familiar? Music companies 15 years ago decided not to participate with downloadable music. Publishers at the time decided not to participate in digital books.
The Internet creates disintermediation industry by industry. Watch out Cable TV. Do you think people will continue to pay $150 per month for 500 channels of content, a few of which they watch? Healthcare is not excluded from the threat either. Stay tuned.
My Reflections – 2022
In a late 2020 estimate of the Bitcoin landscape, 328,370 Bitcoin transactions are processed every day, and 15,174 businesses worldwide accept Bitcoin, according to Fundera, a platform for small business financing.[vi] The case I made about lower fees did not pan out. Bitcoin fees have risen more than anyone expected. The speed of processing Bitcoin transactions was also slower than expected. Retail e-commerce with crypto did not flourish. Fortunately, there is a project underway called the Lightning Network. It promises instant payments, capability to handle millions to billions of transactions per second, low cost, and it will work across other blockchains in addition to Bitcoin.[vii]
Bank and Bitcoin Failures
Written: March 2014
There are a couple of dozen Bitcoin exchanges where you can buy or sell the BTC cryptocurrency. Some exchanges provide digital wallet services, so you have a place to store your BTC. If you buy something, you can authorize the seller to take BTC from your wallet as payment. The question arose about how safe the exchanges and wallet services were.
Last week, the Mt. Gox Bitcoin exchange in Tokyo declared bankruptcy, and the status of nearly a half-billion dollars of BTC is uncertain, at best. Some say Bitcoin exchanges should be regulated like banks. Banks are heavily regulated, but regulation does not prevent them from failing. The Federal deposit insurance Corporation (FDIC) maintains a list of bank failures since October 1, 2000. There have been three so far this year, 24 last year, 51 the year before, and a record of 157 in 2010.
The difference between the Mt. Gox failure and a bank failure is, in the United States, deposits in banks are insured to a limit of $250,000.[viii] Should Bitcoin operators be regulated? A lot of important innovation is occurring around Bitcoin. Credit cards were not designed for the Internet and the fees they charge merchants can be 50% or more of the profit the merchant makes on a sale. Money transfers by working people to family members in other countries incur huge fees. A significant part of the world’s seven billion people have no access to the world of e-commerce.
All these issues can be addressed by Bitcoin, but yes, I feel there should be some “light” regulation. Operators should be registered with some government entity and should provide full disclosure about who they are, how they are organized, how they operate, and what their security procedures are. They should submit to some form of security audit, such as security expert Andreas Antonopoulos just performed for Coinbase.[ix]
Consumers need to take responsibility also. Bitcoin is a new payment platform and should not be viewed as an investment speculation unless you are prepared to lose your investment. The Bitcoin wiki summed it up well. “Warning: Please be careful with your money. When sending money to an exchange or seller you are trusting that the operator will not abscond with your funds and the operator maintains secure systems that protect against theft, internal or external. It is recommended you obtain the real-world identity of the operator and ensure sufficient recourse is available. Because Bitcoin services are not highly regulated, a service can continue operating even when it is widely believed it is insecure or dishonest and webpages recommending them may not be regularly updated. “Exchanging or storing significant amounts of funds with third parties is not recommended.”[x]
My Reflections – 2022
The failures which have occurred have been failures of exchanges, not of Bitcoin or the blockchain, just like a bank failure is not a failure of the U.S. dollar. As of 2022, seven crypto exchanges offer some form of insurance.[xi] Coinbase, the leading crypto exchange in the United States, carries crime insurance protecting a portion of digital assets held across its storage systems against losses from theft, including cybersecurity breaches. The leading exchanges are innovating various protections for crypto holders. Congress is considering various methods of increased cryptocurrency regulation. In 2021, Congress introduced 35 bills focused on U.S. crypto policy.[xii] In my opinion, if regulation is well formed, not overly burdensome, and centralized in one federal agency, it will be a very good thing for the future of crypto.
Reflections on Bitcoin
Written: March 2014
This week on CNBC, Warren Buffett said Bitcoin is a joke.[xiii] This is just one of many derogatory quotes made by the oracle of Omaha. Once again, this reminds me of 1995 when pundits said the World Wide Web was a joke. Many of them had a stake in the status quo. I remain bullish about the future of Bitcoin as a transaction platform. I believe this view is consistent with the evolution of the Internet.
In the beginning, the Internet was a simple communications network allowing messages or files to be transferred from one computer to another. The World Wide Web was built on top of the underlying infrastructure, the Internet. Then along came e-commerce, which was an additional layer built on top of the web. This was followed by social media, which was another layer, and now we have Bitcoin, which is providing a payment, currency, and contracts platform as another layer.
It is certainly possible Bitcoin could go the way of Napster, but I believe the grassroots is gaining momentum.[xiv] The press does not quite get what Bitcoin is about yet. Last week, the New York Times Bits Daily reported “Mystery Swirls Around Unmasking of Bitcoin Inventor”.[xv] A much more relevant news item would have been to invite an expert on cryptography from MIT and get their opinion about the strengths and weaknesses of the Bitcoin platform. Another newsworthy interview would be with the folks at Coinbase, which reported they now have more than 1 million digital wallets.
This past week Coinbase announced Pounce, a retail mobile purchasing app, which will allow consumers to shop at Lord & Taylor and other retail firms and pay for their purchases with Bitcoin. The Coinbase announcement is a sign of adoption, which will be the key to success or failure for Bitcoin.
Some crypto enthusiasts were not happy with my comments about needing some light regulation, but I still stick with the notion. I dislike too much regulation, but without a light dose of it, regulators may attempt to handcuff the Bitcoin innovation.
My Reflections – 2022
Purchases at major retailers using Bitcoin have not materialized as I expected. However, with the development of the Lightning Network described previously, I believe we will see a resurgence of retail activity using Bitcoin. The other unexpected role for Bitcoin has been to invest in it as a store of value. Many individuals and corporations see Bitcoin as an alternative to gold.[xvi]
My Bitcoin Strategy
Written: June 2014
The value of a Bitcoin is up approximately 50% from recent lows. Does this mean just a spike among speculators, or does it reflect increasing belief in the fundamentals as I have described in my blog numerous times? I see coinbase.com as a proxy for the future of Bitcoin.
The company is based in San Francisco, California and claims to support 1,300,000 consumer wallets and 32,000 merchants. Coinbase continues to hire bright young people and build out their infrastructure to support the merchants and digital wallets for consumers. It took years for the entire infrastructure of the web to be built out sufficiently to enable e-commerce. Likewise, Bitcoin has a lot of holes, but they are beginning to be filled.
Coinbase recently announced a merchant refund capability so consumers who return something purchased with Bitcoin can get a Bitcoin refund. Various apps are coming online to support merchants and digital wallets. One significant accomplishment was announced this week. DISH will begin accepting Bitcoin through the Coinbase platform in payment for its pay-tv service beginning at the end of September.
The CEO of DISH said he wanted to offer choice in payment methods for their customers. To the extent consumers pay with Bitcoin instead of a credit card, DISH will save a lot of fees. Meanwhile, consumer digital wallets continue the expansion beyond 1 million. The Coinbase promotion described earlier has attracted 20,000 students in two weeks. One could argue the pedigree of universities leading the pack says something. The top 10 schools include the University of Michigan, Berkeley, University of Texas, UC Davis, NYU, UCLA, and Stanford.
Will the value of Bitcoin continue to go higher? Many years ago, my father said, about investment advice, “Don’t give any and don’t take any”. As I have said many times, Bitcoin may go the way of Napster[xvii], but notwithstanding the possibility of major anti-cryptocurrency actions by governments, I remain optimistic.
The Bitcoin protocols limit the supply of new Bitcoin to 250 every 10 minutes. The ultimate limit is 21 million, currently at 12.8 million. Another way to think about it is Bitcoin has a limited supply. As the number of digital wallets and merchants continues to grow, the demand for Bitcoin logically would increase, and with the limited supply, I believe the price of Bitcoin will increase.
My own Bitcoin strategy is twofold. First, I purchase Bitcoin every Monday morning at coinbase.com. I started at $100 per week but later upped it to $250 per week. The dollar-cost-averaging approach has worked well so far. I purchased some at more than $800 and some at less than $400 with an average cost so far of approximately $600.
The second part of my strategy is to be a Bitcoin miner. Rather than purchase the required specialized crypto-optimized hardware, I use Cloudhashing.com. Since April 7, 2014, I have mined approximately 2/10 of a Bitcoin. I reinvest 30% of the proceeds in acquiring additional mining capacity and now have approximately 5.5 gigahash/sec of mining capacity.
The competitor to cloudhashing.com is the price of Bitcoin – if Bitcoin falls, cloudhashing is not desirable. If the value of Bitcoin rises, the mined Bitcoin becomes more valuable. Time will tell. I am not putting my retirement savings in Bitcoin, but I am making an investment to put some money where my mouth is. I see Bitcoin as analogous to investing in Cisco, Amazon, eBay, Google, and others in the early days of the web.
My Reflections – 2022
The $250 per week strategy from 2013 to 2017 turned out to be quite successful. In 2018, I sold half of what I had accumulated. I continue to hold the other half. I made a philanthropic gift to a healthcare organization at the end of 2021 using Bitcoin. As of this writing, Bitcoin was trading at $30,000. It had traded as high as $65,000. The cloudhashing strategy turned out to be a loser. The company, cloudhashing.com, folded. Fortunately, I did not put much money into it.
Disclosure: I have been an investor in Coinbase since 2017. The company went public in 2021.
Cryptocurrencies and the Scope of Bitcoin
Written: October 2017
I get a lot of questions about Bitcoin, and I do not claim to have all the answers. However, in this post, I will try to clarify some facts, and offer a few opinions. Currently, there are more than 1,000 cryptocurrencies. The total market capitalization, value of all cryptocurrencies, now exceeds $150 billion. The value has grown dramatically but is a drop in the bucket compared to the value of all forms of money in the world, which is approaching $100 trillion.
As of this week, of all the 1,000+ cryptocurrencies, only 12 have a value exceeding one billion dollars. The top three are Bitcoin, Ethereum, and Ripple. The value of Bitcoin is approximately $100 billion. That is 3.5 times greater than the total value of Ethereum and 12.6 times Ripple. These values are as of noon on 10/26/2017.
By the time you read this post, the values could be much different. The values of cryptocurrencies are volatile. This is a concern to many people, but I see it like baby steps. Cryptocurrencies are at their infancy. Coinbase, the San Francisco cryptocurrency startup, recently valued at $1.5 billion, said nearly 50,000 businesses use Coinbase services to integrate Bitcoin payments into their businesses.
There are many other companies which provide similar cryptocurrency payment services. Some of the more well-known companies which accept Bitcoin for payment include Intuit, Bloomberg, USAA, PayPal, United Way, Overstock, Dish, Expedia, Bing, Microsoft, and Tesla. There are many much smaller companies most of us have never heard of which accept Bitcoin.
A debate continues about whether Bitcoin is a currency or an asset. Experts around the world have different opinions. In my opinion, Bitcoin is both. Some are saying Bitcoin is on the way to $10,000, and others say it is on the way to a huge implosion. In my opinion, nobody knows. I continue to view cryptocurrencies as analogous to the Internet of 1995. At the time, some said it was the future, and others said it was a fad.
My Reflections – 2022
As of July 2022, there were more than 20,000 cryptocurrencies. Bitcoin was trading at $23,000 and its market cap was $467 billion. The total market cap for all cryptocurrencies was $1 trillion which was 11% of the market cap of gold. The Ripple cryptocurrency looked very promising in 2014. The price reached $3.30. As of May 15, 2002, the price is 37 cents. Most cryptocurrencies will fail and disappear but more than a few will change the world in how financial activities work, how assets such as digital images are stored, and even how the web works. The trend, made possible by blockchain technology, is toward decentralization. Today’s web is highly centralized with most queries going to a handful of tech giants. The trend toward decentralization may change this with many decentralized networks running on a blockchain. It is possible another in the Attitude series could be Decentralized Attitude.
Applying Blockchain to Container Shipping
Written: March 2017
The 35-year-old twins, Cameron and Tyler Winklevoss, have developed a $100 million Bitcoin exchange traded fund (ETF) for Bitcoin. If the pending decision from the U.S. Securities and Exchange Commission (SEC) provides approval, the result will be a new means for investors to gain exposure to Bitcoin without buying the digital currency itself. The pending decision plus numerous other factors in the growth of usage of Bitcoin have driven the price to nearly $1,300 as of March 5, 2017.
Although I remain bullish on Bitcoin, the underlaying infrastructure which enables Bitcoin to work, the blockchain, is even more interesting to many people. In addition to underpinning Bitcoin, blockchain technology can be used to streamline almost any transaction-oriented process.
IBM, Cisco, Intel, and other technology leaders have gotten behind an open-source collaborative effort, called the Hyperledger Project, created to advance blockchain technology.[xviii] Although initially used only for digital currencies, the Hyperledger Project opens new possibilities in several different industries.
IBM and Maersk, the Danish shipping company, are using a blockchain built on the Hyperledger Fabric to manage the supply chain for container shipping. Shipping is a giant global business, but the container shipping process it depends on is paper-intensive. Up to 15% of the shipping cost goes to support the checking of documents by multiple people in hundreds of interactions.[xix] With blockchain technology, the process can be digitized so that each container can be tracked using the Internet. The potential for improved efficiency and accuracy is quite large.
Another game changing use of blockchain technology is for voting. Each vote could be treated like a container or a Bitcoin. Recording and counting of votes could be much more secure, accurate, and efficient. Read more about the use of blockchain technology for voting in Election Attitude – How Internet Voting Leads to a Stronger Democracy.[xx]
My Reflections – 2022
The Winklevoss brothers’ proposed Bitcoin exchange traded fund (ETF) was rejected by the SEC. Several other crypto ETF proposals have likewise been rejected including one in January 2022 proposed by Fidelity.[xxi] I believe approvals are inevitable and crypto ETFs will have a very positive effect on crypto values. Blockchain technology has enormous potential to change the world, perhaps as much as the Internet has.[xxii] Innovation is occurring at a rapid pace and billions of investment dollars are flowing into blockchain companies.
Three of the key areas of innovation are distributed autonomous organizations (DAOs)[xxiii], distributed financial (DeFi)[xxiv], and non-fungible tokens (NFTs)[xxv]. DAOs are organizations in which holders of the DAO’s tokens have a vote on how the organization will be run. DeFi is a term which refers to innovative new financial services models which use blockchains instead of traditional banking and insurance companies. NFTs are being used to enable digital artists to create pieces of art, store them on a blockchain, and sell them directly to consumers or put them into auctions.
Is MiamiCoin for Real?
Written: December 2021
Wikipedia listed 47 cryptocurrencies in 2014. Bitcoin, established in 2009, was the first. As of December 3, 2021, coinmarketcap.com listed 15,134 cryptocurrencies trading on 436 exchanges and with a total market cap of $2.6 trillion, 26% of the market cap of gold.
Banks, credit card companies, and money transfer companies do not like Bitcoin because the new digital model threatens the status quo and the billions of fees they earn. Nevertheless, behind the scenes, they are hiring crypto skilled people as fast as possible and investing in startups which may represent the future of finance. For example, Goldman Sachs along with some other U.S. banks are exploring ways to use Bitcoin as collateral for cash loans to institutions.
Crypto activity is frenetic. Many new startups are using crypto currencies to fuel ideas for reinventing how finance, insurance, and other industries work. After China shut down Bitcoin miners, many new ones popped up in the United States. They are focusing on methods to make Bitcoin mining more eco-friendly. An interesting development, which some are calling Web3, suggesting an evolution of the World Wide Web, is enabling American cities to use cryptocurrency to redefine how cities are funded and how they relate to their citizens.
Miami Mayor Francis Suarez is a cryptocurrency enthusiast, and he has outlined his vision to make Miami a global hub for blockchain technology and crypto. Working with CityCoins, a new crypto idea which uses smart contracts on the Bitcoin network, Miami has become the first to create its own cryptocurrency. It is called MiamiCoin.
The process is a bit complicated, but it results in the creation of the MiamiCoin cryptocurrency, which anyone can buy. To alleviate the environmental impact of Bitcoin mining, the mayor has offered energy from the city’s nuclear plants. As of December 2, 2021, MiamiCoin was trading at $0.02064 with a market cap of $40,745,738. The mayor’s idea is to enable Miami citizens to become investors in the city. As part of the crypto mining process, a portion of the value of the MiamiCoin goes into the treasury of the city.
The mayor announced citizens of Miami could soon receive Bitcoin as dividends on the growth of MiamiCoin. In doing so, Miami would become the first city in the United States to give residents crypto as dividends. The distribution will require a clear definition of “Miami People.” Criteria being discussed include residents, taxpayers, voters, or other criteria set by the city. The plan is to create digital wallets for the residents. The city will then deposit the yield from MiamiCoin into the wallets. Authorities are approaching technology companies to help create the digital wallets and a registration and verification system to prevent fraud.
According to mayor Suarez, the revenue generated by MiamiCoin over the past three months equals around $80 million if annualized, potentially covering around one-fifth of Miami’s tax revenue. He was quoted as saying, “You could theoretically at one point pay the entire tax revenue of the city, and the city could be a city running without taxes, which I think would be revolutionary.” The mayor is putting his money where his mouth is. He announced he plans to receive his first paycheck as Mayor in Bitcoin.
CityCoin, the company behind MiamiCoin, announced it has launched a similar token in New York, dubbed the NewYorkCoin. New York mayor-elect Eric Adams is also a believer in Bitcoin, saying he will take his first three months’ pay in Bitcoin. As of December 2, 2021, NYCCoin was trading at $0.00005194 with a market cap of $7,467,182.
The CityCoin concept opens many questions about the technology, the partners it requires, and the financial model which returns dividends, just to name a few. The entire idea could go up in a puff of smoke. In my opinion this is the tip of the iceberg of many new ideas we will see evolve from the rise of cryptocurrency. Many will fail, but some will provide disruption to the status quo and introduce some efficient and effective ways to accomplish things.
My Reflections – 2022
As of mid-May 2002, both MiamiCoin and NewYorkCoin are struggling. They may make it, or not. I consider them as experiments. I think there will be many more. Only some will succeed and lead us toward the future.
Will Congress Be Able to Grasp Crypto?
Written: December 2021
The United States House of Representatives Financial Services Committee held its first hearing on digital assets on Wednesday, December 8, 2021, more than 10 years after the birth of crypto. The House is not known for speed, and the Senate is even slower. The House Oversight Committee released a report this week saying the pharmaceutical industry relies on drug-pricing practices which are “unsustainable, unjustified and unfair”. This is something well known and widely written about for a very long time. The committee reached its findings after a nearly three-year investigation.
Wednesday’s crypto hearing was titled, “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States”[xxvi]. The hearing included the full committee of 54 members plus crypto executives including Jeremy Allaire, CEO of Circle, Samuel Bankman-Fried, CEO of FTX, Brian Brooks, CEO of Bitfury Group, Charles Cascarilla, CEO of Paxos Trust Company, Denelle Dixon, CEO of Stellar Development Foundation, and Alesia Jeanne Haas, CEO of Coinbase Inc.
The hearing was chaired by Maxine Waters, 83 years old. I read Wikipedia to look for her education or experience in financial services or technology. I could find none. The most prominent information about her was from the watchdog group Citizens for Responsibility and Ethics in Washington which named Waters to its list of corrupt members of Congress in its 2005, 2006, 2009 and 2011 reports. Wikipedia provided a lot of details behind numerous corruption charges. I am sure Ms. Waters has virtues, but it is clear she was appointed to chair the committee based on seniority, not experience or qualifications. She was appointed by Speaker Nancy Pelosi, 82 years old with approval by the #2 and #3 leaders of the House, Steny Hoyer, 83 years old and James Clyburn, 81 years old. Does older mean wiser? My concern about aging Congressional leaders is bipartisan. Republican Senator Chuck Grassley, 88 years old, has announced his plans to run for another six-year term.
The hearing lasted four hours and 50 minutes. I watched it all. Parts of it were painful. If you are interested in watching any of it, you can see it here. After 5-minute opening statements by the Chairwoman and the Ranking Member, each of the seven CEOs gave their 5-minute testimony. Following these, each of the 54 committee members got 5 minutes to ask questions. The CEO testimonies were exceptionally well organized, clear, and understandable. I could not say the same except for a few of the committee members. Each committee member started out with something like “Thank you Madame Chairwoman and thank you Mr. Ranking Member and thank you to the CEOs for coming to testify. Thank you, Madame Chairwoman, for having this important committee hearing.” Multiply these platitudes times 54.
A dozen or so of the committee members, both Republicans and Democrats, were quite impressive. They had obviously done their homework and had a solid grasp on what crypto is all about, how it can benefit America, what regulation is needed, and how to prevent the digital assets industry from moving to other countries which have already created regulatory environments enabling crypto to operate effectively. Their questions were focused and relevant. About half of the remaining 40 or so committee members added little value. The other half demonstrated a pathetic level of understanding. Some asked no questions, just rambled showing how little they knew. A few ridiculed crypto.
The major theme of the questions was about U.S. federal regulatory supervision. The Chairwoman’s committee report said crypto is an unregulated industry. That is a laughable statement. Sam Bankman-Fried, the 29-year-old physics grad form MIT, is the founder and CEO of FTX, a cryptocurrency exchange. His net worth is $23 billion. Sam described how his company receives regulation of the highest standards, including by the U.S. Commodity Futures Trading Commission (CFTC), the SEC, the U.S. Department of Treasury, as well as stringent supervision by other global and state regulators. All the CEOs acknowledged and embraced the need to fill the gaps in regulation. They all strongly suggested it would be best to operate under one, federal, unified regulatory regime. The sharper committee members, of both parties, strongly agreed. The issues are clearly not partisan. It is a matter of understanding.
Another area of focus from committee members was the transfer of money using blockchain technology. Denelle Dixon, CEO of Stellar Development Foundation, explained how the Stellar crypto platform has pioneered using a more advanced approach for millions of people in the U.S. who send money to family members in other countries. A person in the U.S. can get a digital wallet from Stellar and transfer money from a bank account into it. Alternatively, they can take cash to a MoneyGram location and have them put the money into a digital wallet. The money is converted to USD Stablecoins. These are crypto coins tied to the U.S. dollar. The Stablecoins are transferred instantly across the blockchain to the family member in another country, such as Mexico. The recipient can take their mobile phone to a MoneyGram location in Mexico which can then convert the Stablecoins to pesos. The process is far superior to the current cross-border payment system, which is slow, costly, and fragmented, a problem acknowledged not just by blockchain networks but across the international spectrum from the G20 to the World Bank. Ms. Dixon said 800 million people, about one in nine globally are supported by funds sent home by migrant workers.
Many other examples of how crypto is helping underserved and unbanked individuals were described. The CEOs explained how moving money today uses a series of processes taking days and often carrying large fees. They explained how blockchain technology and crypto enables moving money at the speed of the Internet. Some committee members defended the status quo. Maybe they don’t know 511 banks failed between 2009 and 2020. Maybe they don’t know there were 89,476 bank fraud incidents in 2020 up 52.4% from 2019.
Blockchain technology has the potential to not only be more secure but to be completely transparent. There are a few gaps in regulation which need to be addressed. It is clear leadership on the issue is not going to come from the top. I hope the handful of enlightened bipartisan committee members can win over the benighted members and put a fire under the committee to get it to move faster.
My Reflections – 2022
Reflecting on my learning and experiences with cryptocurrencies since 2013, I remain bullish. I believe all currencies in the world will eventually be digital. Along the journey, I see many startups creating innovative and useful applications based on cryptocurrencies. I agree with Cathie Wood, an American investor and the founder, CEO and CIO of Ark Invest, an investment management firm. She said about Bitcoin, “This is the most secure blockchain technology out there. What’s going on right now would have been [Nobel Prize winning economist] Robert Mundell’s dream: to introduce a global monetary system not under anyone’s control.”[xxvii] In September 2021, Wood predicted the value of Bitcoin would rise to $500,000 in five years.[xxviii] Many people, including me, hope she is right.
Is the NFT Revolution a Bubble?
Foreword – July 2022
Most of the articles in Reflection Attitude were written between one and thirty years ago. The following article was written just before the book was published. The world of crypto, DAOs, DeFi, FinTech, NFTs, and metaverse is changing rapidly. I have commented on each of these in this chapter but, because of the explosion of activity with NFTs, I felt compelled to write something new. NFT (non-fungible token) technology is complicated, but I hope this article will break it down into something which makes sense.
Written: July 2022
NFTs are digital representations of assets including art, music, and many other things. The National Basketball Association setup a platform called NBA Top Shot to sell digital art. The platform sold a clip of Lebron James’ formidable dunk for $ 208,000.[xxix] Musician Lindsay Lohan sold a photo NFT of herself for $50,000 and donated the proceeds to charity.[xxx] The most amazing NFT sale was from Michael Joseph Winkelmann, known professionally as Beeple, an American digital artist, graphic designer, and animator. Beeple gave a boost to the crypto art movement by selling an NFT of his work titled “The First 5000 Days” for $69.3 million, the highest price ever achieved by a digital artist.[xxxi] I think it is reasonable to say something significant is going on here. I will start by explaining what an NFT is.
NFT stands for non-fungible token. First, an NFT is digital, nothing physical. Fungible is another word for interchangeable. If I give you a $5 bill, it is worth $5. You can give it to someone else, save it, or spend it. It is still $5. Non-fungible means something is not interchangeable. If I give you a piece of art I paid $100 for, it may be worth more or less than $100 if you sell it. A token is a representation of something. Casino chips are cheap pieces of plastic which serve as tokens. The different colored chips have different values as assigned by the casino.
NFTs are unique. Each one includes information about it such as date created, person who created it, how much you paid for it, etc. The NFT is stored on a blockchain. A blockchain is a database which resides on many computers, for some blockchains it is millions of computers, all connected by the Internet. Each NFT is encrypted (scrambled) and given a unique ID. Once a majority of the computers which have the distributed database agree the NFT was properly created according to technology standards, the NFT is dropped (stored) on the blockchain. Once it is on the blockchain, it is there forever. The NFT is immutable, a fancy word which means it cannot be altered.
When an artist creates a digital piece of art and wants to convert it to an NFT, they can do so at one of the digital marketplaces on the Internet such as OpenSea, Nifty Gateway, Coinbase, or crypto.com. The artist can then promote their new work of art on social media and the marketplace. They can choose to sell it for a fixed price or initiate an auction to sell to the highest bidder. No longer are galleries, auctioneers, and investors in control of the art market. Digital artists can go directly to consumers.
A person could look at an NFT on their phone or computer and take a screen shot of it. Now they have the piece of art for free, but it is not the real thing. A person could also visit the Vatican Library or the Metropolitan Museum of Art online and take screenshots. The differentiator is the NFT is authenticated, meaning the artist is real and the edition of the piece of art is real. The NFT has the date created and the date placed on the blockchain.
The NFT revolution saw global sales surge to $17.6 billion in 2021, a 21,000% growth over 2020.[xxxii] Venture capitalists continue to pour money into NFT and related startups. The bubble may break, but I do not think so.
The reason I am bullish about NFTs is the potential to modernize the way many types of assets are managed. In addition to art, NFTs could represent games, music, avatars in the metaverse, mortgages, home and auto titles, birth certificates, marriage certificates, death certificates, and even votes. All these things could be NFTs immutably recorded on a blockchain. The way many assets are created and tracked is by paper. Paper trails often get lost and being able to prove certain things happened often requires paying lawyers. Finding a record of missing mortgages can take more than a year.
NFTs and all aspects of crypto have encountered startup problems with technology and legal matters including fraud and insider trading. Regulation for NFTs (and all of crypto) is sorely needed but is slow in coming. Regulations are not being resisted by tech companies. In fact, they are begging for them. In the meantime, there will be business failures and ripped off consumers. One must be careful but not lose sight of the big picture and the long term. A digital world is ahead of us.
[i] “Electronic Fund Transfer Act,” federalreserve.gov (1978), https://www.federalreserve.gov/boarddocs/caletters/2008/0807/08-07_attachment.pdf
[ii] John R Patrick, “Inside Bitcoins,” CircleID (2014), https://circleid.com/posts/20140110_inside_bitcoins
[iii] “Unsolicited Electronic Mail Legislation,” C-Span (2003), https://www.c-span.org/video/?176445-1/unsolicited-electronic-mail-legislation
[iv] “Coinmarketcap,” coinmarketcap.com (2022), https://coinmarketcap.com/
[v] Emily Graffeo, “Jpmorgan’s Jamie Dimon Shares His Personal Belief ‘That Bitcoin Is Worthless’,” Fortune (2021), https://fortune.com/2021/10/11/dimon-bitcoin-comment-worthless-jpmorgan-chase-crypto-regulation/
[vi] Chris Kolmar, “How Many Businesses Accept Bitcoin?,” Zippia (2021), https://www.zippia.com/advice/how-many-businesses-accept-bitcoin/
[vii] “Lightning Network,” Lightning Network (2022), https://lightning.network/
[viii] “Deposit Insurance,” Federal Deposit Insurance Corporation (2021), https://www.fdic.gov/resources/deposit-insurance/
[ix] “Andreas Antonopoulos Verifies Coinbase Security,” Reddit.com (2014), https://www.reddit.com/r/Bitcoin/comments/1ywvt8/andreas_antonopoulos_verifies_coinbase_security/
[x] “Buying Bitcoins (the Newbie Version),” Bitcoin wiki (2018), https://en.bitcoin.it/wiki/Buying_Bitcoins_(the_newbie_version)
[xi] “List of FDIC-Insured Cryptocurrency Exchanges,” Cryptosec (2022), https://cryptosec.info/fdic/
[xii] Jason Brett, “In 2021, Congress Has Introduced 35 Bills Focused on U.S. Crypto Policy,” Forbes (2021), https://www.forbes.com/sites/jasonbrett/2021/12/27/in-2021-congress-has-introduced-35-bills-focused-on-us-crypto-policy/?sh=762c1cbdc9e8
[xiii] “Bitcoin: It’s Probably Rat Poison Squared,” Quote Investigator (2021), https://quoteinvestigator.com/2021/02/11/rat-poison/
[xiv] Tom Lamont, “Napster: The Day the Music Was Set Free,” The Guardian (2013), https://www.theguardian.com/music/2013/feb/24/napster-music-free-file-sharing
[xv] “Mystery Swirls around Unmasking of Bitcoin Inventor,” New York Times (2014), https://bits.blogs.nytimes.com/2014/03/07/daily-report-bitcoin-inventor-is-said-to-be-identified/
[xvi] Rob Curran, “Why Crypto Fans Claim Bitcoin Is the New Gold,” Money (2021), https://money.com/bitcoin-vs-gold-inflation-protection/
[xvii] Lamont, “Napster: The Day the Music Was Set Free”.
[xviii] “Building Enterprise Blockchain Ecosystems through Global, Open Source Collaboration,” Hyperledger Foundation (2022), https://www.hyperledger.org/
[xix] “Maersk and IBM Introduce Tradelens Blockchain Shipping Solution,” IBM Newsroom (2018), https://newsroom.ibm.com/2018-08-09-Maersk-and-IBM-Introduce-TradeLens-Blockchain-Shipping-Solution
[xx] John R. Patrick, Election Attitude : How Internet Voting Leads to a Stronger Democracy (Ridgefield, Connecticut : Attitude LLC, 2016).
[xxi] Tanzeel Akhtar, “SEC Rejects Fidelity’s Wise Origin Bitcoin ETF Proposal,” Coindesk (2022), https://www.coindesk.com/business/2022/01/27/sec-rejects-fidelitys-wise-origin-bitcoin-etf-proposal/
[xxii] Zach Winn, “Unlocking the Potential of Blockchain Technology,” MIT News (2021), https://news.mit.edu/2021/unlocking-potential-blockchain-0616
[xxiii] “First DeFi, Then NFTs, Now DAOs, the Next Big Chapter of Crypto Is Already Here,” nansen (2021), https://www.nansen.ai/research/first-defi-then-nfts-now-daos-the-next-big-chapter-of-crypto-is-already-here
[xxiv] “What Is DeFi?,” coinbase (2022), https://www.coinbase.com/learn/crypto-basics/plp-what-is-defi?utm_source=google_search_nb&utm_medium=cpc&utm_campaign=15227540354&utm_content=135277398851&utm_term=what%20is%20defi&utm_creative=560460582848&utm_device=c&utm_placement=&utm_network=g&utm_location=9011509&gclid=Cj0KCQiArt6PBhCoARIsAMF5waikm2ilSga2DBSXAq8wURigFP1OV6env-m5bFWlwfPRVJKocaSdqC4aAkGcEALw_wcB
[xxv] Mitchell Clark, “NFTs, Explained,” The Verge (2021), https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
[xxvi] U.S. House Committee on Financial Services, “Digital Assets and the Future of Finance: Understanding the Challenges And…(Eventid=114305),” YouTube (2021), https://www.youtube.com/watch?v=4oOTvtupND8
[xxvii] Kerry A. Dolan, “Investor Cathie Wood on Bitcoin, Why She Sold Stocks in China, and What Her Firm Is Buying Now,” Forbes (2021), https://www.forbes.com/sites/kerryadolan/2021/12/03/investor-cathie-wood-on-bitcoin-why-she-sold-stocks-in-china-and-what-her-firm-is-buying-now/?sh=1e99ad265820
[xxix] Crypto Dukedom, The NFT Revolution – Crypto Art Edition (Amazon, 2021).
[xxxii] Ibukun Ogundare, “First Half 2022 Sees Highest NFT and Gamefi M&a Deals since 2013,” Coinspeaker (2022), https://www.coinspeaker.com/first-half-2022-nft-gamefi-ma/