Cryptocurrency ascending

You have heard me mention before about Bitcoin, the first "mainstream" cryptocurrency on the market.  It is certainly on the rise even with several damaging incidents from viral attacks, accidental wallet theft to outright con scams.  In general the community is very good, but one thing is certain Bitcoin seems to be fairly set in stone as it is.  This is leading to the developments of new cryptocurrencies in an effort to solve perceived problems with Bitcoin or to apply very different economic models.  One thing is for certain, fiat currency as the primary currency has its days numbered.

Enter Solidcoin, this currency seeks to address some of the flaws to adoption of cryptocurrency including some native enhanced security features, faster coin processing time and faster growth rate to the maximum currency total.  This currency will be very interesting to watch grow and to see how the economic model they have envisioned is realized.

Faster processing time seems to be the greatest benefit of Solidcoin over Bitcoin, in that with Bitcoin you could see situations where it may take several minutes and even hours to receive enough network confirmations for a transaction to be processed, this is clearly not ideal for point of sale systems or typical retail outlets.  To develop the general cryptocurrency economy retail operations must be brought on board.  Solidcoin can see confirmations start within three minutes (as opposed to Bitcoin's 10 minute processing time) and to receive the recommended 6 or more it can be done easily within half an hour.  A retail store with some processing power to back their operation could easily shorten the time, as well as the possibility of adding features being developed by Bitcoin users such as "Green Addresses" which are representative of client systems (Think Banks, Credit Card Companies, etc.) the transaction times in Solidcoin could be literally instantaneous.

The other advantage relating to processing time is that Solidcoin has done away with optional and variable transaction fees that Bitcoin allowed for.  The Solidcoin model instead opted for a mandatory minimal transaction fee, the reason this is an advantage is two fold.  First, the network does not prioritize your transaction based on the fee you attached, in some cases Bitcoin users had seen their transactions with insufficient confirmation even after many hours when they entered very low or no fee.  Secondly, many Bitcoin clients had built in mechanisms to enforce a variable transaction fee based on the details of your particular transaction, this is never ideal for a retail-consumer relationship because either party does not know what they are going to get.  In the Solidcoin system you will always know what transaction fee you will pay so there will be no mystery.  P.S. Transaction fees are good, they are what will keep decentralized cryptocurrrencies in operation by supporting the people donating their electricity and computing power to process and verify your transaction 24x7 365 days a year.

I will be talking more on Solidcoin in the future as we see it mature and gain stability but for now go check it out for yourself, it is easy to setup and who knows, you might see the value of this and jump on board early... it would pay off in the long run!

Alternative Currency

Currency I would argue has been one of the most fought over entity in all history.  Civil Wars are fought (English civil war was in large part taxes and fees being charged), empires have crumbled (notably the Roman empire), and Revolutions are started (American, in part over taxation and the French for debasing their currency supporting the American Revolution... now that is a little irony...).  Or more pertinent these were fought over improper mismanagement of currency by the governments in place.  Since currency almost by natural law is required for a high level civilization to operate and it is the easiest piece of the economy for a government to control it therefore has become almost universally abused in every country and caused the most frustration of their citizens.

Technology has increased, in use and capability, to the point where alternative currencies can be put into place which by their nature a government or any single entity can control meddle in them directly.  I believe this to be a good thing and it map help usher in a greater world peace possibly greater than even that attributed to the nuclear bomb.  The biggest hurdle being looked at is what economics rules need to be put in place for such currencies to do this, with the two most outspoken schools of thought and argument coming from Austrian vs. Keynesian economics.  Another common denominator to the rise in these projects is a seemingly global increase plight of citizens to reclaim civil liberties that in many countries gradually being stripped from the people.  Two notable examples would be Ripple and BitCoin.  Ripple directly being an exchange of debts between individuals and BitCoin being an exchange of digital currency that in and of itself is intended to have value and properties similar to gold and silver.  I point those out because it would seem that they are increasing in visibility and use more than most.  What is even more unique in these systems is that they are revolutionizing a major principle of one of the major parts of money which is intrinsic value, no digital currency can be directly turned into a good or service, the same is true of fiat currency however fiat currency was an evolution from money which did have intrinsic value.  I would argue however this is really just an evolution of fiat currency, and this can easily be seen by how people currently view those currencies.  Ripple is a measure of debt based on an external system of value (typically fiat currency) and BitCoin is not measured by it's value against goods and services but it's value against fiat currency.  The early merchant adopters of these systems have typically been in the form of service offerings which is a sign that even at their current level of risk people are willing to trade time more than actual physical goods for these currencies in both systems however the trade of goods does occur but the adoption seems to be slower and even then it is more based on the value in fiat currency they can get from these and not the value of the currency itself so a premium is often charged due to the need for use of a currency exchange.  In any decentralized alternative currency this will be the case.

The biggest shortcomings limiting adoption of these currencies is government policy, for instance taxes, by law in the U.S. you must pay your taxes in U.S. Dollars so to use any alternative currency you must exchange it and perform accounting in U.S. Dollars and not an alternative currency.  China has very strict currency control laws and any use of an alternative competing currency is outright illegal.  What this leads to is an interesting phenomena, the earliest adopters for use as an exchange for actual goods of value will be Black Market trading.  With the crack down on online gambling in the U.S. there were online casinos which started accepting alternative currencies and merchants who openly trade contraband goods for it as well.  This is due to the anonymity of the currency transaction itself which is a necessary feature of any decentralized currency.  With a little research of my own I discovered you could also trade foreign currency at much more favorable rates than the current mainstream forex markets... for instance the Chinese renminbi trades a little more favorably against the U.S. Dollar than it does on the forex markets and there are much lower fees in the processing than would be charged by centralized financial organizations.  I believe it is these things which will spurn a backlash by governments and ironically solidify their legitimacy as a fair and valid form of currency since they would need to be treated as such in order to create legislation against them.  Ultimately however once any alternative currency gets to the point where there is widespread adoption and merchants begin to shift to trading alternative currency directly and not their worth vs. fiat currency will be the golden moment when they have a very strong chance to outright replace traditional fiat currency.  Of course it would be nice if government helped speed the process along and allow people to buy government services and pay taxes in an alternative currency but that is unlikely as it is giving up one of their primary means of control on their citizens and economy, it will take mass adoption for this to happen.

What alternatives are out there?  It is very interesting for sure.  Here is another project in the works, the Terra, to help you in your research.

What is Money?

Money at it's most basic form is a 2 part commodity.  1, it is a storage of value and 2, it is a mechanism to facilitate exchange of goods and services.  An example of a storage of value would be gold and bitcoins ( see www.weusecoins.com to learn more ) and an example of a medium of exchange of goods and services would be fiat currency and ripple ( see ripple-project.org/ to learn more ).

People often get these items confused, notably because of the grey areas between these two things, for instance gold has been at times used as a medium of exchange and fiat currency has been used as a store of value.  What really differentiates the two, well fiat currency in and of itself has NO intrinsic value, it is a human defined and generally accepted/decreed system to enable bartering without having to bring a goat or pig into your local dell store to get a laptop.  This kind of commodity can come from nothing and can continually be created and destroyed and as long as it maintains a standard level of liquidity it works.  Gold on the other hand has intrinsic value, meaning you can keep gold and later you can turn that gold into jewelry or component parts in say a high tech airbag deployment mechanism which is a marketable commodity.  This kind of commodity has rarity and requires resource expenditure and effort in order to have more ( ie. Mining ).  We can get into the anomaly of bitcoin in a later posting, which in it's current state is a store of value and NO intrinsic value.

What does this mean to you and me?  Simple really, our entire economy lives and breathes because of both of these functions working as they should concurrently.  Every where you look, you see the price of gold, silver, oil etc. priced against the dollar, yen, euro etc.  This is because, economists and consumers need a gauge to know how stores of value can be universally traded for a medium of exchange.  So when you go to the gas station to fill up the Wagon Queen Family Truckster and you end up paying five dollars per gallon, this is the two principles at work simultaneously, the economy has deemed that your gasoline which is a store of value has an exchange rate equivalent to other stores of value equaling 5 fiat dollars per gallon.  What else could we have done to get this gas?  Say you're a farmer and wanted the gas and you have 5 fiat dollars in bushels of corn, could the farmer not have just given his bushels of corn for the gas directly?  The answer is that yes he can but if the gas station owner doesn't want any corn because he/she has a corn allergy and doesn't want to turn around and trade the corn to someone else then we need to have an easier medium of exchange and this is why we have fiat currency.

For discussion, think about this and tell us your thoughts.  In current forms fiat currency has become both a store of value ( in the form of debt - see this video series www.youtube.com/watch?v=vVkFb26u9g8 for more info ) and a medium of exchange.  Gold and Silver have also been used as a store of value and a medium of exchange ( gold and silver minted coins for example ).  Does a successful economy need to have a currency that is representative of a store of value and a medium of exchange simultaneously or can it be functional with the 2 traits of money separated into different forms?