FRA Co-Founder Gordon T. Long has an in-depth discussion on the future of
Bitcoins and Block Chain technology with serial entrepreneur, Reggie
Middleton. Middleton's experience has given him the ability to recognize
value, or the lack thereof, well before much of the professional populace.
His ability to identify opportunity and his "out-the-box" mind-set
are due to years of entrepreneurial pursuits in insurance, financial
valuation/modeling, technology, media, and real estate. He is the founder of
Veritaseum and the finance and technology blog, Boom Bust Blog. Until 2011,
he wrote about financial evaluation and the global financial crisis at the
Huffington Post.
After graduation with a degree in business management from Howard
University, he worked for Prudential Insurance and trained in the sale of
financial products. Since then, he worked in the fields of financial
securities and risk management. He was also a significant investor in
residential real estate.
Middleton is known for making predictions about the crash of markets and
large financial institutions long before they occur. Aaron Elstein of Crain's
New York Business said "Mr. Middleton has been startlingly accurate in
the past. He forecast the collapse of the housing market in 2007, and in
early 2008 warned of the demise of Bear Stearns weeks before it happened.
Earlier this year, he said that Ireland's finances were in terrible shape
long before Standard & Poor's got around to downgrading that nation's
credit rating."
In 2007, he founded Boom Bust Blog, a commercial financial advisory
reported to have over 3000 subscribers. In February 2013, he won CNBC's
first-ever stock draft competition, beating out six other professional
traders. He then went on to win the second CNBC stock draft in 2014 by an
even larger margin, beating out all other professional participants.In 2014,
he founded his current venture, Veritaseum, the progenitor of UltraCoin technology.
According to Mr. Middleton, UltraCoin exploits modern cryptography in the
fields of finance, economics and value transfer to disintermediate legacy
financial institutions such as Wall Street banks.
The European Banking System
"The problems from 2006-2009 are the same problems we have
now."
I call it the great global macro experiment. Authorities attempted to do
things they have never done before. Things such as negative interest rates
and particularly QE which was a practise adopted from the Japanese. It is
important to note that Japan began QE within their economy 30 years ago and
still to this day the desired results from it have not been achieved; Japan
is still fighting inflation.
"Central bankers believe that if they prolong the problem long
enough they can export their economic problems to other countries, not
realizing that it is a global economy."
The way it works is, we have a bubble; and a bubble is defined as an
instance when prices shoot above the fundamental value of the good or
service. Once this bubble pops and instead of allowing a natural reset of
prices and value, instead people try to further push prices up.
Blockchain Technology
"It is essentially bitcoin revamped with a different name."
Bitcoins underlying foundation is essentially a new way of dealing with
databases. It is a database that is distributed amongst many individuals. In
essence it is a database run by 3 million machines which each shares a full
copy of the database and each having full functionality of the database.
With this much territory, you get a system which cannot be taken down by a
single or even multiple authorities. In addition it solves something called
the "double spending problem" which is the risk that a digital
currency can be spent twice.
Double-spending is a problem unique to digital currencies because digital
information can be reproduced relatively easily. Physical currencies do not
have this issue because they cannot be easily replicated, and the parties
involved in a transaction can immediately verify the bona fides of the
physical currency. With digital currency, there is a risk that the holder
could make a copy of the digital token and send it to a merchant or another
party while retaining the original.
This was a concern initially with Bitcoin, since it is a decentralized
currency with no central agency to verify that it is spent only once.
However, Bitcoin has a mechanism based on transaction logs to verify the
authenticity of each transaction and prevent double-counting. Bitcoin
requires that all transactions, without exception, be included in a shared
public transaction log known as a "block chain." This mechanism
ensures that the party spending the bitcoins really owns them, and also
prevents double-counting and other fraud. The block chain of verified
transactions is built up over time as more and more transactions are added to
it.
"The bitcoin and block chain technology now parallels what the
internet was in 1993. Most people didn't get it and if they did get it they
strictly thought of the internet as email; fast forward and look where we are
now with the internet. Bitcoins and digital currencies are a way of
transferring value."
Independent Global Banking
Certain strong regimes such as the US, Germany and Britain have attempted
to impose their limitations. An example would be the US with peer-to-peer
file sharing halting the activities of The PirateBay. This was possible
because it was a centralized server which was easy to target. But now we are
in an environment that has similar things with millions of hubs and files are
transferred in a huge web. This is near impossible to take down therefore the
law was broken and governments and authorities resorted to illegal means to
halt these new developments, it is unclear still as to how successful they
were.
"It is about adapting to paradigm shifts. History shows that
entities that fight or prevent these shifts will not be successful and
eventually be forgotten. Microsoft is a good example of a top tier company
which sustained two paradigm shifts and this was because of all their patents
and so much of the world using their services."
The banks are taking bitcoin technology and trying to incorporate it into
their business models. It will make many processes faster but at the same
time, you do not need banks to make transactions anymore. Therefore no matter
how much more efficient banks become, if they become obsolete than the
increased efficiency is of no good.
"The banks are following the same route with banking as AOL did
with the internet. Ultimately the end result will be no different as
well."
If you charge a correct risk payment for capital, a bank could never get
big enough to take down the world because it wouldn't be able to afford to
take that risk. If I can get money at 75 basis points then I would take all
the risk in the world and if I mess up I only have to pay 75 basis points;
there is no reason not to take risk. But if I paid 18-25% for that money I
would become far less risk averse.
"Bring back true fundamental market analysis, natural market
economics and the system solves itself."
Future of Bitcoin Blockchain
At the end of the quarter we are launching an HTML client which allows you
to hold assets in your device on a webpage. It is like having a bank account
on a webpage that sits on your device and it cannot be stolen unless it is
stolen from you directly.
Additionally we will be launching applications of block chain technology
to capital markets. We plan to have applications for credit, peer-to-peer
swaps and for real estate transactions in beta of md-year but definitely by
year end.
There are legal issues but we can get passed these issues by putting
actual cash within the block chains. It will increase the efficiency to
facilitate cash flows from various kinds of investments. It is a way of
eliminating banks from the equation.
Abstract written by, Karan Singh
