Cryptocurrencies Achilles heel: trust

I seem to enjoy beating up on cryptocurrencies, despite owning a bit of it.

Volatility seems to be part of owning them as virtually all these currencies are way down from their most recent highs, more so than markets in general. To deal with all the volatility though, many of these currencies have offshoots called stablecoins. The idea of a stablecoin in that it should retain its value in relation to some other store, typically the U.S. dollar. This is supposed to allow easier trade of these currencies without the downside of its implicit volatility.

That’s the theory anyhow. Most of these so-called stablecoins are sort of living up to the promise, with some losing five percent or so compared to the U.S. dollar, but generally only for short periods of time. Some of these so-called coins put money in assets like gold, which I guess they figure is more stable than dollars, or at least more inflation resistant. The price of gold though tends to be pretty volatile, up in risky times, down in more secure times. Others “invest” in other cryptocurrencies, sort of like a crypto index fund. They hope that if one of these goes down some others will go up and counterbalance things. These assets though are mostly loaned out, which is how these coin creators make money. It needs to make sure there are enough real assets in cash to handle a run on the coin. It appears that many of them do this poorly. Anyhow, for sure they are not being monitored by the FDIC.

Then there is TerraUSD, which recently and spectacularly wiped out about $45B in investor assets. One dollar of TerraUSD is now worth about $.07, but it’s hard to unload it if you have it because its trading has largely been suspended. Since May 9, 2022 its value is no longer pegged to the U.S. dollar. Lots of people rushed in to own TerraUSD because it was guaranteeing a 20% return.

TerraUSD succeeded in maintaining its value for so long mainly by purchasing more of its non-stablecoin Luna whenever TerraUSD’s value slipped a bit, and pegging its value to that. It was a stablecoin by algorithm, which if investors knew about this, should by itself have been a red flag. Anyhow, they’ve been pretty much wiped out. The coin’s founder Do Kwan though doesn’t seem too upset and is working to create a new Terra stablecoin fork that isn’t pegged to the US dollar. Presumably his current investors won’t be stupid enough to trust this man again.

It’s hard to find a sure fire bet against inflation these days. The closest version though won’t be a stablecoin, but a U.S. Treasury I Bond. You can get a 9.63% return on an investment up to $10,000 a year, or $15,000 if you invest up to $5000 of your tax refund in this bond. That won’t hedge much of most people’s portfolio, but at least it’s guaranteed by the U.S. government.

TerraUSD’s value was guaranteed by nothing. It is essentially a Ponzi scheme. Anyhow, Do Kwon is being investigated by South Korean authorities. I’m betting most of his investors assets went into his pocket. I’m also betting not much of it is ultimately recovered and returned to investors.

Crypto investors are slowly discovering that crypto is mostly a lot of smoke and mirrors. The smarter ones have left the market altogether, but certainly there are diehards in for the long haul. What crypto really needs is regulation. Unfortunately, regulation means tracking, less privacy and likely less return on these “investments”.

Crypto was invented to make the transfer of money seamless, private and quick. Regulation won’t make it seamless. It also won’t keep things private. And it’s likely to slow things down too, as if things weren’t already pretty slow trading these “investments”. Also, it costs money to trade crypto, either directly or indirectly. When I write someone a check, its full value is exchanged. You just have to wait a few days for the funds to clear.

So crypto needs to be tamed to work, but does it really work at all if it doesn’t achieve its goals? A cryptocurrency whose only value is some correlation between the cost in energy it took to produce it doesn’t seem valuable. As best I can tell, no one first buys, say, $100M in gold assets and then creates 100 million digital coins tied to this asset, and sells them at $1 each. But if someone did, is this really a cryptocurrency? It sounds like a share of an index fund whose ownership can be documented in a public blockchain server somewhere instead of a ledger in a brokerage house.

The U.S. dollar is backed up by the full faith and credit of the U.S. government. You have to assume the country will not be going away and that its money supply will be at least reasonably well managed, but that’s a pretty safe bet. And since it’s a government in charge you can assume it has smart people, like the members of the Federal Reserve, continuously monitoring the financial world and taking steps (like it is doing now raising interest rates) when things go awry.

Who do you trust more, the U.S. government, despite its not stellar record on retaining the value of the dollar? Or Do Kwon? In some ways, inflation appears to be the cost of keeping money transfer moving at all.

Our banking system, despite its imperfections and the slowness by which is transfer assets, at least ensures accountability and, at least in theory, legitimacy of these transactions if they adhere to international banking laws. It sounds like a much safer way to transfer money than to trust in people like Do Kwon.

Decarbonizing your life doesn’t have to be hard

Better late than never. I’ve been decarbonizing my life.

Granted, it’s a work in progress. There are a lot more extreme steps I could take, like become a vegan. Meat prices are so high that cutting back on it isn’t too hard. If nothing else, we’ve been reducing portion sizes. My wife simply won’t give it up, so at best I’d have to eat a lot of meals I prepare myself. Cows in particular put out a lot of methane.

But my wife is helping in other ways. Last New Year’s Eve, she bought a Nissan Leaf, a fully electric car but one which can’t in any meaningful sense be considered a touring car. Its range is about 150 miles. But most of the time we’re at home which means she has a range of about 75 miles on a full charge. She rarely needs more than 30 miles. If we ever move, moving her car will be one of the challenges. Every 150 miles she’d have to stop at a public charger and at best she’d be stuck there a few hours while it recharges.

Our garage now has a proper car charging circuit. We spent about two thousand dollars to have an electrician install a 240 volt, 50 amp circuit to the garage. It seemed a bit of an indulgence since she uses it so little that waiting a day or so to charge it from a 120 volt, 15 amp circuit wasn’t a bother. Eventually I’ll have a fully electric car too and it will be used regularly.

For a while I sort of did have one: a Toyota Prius Prime, which on a good day could get thirty miles before the engine kicked in. Unfortunately, it became infested with mice and was declared totaled. The next best thing was a 2019 Toyota Camry hybrid which I eventually replaced it with. It gets about 47mpg and is our touring car.

Since 2016, we’ve had solar panels on our roof. We paid for it in full with some money I inherited from my parents that I received a few months after my dad died. That is certainly green, but it turns out the system was a bit undersized. The rest of it comes from a solar farm in Central Massachusetts. This is not quite as green as I hoped as I subsequently learned the solar farm displaced a pine forest that used to be there.

I’ve learned that getting solar is a no-brainer. In a bit less than five years it fully paid for itself, helped in part by generous federal and Massachusetts solar tax credits. Now it actually makes us money. In Massachusetts, it’s part of a SREC-II program, which means that companies pay us to claim our solar energy, avoiding their need to decarbonize. It amounted to about $1800 last year. This revenue stream will go away in about five years. But the solar panels will remain on the house, and that will still save us money compared to buying the power from our provider. Here in western Massachusetts, commercial power is very pricey and averages about $.24/kwh. At that rate, we saved about $1500 in annual electricity costs in 2021, and we can expect that cost savings every year until the system becomes too inefficient. I’ll probably be dead by then, so it should outlast me.

It also helps to drive less. If you work from home, you are inadvertently doing your part. While I’m retired from a full time job, I still do some consulting, so I’m helping there. We do a lot less distance driving than we used to do, and the pandemic cut that down even further. It was all that time with my car garaged that likely caused the mice to infest it. Also, we do less traveling. A recent cruise and the flights to and from the cruise port were exceptions. Even the cleanest burning cruise ship is going to put out a lot of carbon emissions.

One of our latest steps has been looking at our investments and making them cleaner. We’ve done this is two phases, but mostly it meant moving money into funds that are focused on green technologies. Talking it over with our financial adviser, we discovered there was likely no downside to doing this. Well managed ESG (environmental, social and governmental) funds tend to match or exceed the S&P 500 index. We started with our retirement funds. Except for my considerable IRA in the federal employee’s Thrift Saving Plan (TSP, which has no such type of environmental fund), these funds have been moved into Black Rock ESG electronic trading funds. This article can point you to some of the funds we bought into.

More recently we decided to invest our cash accounts, well into six figures, into more ESG funds. With inflation high, the low interest rate we were getting meant that we were losing money by hoarding cash. We don’t need all this cash for anticipated expenses, so investing these for ten years or so in the hopes we’ll beat inflation seemed a logical thing to do. After all, I have a cushy government pension. It went into more Black Rock ESG funds. As for my TSP funds, I can move them into a brokerage but I would lose the no-fee aspect which makes TSP accounts so nice to have.

What’s still to be done? We live in New England, generally a cold state. People usually heat their houses with gas or oil. It’s gas in our case. We also have a gas oven and a gas-fired water heater. I haven’t talked my wife into it yet, but I’m hoping as these move toward replacement they’ll be replaced with electric appliances, and the AC unit will become a heat pump. (The AC unit is effectively a heat pump during the summer; it’s the winter that’s the problem.) We weren’t enamored with heat pumps when we lived in Virginia but they have gotten more efficient and more reliable. They’re not sexy and they won’t blast heat at you like a gas furnace will, but it’s a better way to go, particularly if I can expand our solar array.

But expanding the solar array is difficult. It makes no sense, but current law requires that we would have to install and meter a separate system to expand it, needlessly inflating costs. There is a smaller roof on our house that could hold another ten panels or so. If we get rid of gas appliances though, this and the continually falling price of solar panels probably will nudge us in this direction.

Eventually my car will be wholly electric too, but the infrastructure isn’t quite there yet, which is why I reluctantly bought a hybrid.

One household can’t do much, but millions of households can. If you’ve been reluctant to get started, start with solar panels, if your house gets abundant sunshine. It will pay for itself, so it’s also financially sound. Otherwise choose electricity from clean and renewable sources. Check with your electric company to see how you can do this.

Upgrading to a Mac Mini

For those who don’t know, the blog is a side project. I earn money selling my web services over the internet. It works out great because I can work from home, being otherwise retired, and it’s work I enjoy.

2021 was a banner revenue year for my small business, which also means I’ll be paying more in taxes. These taxes can be somewhat offset with business expenses, which tend to be few as I don’t need much except a computer and an Internet connection. Given that I was flush with business income and my computer was eight years old, it seemed a good time to get another one.

Since 2008, I’ve ditched Windows for a Mac. I replaced the Mac once in 2014. A couple of years later, frustrated by having is slow down unacceptably, I had a shop replace the disk drive with a one terabyte solid state drive and bump up its memory to 16 gigabytes. Since then it’s been a solid machine, which is why I didn’t feel the need to replace it.

A year ago I would have told you I’d replace my Mac with some souped up computer than runs Linux. That’s because I know what I’m doing from the command line and for the most part I use the computer to earn money, not to play games or as a form of entertainment.

But Apple’s recent introduction of new Macs with their new M1 chip convinced me that there was now a compelling reason to stay with a Mac. With the M1 chip, Apple ditched Intel in favor of its own in-house chip, the M1. Intel chips are based on a CISC (Complex Instruction Set Computer processor) architecture. The M1 and most CPUs in mobile devices use RISC (Reduced Instruction Set Computer processor) architecture. Providing there is the software to support these chips, they tend to run much faster. These RISC-based chips are definitely the future for desktop and laptop computers. Who doesn’t like faster speed and more efficient use of energy?

I ended up buying a Mac Mini, with a 512 gigabyte solid state drive and 8 gigabytes of memory. I bought it for $869.99 on Costco’s online web site. I skipped buying another iMac. Apple has really jacked up their prices on iMacs. While they have the ultra-fast M1 chips in the Mac Mini, you essentially pay an extra $800 or so for a fancy monitor with a built in camera and microphone. If you are going to stay with a Mac, the Mac Mini is a better buy.

You don’t have to give up anything with a Mac Mini, but should give up less money to Apple. I would need a new monitor, something with retinal display, which my old iMac didn’t have. I’m not too picky. I found this 28 inch Acer gaming monitor at just under $300, also at Costco. I also ordered a web cam for about $25. Altogether, I spent about $1250.

Both the computer and the monitor arrived on Thursday. The Mac Mini is pretty small: about eight inches by eight inches and an inch tall. Generally, Apple does a good job of getting you up and running. I was initially baffled when I turned it on and plugged it into my monitor. Was I setting up the Mac or the monitor? It was hard to tell. The screen had an illustration of what looked like a gaming machine. It was actually an illustration of a Mac Mini, just way too skinny. There was nothing that really told you what to do. Eventually I realized I had to plug in both a wired mouse and a wired keyboard to start configuring the machine, which I should have realized. There wasn’t even a piece of paper in the box telling you this.

Once initially configured, there was the matter of moving my files from the old machine. I didn’t have much spare hardware and there were only two USB-A ports on the Mini Mac, so I had to continually plug and unplug my keyboard and mouse from the old machine and move it back and forth between machines to begin the process of moving all my stuff. I needed a USB-A port for my TimeMachine backup USB drive. It took nearly a whole day to move my 400 gigabytes of files to the new machine. It probably would have been faster had I selected the option to move files using WiFi.

So the process of configuration and migration was definitely less than optimal. But it was worth the hassle. The Mac Mini boots fully in about ten seconds, about six times faster than the old machine. It shuts down in about ten seconds too; the old machine could take a minute or more sometimes. At least the migration program intelligently fetches updated software (when it can) for your apps. Only a few of the programs I use every day didn’t have M1-compatible versions, and it’s hard to tell with the other programs because the machine is so dang fast that it’s hard to believe these programs are being emulated.

This is my first large screen with retinal display and I find it stunning. Everything is so clear and crisp. One of the few things that wasn’t as good is the built in speakers. They are tinny on the Mac Mini and if it’s in stereo, you can’t tell. Fortunately, I have a set of spare speakers with good fidelity that I plugged into the earphone jack, which rendered much better sound than even on my old iMac.

There were a few minor hiccups. I had to login to a host of websites again. Facebook kept giving me a “Sorry! Something went wrong!” error screen with no explanation on how to fix it. The online help didn’t help either: clearing cache and cookies did nothing. I was able to bring it up in Safari, which I don’t ordinarily use, but not in my primary browser. After a few hours, the problem mysteriously disappeared. Also, I couldn’t dim or brighten the monitor from the keyboard like I used to, until I did some searching and found MonitorControl that did the trick.

Aside from a business deduction, my primary interest in this machine was speed. I can’t do much about internet upload and download speeds, but the M1 processor(s) is truly a speed demon that is just stunning. In most cases a millisecond after I press the return key or click on a button, it’s done. Most programs load in a second or two. I’m working on a job for a client, a complex upgrade for a system. It should go much faster than a similar job would have gone on my iMac.

The web cam has still to arrive. I didn’t find much in the way of higher resolution web cams, at least not with 60 frames per second, but a good 1028 x 768 pixel camera will do fine for now. It’s all this plus I can keep running all my old Mac software too, and the same consistent user interface and extremely high reliability that I’ve enjoyed for thirteen years now that is hard to find on Windows. With all this speed, perhaps I can leverage it to earn more money from clients in the years ahead.

Who’s really profiting from crypto?

So I’m continuing to explore cryptocurrencies and specifically why anyone would want to buy them. One obvious reason is greed. While returns on most cryptocurrencies is marginal or negative, as pretty much anyone with a computer can make their own cryptocurrency, the big name cryptocurrencies tend to appreciate exceedingly well. They get a buzz, so that alone makes people want to buy them. It’s gotten to where I can buy Bitcoin at a kiosk at our local grocery store.

In the last five years, one BitCoin appreciated 4075%. You won’t get that return in an index fund. In 2017, Ethereum was virtually unknown and could be purchased at $9.59 each. It’s now worth $3232.61, so it’s up nearly 40,000%! (Technically, Ethereum is the platform, and Ether is the digital currency.)

There’s no way to know which of these coins will take off while the vast majority of them languish. It probably can’t hurt to buy at least some of these coins on the hopes that while most will languish a couple might take off and you could profit from those purchases. Even with established digital currencies though, there are major ups and downs. My BitCoin investment is worth a modest $140.59 at the moment, and my Ether is worth $90.89. A few months ago though my BitCoin was valued at closer to $200. I bought the Ether only recently, but at the moment I’m losing money on it as I spent the $100 in cash in my BlockFi account for it.

Obviously my investment is trivial, but it’s there mostly to get my head around this stuff. So far for me the return has been good but not great. Since it can all appreciate or depreciate very quickly, it doesn’t seem wise to invest too much. It’s clear in general though that digital currency millionaires are very few and that most of us who are late to the party will assume more of the risk because these coins cost more to buy.

I did watch a YouTube video on these currencies recently. It evolved into a discussion on what money is and talked about the gold standard. The U.S. dollar was once tied to the gold standard. What made the dollar valuable was that gold itself is time consuming to mine and process. The gold in our nation’s vaults was “proof of work”. The gold was valuable because it was hard to acquire, which made the dollar valuable because the number of dollars in circulation was (in theory anyhow) proportional to the amount of gold in our vaults.

Digital currencies are trying to create “proof of work”. “Mining” a BitCoin, for example, requires a lot of computing resources and energy use. The computers you use aren’t free and the electricity they use to create it is not free either. Maybe the algorithms used to create the currencies are free but if you manage to mine a new BitCoin (it’s becoming computationally prohibitive) you will sure expend a lot of treasure to do so. This in theory makes the coin worth money.

What makes it valuable though appears to be that buyers reward BitCoin sellers for the hassle it took them to create the coin. The energy and computer resources it took to make the coin can’t be recovered. Gold though is different. It’s a physical thing, although it is expensive to store because it has value and it’s not easy to use it to pay for things as it is, in effect, too precious to be used for routine financial transactions.

But inarguably the existence of these coins proves “proof of worth” because creating these coins is hard to do. If you don’t believe me, try creating one yourself with some spare PCs. For me the question then becomes, “Yeah, so what?” I can dig a hole ten feet deep in my backyard. The fact that I dug it indicates proof of work, but is it valuable? Maybe it would be if I turned it into a root cellar. Building a root cellar is probably cheaper than building an extension to my house for this purpose. With digital currencies though, the fact that you own some part of a virtual coin that was hard to create doesn’t mean much unless you can do something with the coin.

And with most of these coins, their primary value is not to buy stuff with them, at least not directly for most coins, but that they can be traded. Unlike U.S. currency, a digital coin is infinitely splitable. I own 0.00298038 of a BitCoin. I don’t prove ownership of it by pulling it out of my pocket, or from a piece of paper properly notarized saying I do. I own it because a record exists in multiple BitCoin blockchains stored on publicly accessible servers worldwide. I’m pretty sure it’s not directly tied to my name and address, but indirectly with my email address. I can verify my ownership if needed with the private key in my digital wallet or on the BlockFi digital exchange if I exchange it for something else, such as U.S. dollars.

It turns out though that there are other ways these coins generate “proof of work”: the hassle of creating records that show the transfer of these coins from one person to another. These blockchain servers don’t work for free: you have to compensate them for the hassle it takes to make these trades, generally in a percentage of the coin you are trading. If you have a digital coin broker, you compensate them, who probably become the entity to ultimately compensate those who place the transaction on multiple registers. For example, you can see the fees BlockFi charges here. You can think of these fees as similar to interest charges on your credit card or the fees that Visa or Mastercard charge businesses to manage credit card transactions, costs which are largely passed onto you in the form of higher prices.

So in effect these are like taxes, which means that digital coins aren’t quite coins and their price is a bit inflated to cover the cost of using them. If I use some coins to buy a pack of gum at the drug store I may pay a sales tax, but the store won’t have to pay Visa or Mastercard for the privilege of taking my real coins.

If your head is spinning, I’m not surprised. None of this is obvious to most people when they buy digital currencies, but you will be charged coming and going into this market. The profits go to those that “mine” the coin and the brokers that let you trade the coin. They also go to you if you exchange the coin for more than you paid for it after factoring in these fees. But the risk is on you. You will be charged to get into the market, and if you decide to cash in your chips, unlike the casino, you’ll be charged on the way out too.

I suspect except for a few lucky millionaires the real winners are the miners and the brokers managing all this technology, and it won’t be you.

Speculations on the future of digital “currencies”

So my $88.31 or so that I was paid in BitCoin on July 1st is now valued at $174.20, according to BlockFi, where it still sits because I’ve been too lazy to sell it and turn it into U.S. dollars. Looks like my natural lethargy worked in my favor as if I had sold it for on August 2nd, when I last blogged on this topic, it was worth $109.71. I’d be out the $64.49 in extra value it has accumulated since then. If the “currency” continues to rise as it has since I acquired it on July 1st, I’ll get a 666% return on investment and it will be worth $587.95 on July 1st, 2022.

The people who study this stuff think that maybe one BitCoin will hit $100,000 soon, perhaps because it looks like a BitCoin futures electronic trading fund (ETF) will soon be approved by regulators. Anyhow, the guys I follow on YouTube are still all agog on digital currencies. Graham Stephan is upping it to five percent of his portfolio.

Should I do the same? With our portfolio hovering close to $2M, that would be $100,000. No, I don’t think so. But since I have only $174 of digital currency at risk, I see no harm in keeping the BitCoin I have to see how it does as a speculative asset. It will be interesting to track it at yearly intervals.

These digital “currencies” are clearly becoming a new market, like it or not. Lots of people like me continue to feel largely baffled by these virtual currencies. It’s easier to get behind them though when you consider that most currencies are like BitCoin: virtual. That’s true of the U.S. dollar because it’s a fiat currency.

In my last post on this topic, I lamented that there were no assets behind these “currencies”, unless you count the value of the electricity that it took to “mine” one of these “coins”. The U.S. is now the largest miner of digital currencies, and most of it is occurring in Texas where electricity is cheap, at least until there is another winter storm that knocks out most of its power grid. Since most of this power comes from non-renewable sources, owning currencies that are energy intensive to mine, like BitCoin, should come with a carbon tax. Maybe that would deflate its surreal valuation.

Its value is based purely on supply and demand. Which makes me wonder if these currencies are the latest version of a Ponzi scheme and I now own a tiny fraction of an electronic tulip. If it’s a Ponzi scheme, you want to sell your crypto before the market collapses.

What perhaps can be said is that this new “market” is still getting established and time will tell if it’s got legs. But on the other hand, BitCoin has been around since 2009. It’s hard to see it collapsing altogether, if only because so many people have vested wealth in it, and won’t want to lose their investment in it. These “currencies” though are so easy to create that clearly not all them will survive.

I do think that these “currencies” that more closely imitate real currencies are likelier to survive. A lot of work is going into creating versions of these “currencies” that act as currencies. For example, you can buy so-called stable coins whose value is tied to currencies like the U.S. dollar.

These stable coins are generally underwritten by private insurers. Governments are thinking of putting banking-like regulations on companies offering these stable coins, emulating FDIC-like protections. It will be interesting and confidence building if governments but their good faith and credit behind these stable coins by essentially underwriting them. By doing so though they tend to undermine the foundation by which digital currencies were unleashed: to detach themselves from the shackles of traditional currencies. It’s unclear why these “currencies” based on stable coins should be preferred to currencies already in circulation.

I wonder if there will be a Black Tuesday for these currencies. Black Tuesday was the event that kicked off the Great Depression. One of the lessons from Black Tuesday was we needed to keep banks from collapsing, so we formed the FDIC. Because of their decentralized nature though, there’s nothing to prevent a Black Tuesday for crypto, and no organization to prevent it or from happening again.

What’s more likely in my mind is that the block-chain technology rather than these “currencies” will prove to be where its true value lies. Nonfungible tokens, for example, offer proof of ownership and transfer, and work on block-chain technology pioneered by “currencies” like BitCoin. If the goal is to do away with traditional banking, these miners may be onto something. I’m much more skeptical that they can succeed in creating currencies that will be as ubiquitous and fluid as traditional currencies like the dollar.

Sorry, digital currencies aren’t actual currencies

It’s hard to go a month now without a post from me on cryptocurrencies. I dabbled into this market on July 1st when a client paid me in BitCoin, which worked out to $88.31 at the time of the exchange. Since then its price has increased at a much greater rate than the market in general.

Yesterday I moved it from my digital wallet to BlockFi, a crypto exchange, and it was worth $109.47. So over just one month, I made a 24% return. If I could do this for a whole year, the return would be 288% and it would be worth $254.33. It’s safe to say that there is no other asset that I own that would reap that sort of return.

I can’t see eleven months into the future. You will get a million different opinions about where BitCoin’s value will be going. What I can say is that it fluctuates a lot. Since yesterday, its value dropped to $103.71. Volatility comes with the digital currencies territory.

What doesn’t change that much is the value of the U.S. dollar on a given day. Right now there are innumerable news stories because inflation in the last twelve months has been running in the 5-6 percent range. But if I had planned to spend my BitCoin today on something tangible, I’d be paying 5.26% more for it than yesterday. So in a way my BitCoin inflation rate was 5.26% and this occurred over just one day. Wow! But no one seems to be holding BitCoin to the same inflation standard as the U.S. dollar.

Why is this? To paraphrase The Grinch Who Stole Christmas, I puzzled over this until my puzzler was sore. Both are currencies, right? Well, no. BitCoin, Ethereum, Dogecoin and the rest are not actual currencies. Just because someone slaps a label to it, doesn’t make it an actual currency.

Okay, it is a currency in the sense that you can trade it for things of value, like until recently a Tesla. Right now at least though you can’t buy most things in these “currencies”. In my case, I buy them in U.S. dollars. Given that you can’t buy much with them, they are only currencies in a very limited sense. If you really want to buy something with your BitCoins, you are probably going to sell it to someone who will give you a local currency like the U.S. dollar in exchange for it. That’s what I aim to do with my BitCoin. It will feel real when its value in U.S. dollars hits one of my accounts denominated in U.S. dollars. Until then, it’s funny money. But actually, it’s not money.

So the fundamental premise behind “digital currencies” is false, as except in some very limited cases you can’t use these as money. That could and maybe will change over time, but right now for most practical purposes, they’re not currencies. They are not money.

So what are they? Some call them assets. For me, calling them assets fails the smoke test too. An asset is something you own, and it amounts to something tangible and real. These assets are often denominated in shares, so in that sense they are somewhat virtual. As an ex federal employee, I’m still in its Thrift Savings Plan (TSP), their fancy name for 401K/IRA. I have, for example, 2686.0352 shares in the TSP C Fund, which is a basket of funds. It’s likely that some part of its current value of approximately $203,000 is invested in IBM, so I own part of that company along with lots of others. I can claim my share its capital gains and dividends, at least when I sell them — it’s a tax-advantaged account. I own some part of the buildings that IBM owns and the computers and equipment inside them and in its warehouses.

What can I say about the assets behind my BitCoin? Well, I can say there are no assets. That’s not to say it doesn’t have value. If I can convince someone else to buy my BitCoin and give me U.S. dollars, I can take and spend those U.S. dollars pretty much universally. There is no BitCoin headquarters to go to if the currency goes bankrupt. If it does, I’ve lost the value of my BitCoin. Its value lies merely in its perception.

The same is true with U.S. dollars, of course. Dollars are perceived to have value because the U.S. government stands behind them. You aren’t entitled to your share of the gold in Fort Knox if the U.S. government collapses, but we do know there is an institution, a lot of smart people, and the full faith and credit of the government supporting it. If my bank account is FDIC insured and my bank goes belly up, the government will give me the value of my account in U.S dollars, up to $250,000.

If for some reason you have an incompetent government, then a currency can collapse too. Venezuela’s currency is just one of many recent examples. So I have plenty of incentive to keep the U.S. government functional. No wonder I obsess over whether certain radicals might succeed in doing away with our democracy and setting up an autocracy. If nothing else, the value of my U.S. dollars would get very iffy.

Those into “digital currencies” are placing faith in them too, mainly that they can’t be hacked or undermined. That’s pretty dubious to my way of thinking. One thing is clear is that they are subject to the laws of supply and demand. If demand ceases because they aren’t trusted, they become effectively worthless. Just like Venezuela’s currency.

These “digital currencies” are actually speculative assets where the asset is basically the successfully operation of an advanced computer algorithm (which spits out a “coin”) and the faith that blockchain-powered servers will be around to certify transactions in these assets. All of them share one fundamental weakness: they require the Internet. Some share another weakness: they depend on governments to allow their use. It’s hard to transact these “currencies” in China because for the most part its government won’t allow it.

Currencies facilitate the exchange of value. But they have one other important asset: they hold their value within a reasonable range of inflation over a long period of time. If they don’t, this money will move toward other currencies that do a better job of retaining their value. In short, they facilitate savings so that their value can be quickly and conveniently spent.

Digital currencies currently do not excel in either easily exchanging value or as a reliable source of savings. To my mind, this tells me they are not a currency.

So don’t treat them as such. With time, it’s likely the U.S. and other governments will create their own digital currencies. The blockchain technology that is the foundation of these “digital currencies” is something of value. It will be leveraged by other more stable entities like the U.S. government to more conveniently, securely, cheaply and transparently exchange value.

It’s hard for me to see a business case for “digital currencies” once governments start issuing their own.

Congratulations! Your blog’s been consumed by the commercial web

Five years ago I asked if blogging was dying. Five years later I think it’s safe to say that blogging is mostly dead.

I speak not just of this blog, which languishes in ever more obscure corners of the web, but pretty much any blog, at least blogs that are self-hosted. When this one started in 2002, blogging was a new thing. Now it’s beyond passe.

These days the biggest readers of my website appear to be robots. Probably eighty percent of the hits I track on StatCounter come from “Singapore” via the Huawei Cloud supposedly on Android devices all with 800×600 screens and no referrer links. They come in bursts about once an hour. They “read” obscure posts from a decade or more ago that I don’t even remember writing. So there’s obviously no human behind these hits and it’s unclear to me why these fake visitors are even hitting this blog at all. Most likely they are searching for security vulnerabilities.

Twenty years ago we had longer attention spans. Blogs, particularly blogs like mine, are meant for people who want more than snippets. They want detail, context and maybe some sound analysis. Since then there’s been this revolution called social media, and we’ve nearly all succumbed to it. Its purpose is to suck us into aggregator websites where our “friends” hangout, so we never leave it. These sites like Facebook and Instagram are all about short bursts of text and photos, and generally emoji too. By keeping you in their enclave they also keep your eyes and brain away from places outside of their sites, except of course to links recommended by their algorithms, all of which are designed to give you more reasons not to leave their sites. They want to keep you comfortable and in a friendly space.

So we have this amazing World Wide Web but most of us won’t venture much beyond our social comfort sites. It’s like going from the Internet back into a walled garden like Compuserve and AOL … anyone remember them?

Blogging gave everyone (including me) a place to exchange our thoughts with the world at virtually no cost except time. When it was new, there was the thrill of the discovery of independent and thoughtful blogs. It got lots of hits back then, but the lure of social media proved too powerful.

It’s nice to know that some blogs are still highly trafficked and going, but these are well established and almost branded at this point. Many of these blogs have found homes inside of other websites. Barack Obama blogs on Medium.com, which maybe makes it a trending blogging site, if you can put up with article limits and ads (assuming you don’t want to pay to read). There is also substack.com, where the emphasis seems to be on monetizing your “extra” content behind paywalls. So it helps to have a following already before posting on Substack.

There are of course many other blogging sites, some of which have been around a long time including wordpress.com and blogger.com. Posting there has no guarantee that your content will be read. In most cases you don’t have to pay to post on these sites, although they might serve ads to your readers. In short, they are likely to make someone rich, just not you. But hey, the hosting is free!

Having my own blog allows me complete freedom of content, design and setting the rules. I don’t have to worry it will be abruptly shut down if someone doesn’t like my content, as I pay for the hosting. But unless I want to spend lots of time and money to find readers and influence influencers, it’s likely to keep languishing.

So it’s probably going to get shut down at some point, not that anyone other than me is likely to notice. I’ll probably move the whole thing to wordpress.com and let it live there in perpetuity as an archive. If I blog again, I’ll do it elsewhere under a blog aggregator and under a new alias. I probably won’t even tell my friends where it is. At least I won’t have to pay for hosting.

Blogging has scratched an itch, but its moment was an aught decade thing. So expect the blog to disappear by December 13, 2022, if it makes it that long. At that time it will turn twenty but if it makes it than long it’s pretty clear I will be celebrating its longevity all alone.

Give me a (reasonably) dumb home

As a partially retired software engineer, I’m all about the power of technology. I’m part of a group that’s succeeding in getting our city to create a municipal internet, for example. I want affordable fiber to the home! I want gigabit per second (or higher) upload and download speeds. At the same time, I want to keep my home as dumb as possible.

Admittedly, it’s an uphill struggle. For example, I’m guilty of having a Google account and using Facebook. Both companies are no doubt collecting reams of data about me. While I really loath Facebook, it’s hard to give up. I’ll lose contact with lots of people, mostly people I used to know. Yeah, they could email me, but they won’t. Since we moved in 2015 it’s a good bet I won’t see most of them in the flesh again anyway. Now in my sixties, a lot of them have moved elsewhere too, making the odds of a face-to-face meeting even less likely. To some extent these people have been supplanted by even more people in my new neighborhood. In general I don’t seek them out as friends. I let them “friend” me and sometimes I just decline the opportunity. What I can do in Facebook is refuse to click on any targeted ad. That’s my policy.

Our daughter got a protonmail.com email account. I’m considering it too. The company is based in Switzerland and stores nothing in the cloud. Even if they wanted to read your email, they can’t. So as a secure email solution, it’s likely the best out there, though a bit pricey, at least if you want to keep more than 500mb of email online.

But most of us give away our privacy, often inadvertently. A few years ago I visited an aunt to discover she had an Alexa smart speaker. It was very good at giving her music to listen to and weather reports. What it’s not good at is not listening to you. Unless you change some very obscure settings or explicitly turn its microphone off (which defeats the purpose of owning one), it’s recording anything its microphone can pick up. It’s supposedly all about making these personal digital assistants (PDAs) more useful to you, but it’s much more about Amazon trying to monetize what it knows about you. Both Google and Apple are doing the same thing with their PDAs.

Alas, if it were just PDAs you had to worry about. This stuff is everywhere, and pervasive. For example, your TV is likely “smart”. I bought a new one last year (Samsung) and it too is watching and listening. These features can supposedly be disabled, and Consumer Reports indicates how to do it. I tried to disable these features of my Samsung TV and I keep getting an error code when I try.

For a few years now I’ve been searching the web using DuckDuckGo. I actually think it’s a better search engine than Google, returning more relevant results. But it’s also built around privacy, so when I use it Google (supposedly) remains ignorant of my search queries. But there are times I can’t, or can’t easily not use Google search. For example, my tablet computer runs the Android operating system, so I can’t make a voice search without using Google’s search engine. I don’t think DuckDuckGo has a similar app, but it likely hasn’t perfected the voice recognition business, so even if one existed I’d probably have to type in search queries. And really, who knows what goes on inside the Android operating system anyhow. Google may be listening anyhow.

These days pretty much any device you install is suspect, and the company making it is likely making money monetizing what it knows about you. Many have invasive implications, not just for your privacy, but for society at large. Google bought Ring, which makes smart doorbells. These smart devices can help identify porch thieves stealing your packages, but they are also being networked with similar devices other neighbors have and potentially used by police. Again, it’s possible to disable these features, but they are on by default.

For Ford, selling cars is now ancillary. A car is just a vehicle for monetizing information about you, or at least that’s its long term goal. Ford hopes to make $20B a year from this by 2030. It’s recording where you are going, when, where you stopped and no doubt is feeding that information to other systems willing to pay for it. Most cars these days integrate with voice assistants like Alexa too. Most of these smart devices you bought are doing similar things, so it’s likely the real profit from selling you a device comes long afterward when over years it sells or provides the information to third parties.

It’s becoming impossible not to buy smart devices so in some sense you can’t escape these invasions of your privacy. It’s becoming impossible to live without a cell phone, and dumb cell phones are pretty hard to get. The same is true with cars and most appliances. The trend is only going to get worse. The only real solution is legislation. Maximum privacy should be the default, not the other way around. It should be hard to make these devices share data.

I am trying to figure out where my boundary is. I feel I’ve strayed too far off the privacy path. Even if I can get back on it, companies already have reams of data about me, and it’s equally burdensome to get them to remove their data about you, if it’s possible at all. There’s really no way to know for sure if they’ve done this.

Aside from privacy, all this technology is contributing greatly to polarizing our society. In addition to targeted ads and predictive behavior, it’s also putting us in information silos, making it hard for us to hear perspectives outside our bubbles. Keeping us in our bubbles seems to be much more profitable to corporations, and much more useful for politicians. These behaviors simply make us more predictable to them, and the more predictable we are, the easier we are to influence and control. Much of this is being championed by Republicans, supposedly the “pro-freedom” political party.

So I’ll do my best to maintain my privacy, but it will be an uphill struggle. As I integrate more technology into my life, I now weigh the privacy implications carefully. For example, I’m considering a home security system, but I need devices that won’t place everything in a public cloud. They are getting hard to find.

Part of the solutions is staying no-tech if you can. Rather than tell Google’s assistant to create an appointment on a certain date and time, enter it into a calendar on your refrigerator, if that works, or at least use third-party calendar software and type it in yourself. Rather than tell Alexa to add something to your shopping list, make your shopping list out with pencil and paper. This still works for us.

Simply be conscious of what you are doing when you make these choices. In many cases, what you are giving up greatly exceeds the value of whatever services they provide.

Give me a mask, please

So after months of waiting, I get my first covid-19 shot tomorrow.

I’d like to say it was easy, but it was just the opposite. I did discover that if you are determined enough, it is possible. It just meant some compromises. In my case, it meant compromising my sleep. I’m still on the waiting list for the Massachusetts mass vaccination sites, but there are a limited number of CVS drug stores where you can get the shot. The problem is if you go to their website to book an appointment, it will always say there are no appointments available. But from friends and neighbors I learned that they open up new appointments between 3 AM and 3:30 AM. It’s not all CVS stores.

Here’s where it helps to be an older male. Our prostates will naturally wake us up in the middle of the night anyhow. Of course at 3 AM while awake, you are not generally able to focus on a task more complicated than emptying your bladder. But with my tablet computer while sitting on the john, I could scan the list of CVS sites provided by the state. Since my wife has two co-morbidity symptoms, she had priority. After fifteen minutes of trial and error I found a CVS in Chicopee and got her an appointment there. The next night I tried again for myself with no luck. But the third night was the charm. Tomorrow at 11 AM I expect to get the first dose of the Moderno vaccine at this same CVS in Chicopee, about a half hour drive in Hampden County. Welcome to our modern world.

But it may be the beginning of the end of this madness. Just today the Centers for Disease Control and Prevention said that traveling is fine two weeks after your second shot. I doubt I’ll be on the first plane to Hawaii, but maybe the second one. Living in Hampshire County is fine but at this point I … want … out … of … here!

But I have the feeling that we’re still quite far from the end of this. You would think after three waves of covid-19 people might have learned something from it all. But, no, we’re Americans, which means huge portions of us are either too desperately poor to do much about it or, most likely, figure they are immortal. It’s often the young people that are the most reckless, so of course they flocked to Miami Beach and rubbed a lot of shoulders, and now a fourth wave is building across the country, which seems to be affecting younger people more this time. The stupid compounds on the stupid. About a fourth of the country says they won’t get a shot. If they’re serious, that means we can kiss the idea of herd immunity goodbye … and that’s the very reason a lot of these people were out maskless in the first place … supposedly to bring about herd immunity!

It sure appears they’d like to get there via unnecessary deaths than through vaccinations. That’s because at least some of them are anti-vaxxers, which essentially means they refuse to believe in science. Others are convinced tiny microchips from Bill Gates are in the serum, so the government can track us or make us communist or something. It all doesn’t make any sense, but to these people the very fact that it doesn’t make any logical sense means they are probably right. America: the land where freedom means you have the right to be as stupid as you want and where civic virtues does not extend to doing your part to keep preventable illnesses from spreading.

Indeed, the evidence is pretty widespread that American is rapidly dumbing down. Sixty years ago we were anxious to down sugar cubes to avoid polio. Vaccine exemptions were not a thing; parents could go to jail if they didn’t get their kids vaccinated. Sixty years ago science was cool and patriotic. We looked up to scientists. Now we don’t accept any science that conflicts with our biases and political philosophies. The only good thing from all this vaccine hesitancy is that those with this trait are self-selecting themselves to be wiped out. Darwin would be amazed that people would choose their own natural selection.

Well, not all of us. I’m the product of a nurse and an engineer. My Dad was left-brained to the max, my Mom spent a lot of time scrubbing with disinfectants and tracking our vaccinations to make sure we survived to adulthood. It naturally rubbed off on me and my siblings. The mere idea of not following the recommendations of medical professionals and scientists was not only absurd, but was obvious lunacy. We knew medicine was not an exact science and were comfortable with advice evolving at covid-19 was better understood. The virus continues to evolve, making it likely that we’ll be getting annual booster shots, at least.

Unsurprisingly, the virus unfolded largely the way the experts predicted. Trump scoffed at the idea of a half million Americans dead of covid-19. We passed the milestone and have hardly tallied the last casualty. We endured more than a year of stupid leadership by stupid people. Unsurprisingly, about the time we got rid of the last president, things started to improve in a meaningful way. After four years of doing pretty much everything completely counterproductively, we have a government determined to work with nature and reality rather than deny it.

At least some Americans are waking up from their dogmatic stupors. Vaccination rates are rising and the number of people saying they will never get a vaccination is declining. I’m quite confident Bill Gates won’t be controlling me via a tiny microchip after my vaccination tomorrow.

The second shot is scheduled for May 1, which means on May 15 I’m largely out of covid-19 jail. I still won’t be able to do everything. There is maybe a ten percent chance I can still acquire the disease, but it won’t hospitalize me or kill me. It’s possible one of the variants could sneak in somehow. As I said, there is no guarantee. There are simply improving probabilities that it can be avoided or its impact lessened if acquired. I’ll probably still wear a mask a lot of the time I am in public. We may start eating in restaurants again, but we’ll keep the masks on until the food is served and put them on shortly afterward.

I’ve come to appreciate the value of the low-tech mask. If Americans had brains, they would use this opportunity to use masks routinely during the cold and flu season. The flu largely didn’t happen this year, thanks to all the masking. While I was aware a lot of illness was transmitted in the air, I can now clearly see the link and the virtues of wearing masks. It’s no longer that big a deal.

I just wish most Americans could embrace the idea that rather than limiting freedom, using masks allows freedom not just for you, but for everyone else too.

Is Google trying to kill YouTube?

If you watch YouTube (as I do regularly) you’ve likely noticed a few changes. Specifically, you should be noticing a lot more ads. To me, the limited ads were one of its attractions, aside from the breadth of information you can find on the site.

Like many YouTubers I think, I have a short attention span. YouTube has catered to me, giving me lots of videos of ten minutes or less in length about really unique topics that interests me, often by very creative content creators. The site has to make money so it was acceptable to have to deal with an introductory ad, which I could usually skip after five seconds or so.

As you probably have noticed, the ads now tend to be longer (usually fifteen seconds) and it’s getting harder to skip the ads. Also, ads are now getting stacked. Sometimes you have to sit through two ads, fifteen seconds each, to watch a video that is usually ten minutes or less. Already I was getting an itchy finger. At least YouTube warned me how many lead ads I was going to get and if I found the video of marginal interest, I hit the back button and watched something else instead.

Now of course many videos somewhere around the ten-minute mark interrupt the video, usually in the middle of the sentence, to serve you more ads, generally one or two more fifteen-second ads. It’s just grating and spoils the whole experience. If the video is long enough, you’ll get another set of ads. In short, YouTube is becoming a lot like commercial TV, just inserting ads in a less elegant and more jarring manner. This is making me (and I’m sure lots of others) rethink just how much I want to watch YouTube anyhow. So I’m starting to look at alternatives or going cold turkey.

Content creators will usually hit the checkbox to show these ads, because they want more revenue from their content. Particularly with the pandemic and the shrinking economy, ad rates are down, so to make up the difference content creators are generally happy to tell YouTube to insert more ads. This is particularly true of the more popular content creators I follow. If you are getting hundreds of thousands of views for every video you create, and your subscriber list just keeps growing, why not milk them for all they’re worth? This has been true of people like Graham Stephan that I’ve been following. I notice I’m watching fewer of his videos now that he is filling them with ads.

It’s obvious to me that YouTube wants you to subscribe to YouTube Premium instead. Like other subscription services like Netflix, you can do away with these ads, in Google’s case for $11.99 a month. They share some of this money with content creators, but the skinny seems to be this revenue is less generous than what you can get from ads, or at least what you could get from ads before YouTube started bloating them with before video and mid video ads. If true, content creators should be leery about relying on this revenue because YouTube will get the lion’s share.

One of the reasons I am not also a content creator on YouTube is because they have a monopoly. They set the rules and can change it whenever they want to. Some strike it rich, but the revenue stream probably always feels problematic. Like Google’s search engine, you really never know when YouTube will change its algorithm, so suddenly you may be losing subscribers and views and there’s no clear way to regain them. As a profit making company, of course Google’s going to try to squeeze as much profit as possible, from viewers and content creators. And if you don’t like it, well, maybe get a site on Vimeo, pay its hosting bill and hope for the best. Good luck in getting people to follow you there.

It’s a game I don’t want to get into, so I won’t. But because of all these monetary changes, YouTube is also becoming a less interesting platform. For me, the hassle level just isn’t worth it. It’s easier to search the web for the content I need, even with the web ads and crap there too, than get it in a more leisurely and personal way from YouTube.

Or there could be a darker motive. Maybe Google has run the numbers and it has the long-range goal of killing YouTube. It must be bleeding viewers like me with limited patience for all the ads it is serving, who also are either too cheap or simply don’t find the service compelling enough to spend $11.99 a month for. It must cost a fortune for Google to host all that content in real time. Hosting centers don’t come cheap with all that technology to serve it all instantly and deal with the huge volume of content it gets. Whether that’s their plan or not, I suspect it’s where YouTube is going to end up. I’m increasingly doubtful it will be around five years from now. We will have simply moved on to some service that costs less and is less hassle. Clearly, Google is not interested in fulfilling either of these missions anymore.

As for content creators, by throwing ads into their videos I suspect that they are generating short-term profit but long-term loss of subscribers and income. I understand their greed and I understand Google’s greed. But this platform just doesn’t work anymore and I think greediness on both sides is going to be its undoing. It’s feeling like a house of cards that’s about to collapse.

I may be one of the first to leave and help bring it down.