What if the Bitcoin boom was a conspiracy?

Conspiracy theories are for the birds, never ascribe to mendacity that which can be explained by incompetence, but they can be fun nonetheless.

Bitcoin is currently going through the mania phase of the classic chart of the bubble.

Articles about the cryptocurrency are everywhere on social media and, regardless of whichever Legacy Media ™ newspaper website you view, there will be a daily quotient of about three articles posted.

It’s the new big thing. If you bought some 5 years ago you’re minted, if you didn’t, there’s a thousand opinions on whether there’s still time.

This one, for example, written by the suspiciously 1930’s Film Noir named Spencer Bogart, in which he gives 3 reasons why the Bitcoin valuation is about right.

Strangely, none of his three reasons are “because people are hoping to sell it later for more than they bought it”.

As Warren Buffet may or may not have said, there are only two types of assets, those with an income stream and those that you hope like hell someone will buy off you later for more money.

Of course Bitcoin is a bubble.

The interesting question is not whether it’s a bubble but whether there was any intent or design behind the instigation of the bubble?

Is there a puppeteer pulling the strings or did this come about by the magic of human interaction at a speed never seen before.

Please note, the use of the word “magic” is not meant sarcastically there; humans trading in markets are responsible for wonderful things (you and I being alive and with a better chance of living longer than any of our ancestors, for example). This is a kind of magic.

But is Bitcoin multiplying by 25 times (or whatever it is currently) its value in a year a result of some effort to by an unknown party? If so, who, why, how?

In our investigation of this possible global conspiracy, let’s examine motive; who would most benefit from a bubble in the cryptocurrency?

Anyone holding it, obviously, but also anyone who wished to see it discredited. There are are only two things we know about bubbles; they crash and you can’t predict when. If you wished to discredit Bitcoin, instigating a bubble and the subsequent wringing of hands after the crash might work.

So who doesn’t want this cryptocurrency to work? Well, people invested in other cryptocurrencies and traditional currencies.

Ah, you’ve worked out where this conspiracy theory is going….

What if Central Banks such as the Federal Reserve instigated this bubble to prevent an alternate currency from destroying its stakeholders’ grip on the world’s economy? Would anyone doubt that they would if they could?

How then might this be achieved? Simply by buying the damn thing and watching the price increase!

Bill’s Opinion

The concept and the underpinning technology of Bitcoin seem sound, it’s just that there’s a wave of very basic human emotion riding it currently.

Whether or not there’s a Central Banker’s hand giving the surfboard a helpful shove or not we may never know. It’s not completely beyond the realms of possibility though.

In 2014 the World Bank produces a report with the conclusion that Bitcoin was not a deliberate Ponzi scheme. To misquote the words of the recently deceased Christine Keeler, “well they would say that, wouldn’t they?“.

11 Replies to “What if the Bitcoin boom was a conspiracy?”

  1. How come it hasn’t been regulated yet? I’d imagine there are a few people who’ve pocketed great profits yet I haven’t heard of any need to include this in a tax return?
    I’ve read that it’s not legally possible to define it as an asset or an income source ….because it isn’t regulated.
    Why is it not regulated…..?

    Maybe it’s a way of sucking up excess QE. Or, it could be an ideal scape goat for a 30% market correction.

    When Bitcoin drops by over 50% it will likely send other cryptos down by more, I reckon that’d be big enough to send a reasonable shock wave through other markets.

    How many baby boomers would have a massive attack?

    1. Regulation is tricky, which is why the conspiracy theory works.

      As for tax; it doesn’t need to be defined any further because capital gains sweeps this up nearly in most legislations, surely?

      If you sell and deposit a million in the bank, good luck with the conversation with the taxman.

      1. You keep the profit in another crptocurrency. Using a new ICO everytime the price moves too high.
        Buying stuff becomes a problem.

        1. Yes, I suppose that would work… until you ran out of actually currency that the local grocer recognises!

          That’d be the moment you’d understand what the “fungible” part of a currency is all about.

        2. Or just blow it on the dark web on high class hookers, coke, guns ammo and contract killers, the taxman and your missus wouldn’t need to know.

          But the thing that no one mentions is that every single transaction ever made is recorded, fuck that, there are far better ways to hide things than this which might ultimately prove to be the ultimate back door trap of all time.

  2. Check out Quantum computers and how they will inhale blockchain code in minutes.

    Practical ‘Quantum Supremacy’ Demonstration Looms in 2018

    ‘It isn’t just a faster computer of the kind that we’re used to. It’s a fundamentally new way of harnessing nature to do computations. People ask, ‘Well, is it a thousand times faster? Is it a million times faster?’ It all depends on the application. It could do things in a minute that we don’t know how to do classically in the age of the universe.’ Scott Aaronson, the head of the Quantum Information Center at the University of Texas at Austin. ‘

    We demonstrate an application of these algorithms by systematically increasing the disorder and observing a transition from delocalized states to localized states. By extending these results to a system of 50 qubits, we hope to address scientific questions that are beyond the capabilities of any classical computer…’ Recent proof-ofconcept research paper from academic and Google researchers

     There is no easy explanation of quantum computing/mechanics and its underlying physics concepts from Schrödinger’s Cat to the Heisenberg Uncertainty Principle (Bill Gates has claimed it’s the only Microsoft research project he can’t fully comprehend), but essentially scientists have proved that atoms can exist in two states at once, a phenomenon called superposition. A single atom, for example, can be in two locations at the same time, a phenomenon that gets even stranger as it scales. Some physicists theorize that entire objects can exist in multiple dimensions, allowing for the possibility of Matrix style parallel universes, but the immediate implications are more mundane if still radical.

     The big advantage of quantum computing ‘qubits’ over ordinary bits is that they can exist in a superposition of states (i.e. a bit must be binary 1 or 0 but a qubit can be both at the same time). Like AI, for nearly three decades, these machines were considered the stuff of science fiction. Until the past few years, the consensus on a timeline to large-scale, reliable quantum computers was 20 years to indefinite but the technology seems to be where AI was in 2011/12, as a series of experimental breakthroughs coalesced.

     A breakthrough in quantum computing would devastate the constraint on cryptocurrency creation and usher in a virtual Weimar Republic. I think the Metcalfe’s Law analogy above is interesting, but not in a bullish sense because cryptocurrency advocates believe they are betting on innovation, but they are actually betting on the opposite – if we see a paradigm shift in computing away from silicon transistors, as certainly seems likely over the next decade, the processing/energy limits on cryptocurrency mining will disappear. You can’t be bullish on quantum and crypto, and the former looks far more profound in its long-term implications to me…

     Quantum computers will threaten Bitcoin’s cryptography by easily backtracking the public keys (Bitcoin wallet addresses) to deduce the private key associated with it and if in criminal hands, own most, if not all the ~$100bn Bitcoin now in circulation. There are attempts to add quantum security to the blockchain protocol underpinning Bitcoin (notably in Russia) but even if the wholesale hacking and theft of cryptocurrencies can be prevented, the cost of mining them will plummet in this new era.

     Current computer technology increases hardware speed by increasing the density of transistors on a single processing chip via Moore’s Law, shortening the travel distance for electrons through the trace paths within the chip. This miniaturization is becoming subject to harmful quantum effects because of the minute distances between electron paths (quantum tunneling) so hardware built to harness quantum effects rather than minimize them would inherently run vastly faster.

     Physicists have long claimed that a quantum computer with just 50 qubits could outperform even the world’s most powerful supercomputers. Surpassing the limits of conventional computing or ‘quantum supremacy’ is hugely complex. Quantum states are extremely delicate and physicists have struggled with the practical challenge of isolating then and their machinery (deep refrigeration for superconductivity etc.) from outside environmental influences which disrupt their operation.

     There will be no quantum PC equivalent – given the technical challenges and costs, these devices when they eventually arrive will be available via some form of cloud service controlled by the largest tech giants. Google rents storage by the minute currently; quantum machines would slash computing times drastically for everything from drug discovery to AI model training. Useful applications will probably require a system with more than 100 qubits.

     Scientists at Google now believe they know how ‘quantum supremacy’ can be achieved, and have successfully demonstrated a proof-of-principle version of the machine for the first time – the first demonstration of quantum supremacy could be in 2018, a seminal event for technology. Two qubits can represent four numbers at the same time, three qubits can represent eight numbers, and nine qubits, 512 numbers simultaneously. In other words, their capability increases exponentially. One way to achieve quantum supremacy is to create a system that can support 49 qubits in a superposition of states (this system doesn’t need to perform any complex calculations to claim a valid breakthrough).

     The Google quantum system is a superconducting qubit using a loop of metal cooled to low temperature; when a current is sent through this loop it will theoretically flow forever thanks to superconductivity. The current can flow in both directions at the same time, allowing a qubit to simultaneously represent both a 0 and 1.

     The proof-of-principle experiment is to make a chip with nine neighboring superconducting loops and show that the qubits they support can represent 512 numbers simultaneously. The big fear among physicists is that it is not only the numbers but also errors that increase exponentially in these quantum systems. If the errors increase too quickly, they will swamp the system, making quantum supremacy impossible.

     The key result from this experiment is to show that the errors do not scale rapidly in these superconducting chips, at least using a low number of qubits (error rates may prove non-linear as they scale toward quantum supremacy, but if not the computing world will change radically over the next 5- 10 years). Making a quantum chip using these techniques should be straightforward— and is almost certainly well underway.

     Canada’s D-Wave systems has announced the commercial availability of its $15m 2000Q quantum computer, already in use at the NASA Ames Research Center in, California, which like the Google approach uses superconductivity and liquid nitrogen. However, its range of applications are limited and isn’t a true general purpose quantum computer as Google aspires to – this is more a very specialized supercomputer employing quantum principles.

     In the mid-1990s, MIT mathematician Peter Shor devised an algorithm for quantum computers which factorizes so quickly that public-key encryption will almost certainly be a defunct technology within the next decade or so. As qubits allow mathematical factoring at astonishing speed to unprecedented order, they will demolish our existing cybersecurity/encryption framework. The future of encryption will likely be quantum-key distribution.

     In one set-up, a sender launches single photons toward a receiver, randomly choosing one of four planes along which the light particles are polarised, two of them associated with a 0 and the other two with a 1. The receiver likewise randomly chooses which kind of polarisation to check for. After sending a string of these bit-associated photons, the pair can publicly compare notes on which polarisations they employed; whenever they happen to have chosen the same one, the 0 or 1 associated with that polarisation can be used as a bit in a cryptographic key.

     The system’s security is underpinned by Heisenberg’s uncertainty principle, a critical quantum rule which guarantees that an eavesdropper would disrupt the system’s randomness, because intercepting and measuring a photon exchanged across a secure quantum network connection forces it into a given polarization. That disturbance would reduce the number of coincidences the pair sees; if there are too few, you know someone is attempting to eavesdrop.

     Public-key cryptography provides security for banking transactions, encrypted chat, secure browsing etc. Breaking the codes currently requires too much conventional computer time and power to make it feasible (the Bitcoin mining constraint), but that changes in the looming quantum era. Applying the technology requires quantum transmission networks, the infrastructure required to connect many senders and receivers using quantum keys. These are springing up within and between major metropolitan areas. South Korea’s government is funding a 250km link to join existing metro quantum networks. No network is more ambitious than the one already completed in China linking Beijing and Shanghai via Jinan and Hefei.

     If China or Russia developed this technology first, US nuclear weapon technology, trade secrets or diplomatic traffic would be readily accessible while the NSA and CIA’s vast electronic espionage infrastructure would be rendered obsolete. Indeed, while Google seems to be making key breakthroughs, undoubtedly military research is intense, given the game changing cybersecurity and missile guidance optimization applications among others (no US carrier group could hope to counter a missile guided by quantum algorithms). China’s ambitions are huge and as covered in an Economist article in August, they look set to launch the world’s first quantum-cryptographic satellites.

     Google isn’t alone among the tech giants in pursuing this technology- IBM has come up with a way to simulate quantum computers that have 56 quantum bits on a non-quantum supercomputer It used to be widely accepted that a classical computer cannot simulate more than 49 qubits because of the vast amount of memory required (the memory required for simulations increases exponentially with each additional qubit). IBM’s new simulation simulating 56 qubits with only 4.5 terabytes using a mathematical trick that allows a more compact numerical representation of different arrangements of qubits. It now has a functional if primitive 56-qubit quantum computer hosted within a conventional supercomputer.

     IBM admits that their current simulation runs about “a billion times slower” than the theoretical estimates for an actual 56-qubit quantum computer but it has advanced our understanding further on how these will work. Meanwhile, Intel has begun manufacturing the first chips for quantum computers, again a major practical breakthrough on the path to quantum supremacy. If 2017 was the year when AI went fully mainstream and generated growing media and investor hysteria, quantum computing is likely to emerge as a key tech story over the next year or two.

    1. Thanks. That was completely new to me, I appreciate you sharing it.

      Yep, that would bring it down in a heartbeat!

      My suspicion though, it that it will crash for human reasons long before this technology is used.

  3. I like it because of the massive amounts of power it consumes and therefore its anti green aspect. From an invetment point of view go for your life and best of luck with that.

    Although I would caution that you read and ensure that you fully understand the meaning of the fourth law of the Five Laws of Gold before you invest.

    The Five Laws of Gold

    Kalabab relates the story of a man named Nomasir (The son of Arkad, The Richest Man in Babylon), who went out to make his way in the world. He foolishly lost the money that his father had given to him, but remembered the five laws of gold that his father had related to him.

    Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family. (Save 10% of your gross earnings.)

    Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

    Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.

    Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep. (Educate yourself or rely on those who are educated in the investment you’re interested in.)

    Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

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