Bitcoin’s Killer App

In my quest for Bitcoin’s killer app, I watched David Schwartz, CTO of Ripple, being interviewed by Fortune’s Jeff Roberts on YouTube. The interview was recorded on June 12th, 2019 at the Future of Fintech conference in NYC. For those interested in Bitcoin’s nuts and bolts, this was a very interesting discussion. As far as killer apps were concerned, Schwartz touches on some very promising technologies in the works that may be killer apps.

The killer app would be the application that launches Bitcoin into the stratosphere by making Bitcoin indespensible, giving anyone using it such a definitive advantage over those that don’t that Bitcoin becomes a must have, go to asset. There have been many proposed killer apps but so far none have stepped up. I’m seeking that application that makes Bitcoin impossible to live without.

If you were living in Venezuala right now you might feel Bitcoin was your only guard against the rampant, runaway inflation. By Venezuelan standards, Bitcoin’s valuation barely fluctuates. If you were a drug dealer or holding someone’s computer for ransom, Bitcoin might also be your goto application. But David Schwartz mentioned an application which I felt is worth further investigation — micro-payments.

Micro-payments are very small payments, sometimes as little as $0.0001 (one ten thousandth of a cent) or less. For some applications they are very useful but impossible to manage. For example, have you ever run up against a pay-wall when trying to read an article from a publication you don’t subscribe to and you forego reading it because the $19.95 per month or whatever the cost is wasn’t worth it for this one article. Besides, you weren’t really interested in a subscription, anyway. It would have been nice to get charged $0.99 for this one page article, and leave it at that. But in order for the publisher to charge you that $0.99 with a credit or debit card, there would be a $0.35 minimum charge plus between 2% and 6% fees from the publisher, and several forms to fill out for you, the reader, before you could read the article. Since those type of transactions take a day or so to post, there will also be enough follow up work that the small publisher would opt NOT to offer the small fee. In fact, few if any do.

If that $0.99 transaction were made using Ripple (XRP) cryptocurrency, the transaction could be accomplished totally anonymously, with a few cents in fees, in seconds. The website could be charging you per column inch read, or any other smaller scheme which would be served by micro-payments. Let’s say you read 18 column inches at a cost of $0.0016. MasterCard would charge the publisher $0.365 cents for you to pay this $0.0016. The publisher would lose money with every visitor. With cryptocurrency you would pay $0.0016 plus $0.00012 in service charges. In other words, you’re paying next to nothing for Ripple payments. It’s all done safely and securely and in a matter of seconds. If this capability is built into your browser, as it will some day be standard on all browsers, micro-payments will be nothing more than a key stroke.

Environmental Protection Act

I, for one, am so disheartened and disgusted with what is happening to the environment these past two and a half years I want to cry, almost daily.  Instead of watching the Trump administration rape and plunder the environment, I propose the following: let’s just write a check and be done with it.  Give a billion dollars to each company that promises not to drill, mine, frack, pump or dump. That’s the idea. They don’t have to lift a finger. In fact, that’s just what we want they to do: nothing at all.  

Why do we have to watch as these companies undo all of the decades of environmental good deeds we’ve accomplished cleaning the air, purifying the lakes, rivers and streams and making our food supply safe?  The only reason those companies do what they do is money. So why don’t we just give it to them, no questions asked, in exchange for them stopping altogether. 

The Exxon-Mobils, Cargills and Kochs get their money and we get to keep the parks, national monuments, fields, rivers and streams.  We get the birds and the honey bees, and the icebergs for another generation or two.

Climate Change

Perpetuating the myth that if only we are able to keep climate temperature increases to 2ºC everything will be okay is almost worse than the claims of the climate change deniers.  The complacency today in the face of the absolute collapse of our planet’s biosphere is unconscionable. We watch as the world is turned uninhabitable, and rather than take up the challenge, we continue, if not accelerate, in the wrong direction.  More carbon has entered the atmosphere in the last thirty years due to mankind’s activities than in all the time we had been on this earth till then combined. Instead of reducing our carbon emissions to zero, we have increased our output by 1.5% since Al Gore wrote An Inconvenient Truth in 2006.

We’re apathetic because we’re losing, and see no possibilities of a good outcome. But it’s much worse than that.  We’re already seeing the devastating effects but have not yet felt them at home. Those days are about to commence.  We’re literally dancing at our own funeral. The insect world has collapsed. Amphibians are disappearing around the globe.  The bumblebee has been put on the endangered species list. Did you see any smashed bugs on your windshield this past summer? Any moths dancing by the night lanterns? I just drove from NYC to Boca Raton, FL and back.  Not a bug on my grill in twenty-six hundred miles. Last spring I drove to San Francisco and back. The state of Utah was practically covered in the smoke from forest fires the entire time I was crossing the state.  Tornadoes in the middle of winter? Arctic cyclones? Meteorologists are having to invent new names for weather events. The end has already begun, we just don’t know it yet.

Blockchain Now!

Reuter’s reports that Germany’s justice and finance ministries have proposed to launch a state-run register to boost the use of blockchain. We’ve seen these same efforts repeated with other governments across the globe. While bitcoin is slowly being adopted, its underlying blockchain technology is being widely adopted. That the blockchain regulations, policing of the blockchain technologies, and the registration of blockchain based exchanges are being put in place now will later prove useful to a bitcoin economy.

Blockchain technology replaces a centralized network with a decentralized, distributed network. Instead of a central clearinghouse for all transactions, exchanges are made throughout the network. Instead of a physical token for each transaction, such as printed shares of stocker each trade, trades can be made in blockchain technologies entirely digitally. In order for investors to pay their fair share of taxes on blockchain transactions, both the government agency and the tax payers have to have the apps that allow them to compute the necessary amounts. To follow up on complaints of foul play, emergencies, and general police detective work, law enforcement agencies need to know what blockchain technology is and how to deal with it. There is no difference between researching a transaction made in a blockchain network for real estate and for a bitcoin transaction. The list goes on, but in short, learning to work with blockchain is the very skill required to work with bitcoin.

Kroger Drops Visa

Quote from Cointelegraph, a daily cryptocurrency news feed:

“On Friday, Mar. 1, Kroger officially announced that its Smith's Food & Drug stores will not accept Visa cards starting Apr. 3 due to the high fees that company imposes on major retailers. "Visa has been misusing its position and charging retailers excessive fees for a long time," Kroger's chief financial officer Mike Schlotman said, explaining the decision.”

Link to the original online statement:

It stands to reason that a grocery chain such as Kroger’s would find it necessary to restrict the use of VISA cards in their stores.  You would think the small fees merchants are required to pay to accept VISA cards is well worth the attraction to customers. But grocery stores work with extremely small margins.  While a typical suburban store may hold a million dollars in inventory on its shelves and turn over that merchanize several times per year, the markups are so slight that added VISA costs could tip the economics in the wrong direction.  

The equivalent ‘fees’ cryptocurrencies charge are miniscule by comparison.  Mining fees are usually just pennies compared with VISA and MASTERCARD fees which are a small fraction of the total spent.  A $6.00 item might cost the merchant $0.45 in fees. Grocery stores are particularly hard hit by the VISA costs since fees are comprised of a flat fee for every transaction, around $0.15, and a percentage of the gross amount.  Higher percentages are charged for smaller ticket items. An expensive item might have a 1.5% VISA fee, while an item selling for under $2.00 might have a 4% fee. Groceries are usually under $10.00 per item.

A merchant, therefore, must compare VISA fees of $0.45 or more and cryptocurrency fees of just pennies.  What merchant wouldn’t want to save an extra $0.30 per transaction?

To make matters worse, VISA and MASTERCARD formulae include extra premiums on smaller merchants, out-of-the-way sales locations, and sole-proprietorships.  In other words, the smaller, less secure the merchant’s situation, the higher the fees. Some Etsy-type merchants selling from their homes are being charged a 10% processing fee.

Cryptocurrency is going to attract merchants facing these excessive plastic card charges.

Facebook Coin (FBC) — Company Scrip

Olga Coal Company scrip, West Virginia

Company scrip is a substitute for government-issued legal tender or currency issued by a company to pay its employees. It can only be exchanged in company stores owned by the employers. It was largely made illegal around 1950 in the U.S. .

Mining and logging camps were typically created, owned and operated by a single company.  Camp locations, some quite remote, were often cash poor.  Even in ones that were not, the workers were paid in scrip and had little choice but to purchase goods at the company store using scrip. The exchange into currency, if available, was usually done at an exorbitant exchange fee. With this economic monopoly, the employer could place large markups on goods, making workers dependent on the company, thus enforcing employee “loyalty”.” — paraphrased from Wikipedia.

It wouldn’t surprise me to hear that Facebook decides to issue Facebook branded cryptocurrency.  It would probably be called Facebook Coin, FBC for short.  Imagine at the outset, FBC is issued at a 1:1 equivalency with US dollars with the promise that a maximum of 1,000,000,000 (one billion) coins would be issued.  The coins would be used to purchase all things Facebook.

Everything you purchase from Facebook, and everything you purchase through Facebook would be paid for in FBC currency.  Since Facebook sells several billions in advertising quarterly, there would be an immediate crush on FBC as advertisers purchase enough to have on hand for the coming months.  When FBC goes to $2 per coin it would be seen as a good investment as well as a useful currency.  Facebook services, such as their newly announced exploration into dating, would be purchased with FBC.  Retailers who open Facebook page-based stores could use FBC, as well; another way for customers to differentiate and be differentiated in the marketplace.

Why would Facebook do this? There are many advantages to using a cryptocurrency. First, since advertisers would use FBC to pay for their ads, the demand on FBC would be a good leading indicator for Facebook’s marketing department.  Facebook could know months in advance their advertiser’s coming marketing intentions.  Second, Facebook gets the revenue long before the money is actually used.  In a sense, FBC would be like company stock expect that it would not be tied to any specific underlying commodity or service.  Third, FBC would be similar in use to gift cards in that they would be bought and set aside for the specific use of purchasing all things Facebook.   They might be used as gifts from one person to another, they might be a kind of savings account like a Christmas club account folks used to open at banks, or just strategic long-range planning. IF Facebook Coins are anywhere near as popular as gift cards, we should soon see them appear on a Facebook page near you.



traffic at night
A sea of red taillights on Sunset Blvd at night.

One of the finest examples of a stated and enforced standard is the specifications written for the automobile.  Every aspect of the automobile is specified so that every manufacturer is required to provide the same features and quality.  Every consumer can expect those same features and quality.  It is a tribute to our society for having created and enforced these standards. Most people do not appreciate what this body of work does or why it is so important.  The automobile industry is over 125 years old and it’s taken much of that time to sort out these standards.


Picture yourself driving down a busy highway at night.  Before you are several hundred cars going in the same direction.  What you see are rows and rows of red tail lights.  That’s is to say not just any tail light but the red color specified under Title 49: Transportation, PART 571—FEDERAL MOTOR VEHICLE SAFETY STANDARDS, Subpart B.  Looking down the highway you see each and every red tail light lens’ color matches every other precisely.  Wow.  When we glance down the road we can see in an instant that everyone is headed the same way.  If one of those 100 cars were coming at us, we would spot that in an instant.

Imagine what we would see if there were no standards; if every automobile’s owner decided for his or herself what he wanted for a tail light color.  Looking down the highway we would see something more like a Christmas tree then a column of red.  Is the car ahead of you slowing or stopping?  No one would know. Chaos would ensue.

New technologies take decades before manufacturers and consumers can agree on and set standards and rightly so. To set standards too quickly in the life cycle of a new technology means quashing inventiveness and creativity.  To wait too long before setting standards allows the biggest players in the space monopolistic control over the marketplace which drives up prices and further limits choice and ultimately hurts consumers.  Until standards are set and enforced that new space might behave like the wild West where anything goes.  The law is slow to catch up to the reality of the times, too.  Price gouging, failure to supply the promised value of a new product, and lack of truth in advertising are rampant. Misalignment of consumer expectations with manufacturer’s deliverables is common.  The resultant feeling is one of mistrust and disappointment.

With cryptocurrencies, we’re experiencing the early days of a new technology, characterized by much of the same.  There is a general feeling of mistrust and disappointment with software that doesn’t work as expressed or expected, and developers (the manufacturers, in this case) who are too quick to make promises and not experienced enough to understand why they should not cut corners or speed production in a trade-off with quality assurance and testing. Unfortunately, until standards are set and maintained, we can expect more of the same.  Furthermore, standards take a long time before they are written and ratified.  Until then, expect cryptocurrencies to feel like part of the wild, wild, West.

Bitcoin Wallets: Stressful and Demanding Concentration

applepayYes, the automobile is a wonderful invention.  Actually, it is probably 1,000 inventions all contributing to a vehicle which moves us about in comfort effortlessly.  Blockchain and Bitcoin are wonderful inventions, too, with the promise of doing miraculous things for us.  However, at the moment, you cannot say these work with little or no effort.  In fact, it takes a great deal of effort and concentration, often fraught with stress and uncertainty.  Before Bitcoin can become a natural part of our lives, much more technology needs to be brought to bear upon the problem.

As secure as the blockchain itself is, going into or out of the blockchain wallet is still dangerous and difficult.  It has to be as easy, thought-free, and fast as taking cash from your leather wallet or putting money in a piggy-bank.

The Wallet on my iPhone uses NFC (Near Field Communication) which allows two electronic devices, my iPhone and the merchant’s card reader, to communicate with one another by bringing them within 4 cm of each other.  The Wallet also makes use of the iPhone’s fingerprint authentication to validate me as the user.

So far, the best blockchain wallets I’ve seen use text SMS messages to copy/paste public addresses, or, use the iPhone’s camera to take a picture of QR barcode to deliver the same public addresses to the wallet.  Neither is as good as NFC or fingerprint authentication.  A first-rate wallet would have to use all of these technologies to work intelligently and quickly.  The user must be able to pocket Bitcoin without a second thought, with one hand tied behind his back, underwater, covered in mud with the lights out. It has to become THAT easy.


Screen Shot 2017-10-03 at 9.52.26 AMDon’t understand cryptocurrency? Think ‘airmiles’.  You know, the premiums given out by various airlines, credit cards and other players as a reward for flying or shopping referred to as airmiles.  Almost every airline gives out some form of airmiles.  Airmiles are virtual.  There’s nothing physical thing you can point to called an airmile.  They exist in computer programs.  For each airline’s airmile program there exists a formula by which you earn and use airmiles.  You might have to spend a dollar on a participating credit card to earn an airmile, for example.  Or, you might have to accumulate 30,000 airmiles to use airmiles to fly from New York to Chicago at no additional cost.  You know the drill.  Cryptocurrencies are similar.  Each cryptocurrency has a specific function and value proposition.

How can something virtual have value?  How do airmiles equal a trip to Chicago worth $250?  Because that is its value proposition.  That’s how it was set up.  That’s what you get if you take the necessary actions.  That is the social contract that has been set up for each individual airmile program.

Cryptocurrencies are the same.  There is a cryptocurrency that is used for online gambling, one for online gaming, and even one for sports betting.  There’s one which is the currency of international money transfers, one for healthcare and one for real estate.  Before we’re done you will see thousands of different cryptocurrencies.  We’re just getting started.  Some will be valuable and worthwhile acquiring.  Some will not be worthwhile at all.  We, as a society, are just now learning how to use cryptocurrencies.  It is only now that they are even being considered a new asset class, a new form of wealth.  There are bound to be missteps and mistakes.

Bitcoin Valuation: As Cash; As Gold

Gold bars

There are 5.5B ounces of gold in the world and 7.5B people, an average of 3/4 ounce per person @$1232 is worth $961.50.  If gold’s market cap is 6,776B is divided by the total number of bitcoin ($6,776,000,000,000  / 16,600,000 Bitcoin = $408,192).  One bitcoin would be worth $408,192.

Here’s another way to evaluate bitcoin: How much cash is there in the world? That is a complicated question which depends on your definition of cash.  Low estimates start at five trillion.  High estimates go from thirty-five to ninety trillion.

pile of cash

Cash, for our purposes, is the liquid money that you keep on hand to use for pleasure, maintenance, and emergencies.  That would be all the money you have in the bank and under your mattress that is NOT stocks or bonds, gold, real estate or fine art.  If bitcoin were to be the currency of choice, then one bitcoin will equal USD $5T / 16,600,000 Bitcoin (the total number in circulation) = $301,204.  Remember, this is a low estimate of the amount of cash available.

The two numbers, $408,192  in gold and $301,204 in cash equivalencies respectively, are not all that far apart. There might be some truth to this valuation.