Do not invest in a way that assumes that your worldview is correct.

The more confident you are on that your worldview is correct, (statistically) the less likely you are indeed correct, and the more likely you are to invest disproportionately in assets whose performance depends on you being correct, and the less their performance turns out to be, if/when you are not actually correct, and the less the good performance in the other assets can help you as you did not buy them in the first place.

If your worldview is paranoid, including concerning your perception of yourself being correct, the more likely you actually are reasonably correct, and the conservative investment strategy also yields good results to you, as it has done to me.

No, I did. And will continue to address the monumental defence erected by Z.B.:

Original theses:



The arbitrage works if enough of the existing holders of the new chain truly believe in the old chain, and are in the new chain only to make money. I don't chastise anyone for thinking this way as there is hardly anyone in the myriads of other alts who believes in their alt more than in BTC, so it's convenient to assume that this is the case universally.

However, the premise outlines the case that there is a split in the opinion how the main chain should continue, and both sides perceive that the other side's opinion spells doom for the experiment. Thus there is no thinking or incentive to come back - the same way how Bitcoin has managed to gain and preserve a formidable marketcap. It has taken a lot of brunt, but I for instance, don't - and cannot - go back to fiat, because I perceive that as a destructive move regarding my capital. Everyone reading this has the same thinking, so now I urge you to consider the situation where you honestly believe that your solution preserves Bitcoin, and the other camp's one turns it into fiat.

If the new chain starts out empty, there is no one to sell. Everyone who exits the old chain, obtains some value in the new chain, and the wealth effect as calculated from the actual net new capital flows, is 4x-10x. So the new chain does generate a lot of wealth effect (note that the wealth effect multiplier is calculated from the existing data, which have totally allowed the portfolio balancing back to the original chain, eg. BTC/USD rate increase in Mt.Gox in 2010 did allow conversion back to USD, yet the wealth effect was 10x - this is based on many factors that are outside the scope of this post but I have researched them).

If we go closer to the situation in the "protocol split scenario", we can take Crypto Kingdom and CKG as an example. It is not a "push" asset, it is a "pull" asset ("push" is a refuge out from the unwanted chain (example: gold), "pull" is a wanted chain (cars), and both Bitcoin and Monero are a mixture of escapist and going-forward tendencies). CK has only absorbed about $50k of value from the outside world, and its market cap is persistently in the order of $500k. This value has come from somewhere, either it is newly generated digital wealth because a new interesting thing has become available (new digital wealth is generated at a very high rate worldwide!) or some other chains have suffered a loss of interest, and of valuation. Until now the effect is of course not noticeable from the volatility in the other chains, as we only have 100 characters and a very meager marketcap.

But for the sake of getting the point, you just have to envision a scenario where the new chain is either perceived as significantly more desirable than the old, or the old chain as doomed, by a minority of the people originally holding the wealth in the old chain but not going back due to the reasons, and the effect is just as described - negative wealth effect in the old chain and positive in the new.

Don't let the current paradigm of altcoins deceive your thinking concerning a perceived "life-or-death" situation.

ADD: The coming (or why not any of the existing ones in history) bond market collapse (or cash hyperinflation, or altcoin-biting-the-dust) comes to mind. We all know that bonds are unrepayable. Yet they represent a large share of "wealth" of for example pension funds. When the collapse is triggered, the first ones exit, causing a large negative wealth effect to the rest. There is no wish for arbitrage after the tipping point. The supermajority is left holding a bag worth nothing in the end.

I have theoretized that the actual event horizon for BTC's demise is when any competitor gains as little as 20% market cap share without gimmicks. In the BTC-dominant environment that is a gargantuan accomplishment, and if it is realized against all odds, I am sure you all see the writing on the wall, (and if not, someone else does - as the majority's opinion is not relevant, everyone stands for himself). The power of minority has never been as prominent.


Now you are talking about the spinoff, my whole agenda is to bring to your attention the higher-than-perceived chance of a new chain abruptly taking ground in the scenario outlined. The reason why you have not perceived the chance as high as it is, is the lack of understanding concerning the wealth effect, and the resultant need of no supermajority but only a small minority deciding to convincingly move, to achieve unwanted consequences to the majority.

In short, as is the case with CK, the ones not migrating there do not have holdings there, and do not have voice, vote or exit available in there, and we can therefore happily hold our CKG "coins" which are now 8x more valuable than 6 months ago, perhaps the best performance in cryptoland.


After taking 2 days to think whether this is correct, and if not, how I would refute it, I have reached the conclusion that I don't believe you are correct, and have given anecdotal evidence supporting my viewpoint. Yet I don't hold a great confidence that many would only because of them, change their thinking on the subject. It is a deep matter and my extensive (if anything in cryptosphere can be classified as such ) research has pointed me to think the way I do, and being familiar with the concepts and data is almost a prerequisite for understanding it.

No comments on my piece? I think it was good 

Yes, it is true that I am trying to live my life such that punishing me for doing it will result in an public outcry.

Also, if we switch off our humanity to continue our existence, that is actually the winning condition of the enemy! If we go public, go to prison, and to the firing squad, without forsaking our morality, then we win.

I don't know how you can call yourself either white american or native american, as in both cultures staying true to freedom is not to be compromized by such temporary nuisances as prison and death?

Yeah. Please guys, don't be such idiots. I say this once, and you will be an idiot (at most) once, ok?  




As I tried to explain a few weeks ago, Monero's scenario universe is such that it either fails comparably soon, or reaches a high value somewhat later.

How does the (so far not experienced, rather completely theorized) reduction in trading volume affect the scenarios?

It does not affect the magnitude of the upside to a quantifiable extent (it is too far in the future to be affected).
It does not affect the probability of total failure to a quantifiable extent (total failure is either technological or community-induced and not correlated).
It may increase of decrease the price of the coin in the short term (hard to say which one: my knee-jerk reaction was to buy XMR as long as I conveniently can, but apparently the economic majority last night wanted BTC instead).

+2.  (there were 2 points )

A highly public conscientious objector noncompliance group, who declare sovereignty from geographical countries (defacto bankster rule), or submit to their rule but only in the matters that are not against human rights as defined by the UN and interpreted by the group themselves, which include the right to treat anything to your physical, mental and spiritual being (freedom of food, drugs, information and consciousness) and refuse to be treated with stuff you don't appreciate, under no circumstances can morally force/permit you to give out access to your crypto, and require your consent to tax you (as there is no exception to voluntary dealings rule just on the grounds that someone needs your money and has the racket to take it).

The "creed" or "declaration of independence" is short and appealing to people who can't understand why a gang that calls itself "government" is empowered to do stuff, which is unlawful for its constituents (the people), who are even punished by the government for doing it! The leaders have full-color information pages in the professional website, they live their lives with drone videocameras recording all they do, the footage can be used against the infringers of their freedom and sovereignty. Surely some of them will be thrown to jail and to prison, but even killing them is a tough call as the whole struggle is marketed to the masses as a better reality TV.

So most of the freedom movement is underground, and the leading figures who show by example are in a real danger of getting a long prison sentence (but that will cause a public outcry if applied). If they are harassed too much, and if what we offer is better than the current system (the system is making this one easier by the visible degradation of their alternative   ), anything they do just heaps coal upon their head. If they "finish it off", they lose, as the masses will get a shock therapy and start to fear for their existence, quickly regenerating the movement. If they fight against it with soft means, it is a war of attrition, but we will spend the time getting the masses (de-)educated while their position gets more untenable by the year. If they let it be, it spreads like wildfire as nobody will pay taxes if they can avoid it just by joining a movement.

Don't get depressed, nor violent! In the Internet age, public, even marketed, civil disobedience is more fun, and more effective than ever!  

Far be it from me that I were against Bitcoin! I am one of the few people who even owns a Bitcoin castle!  

But using monero is just soo easy that even if BTC fungibility is fixed and markets would force me to return to it, I would miss the ease of life when it was possible just to click "send" and not care...  

Having to spend contraband coins in a public blockchain would feel awkward, a private chain suits the use case much better.

Stay calm. The network is as anonymous as yesterday, and the NSA anyway knows if you buy from an exchange (or outside of it ), regardless if you do KYC or not. Monero still allows you to be compliant to the banksters, and it still allows you to not be, and neither has changed.

It is a trade term, commonly used in the T&Cs to represent a certain list of calamities.

It seems that the new requirements they ask are very mild for those who were anyway intending to be compliant. For those who did not intend such, it was ridiculous to assume that their funds would be safe in any exchange, especially one based in the U.S. So, objectively this was fully expected, and is implemented reasonably.

BUT: The 2 days withdrawal period is a joke, and there will never be enough coins in the hotwallet, all the people trying to withdraw will experience a nonperformance, will need to file a ticket, the 2 days period will end, then endless hours will be consumed in sorting out the tickets and whether the KYC will be required regarding them or not, causing very much bad feelings.

Perhaps the listing of CKG in Poloniex will keep the XMR trading there alive

I logged in and did not find anything related to KYC requirements. Where is this information from?

Can someone summarize what has actually happened?

The market cap of crypto is the measure of how much wealth people want to hodl in the form of crypto.

If cryptocoin A is dethroned for the reason that there is a better cryptocoin B, whose emergence causes the owners of A to stampede into B, it may of course cause that people will want to hold less wealth in cryptocoins.

But much more likely is that people will want to hold more when an upgraded version comes available. Compare history - seldom before have improvements in technology caused the sales of stuff to plummet!

Yeah, same with me. In dealing with altcoin people, saying that all altcoins are unadulterated shit (which I do regardless) is not popular. Here at least it is ok to confess that.

Monero is not an altcoin in that sense. It is what Bitcoin was promised to be (but is not, and likely cannot be) - private cash, and nothing more.

I will never buy bitcoins with the gains from my XMR; Bitcoin is legacy to me, as well as silver, gold, and bank accounts.

(I will answer to the main points by Z.B. later, they seem strong, the debate is just getting interesting! )

Whatever is not adequately explained by stupidity must be attributed to malice.

(And: Don't be stupid enough to place all your bets on the premise that your definition of "adequate" is universal.)

A great post deserving a rare full quote.

However,

I have seen the light concerning the wealth effects, which in my understanding alters your incentive structure.

- The voice requires at minimum a 51% majority and in practice an economic supermajority. If this is achieved, the value is retained in the majority ledger by popular consent.

- The exit requires as little as 10% selling their coins in the previous majority ledger, which effects a huge decrease in the value of the remaining coins there due to the negative wealth effect, while increasing the value of their new ledger by approximately the equivalent amount of positive wealth effect. Thus the small minority of the "rogues" can enrich themselves in the expense of the majority by so doing, creating a new majority ledger in terms of marketcap.

Very much interested in hearing rebuttals which take into account the human psychology and stay on the ground of voluntarism

I don't think Pruden is oblivious of this, his IQ is in my understanding about half way between us two (and even I undestand it ).

Yes. "Free float" matters, and transaction costs (the largest being inflation tax aka "capital gains tax") are the main driver reducing the free float.

In everything except pegged assets, the wealth effect both in appreciation and depreciation of the asset is great.

My post as regards to the possible transition from Bitcoin to a fungible cryptocurrency posits that only 10-25% of the value currently stored in Bitcoin can be migrated to the contender coin, because as this happens, it causes both a negative wealth effect where the rest of the bitcoins lose the bulk of their value, and a positive wealth effect where the contender coins increase in value. The result is that the value which belonged to the majority of the original bitcoin holders is invisibly transferred to the early minority who correctly guessed the transition and acted accordingly.

Yes I know the regulars in this thread do not like to even think this way, but hey - that is the same mechanism that transferred the value from outside world to Bitcoin after we bought it in 2010-2011 and up to 2013! The net new demand cash flow that lifted BTC from $1 to $32 for example, was likely only about 5% of the corresponding increase in the market cap (even the total trade volume in Mt.Gox during the period was only a small fraction of the increase in marketcap).

The changes in world capital base are rather slow. Even a huge financial bust is not destroying capital that much. What mainly happens is that the imaginary capital is written off as malinvestment (in reality it was destroyed during the boom already) and asset values take a hit, but the earning capacity of the current assets (here: not meaning liquid assets, but assets that are solid and needed) stays intact, or even increases as the excess capacity is purged out. The IRR of the assets increases in proportion to the decrease of their valuation, as the IRR is defined as annual_profit : valuation.


(You probably meant no bid.) And besides they do: I was quite close to follow the shtf in Sept-Oct 2008, when mutual funds closed the redemption window as there was no bid for their assets, and consequently no way to calculate the daily value, nor liquidity obtainable to process the redemptions.

Bonds are precarious, as they are not really assets, they are obligations. Whereas the assets are more or less indestructible, and seldom go to zero in value, the obligations may be defaulted easily, and as is the case of sovereign bonds, they are backed by nothing much of value except the enslavement of the people of that country, and in my observation the young generation up to the people in their 40s-50s do not feel much sympathy to the idea that they would be forever slaves of the system for debts that they neither contracted nor enjoyed. Sure TPTB is headed to expropriate all physical wealth under the color that the governments owe them unrepayable amounts of database entries, but this resource grab is so out of whack in relation to global consciousness and fairness that it is not easily done. They need the consent of the sheep at minimum to do it, but otoh the population of sheep (the boomers) will soon experience a rapid decline due to the reason that TPTB is killing them via the big pharma! So it's not going to be easy.

And even if they manage to continue along these lines, they cannot easily destroy the knowledge capital which anyway grows every year, keeping the population's share of the total capital high.


I hope you realize Pruden's point that what you call "capital" here is "liquidity" and that is not affected by changes in asset values, rather it is diametrically the opposite: rising liquidity causes the fall of interest rates and they both cause the rise in asset values and vice versa.

The coming bond malaise is most basically explained by this simple way: the world is loaded to the hilt with bad debt; the least productive members of the society (governments, frothy business and homeowners) are indebted far in excess to their assets or productive capacity, whereas the most productive (solid businesses, TPTB, savers and knowledge nomads) are the creditors. Cyprus example showed that TPTB is easily able to get away with stealing from the creditors in case the push comes to shove, while retaining the debtors in their grip. While I have always asserted that going into debt is stupid, holding debt is if possible an even worse proposition in the coming years. TPTB is screwing you as surely as they are grabbing the assets of the debtors. The bonds regime is a racket, charade, fraud and scam.

(The debtors are already their slaves, so the strategic thinking goes along the lines how to enslave you)  


My bold 2013 prediction for forward escape and bitcoin singularity (the collapse of fiat and bonds, leaving only the CB's printing money to prop up their market in hyperinflation, and the printed money chasing bitcoin prices up to unfathomable heights denominated in currency, and quite high in purchasing power as well  - it is already the case that CB's buy all the new bond issuance as there is no sane market actor doing it with their own money!) was just a few years early. With the developments in Bitcoin in the last 2 years with TPTB buying clandestinely with both hands and enacting draconian regulation in this 100% transparent chain, I have more confidence than ever to the scenario becoming true soon.

They are trying to use it for entrapment of the value to a thing they can control to a larger extent even than the present assets. For this reason diversifying to the private cryptocurrencies now is very prudent. Armstrong's model forecasts that the private assets will enjoy in the coming years, and that includes Bitcoin only to the point that it is perceived as a private asset. Unfortunately in my thinking it is strongly entrenched in a slide to not being one in the years to come.


To me as well. But confidence in gold was formed during millennia, cryptos have quite a game ahead for gaining the same level of confidence, because low inflation == premine, and there is no question that all the cryptos that exist have far too much tilted to gaining the low inflation too early, and attempting to make a huge value grab to early adopters. Despite its infancy, I dare to say that CKG is the most level-headed attempt at correcting the flawed economic thinking in cryptocurrency issuance.

For one, capital can be created or destroyed. If you bomb stuff and they are destroyed, you destroy capital. If you invest less than the equipment is worn, you let capital be destroyed. Malinvestments also "destroy capital" as you spend resources to something that is not useful and cannot be called capital. Saving creates capital.

For another, property values can go up and down, but this does not create/destroy capital (as such; the adjustment process is typically associated with suboptimal production and loss of aggregate utility). Property values have more to do with interest rates than capital. If interest rates are low, property values are high, because the properties compete with bonds for the investments.

If bonds could be guaranteed to never pay a positive return, the property values should theoretically reach infinity and still make a better yield. This obviously does not practically happen, rather it causes a boom of building new properties to compete from the yields. This "investment" is a diversion from consumption, so causes a decrease in the standard of living, and causes something to be built which cannot generate good returns (ghost cities in China, oil shale projects, wind power, all malinvestment).

The idea that interest rates should be coordinated is a really stupid one, there is absolutely no mechanism for a CB to make better the equilibrium rate the markets freely decide if they are left alone to do it - it is already and automatically optimal. Both lowering and raising it just cause misallocation and misery.

There is nothing to fear from the crash of property values - with a reasonably diversified portfolio (weighted with the global weights of different asset classes), after the crash you own the same % of the total cake as you did before, and your annual profits are the same as well. The ones who suffer are the leveraged guys - a fool deserves his punishment.