Folks, you’ve probably heard a “news” reporting that there “likely” was a “single actor” that moved the price of the Bitcoin high up. And this “finding” was a result of a research which was done by the researchers from Tel Aviv University in Israel and the University of Tulsa. Bitcoin price manipulated from $150 to $1000 by single actor – RT.com. This “news” seems not scary enough to potential Bitcoinners, However, right after that Zerohedgians flashed a devastating headline from ibankcoin.com “Bitcoinnect Abrubtly Shut Down, Crypto Currency Collapse, BCC Holder On Suicide Watch”.
This seemed to be more than enough for those statist worshipers jumping for joy “See! I told you so”. Not so fast. Let me deal with these “news” one by one.
1- A single normal John Doe can have as many wallets as he/she wishes.
2- A wallet can produce/generate many different addresses
3- A PC can have many IPs with multiple VPN and many masked MAC numbers.
Thus, if the “single actor” really wants to play this price pushing game on Bitcoin with his/her own millions dollars, he/she must have been technological better than the above John Doe.
4- Researchers can trace a “particular wallet” through the blockchain with a complex technique called data clustering analysis. But to trace a careful millionaire “actor” with multiple wallets, multiple BTC addresses, IPs, PCs etc is a totally different matter! That’s why the “finding” cleverly used the word “likely”. But it’s good enough to give the lay-person majority in the public a hysterical jaw-drop!
5- The “report” is also carefully using the word “single actor” rather than a “single person”. For an “actor” can be an institution, an organization, a government…(in this case Mt COX) And in this case especially with Bitcoin and with all the above reasons, “the researchers” have a tiny chance to know the name of that “actor” and much more less how many “wallets” the Actor has.
However, as I shared with you in the previous article, I do suspect this actor must have been the American Central Bank a.k.a the Fed. Because only Governments/Banksters have such printing money power and a clear destructive motive in rapidly buying a large amount of Bitcoin and other cryptocurrencies i.e Bitcoin Cash, Etherium etc then dumping them back in order to discredit the Bitcoin/ cryptocurrencies all together . It’s perfect excuse to call for strong regulations! It’s the music to “the public”‘s ears! This is a near perfect plot! Except it’s the blokchain Bitcoin. A peer to peer virtual currency payment system, in which two or more persons can make a transaction to one another virtually everywhere at any time without banks, without coinbases!
And while all the major coins were going down (Bitcoin= USD 9,000) , the ibankcoin.com shouted out loud a headline “Bitconnect Abruptly Shuts Down, Crypto Currency Collapses; BCC Holders On Suicide Watch”.
Collapse? Suicide? As of to day (22.56 thu 18-Jan-2018 Australian Time), all major coins are climbing back with Bitcoin= USD 11,548. There has been no report of suicide except “small” Bitcoiners (including this yours truly) are buying a little bit more crypto-coins with their small savings… and optimistically looking forward to see a Bitcoin at 50,000 or 100,000 very soon!
However I admit that I did overlook a shortcoming of Bitcoin Blockchain, that is the rising fee and longer verifying time. What I cannot fathom is that why Satoshi Nakamoto let the power to complete a transaction to the “pleasure” of the miners? This is a serious mistake that can kill Bitcoin favor in its users. This is not only because the “fees” itself but it is the “control power” that the miners, which are minority, have over bitcoin transactions! This is suppose to be a free money (as in free speech) decentralized peer to peer payment system, is it?
What will happen when the number of 21 million bitcoins is reached? The fee earning must be higher than the cost of running the non-coin-mining for a person or group of persons to act as transaction verifiers!
Is there any way the developers can device a mathematical algorithm within full-node clients performing an automatic proof of works verification through the blockchain as all required conditions are met? Such as automatic performing “the proof of proof of works” into a new block in the blockchain, so that a true peer to peer transaction through the blockchain can be verified and concluded successfully without the miners?
Imagine in a scenario that, by whatever reason, there is no mining machine/server running, say the miners face a high running cost but cannot charge higher fees, they give up running non-coin mining, then there is no transaction will be verified and concluded into a block and be added into the blockchain! This will be a real Bitcoin collapse!
There must be an automatic proof or work verification solution very soon before the number 21 millions is reached. Otherwise the Bitcoin will be dead! I am a non-software-developer person. I hope I am totally wrong about this.
At any rate, if you are a faint heart person or a statist follower, don’t use crypto-currencies especially the Bitcoin for they are the enemies of the State. They are your enemies!
Bitcoin price manipulated from $150 to $1,000 by single actor – researchers
In a paper published in a recent issue of the Journal of Monetary Economics, a team of researchers examined the impact of fraudulent activity that occurred on the leading bitcoin currency exchange in 2013, and found that a single actor was “likely” behind a massive spike in exchange rates.
In their paper, “Price Manipulation in the Bitcoin Ecosystem,” the researchers from Tel Aviv University in Israel and the University of Tulsa examined Mt. Gox transactions over a ten-month period from February to November 2013, and found that approximately 600,000 bitcoins, valued at $188 million, were “acquired by agents who likely did not pay for the bitcoins.”
In an early version of the paper published by the Tandy School of Computer Science at the University of Tulsa, researchers said they discovered a group of users that had “??” as an entry for country and state fields, which usually contain location data or a null value.
After analyzing the accounts with abnormal location values, they found one account named “Markus,” which was different from the rest. Markus never paid transaction fees and “reportedly paid seemingly random prices for bitcoins.”
“Markus likely did not pay for the bitcoins he acquired; rather, his account was fraudulently credited with claimed bitcoins that almost certainly were not backed by real coins,” the researchers wrote.
The Markus account bought a total of 335,898 bitcoins, worth $76 million, over the course of 225 days.
An additional 49 accounts with abnormal location values were grouped into a collection of accounts that the researchers named “Willy.” Each of the Willy accounts bought exactly $2.5 million worth of bitcoin before they became inactive.
The researchers referred to the group of Willy accounts as “Willy Bot,” which they said collectively bought around 268,132 bitcoins for just under $112 million over the course of 65 days.
The paper claims that Willy Bots were allowed to make trades even during the times when the Mt. Gox trading API (application programming interface) went offline for several hours, while no other trading activity was being processed.
The paper states that during a trial in Japan, the former Mt. Gox CEO Mark Karpeles “confirmed that the exchange itself operated these accounts and that the trades were issued automatically.”
The researchers pointed to a Reddit theory, which claims that hackers stole around 650,000 bitcoins in 2011 and Mt. Gox founder Mark Karpales “took extraordinary steps to cover up the loss for several years.”
“By offering to buy large numbers of bitcoins, Willy could prop up the trading volume at Mt. Gox and ‘convert’ consumer ‘bitcoin’ balances to fiat money,” the researchers wrote. “Consequently, this theory holds that Willy was not trying to profit directly from these large purchases, but rather was trying to stave off collapse of the exchange.”
— Christophe Jurczak (@ExQuanto) January 9, 2018
Researchers said the fraudulent purchases had a “very strong positive association” to the “unprecedented” increase in the bitcoin exchange rate, which grew from around $150 to more than $1,000 in two months.
During those two months, the exchange rate increased by more than $20 a day, or an average of four percent. On the days that the suspicious trades were not active, the exchange rate decreased or remained “virtually unchanged,” according to the researchers.
“The publicly reported trading volume at Mt. Gox included the fraudulent transactions, thereby signaling to the market that heavy trading activity was taking place,” the researchers said, according to TechCrunch. “Indeed, the paper later shows that even if the fraudulent activity is set aside, average trading volume on all major exchanges trading bitcoins and USD was much higher on days the bots were active.”
— RT America (@RT_America) December 26, 2017
The Markus account purchased an average of 9,302 bitcoins on each of the 33 days it was active, accounting for an average of 21 percent of Mt. Grox’s daily activity.
The Willy Bot accounts purchased an average of 4,962 bitcoins each of the 50 days they were active, accounting for an average of 18 percent of Mt. Grox’s daily activity.
Researchers warned that such manipulation could be occurring in current exchanges, and advised regulators to “begin taking an active oversight role as the bitcoin ecosystem becomes more integrated into international finance and payment systems.”
Bitcoin is celebrated by supporters and admonished by skeptics because of its finite supply. There are only 21 million bitcoins that can ever be mined, regardless of the earth’s population and its corresponding demand for bitcoins. Once all 21 million have been mined, there will never be any new bitcoins (unless a change to the protocol is made to increase the supply).
Supporters love Bitcoin’s fixed supply because it harkens back to the days of the sound money gold standard. Gold shares many similarities with Bitcoin, the most obvious being its fixed supply. Gold cannot be created out of thin air in arbitrary amounts, it must be extracted from the earth and put into circulation as market prices dictate. A gold standard hinders banks’ abilities to issue fiduciary media, since at some point the bank will be forced to redeem its paper notes in gold. Bitcoin — if it ever achieves as widespread use as gold — can accomplish these same things with its own fixed supply.
Bitcoin: Gold but Better
Bitcoin takes gold’s benefits a step further, though, by being digital. The Bitcoin supply is not only incapable of being arbitrarily manipulated, it also eliminates the need for paper substitutes by being totally weightless and virtually costless to store. With gold being so heavy and taking up so much physical space, people under a gold standard tend to prefer paper substitutes for gold rather than carrying actual coins on their persons. This practice leaves gold in the bank, forcing people to trust the bank to handle their gold responsibly. Thus, even under a strict gold standard, banks can still betray their patrons’ trust and create new deposits and issue fiduciary media. Bitcoin’s digital nature eliminates this problem; since it costs almost nothing to store, and it takes up zero extra space, Bitcoin can be carried on one’s person with no extra burden. No more paper substitutes are needed, and banks no longer have an opportunity to create money from thin air.
Despite these promising benefits, people still take issue with the fact that Bitcoin has a finite supply. One issue critics like to harp on regarding Bitcoin’s fixed supply is how miners will fare once they lose their block rewards. They worry that the mining system is unsustainable because once all the bitcoins are created, miners will have to rely on transaction fees to keep themselves financially operational. Critics say that a reliance on miner fees instead of a block reward will make mining very unaffordable, which will lead to a contraction of miners, a centralization of the network, and possibly a complete collapse of the network.
Will Bitcoin Mining be Profitable After all the Bitcoins Have Been Mined?
It is true, once all the bitcoins have been mined, transaction fees will be the sole source of income for miners. The main concern, then, is whether or not transaction fees will be enough to keep miners financially afloat.
Using current mining costs as a measure of required mining profitability over 100 years from now is dubious, since we don’t know how mining technology will progress over time. It is entirely possible that mining chips will become so small and cheap that they can be installed on all electronic devices — similar to the goal 21 Inc. hopes to achieve. This development would turn mining from a purposeful business decision to an after thought, surviving in the background of daily life. Furthermore, mining hardware may become so energy efficient over the next century that transaction fees prove to be plenty to keep miners in business.
It may also be the case that transaction fees simply rise to a level sufficient for mining profitability. If, once all the bitcoins have been mined, the entire world uses the digital currency as its primary medium of exchange, then it is possible that transaction fees will rise due to an increase in the demand for transactions.
However, the likelihood of fees rising to such a rate is uncertain at this point, since the consensus in the community at present is to have a gradually increasing block size to ensure network scalability. This means that, if the block size continues to grow, people will always be able to have their transactions confirmed at low fees. This prospect may seem like a threat to the network on the surface, as it entails forcing miners to survive on low fees after the block reward is gone. But not increasing the block size may be an even larger threat to the network than low transaction fees. If blocks reach their maximum size, no more transactions can be confirmed until a new block is created, which means excess transactions will be dropped from the network. This scenario may mean higher fees for miners — since people will pay higher fees in order to get their payments through — but it would also greatly discourage people from using Bitcoin altogether, which could kill the digital currency much faster than a centralized mining network.
Although Bitcoin’s fixed supply means that miners will eventually have to give up their block rewards, it also creates an opportunity for miners to survive on transaction fees through simple monetary theory. Once all 21 million bitcoins have been mined, the supply cannot increase — regardless of growing demand. The result of this discrepancy between the supply of and demand for money is a steady and gradual decrease in the general price level, which equates to an equally steady and gradual increase in the purchasing power of money. Therefore, as Bitcoin miners collect transaction fees over time, no matter how large or minute, the funds gain value. This value appreciation across time turns fee-centric mining into a financially infeasible task to a sensible, long-term investment.
To conclude, there are several different ways that Bitcoin mining can remain profitable after the block reward goes away — the above examples are but a few in a myriad of possibilities.. Furthermore, since the block reward gradually diminishes over time, rather than disappearing all at once, miners have the chance to gradually adapt and adjust to relying more on transaction fees than revenue from mined bitcoins. The most likely combination of factors that will keep miners afloat in the future is evolving mining technology and the steady increase in Bitcoin’s purchasing power. However, our visions of the future should not be limited by our imaginations. Being unable to imagine something does not render it impossible; the spontaneous evolving and shifting of the market economy reminds us of this fact every day.
Do you think Bitcoin mining will remain profitable after the block reward goes away? Let us know int the comments below!