2014: The Year in Review

BITCOIN

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1) The Immovable Mover

The most important fact about Bitcoin is that it still exists and it still functions as it’s supposed to. Regardless of the FUD, hype and controversy, the blockchain endures. Day in and day out it keeps processing transactions.

Every day that the Bitcoin network does what it’s supposed to is a good day for Bitcoin.

2014 brought no fatal protocol flaws, no catastrophes that took the network down, no hard forks, no 51% attacks from evil governments or miners. No negative black swans never to be recovered from.

Fiat based economies are incredibly fragile and face massive existential threats from numerous angles. A strong case could be made that several major fiat currencies won’t last the decade and all bitcoin has to do to win is to stay in the game and keep existing.

The next time the world faces a 2008 type crisis, bitcoin will be there. Consistent, predictable, dependable, immovable. The fundamentals of most government currencies are so appallingly bad that it’s just a war of attrition to be the last functional currency standing.

 

2) Price

The bitcoin price is the only important metric down in 2014. It ended the year at $315, a 62% decrease year on year. And yes, the price does matter.  People who claim “it’s the tech that matters, not the price” are wrong. Profit is not a dirty word and people shouldn’t be ashamed that speculation is one of the things that drives their involvement in the movement.

Bitcoin’s market cap currently stands at $4.2 billion. For bitcoin to become the world’s largest currency, which it will, this needs to grow into the trillions.

Bitcoin is currently the world’s 103rd most valuable currency, ahead of the Icelandic Kroner and the Sri Lankan Rupee. Within the next couple of years I expect to see bitcoin break through $100 billion and overtake many other national government’s currencies.

Despite 2014’s heavy price decline, bitcoin is still up 2,000% over the last 2 years.

 

3) Hash Rate

Without a secure and dependable blockchain, the bitcoin currency is as worthless as the countless two-bit copy and paste pump and dump altcoins. Bitcoin is secured by a strong hash rate, and in this regard it has become formidable.

The network was at just 11 petahashes in January 2014. By June it reached 100 petahashes.

Now, at the end of 2014 the bitcoin network stands at a staggering 313 petahashes. This is a major blow to bitcoin’s would be enemies and should be celebrated by everyone invested in the success of the currency.

 

4) Number of Bitcoin Users

Average Daily Transaction Volume at All Time High 

* Number of Blockchain.info wallets

Jan 2013 = 100,000

Jan 2014 = 1 million

Dec 2014 = 2.7 million

* Number of Coinbase wallets

Jan 2014 = 600,000

Dec 2014 = 2.1 million

 

5) Infrastructure

Massive infrastructure has been built in the Bitcoin economy that no altcoin can possibly hope to compete with:

* $311 million of VC money into startups that offer Bitcoin based products and services (up from $92 million in 2013).

* Tens of thousands of developers working on Bitcoin (top talent leaving Google, Facebook and others).

* Big name companies accepting the currency. Microsoft, Dell, Dish, Overstock, Expedia, Time. Paypal/Braintree

* 44,000 merchants using Bitpay (up from 10,000 at the beginning of the year)

* The first Bitcoin ATM was launched just over a year ago. Now there are over 300 worldwide.

 

6) Institutional Investment

2014 was expected to be the year of institutional investment. Barry Silbert and Jeremy Alliare frequently hinted that Wall Street’s billions were about to move into bitcoin. While many Wall Street professionals are known to personally invested, their companies are yet to take on any official holdings.

2015 may see Wall Street figure out their compliance issues and start allocating funds directly into bitcoin.

 

 

ALTCOINS

Peak Altcoin Hype

“Don’t let speculative experiments at the margin distract from the most mind-blowingly awesome monetary system mankind has ever seen – Bitcoin proper” – Erik Voorhees, 2013

In 2013 a common line of thinking was that bitcoin’s value would be diluted by copy and paste altcoins (despite obvious evidence to the contrary, Peter Schiff and Warren Buffett still continue to make this claim).

2014 saw hundreds of scam coins and worthless copies come along (Dogecoin and Auroracoin are particularly memorable examples). None have come close to challenging bitcoin as a serious transactional currency with a meaningful network effect.

Litecoin was the 2nd largest digital currency in the world a year ago. Some people even speculated it would grow into a mainstream currency “the silver to bitcoin’s gold” but instead it has weakened and fizzled out. Bitcoin’s market cap is now 45x larger than Litecoin’s, up from just 18x seven months ago.

“Blockchain tech” and “Bitcoin 2.0” have become huge buzzwords.

Intense hype surrounded the Ethereum project which has so far delivered little. Vitalik Buterin became a household name in the bitcoin world and won numerous plaudits  over the year (awarded a Thiel fellowship, won the World Technology Network prize). After generating much excitement in 2014, the first quarter of 2015 brings heavy pressure to deliver something spectacular.

Counterparty is by far the most interesting project to emerge this year and is the only “altcoin” I hold. At around $4 per unit, the Counterparty currency (XCP) is a very attractive investment considering its vast upside potential.

 

 

COMPANIES

A fascinating counter-economics experiment is taking place:

Uber ignores Thailand ban.

Uber ignores German court ruling

Uber rejects rule changes from Delhi authorities

Uber CEO indicted in South Korea for Violating Transport Laws

The giant app based transportation company Uber has provided customers with a service so much better than the existing taxi services that it threatens to make them utterly obsolete.

In San Francisco there has been an astonishing 65% drop in taxi rides over the last year. Uber is threatening to disrupt the corrupt current order worldwide in hundreds of cities.

The status quo hasn’t taken this lying down, and have launched vicious legal attacks on Uber and its Libertarian founder Travis Kalanick.

 

Uber’s response has been textbook counter-economics:

1) Offer an exponentially better service than the status quo

2) Grow to a massive scale ($41 billion valuation). Gain mass support from tens of millions of users.

3) Openly disregard the State’s commands and threats. Ignore all cease and desist orders and make it politically unfeasible for the laws to be actually enforced.

This is how communism was overturned in China. People just ignored the blatantly stupid laws and went about their business despite the threats dished out by government agents. When the number of dissidents overwhelmed the number of government agents who could be bothered to try imposing the laws, the game was up for the State.

By simply ignoring ridiculous laws, Uber is challenging the government’s perceived power and moral authority.

Airbnb users are facing (and ignoring) similar threats from the state. Bitcoin and Voluntaryism will ultimately prevail by this type of counter-economic activity becoming commonplace across all areas of the economy.

 

 

PRIVACY

A few anonymous coins emerged this year, but have so far failed to gain traction. Monero is one of the more interesting ones, but my hope is that software like Dark Wallet will become popular this year, giving bitcoin users a higher level of privacy.

Even though bitcoin transactions can be traced, the scale of people using it to evade / under-report taxes will strain the government’s resources to accurately assess who “owes” what and to inflict punishment on them.

While transactions can be tracked and (potentially) attached to an individual, obfuscation over what the transaction was actually for will make it impossible for the limited number of government agents to unravel and clear the legal process in a timely and cost effective manner.

While a few high profile token arrests will be made (just as with file sharing) the increasing cost of collecting tax will rise above the revenue that can be reasonably extracted, making aggressive tax collection a losing proposition for the State.

 

 

PLACES

The Chinese government’s perceived aggression towards bitcoin at the end of 2013 has probably done more than anything to slow bitcoin’s march to total domination. In late 2013 China overtook the US in number of bitcoin nodes. Now it’s down to number 8, with less than 2% of the total.

We saw a similar chilling effect in Russia, which was number 2 for nodes worldwide before their government started making threats. Russia is now down to number 7 in the rankings.

Throughout 2014 there was frequent speculation of various countries moving money into bitcoin (Saudi Arabia, Argentina, Russia) and triggering a massive price spike. It seemed like a no brainer that Argentinians and Venezuelans would be attracted to bitcoin, but surprisingly no country has fully embraced it yet.

Remittances are growing in the Philippines and numerous bitcoin companies are sprouting up in Manila. I expect this to be a standout market for bitcoin in 2015.

Overall, the knowledge and user base of bitcoin appears to be mostly rooted in the developed Western world (US, UK, Australia, Canada). Tin-pot government’s in developing countries who claim to want to build their own “Silicon Valley of …..”  have shown nothing but hostility to bitcoin, and regular people who stand to benefit the most continue to be the most ignorant and apathetic. Turning a blind eye to bitcoin is a real missed opportunity for the developing world (Asia in particular) to gain ground economically, and raises question marks over the popular narrative of the rise of the East and decline of the West.

 

 

THE SINGULARITY

2014 was definitely an incredible year.

2014 has seen many exponential technologies move to the next level. It looks like we’ve hit an inflection point where big breakthroughs are now routine and happen too fast for any one person to keep up with (Bitcoin, 3D printing, Drones, Space, Robotics, Voice Translation, Telepresence, Deep Learning)

There is no doubt that Virtual Reality is about to make a huge impact on the world. The Virtual Reality Era has Begun. Oculus received $75 million in funding in 2013. By 2014 they were bought out by Facebook for $2 billion. Magic Leap is another company that has got some of the top engineers in the world giddy with expectation.

Jaunt VR is a promising company to keep an eye on. Speculation is circulating that by the next World Cup (2018) people will be watching the games in an environment which will feel like they are actually inside the stadium. This is a bold statement. Even if that type of technology is available only by the 2022 World Cup in Qatar, it will be hard for skeptics to deny that the Singularity is upon us.

Virtual Reality will redefine fundamental human experiences in areas like film, education, architecture, and design – Marc Andreessen

 

One of the strangest and surprising areas of progress has been in the field of brainwaves and mind control. A Double Amputee Became the first person to Control Robotic Arms with his Mind, and a team of researcher successfully achieved brain-to-brain verbal communication across a distance of 5,000 miles.

Artificial Intelligence has captured the imagination of the world. The rate of progress is so powerful and dramatic that people as distinguished as Elon Musk are worrying that this technology might run away from us within just 5 years and bring us existential threats.

Barely a week went by without groundbreaking news in space exploration, or plans to send man to Mars. Voice translation has improved more in the last couple of years than in all other years combined. Amazingly Skype have a working version of live speaking translation from English to Spanish available right now.

Powerful consumer drones have become so common that it feels like they’ve been around forever. Yet, this is the very first year they have been used to capture footage from the iconic Sydney harbour firework celebrations, demonstrating just how quickly this new technology has appeared seemingly out of nowhere.

A few years ago, the thought of 3D Printing being one day used to print organs was deemed ludicrous. Yet in 2014 they were used to build houses. remove previously inoperable tumors, and reduce the cost of prosthetic hands from $30,000 to $5. A 3D printer was even sent to space, where the first off planet manufacturing took place on the International Space Station.

The rate of technological improvement is clearly accelerating and we should expect to enjoy more thrilling and life extending developments in 2015.

 

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9 comments

  1. […] 2014 saw hundreds of scam coins and worthless copies come along (Dogecoin and Auroracoin are particularly memorable examples). None have come close to challenging bitcoin as a serious transactional currency with a meaningful network effect. – Lee Banfield […]

  2. […] 2014 saw hundreds of scam coins and worthless copies come along (Dogecoin and Auroracoin are particularly memorable examples). None have come close to challenging bitcoin as a serious transactional currency with a meaningful network effect. – Lee Banfield […]

  3. […] Litecoin was the 2nd largest digital currency in the world a year ago. Some people even speculated it would grow into a mainstream currency “the silver to bitcoin’s gold” but instead it has weakened and fizzled out. Bitcoin’s market cap is now 45x larger than Litecoin’s, up from just 18x seven months ago. – Lee Banfield […]

  4. […] Counterparty is by far the most interesting project to emerge this year and is the only “altcoin” I hold. At around $4 per unit, the Counterparty currency (XCP) is a very attractive investment considering its vast upside potential. – Lee Banfield […]

  5. […] While a few high profile token arrests will be made (just as with file sharing) the increasing cost of collecting tax will rise above the revenue that can be reasonably extracted, making aggressive tax collection a losing proposition for the State. – Lee Banfield […]

  6. […] After generating much excitement in 2014, the first quarter of 2015 brings heavy pressure to deliver something spectacular. – Lee Banfield […]

  7. […] “Blockchain tech” and “Bitcoin 2.0” have become huge buzzwords. – Lee Banfield […]

  8. […] Artificial Intelligence has captured the imagination of the world. The rate of progress is so powerful and dramatic that people as distinguished as Elon Musk are worrying that this technology might run away from us within just 5 years and bring us existential threats. – Lee Banfield […]

  9. […] Artificial Intelligence has captured the imagination of the world. The rate of progress is so powerful and dramatic that people as distinguished as Elon Musk are worrying that this technology might run away from us within just 5 years and bring us existential threats. – Lee Banfield […]

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