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George Samman Exclusive: Global Inequalities Created Need for Alternative Financial Solutions

Exclusive: Global Inequalities Created Need for Alternative Financial Solutions

Barely a decade after the last global economic crisis of 2008, economic pessimists continue to predict another impending crash on a global scale, brought on by the persisting inequalities in financial systems around the world.

Bitcoin News caught up with prominent cryptocurrency advisor, investor, and author George Samman to explore how a move towards full decentralization in the blockchain sector would be possible, why things may be looking better for the market in 2019, and why algorithmic stablecoins may be the real future of money.

George Samman has a versatile role in the blockchain industry and is currently running a proof of concept with the development team and holds the role of technical advisor for a project that is currently still in stealth mode. He is also working on a tokenomics and government model with another project, alongside his continued role as an advisor to blockchain companies. Samman often co-authors cryptocurrency reports and writes on his blog, with most of his work focusing on market trends and strategy as well as collaborating with teams on blockchain architecture and design.  

Moving towards full decentralization

As increasing numbers of institutional investors enter into digital currency, centralized exchanges like Coinbase and Binance are scooping up more traders through the promise of convenience. But many in the cryptocurrency community are concerned that centralized forces are beginning to play a major role. Samman firmly believes, however, that the future of cryptocurrency is bound to be more decentralized. This can not happen all at once though he said, pointing out that decentralization needs to be staged and it is not something you can start off with fully.

On the journey to total decentralization, Samman explained that there are trade-offs and in order to have real use cases and adoption emerge most systems will be- and are being designed to- gradually get to fully decentralized systems.

But the author had another note to add, linking the failings of the current global political system to the cause in the rise in popularity of decentralized models:

”I think the era of centralized systems is coming to an end. I don’t think it matters whether institutions come or not, the long arc of history is veering towards decentralization and I believe people are waking up to this now. Global inequality has reached levels where alternative financial systems are desperately needed. Riots and populism are the beginning of the end of centralized forms of governance as they have existed and centralized forms of money.”

Market performance

The shadow of 2018’s bad market year is still at the forefront of many investors’ minds, with nothing that looks too promising on the horizon for 2019. Samman explained what he believes went so wrong last year, pinning it down to overzealous investors and initial coin offerings.

”For me, the bull markets time ran out which ended with an irrational exuberance and market caps reaching unrealistic levels. Too much money was raised at crazy valuations  and one of the functions of bear markets is to always punish that and purge out the good projects from the bad and that’s where we are now.”

He has hopes that these negative factors have largely passed, saying the ”downside [this year] is limited”. Lots of poor projects are failing and real use cases and projects that have been working hard are going live; he pointed to these as encouraging signs. Breaking down what to expect in 2019 further, he continued: ”You also have some signs of institutional money coming in, ie Fidelity Custody and Bakkt launching. I think we can expect a long drawn out year of boring price action where lots of things are happening under the surface.  Volumes have dried up and stealth accumulation is happening.”

Samman advised investors to look out for interoperability solutions like Cosmos (a decentralized network of independent parallel blockchains)and Polkadot (a heterogeneous multi‑chain technology), saying they will ”be big deal and bring crypto to the next level”. And watch out for Bitcoin’s trading volume starting to rise again, as it could be one of the first telltale signs of the next bull market.

But for 2019, Samman really hopes to see big, solution-finding projects work and benefit from some type of adoption. As for what industry blockchain will conquer next, ”what hasn’t it conquered already?” he jokes.

The future of money

Samman’s hopes for decentralized currency are high and he has faith in their ability to replace fiat currency. He explained, ”I think the future is money systems which are not government owned, these will take many shapes and forms as we move through a giant experimentation phase but ultimately I believe some will emerge as the decentralized central banks for the internet.” The vision is for digitally native internet technologies to power the decentralized web.

But centralized currency is here to stay for a while, at least until algorithmic and cryptocurrency backed stablecoins prove they can remain stable to their namesake while maintaining the demand side. There is also the possibility that if a new bull market emerges, a lot of these stablecoins will lose value as traders and speculators use them to purchase cryptocurrency and don’t want to be “locked-up”.

That may not be a bad thing, however, as Samman explained: ”This actually would be a best-case scenario as it would be like Quantitative Easing for the crypto markets as there are billions of dollars locked up in stablecoins which could move the market much much higher.”

He recently worked as the lead author on the State of Stablecoins 2019 Report in which he explored in more depth why he believes stablecoins will evolve past the asset-backed subcategory dominant today, to be replaced by crypto-collateralized and algorithmic stable coins. Primarily, it goes back to his lack of faith in fiat currencies and his belief that an alternative form of currency will prevail.

To read more about George Sammans work and views, visit his website, LinkedIn or Twitter


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Bitcoin an Exotic New Asset Class

Bitcoin represents a difficult categorization effort by traditional financial organizations, resulting in some seeing this exotic new asset class as much as a hybrid of a currency as it is an investment.

The Commodities Future Trading Commission (CFTC) has declared Bitcoin a commodity, the Internal Revenue Service (IRS) has declared Bitcoin to be property, the Securities and Exchange Commission (SEC) polices the Bitcoin market like it’s a security, yet Bitcoin is mainly used as a currency.

Bitcoin was originally designed by Satoshi Nakamoto to be the first cryptographically secure and blockchain-based currency, and is regarded as the first cryptocurrency. Bitcoin is cryptographically secure and not even the most powerful supercomputer can hack it, so no Bitcoin transaction or wallet can be hacked, unless the password of the wallet software is compromised.

Bitcoin can be sent instantly anywhere in the world, making it an excellent choice for international finance. There is no waiting time like there is with banks when sending large amounts of money, and the fees for Bitcoin are usually extremely low. As of September 2018, someone could send as much Bitcoin as they want, whether it be USD 1 or USD 10 billion, for a fee less than USD 1. No fiat payment network in the world can compare to Bitcoin in terms of fee efficiency.

Perhaps most importantly, Bitcoin is decentralized, so transactions and accounts can never be frozen or seized. This is unlike every fiat payment service in the world, which can easily be seized or frozen. Additionally, Bitcoin transactions are immutable, meaning they can’t be reversed, making it safer for merchants than anything else.

Due to Bitcoin’s advantages over fiat currency, in addition to its 99.999% or so uptime over the course of nine years, in addition to global infrastructure and demand, people are buying and holding Bitcoin as an investment since they expect it to gain value relative to fiat long term.

There is one more very important factor when it comes to investment. Bitcoin is decentralized and coded so it can’t be printed at will or manipulated. There is a fixed supply of 21 million Bitcoins once mining is complete, ensuring a lack of money printing, unlike fiat currencies run by central banks which can be printed at will. Central banks have other powerful mechanisms besides money printing to control their fiat’s value, such as interbank interest rate modification and the issuing of debt denominated in their respective fiats.

Central banks have been manipulating their fiat currencies, mostly by issuing debt and money printing, as leverage to balance their national budgets. Bitcoin does not have this problem since it is not run by any individual, entity, or nation. Bitcoin is not being abused to balance budgets, unlike fiat.

Due to this, fiat currencies are experiencing tremendous inflation long term. This makes Bitcoin appear to be an ideal investment choice as a safe harbor to weather the global fiat inflation crisis.

Eventually, perhaps Bitcoin will mature and become the prime global currency, and be used mostly as a currency rather than an investment at that point. But for the foreseeable future, Bitcoin is an exotic asset that is both a currency and an investment, which leaves government regulatory agencies confused and in conflict over how to regulate it.


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Hyperbitcoinization: The End Of Fiat Currency, $100M Bitcoin?

Hyperbitcoinization is defined Bitcoin commentator ObiWan Kenobit as “a theoretical state wherein Bitcoin displaces legacy currencies and becomes the dominant if not only method to exchange value”. Hyperbitcoinization was first discussed by Nakamoto Institute founder Daniel Kraswisz in 2014, and ObiWan Kenobit thinks it could lead to Bitcoin prices as high as USD 100 million per coin.

Essentially, hyperbitcoinization believers argue that Bitcoin is superior to fiat currency, and the demonetization of fiat as Bitcoin rises to dominance is inevitable. This is because Bitcoin is non-inflationary: it has a fixed maximum supply of 21 million coins, unlike fiat currencies which can be printed at will by central banks. Money printing and the associated hyperinflation has led to the collapse of Zimbabwe’s native fiat currency and currently, Venezuela and Iran are on track to similar fiat currency collapses. Even the most powerful fiat currency, the USD, experiences constant inflation from money printing.

Also, Bitcoin gives power over money back to the people. Bitcoin is decentralized, so no centralized authority can stop Bitcoin transactions. This is much more ideal than the current fiat system where money can easily be frozen and confiscated by banks and the government. Additionally, Bitcoin is borderless, breaking the current paradigm where citizens use their local government-backed fiat currency. Bitcoin is designed to work seamlessly as a global currency.

Due to these advantages, hyperbitcoinization believers think that Bitcoin adoption will steadily grow and eventually, it will cost people more money to reject Bitcoin than to accept Bitcoin. This will be the tipping point that leads to rapid adoption and the replacement of fiat with Bitcoin.

ObiWan Kenobit describes the evolution towards hyperbitcoinization in three phases: equilibration, nucleation, and crystallization, which is the same theory behind the growth of crystals. Equilibration was during the early days of Bitcoin when it first gained monetary value, and innovators and miners dominated the field. Currently, we are in the nucleation phase, which involves engineers, exchanges, wallets, and mining pools. Nucleation has a high energy barrier and many factors are needed for crystallization.

The latter parts of nucleation are defined by increasing trading activity, increasing practical uses, fiat onramps, and custodial solutions. During crystallization, Bitcoin will grow exponentially until it becomes the dominant global currency, and this phase will be defined by institutions, banks, and governments adopting Bitcoin. It can be argued that crystallization has already begun.

ObiWan Kenobit argues that Bitcoin will hit USD 100 million, based on a rough calculation that total money supply is USD 1.8 quadrillion and there are a total of 16.8 million accessible Bitcoins, since millions of Bitcoins have been presumed lost. In a recent article on BitcoinNews, this topic was explored, and it was found that there is roughly USD 90 trillion of real money in the world, which would lead to a Bitcoin price near USD 5 million in the event of fiat being extinguished. The 1.8 quadrillion figure is from including government debts, real-estate, and derivatives in the total amount of money, which isn’t accurate.

If hyperbitcoinization does occur then fiat would lose most of its value, so perhaps Bitcoin would hit USD 100 million or even orders of magnitude more than that. If fixed relative to 2018 valuations and ignoring all future fiat inflation, then Bitcoin is unlikely to get much higher than USD 5 million, since at that point Bitcoin’s market cap would include all of the real money in the world.


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Bitcoin Predicted to Dominate Future of Online Marketplaces

Bitcoin is becoming the world’s number one internet currency. This is according to Jack Dorsey, the owner of Square. He says that Bitcoin will emerge with time to become the Internet’s “native currency”, with the increasing popularity of the currency to overrun other internet currencies and become a preferred medium of exchange.

Bitcoin’s predicted future dominance

Jack Dorsey predicted the future dominance of Bitcoin back in March 2018 during an interview with Elizabeth Stark of Lightning Labs, where he expressed belief that when native internet currency emerged, Bitcoin would be at the fore..

Speaking during the Consensus 2018 Conference in New York, he said that the internet deserved a native digital currency that would become the mode of all payments for all transactions running across the web.

The digital marketplace

The concept of digital currency is entrenched in the world of online trade. In many instances, new digital currency such as Bitcoin has been the subject of discussion.

“Similarly, a day never lapses at Square without people discussing the idea of Bitcoin dominating the future of all internet transactions,” added Dorsey. Despite some people being skeptical about the digital currency, the open access policy will inspire its quest for dominance in all internet payments.

Payments solutions boosting the rise of Bitcoin

Additionally, the payment solutions developed for blockchain recognizes the significance of Bitcoin.

“At Square, any payment that comes across our table, the seller should be able to accept it,” remarked Dorsey. Square is in the payment industry and applauds Bitcoin’s role in ensuring swift and safe payments through the internet.

Square has a system that accepts Bitcoin payments. According to Mike Brock, an engineer at Square, the reason why they settled on Bitcoin is because of its simplicity.

Simple payments

Mike and Dorsey were eyeing simple internet payments that would work like any other common dollar payments. With Bitcoin, simple transactions like coffee purchases would not look any different as a transaction, so much so that cashiers might not even notice that the payment was in Bitcoin.

Square will build systems that will accommodate the payments for consumers and merchants. It wants to push for the acceptance and the dominance of Bitcoin payments by developing payment solutions. However, according to Dorsey, the goal for all these payment solutions must remain the same – just like walking into a coffee shop and making payments with Bitcoin.


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Bitcoin like a Regular Currency, Says St Louis Federal Reserve

In a blog entry posted 25 April, the Federal Reserve Bank of St. Louis likened Bitcoin to fiat currencies in a validation of one of the core premises of the currency.

The post, titled Three Ways Bitcoin Is Like Regular Currency, is based on research previously conducted by the reserve bank. While the study found that ”Bitcoin units have no intrinsic value”, it also acknowledged that currencies “such as the US dollar, the euro, and the Swiss franc… have no intrinsic value either”.

This provides a valid counter-argument to the misguided criticism that claims Bitcoin has a monetary value of zero because it is not tied to any real-world commodity. As the research points at, since the dismantling of the gold standard in the 1970s, the vast majority of national reserves rely on trust as a medium of value exchange.

The US dollar, for example, relies on a trust in the government and economy for their transactions to be facilitated. Bitcoin and cryptocurrencies, on the other hand, rely on computer coding and for the majority, the blockchain to facilitate transactions.

Libertarian proponents of cryptocurrencies have also argued a similar case to that of the Fed’s new study, but with an entirely different conclusion reached. They believe that cryptocurrencies are in fact a better alternative to national currencies, as they are not at risk of devaluation via inflation.

Bitcoin instead has a strictly fixed supply, as opposed to the Fed that has the ability to expand the money supply, even if not directly through printing more bank notes.

While the post does not directly endorse the use of Bitcoin or other cryptocurrencies, it does provide a certain amount of credibility, and authority as the comments come from an American federal agency.

However, the reserve bank of St Louis has previously been skeptical of Bitcoin, posting an entry in February 2015 that demeans the currency as inefficient. Some of the reasons cited in this post include the inefficiency of requiring mining as a proof-of-work model and the energy wasteful nature of this process.


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