Tharp's Thoughts Weekly Newsletter (View On-Line)
$700 Discounts End Soon on May Workshops,
Ends Today on Systems Development Workshop
There are only a few seats left in the How to Develop a Winning Trading System workshop. Register today if you want to take advantage of the $700 early enrollment discount.
Mark McDowell will help you understand bear markets and how to profit from them in the upcoming Trading in a Bear Market Workshop. The early enrollment discount for this new workshop ends next week.
Also next month, Ken Long will present the popular Swing Trading Workshop at the Van Tharp Institute May 16-18. The discount on this workshop will be ending soon as well.
For our full workshop schedule, including discounts and pricing, click here.
Bitcoin, The Blockchain and Distributed Systems
Dave, one of my two best friends in college, was a great conversationalist and debater. When a discussion no longer interested him, however, he would finally say, “Personally — I feel strongly both ways”, and then walk away. (Heaven help the hapless soul who would drag him back into a conversation after that… but that’s a story for another day.)
Investors and traders, however, can’t feel strongly both ways if they want to take a position – otherwise they sit on the sidelines. In certain situations, they might sit on the sidelines if they have trouble establishing the long-term value of a company. I take some solace in the fact that I’m not the only one trying to figure that out in the case of media companies like Twitter (TWTR):
Likewise, a number of people are having trouble establishing the long term value of Bitcoin. Is it a flash in the pan or the next big thing? When I started to dig into Bitcoin, I figured I could clearly and quickly answer for myself how long the cyber currency would remain relevant. (As I said in the first article in this series, I don’t care to fade the Oracle of Omaha over the long haul.) It hasn’t happened nearly as quickly as I would have imagined but as I continued to dig deeper into Bitcoin, a number of aspects about it have become clearer. Let’s look at the most important ones.
Bitcoin contains truly disruptive technology (the blockchain) that will usher in a new era of secure Internet transactions. Ultimately, this technology will reach far beyond currencies and payments (more on that below). But alas, like the Apple Newton (see Part 2 in this Bitcoin series), I now believe that Bitcoin itself is most likely to be relegated to a niche role in the cyber currency arena, though it could find many other ways to monetize itself. Finally, there are some current companies that are likely to thrive and some that will be hurt as the blockchain starts to exert its potential.
On a side note, I’ve had a tough time writing this article. Every useful observation or article usually led me to five more articles — or even ten more. I’ve learned much and grown in my appreciation for a lot of smart people. But it has taken forever! To be honest, so much reading produced some really good examples of my synthesis of information and probably some that were someone else’s. For any of you who are interested in digging further on your own, I’m including a few links for the best stuff I’ve read on the subject. Let’s call it an erstwhile bibliography and consider that I couldn’t have written as informed a piece without those insights.
First — Some Insightful Observations About the Internet
One of the most intriguing pieces that I read in my research is the manuscript of a talk given by Lev Sergeyevich Termen1. Well-written, very informative and ultimately sad, it chronicles the scary history of Russia’s contribution to technology development. He’s not even talking about Bitcoin, but in his section, appropriately entitled, “Rant” — he touches on why Bitcoin won’t be allowed to win the cyber currency game (though, once again, it certainly enables whoever does win):
“Technology concentrates power.
In the 90's, it looked like the Internet might be an exception, that it could be a decentralizing, democratizing force. No one controlled it, no one designed it, it was just kind of assembling itself in an appealing, anarchic way. The companies that first tried to centralize the Internet, like AOL and Microsoft, failed miserably. And open source looked ready to slay any dragon.
But those days are gone. We've centralized the bejesus out of the Internet now. There's one search engine (plus the one no one uses), one social network (plus the one no one uses), one Twitter. We use one ad network, one analytics suite. Anywhere you look online, one or two giant American companies utterly dominate the field.
And there's the cloud. What a brilliant name! The cloud is the future of online computing, a friendly, fluffy abstraction that we will all ascend into, swaddled in light. But really the cloud is just a large mess of servers somewhere, the property of one American company (plus the clouds no one uses).”
So over time, the once anarchic Internet and its associated platforms have become dominated by several centralized systems, each having virtual monopolies in their field: Google, Apple, Facebook, Amazon and Microsoft. When we talk about “computers”, “smartphones”, or even “The Internet”, we’re really talking about a group of technologies being developed, shaped, and controlled by one or all of these entities. Author/Futurist Bruce Sterling calls these entities “The Stacks.”
Jon Evans, a truly astute writer at TechCrunch, has this to say about The Stacks:
They don’t want much, those Stacks. Just your identity, your allegiance, and all of your data. Just to be your sole provider of messaging, media, merchandise, and metadata. Just to take part in as much of your online existence as they possibly can, and maybe to one day mediate your every interaction with the world around you, online or off.2
So how do The Stacks relate to Bitcoin? Bitcoin does little to enrich the coffers of The Stacks so they have no reason to embrace it. And since it actually threatens parts of their kingdoms, they will probably defend against any similar enterprise that they cannot either monetize or control.
Which brings us to the next big things — distributed systems (things talking to things) and distributed computing (in a simplified sense — networked computers that pass messages). This last one is where Bitcoin has taken a revolutionary step forward, because its core, the blockchain, is a disruptive technological breakthrough. The blockchain is a “distributed consensus system” that permits anyone to securely verify and store transactions and other data. Because the whole network validates those transactions, there’s no centralized authority required. If you have some interest in understanding “distributed consensus”, I encourage you to read Yonatan Zunger’s article3 (he’s one of the prime movers behind Google+).
Bitcoin, the Blockchain and Distributed Systems
Distributed systems are bringing about new ways of doing things, revolutionary much as the personal computer was about thirty years ago. Those in my parents’ generation who tried to ignore the impact of personal computing got passed by in almost every field from technology to visual arts to business. Distributed computing threatens to become a similarly ubiquitous, mysterious and ultimately redefining force in our day-to-day lives today.
The blockchain is a direct outgrowth of distributed computing and promises a host of new applications. As an example of where the blockchain may be used next, take a look at the list of 84 applications that Ledra Capital Twitter followers helped it to compile in just three hours. These ones really struck me:
- Online voting — in the same way that Bitcoin does not want its “coins” reused, we now have the technology to insure “one person, one vote.”
- Physical asset keys — this could revolutionize hotel keys, house keys, car keys, etc.
- Software piracy protection
- Public records
- Personal medical records
Any transaction that needs to be protected or verified could be moved onto a blockchain technology.
. . . And Investors Say “So What?”
As a disruptive technology to the Internet and far beyond, blockchain has the potential to impact a number of individual companies in a big way.
What will be next major step forward for the blockchain? Most likely, one of The Stacks will embrace it for some aspect of business. Let’s look at one possible example. Apple is SO big and successful already, how can it continue to grow? How about iCash? Or how about Apple using blockchain verified transactions to become THE dominant music/video broker on a global scale? We could go through similar thought experiments for each of the stacks.
Are there likely to be companies that blockchain technology could hurt? Definitely. Unless they find a way to embrace or innovate in the cyber currency world, transaction companies like Visa (V) and Mastercard (MA) and the PayPal division at eBay (EBAY) could be hit in the long term.
Finding the start-ups that could benefit from cyber currency acceptance and from distributed computing / blockchain adoption is proving to be a bit tougher. I am currently doing a deep dive into that area but . . .
If you have any thoughts about cyber-currency or blockchain startups, or any thoughts in general about the topic, I’d love to hear them. Just send an email to drbarton “at” vantharp.com.
Until next time…
Bibliography / References
Lev Sergeyevich Termen’s talk manuscript: “Our Comrade the Electron: https://static.pinboard.in/webstock_2014.htm
Jon Evans of TechCrunch “The Internet: We’re Doing It Wrong”
Yonatan Zunger “How Your Data is Stored, or, The Laws of the Imaginary Greeks”
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Trading Beyond the Matrix:
One Way or Another
I loved Trading Beyond the Matrix, from the first word to the last. I am truly moved and inspired by it, finding myself able to relate to everyone involved in writing it.
I realized that I am not alone in my struggles to trade successfully, deal with life’s challenges and expand my spirituality. We are all students in the same classroom called “Life.” No matter our background, the country in which we were born, or our level of education, we all look for the same purpose in life: to find happiness, inner peace and love for ourselves and everything in the universe. The only place we can find those things is deep within us, not in the material world where most of us search hopelessly for decades. This book gave me countless examples to confirm this truth.
I strongly believe that when we are ready for growth, the door of knowledge will open, the appropriate books will be found, the right website will appear. We will be at the right place, at the right time, to meet the right person who will give us the wisdom to move on our way to self-discovery. I have been on this road since high school, when my curiosity for answers brought me to religious youth group meetings led by a priest. I was not religious, but at that time these meetings were the only place to talk about any spiritual theme (considering it was in Hungary in the mid seventies behind the “Iron Curtain”).
Since then I have read many books and have been involved in several life-building activities, but after 30 years of inching along, the first big milestone was completing the exercises in Hale Dwoskin’s book, The Sedona Method. What I find remarkable is where I found the recommendation for The Sedona Method, which was in Dr. Tharp’s book, Super Trader. I lived my life in “darkness,” in constant fear battered by depression, anxiety, panic attacks, the squeeze of AGFLAP, and falling well below 200 on consciousness scale, having no effective coping skills. All I knew was how to suppress my feelings. My only relief was finding ineffective ways to “escape” from my misery with temporary “cures” like watching television, seeking refuge in relationships or excessive exercise.
From Hale’s book I learned about CAP (Courageousness, Acceptance, Peace). CAP showed me the light at the end of the tunnel and it was just the beginning. From Trading Beyond the Matrix, I now have insight into other powerful ways to deal with my “baggage” that has accumulated over the years. I am now able to re-evaluate my thoughts, as described in The Work by Byron Katie, and have been redeveloping my belief system using Dr. Tharp’s tool, the Belief Examination Paradigm.
What excites me the most is that the solution is not somewhere in the distant future, meditating in lotus position for decades and waiting for the “enlightenment” to happen, but it is in the now — when life is actually happening. There is no other system, course or school in the world that gives people all the benefits that Dr. Tharp’s Super Trader Program provides: the spiritual growth, psychological and technical readiness to trade the market effectively, and hands-on supervision and guidance through Dr. Tharp himself. This book answered all of my questions and more.
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