Girl, You’re Special

(A rap song for my little girl, Kristin.)

Hey, girl, you tell me you’re not special?
I’ve got your number girl, and I’m talking to you right now.
Imagine that, girl.
I’ve got your number.
Your number out of billions of other numbers.
I could be talking to a billion other girls right now, girl.
I’ve got your number and I am talking to you!

Look at your number girl.
It’s got a country code.
That country code is 1, number one.
After that country code girl, your number has an area code.
And in that area code, out of millions of other numbers, I’ve got yours.
No other number but yours.
Imagine that.
Girl, I could have called a billion other numbers around the world.
I’m talking to you now, girl!
When I call your number,
I first key in your country code, out of hundreds of other countries, I touch your country.
I then touch that one area code in your country, out of hundreds of other areas,
I touch that one place where you live, girl.
And within that area, I touch your number, and now we’re talking.
Out of millions of other numbers in your area, I touch one number, your number girl.
And you say you’re not special?

Hey girl, look, there are billions of conversations going on around the world right now.
Billions of conversations, billions of connections, right this minute.
Out of all those billions of connections, girl, there’s one and only one that connects me to you!
So now you see, girl, how special you really are.
And you say you’re not special?

Posted in Amateur Philosophy | Leave a comment

Incantation Programming

#incantationprogramming

The magic of myth and legend has come true in our time. One types the correct incantation on a keyboard, and a display screen comes to life, showing things that never were nor could be…. The computer resembles the magic of legend in this respect, too. If one character, one pause, of the incantation is not strictly in proper form, the magic doesn’t work. Human beings are not accustomed to being perfect, and few areas of human activity demand it. Adjusting to the requirement for perfection is, I think, the most difficult part of learning to program. ~Frederick Brooks

Are systems becoming easier to use?

I remember when I assembled my first PC a long time ago. There was no operating system, just a brick with switches in front, and inside was a very simple 8-bit processor. To program, I had to enter one eight-bit code using the switches, one byte at a time. Nobody else at home could use it except me, and its usefulness for anything other than assembly programming fun was dubious at best. I was so proud of the day when I programmed it to play the bumble-bee tune.

Fast forward to today, and I am typing on a respectable Surface tablet, whose usefulness cannot be doubted. The difference between that old 8-bit system and the Surface is mind-boggling: 8 bits versus 64, 1 kilobyte of main memory versus 2 gigabytes, front-panel switches versus a full keyboard that also doubles as a cover, 10 kilograms versus less than a kilogram in total weight, LED lights versus a high-resolution screen, and on and on.

In terms of software, the contrast is even more mind-boggling: no operating system versus one that is more complicated than that run on mainframe systems a couple of decades ago. A programming system that makes it easy to churn apps for any task imaginable.

Clearly we have progressed so far. Or have we? Sometimes I have my doubts, like when I was explaining to my sister (who is almost as old as I am) over the phone how to drag-drop a file from a folder to dropbox.com. She got it done, but I felt that the only proper way to teach her was for me to take control of her PC remotely. Why can’t she just do it using voice commands? “Move file X from PC folder to dropbox.com.”

Voice commands now work too, but there is a catch. You have to be very precise in your “incantation”. Wrong incantation, and you get the wrong results. This makes our computer manuals no different from sorcery books. May be there’s a better way to communicate with computers, but for now precision of language is most important.

Of course precision of language is also important in the practice of law. I believe this is why lawyers love their laptops and tablets too.

Posted in Computers and Internet | 2 Comments

What is the 51% Problem?

With the sudden rise of GHash.io as the number one mining pool, the 51% “problem” has again come to the forefront of people’s attention. It’s about time we pay attention ourselves and think clearly about this issue. At the outset, I have to say that I think this is a non-issue. What is surprising to me is how it is even an issue in the minds of the leaders of the Bitcoin movement themselves.

Now why do I think it is a non-issue?

Technically speaking it is clearly a problem: whoever controls the simple majority of hashing power CAN control the network. The question is, will the individual or group of individuals who gain such control ruin themselves? In the end, that is precisely what it means to bypass the rules that the network enforces on everybody: if you control the simple majority of hashing power, bypassing the rules is tantamount to ruining yourself.

Say you own 51% of a successful company. Will you do anything to ruin that company? I am not surprised that a lot of people think so. A lot of people think that capitalists are prone to fool people by building up the reputation of that company thereby increasing its price, and then all of a sudden sell its shares just to make a profit. Well, this does happen sometimes, but it very rarely happens to companies with a solid reputation.

The fact is that, in the short history of Bitcoins, one mining pool or another has been the number one. Previously the number one mining pool was btcguild.com. I believe that Btcguild could have attained 51%, but the Bitcoin community urged them not to, and Btcguild heeded the call. I had no problem with Btcguild gaining 51% or even more, and I don’t have a problem with GHash.io gaining such control now.

I believe that attaining 51% is untenable anyway. The natural tendency is for there to be several business entities (not a single entity) who dominate any sector of the economy by more than 50%. Such is the nature of competition when prices are in equilibrium: if attaining 51% is so profitable, the second best entity in the race won’t be far behind.

Looking at it from a philosophical perspective, in the long history of capitalism, the issue of 51% has always been there. It has come in several forms, but this persistent fear of a dominant force has appeared now and then. It has been a central thesis of most philosophers who have come and gone to attack capitalism, foremost among them being Karl Marx.

This fear of a dominant force is now even part of the body of ineffective laws that big companies in the U.S. have to comply with, in the form of the so-called Anti-Trust laws. I call these laws “ineffective” because these have been used mostly by lagging competitors to bludgeon highly successful companies. These laws have mostly not accomplished what these were intended for.

Posted in Computers and Internet, Money and Economics, News and politics | Tagged , , | Leave a comment

The Concept of “Pure Money”

Recently I read about Alan Greenspan’s comments about Bitcoin to the effect that it’s nothing but a bubble phenomenon. Crypto-currencies are a bubble because these things have no “backing”.

What Alan fails to understand (and what I failed to understand back in 2011) is that money does not need backing. It used to be that fiat money was indeed backed by the government that issued it. It used to be backed by gold, and gold has its natural value as metal. Nowadays, which country can claim that its fiat currency is backed by gold? In reality, fiat currencies are just like any crypto-currency in this regard: no backing.

Ludwig von Mises, in his magnum opus, “The Theory of Money and Credit” teaches that there are two important components in the value of money: its natural use value (i.e., gold *as* metal), and its value when used as a medium of exchange. When gold deflates, its natural value diminishes with respect to its value as medium of exchange. When it inflates, its value as money can decrease to the point that people start using it more for filling teeth and as conductors in integrated circuits.

Crypto-currencies have no natural use value. Crypto-currencies are just numbers stored in their respective networks. They’re not worth anything. They have no “backing”. It does not mean however, that they have no money value. In fact, they are very useful as media of exchange. And therein lies their value: Crypto-currencies are a form of “pure money”.

It’s interesting to note that Ludwig von Mises himself did not conceptualize such “pure money” to be possible. I can’t blame him because computers and the internet have not come of age in his time. I do fault Alan Greenspan, though, for not understanding what crypto-currencies are. I expect more from him because he used to be the Fed Chairman.

Posted in Uncategorized

Total Market Breakdown

It took a couple of days after typhoon Yolanda has left for people to realize how devastating she has been. The hardest hit was the island of Leyte in which more than a thousand dead have been recovered, and the casualty count is still climbing as more dead bodies are found. This morning I tried to explain to my nine and ten year old how it is like to survive the typhoon itself in that island. I asked them to imagine that we were in that island right now, and that we all survived, in spite of what happened there.

My wife objected to the scenario I was painting: “But don’t you think we would have flown to the island of Mindanao or even to Manila even before Yolanda struck?”

“Remember that we here in Cebu City got the same warning”, I explained. “We got the same Storm Signal #4 as Leyte. Why did we decide to stay? The fact is that there was no way to predict how hard Yolanda would hit any one island. The inhabitants of Leyte stayed, just as we would had we lived there. The path she took was not exactly as predicted because predictions are just that, predictions. The path you saw drawn on TV in vivid colors before she hit any island was a probability map, not an accurate navigational map of a ship. We need to understand that.” She nodded her head in agreement.

Let’s imagine we are in that island right now. I want to paint a picture how horrible it would be, how difficult it is to keep surviving in a situation where there is nothing you can buy, and there is total market breakdown, for that is one after-effect of a calamity, total market breakdown.

In the morning after the typhoon, we find the ground floor of our apartment filled with mud. There is no electricity, and so we try to save as much food as we can from the refrigerator. We realize that by tomorrow, we will be out of food and water, and so our first instinct is to go buy food at the nearby grocery. But one of our neighbors tells us that she had gone there, and the neighborhood grocery is all in shambles. People have looted whatever was left, and there was absolutely nothing to pick up, much less buy, by the time she got there in the early morning light. It does not take long for us to realize that the same fate has befallen all groceries in the city. We hear on the radio how a big grocery store was attacked by swarms of hungry people. The lone guard attempted to control the crowd, only to be killed himself. We can only imagine how his family is now suffering in his absence.

We need to decide what to do. Our prime objective is to get food and water. How? Our car still has some fuel left. May be we can drive to where there may be some food left. However, we hear on the radio that the whole island is devastated, and we can easily run out of fuel in the middle of nowhere looking for food and water. We decide to stay put. We cannot do anything but pray. In the evening, even starting the fire for cooking is not easy. We find out that our cooking gas fuel tank is empty. We gather wet twigs and branches to start a fire.

In the following couple of days, we start to feel the pangs of hunger. The kids are crying all the time. We start to smell this terrible stench of dead bodies still uncollected. There are dead cats and dogs all over the city, not to mention dead human bodies still undiscovered in some crevices and abandoned houses. Why is it taking so long for the rescuers to reach us, we wonder. I suggest that we start thinking about catching mice that somehow start to proliferate everywhere. I ask our maid whether she knows how to cook freshly caught mouse. She grimaces and says she will never cook a mouse, much less eat it.

Pre-Calamity Functioning Market

Indeed, why is it that help is always slow to arrive in any calamity? Before the calamity, when everything is normal, we take for granted so many things around us: businesses that literally put food on our table. We forget that when we go to the grocery, food does not just get there on the shelves for us to pick up, but that is what it seems. We don’t realize the sheer number of people involved to get all kinds of food on the grovery shelves. Early in the morning on any normal day, trucks would arrive at the grocery to deliver both perishable produce and packaged goods. Every food item is delivered from somewhere else, may be middle men who have boght the items from some other supplier, may be farmers. Imagine the number of people involved to produce each item. How does it all happen? How do the producers know exactly what kind of item to produce, and how can they get their produce to the market on time? How do the distributors and middlemen organize themselves so that every item is delivered and distributed to all grocery stores on a daily basis?

In a functioning market, there is nobody coordinating the truckers, the distributors, the middlemen, and the producers. It’s all based on the idea that each one of these market participants are in it for the money. The better each one of these participants serve their markets, the more profits they get. By its very nature, the market rewards those who can deliver food from the farmer to the consumer in the most efficient manner. How does this happen, as if by magic? Each one of us participates in this phenomenon: by simply choosing to buy the best that our money can buy at the grocery on a daily basis, by doing so we reward those who can deliver the best product for the least cost. The price of each item in the market serves as a signal, a feedback to the producer, how much of it to produce.

Helping Is Not Easy, and Neither is it Simple

When a calamity like typhoon Yolanda hits the islands, we get a taste of how it is like to live without the market. We cannot expect goods to be delivered as efficiently. People think that giving is all that is involved in helping. I take my family to a donation center and donate food and water. I remind them how complicated and difficult it is to deliver and distribute what we just donated to the victims. In order for every donation item to get to its intended recipient, think of all the logistics and planning that has to happen first before such endeavor can even begin. What you are doing is basically substituting a hierarchical logistical system for the most efficient delivery and distribution system a market can provide. The substitute system will have to be centrally planned and coordinated. If not, you may miss an area and the consequences would be severe for that area. Or you can simply deliver the wrong goods to the wrong place. People would greatly suffer while a vast quantity of food can lay rotting in some storage building. No wonder you need a regimented, obey-all-detailed-commands type of organization like an army to replace all the logistics of a well-oiled market.

A news item relates that PNoy walked out of an organizational meeting out of frustration. We complain about the inefficiency and think that PNoy as president should get down and dirty to get it all done. It’s not that simple. It’s more like formulating a strategy for war than anything else. There are strong disagreements among the different government agencies. Any meeting to formulate strategy can easily turn into a shouting match. None of those C-130s would be of any help if you don’t have the goods all ready to be delivered. None of those hundreds of millions of dollars donated by other countries would be of any help if an agreement cannot be reached how best to use them. I am sure that, given the climate of mistrust of government right now, none of PNoy’s more reputable cabinet members would want to handle such large amounts of money. It is a political hot potato.

I Propose an Emergency “Market”

To the degree that the authorities suppress the market, hunger and starvation on a mass scale can occur. The most efficient organizations, like the Red Cross, are huge, well-managed organizations. Executives of these organizations are skilled in running such big organizations, especially during an emergency. These skills require a market, and indeed these organization reward their leaders well. Some of us think that these people should not be so rewarded, thereby killing the market for organizational talent in these big organizations. If this happens, and organizational skills become lacking in charitable organizations, hunger and starvation can happen in the time it takes to distribute food and water.

Our instinct is to reward charitable people and punish the profit seekers, especially during a calamity. Such instinct is nt necessarily beneficial. For example, we have laws that punish “profiteering” or “price gouging” during a calamity. Our Christian instincts lead us to promulgate such laws. My opinion is that such laws can be very harmful. Imagine, again, being in Leyte right now. What you need is food more than anything else, because you happen to have a large tank full of rain-water in your backyard. How can the authorities know this fact? They have no way of knowing that you need food more than anything else. Or may be what you need most of all is medical supplies because your wife is badly bruised and just need some ointment to heal the wound and prevent infection. There is no way that the authorities can know all of these circumstances for every family. No way. So you would be very lucky to receive exactly what you need in a centrally planned distribution system.

Now imagine that instead of delivering goods outright, the authorities focus on establishing an emergency market. Prices are not controlled, and profiteering is not prohibited in any way. Money is then distributed, instead of goods. It is easier to distribute money than goods: in the worst-case scenario, a charitable organization can just distribute money by throwing bills in the air from a helicopter. People can then buy goods from a market that will find its way among the ruins to deliver. Calamity victims would then decide, based on their individual circumstances, what to buy from the emergency market. Those businesses that deliver first to the hardest-hit location will be rewarded. Of course, charitable distribution systems would still be allowed, to ensure that those not strong enough to even pick up money dropped from helicopters are taken cared of. I am not claiming that such a system would prevent horrible tragedies, but I do claim that the current system of total market breakdown is more catastrophic in terms of the sheer number of people dying because they did not receive exactly what they needed.

Posted in Money and Economics, News and politics | 2 Comments

The Future is Here, and It’s Wonderful

This is an illustration of what it’s going to be like when Bitcoin or something like it becomes more dominant than any fiat currency.

At the end of every month, from work you get paid in Bitcoins, say 100 miniBits. (A miniBit is one-thousandth of a Bitcoin, a microBit is one-milionth.) That money doesn’t get “directly deposited” in a bank. The Bitcoin infrastructure does not need banks. Instead, that money gets “deposited” by your company directly to your Bitcoin account. So on the first day of the following month, you check your account by opening a simple app on your smartphone, and verify that indeed, 100 miniBits have been deposited. (To simplify the illustration, let’s omit taxes and other possible monthly deductions.)

You work mostly from home, driving to the company office only when there is a meeting. Just before leaving for a meeting, your wife asks whether you can drop by the grocery store. Sure, you say, and asks her to send you the grocery list in a text message later, preferably after the meeting so you are also reminded by her message. The text message has the following list, together with maximum prices beyond which she instructs you not to pay, but instead to drive to another store for those.

One ten-kilo bag of rice – 25 microBits
Two kilos of Tilapia fish – 135 microBits
One small bag of ground coffee – 5 microBits
One dozen eggs – 12 microBits
One liter of milk – 23 microBits

The total being 200 microBits. As you enter the grocery store, the Bitcoin program in your smartphone detects that you are in a business establishment, and automatically gets ready for any payment you may make to the Bitcoin receivable account number of that establishment. It does that whenever you are in the vicinity of any store registered with the Bitcoin network, just in case you decide to buy anything.

You pick up the items one by one, and as you pick up each one, an RFID detector on your smartphone identifies what you pick up, prompting the Bitcoin paying program to ask you for permission to pay. The Tilapia item costs 140 microBits, but you tell your smartphone to pay it anyway. As soon as you say “Yes, pay”, the Bitcoin program credits the grocery account 140 microBits. One liter of milk costs 18 microBits today, so the total comes out to the same, 200 microBits.

No check-out counters! As you head out of the store, your smartphone flashes an image of your receipt. You take a glance, thinking how wonderful it is that by now your wife has received an email with a copy of the same receipt.

All those credit cards in your wallet are gone. In fact, you don’t need a physical wallet anymore. Your smartphone serves both purposes now, including a hundred others.

All of the above will be visible to users of the Bitcoin infrastructure. What is not visible is the tremendous benefit we will all gain from a system that is NOT under any centralized control. No central banks to decide how much Bitcoins should be worth! We all decide ourselves how much each item we buy is worth, in terms of Bitcoins. All these billions of decisions every second, in turn, determine also the value of every Bitcoin.

Posted in Uncategorized | 1 Comment

The Miners’ “Greed” will Save Bitcoin

It just occurred to me that the Bitcoin system of production does not need to be controlled at all, not pogrammatically, not even by any rule. What will limit production is the profitability of miners. At this stage of development, Bitcoin is increasing in value, and mining is very profitable. It cannot remain so forever, if production is not limited by absolute quantity. Assume for the sake of discussion that there is no limit. Every miner, to increase profitability, would produce as many Bitcoins per second as he could. There will be over-production, and subsequent inflation (inflation in quantity, and then eventually reduction in value [the alternate “definition” of inflation]). As the value of Bitcoins come down, naturally the profits of miners will come down also, if measured in terms of how much a Bitcoin can buy. The system will tend towards a state of equilibrium, one in which the profitability of miners is throttled by inflation (in the second sense), and the value of every Bitcoin stabilizes.

This absolute limit on quantity is fictitious anyway, and I daresay it is GOOD that it is fictitious.

Let’s say that the miners “collude” among themselves in order to remove the absolute limit on quantity. As the moderator of this forum pointed out here: https://bitcointalk.org/index.php?topic=145475.msg1543280#msg1543280, there is really nothing that can stop the miners from changing the quantity rule, except the wallets in everybody else’s possession. What if the miners themselves also start distributing their vesion of the wallet, with compelling advantages to the user? (For example, a version with a much pruned Merkle tree, so that everybody with a smartphone or any handheld device can use it.)

So now the question to ask is, if the limit on quantity is fictitious, what sets Bitcoin apart from any fiat currency in use today? Every fiat currency is controlled by some monopoly, a monopoly necessarily sanctioned and enforced by the state. In Bitcoin’s case, such monopoly does not exist. In Bitcoin’s case, its own market will control its quantity, while any fiat currency is prone to hyper-inflation because its monopolistic structure does not present a feedback mechanism to limit production or “printing”.

The two worries I expressed in my previous blog are in reality no cause for concern. I now believe in Bitcoins much more than I ever did. If a version of the wallet that can run on a handheld becomes available (as I am sure it will, soon enough), then its proliferation will further enhance its own integrity, as I explain here: https://ctapang.wordpress.com/2013/01/30/more-on-bitcoins/.

Posted in Money and Economics | 2 Comments