Wagner James Au / New World Notes

2 responses to “Throwback Thursday: That Time We Noticed Bitcoin Was Being Used Less Than Linden Dollars… in 2013”

1. 

   Gwyneth Llewelyn

   May 13, 2022

   Hm! That’s actually quite interesting news (as it was back in 2013, mind you), and perhaps a bit surprising, in view of the (alleged!) size of each market.
   Then again, and taking into account that I’m by no means an expert in cryptocurrency (in particular, I have no idea how the BTC market fixes the coin’s actual price — since it’s clearly not by old-fashioned supply-and-demand rules), all I know is that, these days, almost all BTC transactions occur between users and crypto-to-fiat currency exchanges, and between the exchanges themselves, as actually adding things to the ledger takes an insane amount of processing time, and is restricted to ‘a few’ entries per minute. What that means is that exchanges have their own way of, well, exchanging data among themselves — at mind-boggling speeds, since this is just a private way of settling balances between them, not to actually write anything on the ledger — while, every once in a while, they actually write something to the ledger. Perhaps just once per day, or once per week, or something like that — it’s actually irrelevant, except when ‘problems’ occur (e.g. an exchange that goes down, or gets hacked, or gets limited in some way by regulatory bodies…).
   My point is that we only see public transactions on the ledger — not necessarily the transactions occurring on individual exchanges, or between the exchanges themselves. Unless they choose to publish such data (and in most cases, since they are unregulated, they keep such data strictly to themselves), there is no way to actually know how many BTC transactions were made. Sure, we can speculate, and extrapolate from the few exchanges which do publish their data, but we cannot know, in the sense that we know how many L$ get transacted (or how many ledger entries were updated on the Bitcoin blockchain). In other words, more likely than not (I don’t know, I don’t run a Bitcoin node, and haven’t ever bothered to peek at the ledger!), the ledger gets written with bulk entries that correspond to vast amounts of transactions occurring between exchanges — but not to individual transactions.
   Then again, I don’t really know how it works 🙂 All I know is that the vast majority — and that’s ‘vast’ with a capital V — of BTC transactions do not occur between individual users themselves, but rather between such individuals and their wallets and their wallets with whatever exchange(s) they work with. And all of these are unknown, untracked, and uncounted…
   Thus, an alternative explanation about the question you’ve been asking in the past nine years is simply one: we (investors) do not really want you (representants of the media) to get a clue on how much we actually exchange (or who we exchange with), lest governments engage themselves even deeper into cryptocurrency regulation.
   They might also not be very willing to announce to the wide world that the actual speculation on BTC occurs on exchanges — not on the blockchain — and it’s there where day traders make money, since exchanges (unlike the blockchain!) are able to clear transactions in nanoseconds among themselves using their own protocols which bear nothing in common with the whole blockchain concept. In fact, such inter-exchange transactions are at the other extreme of the spectrum: it’s an interchange of information, which is not public, not open, uses multiple protocols, is completely unregulated but also unregulatable (anybody can get a peek at the blockchain ledger and see who is exchanging BTC with whom; nobody is allowed to take a look at the information exchanged between exchanges), it uses strong encryption solely among business partners who only share keys among themselves (their communications are therefore inviolable), and it’s certainly not ‘centralised’ (in the sense that there is no government body doing oversight), but also not ‘distributed’ in the sense of Bitcoin (where anyone can participate), since only exchanges are able to join the playing field. Indeed, it resembles much more the way how SWIFT or similar inter-bank protocols work — you need to be a bank to transfer money to another bank using SWIFT, although you can offer ‘SWIFT bank transfers’ to your users — and much less the conceptual framework that cryptocurrency was supposed to provide.
   Finally, your contacts in the investor market may not really want the public to know that you make far more money in ICOs (Initial Coin Offerings) than on day-trading on the BTC exchanges…
   Although I seriously suspect that you make even more by operating an exchange; at least, at the insane fees they charge (well, I just tried out with very few, I cannot say if this is common to all; I would just guess that people would gravitate towards those with the lowest transaction fees, which ought to bring the overall price down — that, at least, is basic economics…).
   After all, Linden Lab found that out on their own a long, long time ago, and that’s why they run the LindeX as a monopoly.
   Disclaimer: I really don’t know much about cryptocurrency except the very basics. So, take my words with a container load of salt!

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2. 

   Joey1058

   May 15, 2022

   The US designated crypto as a commodity. So asking to use BTC as a currency is like asking to use gold and silver as an everyday currency again. The L$ is an inworld currency, and has been planned that way from the outset. Broadly speaking, Second Life holds it’s own sovereignty, so exchanging Lindens for USD is like exchanging GBP for USD.
   Both BTC and L$ require an exchange to convert to USD. Once converted, they get taxed. The difference in exchanges is that LindeX/Tilia do a full transaction disclosure to the Feds. Crypto exchanges do not. Which is why the Feds are attempting to regulate crypto. If you are not reporting your crypto cashouts to the Feds, you are in violation of whatever rules the IRS deems to slap you with.
   Your story is comparing apples to oranges.

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