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Michael Gracie

A Practical Guide To Getting Started With Bitcoin

Bitcoin is like cold fusion: It’s had a difficult childhood. Those few in the field are orphans, bastards at best.1

I’ve often wondered if Bitcoin would shed its thick glasses and step out into the real world, but until recently I had neither the time nor inclination to find out. However, I follow the commodities markets quite closely, and recently came across mention of it in an ETF manager’s research report. That prompted me to ask around, and what I heard back intrigued me, in an anti-groupthink sort of way.

Bitcoin will never be good for anything except buying drugs; It’s bullshit technology … smartphone games and hookup apps are where it’s at; Bitcoin can’t be used for marketing so why would I want to mess with it?

Shot down, over and over again. But it was the steadfast, verbatim answer to one question that got me thinking:

YOURS TRULY: Do you have any Bitcoin? Do you know how to get any?

EVERYONE: No. And No.

Maybe nothing had changed, and Bitcoin was still an artifice lurking on basement computers and circulating the “dark web”. However, seeing as nobody I talked to had any Bitcoin, mentioned they’d tried to acquire any Bitcoin, or seemed interested in doing so, I surmised this might just be a case of bad press, combined with the inexplicable desire of the self-professed psuedo-technorati to leverage their free time posting geo-tagged photos of their lunch plates.

Hence, I invested some otherwise scarce time to test my contrarian theory.

What follows is the quasi-organized regurgitation of an endeavor seeking out the simplest, most practical way, if any, for the layman to dip their toes in the Bitcoin waters. Cold water too, so those following wouldn’t get burned. It probably isn’t the path of least resistance – it requires a time commitment – but you will not have to spend a dime of your hard earned, government-issued currency to find a pot of gold gather some spare change.

And of course, learn something new. Like does Bitcoin have legs? Does it have any applicability to the present financial system? Can I acquire Bitcoin without meeting some cartel member in a dark alley?

But first, what is Bitcoin?

If you are technically adept I highly suggest reading the original Bitcoin white paper (PDF), authored by the enigmatic Satoshi Nakamoto, inventor of Bitcoin. For the other 99.99%: the Bank for International Settlements calls Bitcoin a digital currency with an embedded decentralised payment mechanism based on the use of a distributed ledger.

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Another Ponzi scheme bites the dust

From the Commodities Futures Trading Commission:

Federal Court Order Freezes Assets of Illinois Commodity Pool Operator Brookshire Raw Materials Management, LLC and its Canadian Principals Based on CFTC Charges of Misappropriating More Than $4.6 Million in a Ponzi Scheme

The U.S. Commodity Futures Trading Commission (CFTC) announced today that it obtained a federal court order freezing the assets and prohibiting the destruction of documents of a Barrington, Illinois commodity pool operator, Brookshire Raw Materials Management, LLC (BRM), and its principals John M. Marshall and Stephen Z. Adams, Brookshire Raw Materials Group, Inc. (BRMG) and Brookshire and Company, Ltd. (BCL), all of Toronto, Ontario, Canada…

As alleged in the CFTC’s complaint, between September 2006 and December 2008, Marshall, Adams, and BRM accepted millions of dollars from customers for investment in a commodity pool known as the Trust and operated as a Ponzi scheme. The Trust is governed by a Private Placement Memorandum (PPM), which, among other things, states that each fund in the commodity pool will invest customer proceeds in a portfolio of commodity futures and forward contracts designed to approximately replicate the investment methodology of corresponding indices developed and managed by BRMG. However, as alleged, Marshall and Adams, as agents and officers of BRM, BRMG, and BCL withdrew more than $5 million from the Trust account and wired those funds to bank accounts in Canada, mostly in the care of Marshall.

Five million bucks isn’t a pimple on an elephant’s arse nowadays, but a million here, a million there and pretty soon you’re talking about billions. Or is that trillions?

Stay tuned. Enjoy the fun.

Today’s crude oil craziness

Just a summary of nuttiness

  • Congress is nearing a quest to sue oil producing countries over prices. Even if they won such a lawsuit, who would determine the damages, and who would enforce the judgement? Is the Justice Department going to say “pay up, or you can’t export your oil to us anymore”?
  • It’s time to lay down further regulation of the commodities markets. Despite skyrocketing global demand (and blatant stockpiling on China’s part in advance of the Olympics), the government still wants to blame everything on speculators. Forget never ending trade deficits, soaring national debt, and a plummeting dollar…it’s time to further regulate the exchange of futures contracts by Joe Trader In The Bathrobe.

What is going to happen when and if this bubble bursts?

UPDATE: Revisting peak oil (seen the chart before, and I’d recommend downloading and looking at it on a big screen).

UPDATE 2: More blaming the traders.

UPDATE 3: Hoarding may be reality.

Changing the world: one app, one bubble, one ID, and one margin call at a time

Having 2,000 feed items stuffed in one’s reader when returning from even the shortest vacation has me thinking about how to put said reader on vacation as well.

  • MySpace and Facebook apps suck. That’s not what they really said, but The Silicon Alley Insider did point out how little they might really be worth. I’ve got no experience with MySpace apps, and my only brush with Facebook apps was getting some notification that a friend had installed one and I should do the same. My first impression – I’m getting spammed (and others share that feeling). I would never react to such a notice again, even if I was an active Facebook user. Hence, they are worthless to me too (or maybe I’m just worthless to marketers). Also of note: based on their numbers Facebook should be worth something in the neighborhood of $850 million.
  • The New York Times infers that things are getting overheated in Silicon Valley. I disagree – I think a lot more bets are being placed on a lot more companies, and I suspect those bets are generally a lot smaller than post-Bubble 1.0. There may be a lot of duplication of effort going on, but the best execution in each category is going to turn out a winner. The money is just trying to find each of those winners. Meanwhile, TechDirt had its take on the Dallas Cowboys backing out of a domain purchase, but I says its a simple matter of the rest of the world not paying much attention to the chaos.
  • Commodities traders are in short supply. As a general rule, the commodities business also retains far fewer numbers than its big sister on the securities end. I think the actual registered headcount via the CFTC is less than 200K, while the NASD numbers hover around 800K. Someone throw me a bone on those numbers (and if anyone needs a Series 3/30, drop me a line).
  • OpenID gets a victory in the fight against phishing, as well as some competition. I think the first part is great – now the challenge is getting anyone and everyone to embrace Information Cards. On the latter, I’m going to bet it’s a non-starter – too little, too late. Despite being widely embraced, even OpenID is having slow goings regarding consumption (both in systems and people). More power to SlashID if they can be more effective on that end, but I’m skeptical.
  • After consuming this, I dropped TechMeme from my reading list. I guess I can just read each of these every morning from here on out. That, by the way, is a joke.
  • Seems that debt problems extend beyond the government, those bought out, and even mortgagees. I thought much of the last year’s rally was purely cash-driven, but I guess I was wrong. Personally, I only use my margin account for short selling.

I think that covers last week.

Don’t need web ads, but still need bacon

The latest…online advertising exchanges are beginning to mirror commodities exchanges. Exchanges, however, seem to work best when there is a scarcity of resources. I don’t see any scarcity in the online ad realm, as the “real estate” has a marginal cost near zero, and delivery isn’t guaranteed (users can block ads).

The mirror must need cleaning.