When fired from Reddit, the world’s first cryptocurrency engineer at a large corporation, Ryan Charles, hadn’t seen it coming.
“I was shocked. Perhaps, I shouldn’t have been shocked in hindsight. It was obvious that my project was not going to work after some changes at Reddit, but only in hindsight,” Charles tells Hacked. He concluded he needed to leverage the newsworthiness of his firing to ensure he could continue earning an income, as he had no backup plan.
“Since it was newsworthy it led a whole bunch of people to reach out to me, which opened up new opportunities for me,” he said. “I deliberately talked about it in public to make sure I met a lot of people.” The experience was not easy, as anybody who unsuspectedly lost their job knows.
“I had never been fired before,” Charles told me. “On day one, I was super, super stressed. A bunch of people contacted me and I was able to interview at companies right away.” For a few weeks, the uncertainty about his future caused him stress. “In San Francisco, my rent is very expensive, so it is stressful without income,” he said. In the end, he sees the change as positive.
“In hindsight it all makes perfect sense,” Charles said. “I feel like I am better off any way. If I had stayed with Reddit, I couldn’t have done what I was interested in doing.” His new project fits better outside of Reddit.
According to much press coverage, Charles has embarked upon a decentralized Reddit project. Charles does not see it that way exactly. “It’s a bit of a misnomer because I don’t think things are going to look and feel like Reddit.”
The former Reddit cryptocurrency engineer believes a solution is possible, and will hold a hackathon on Saturday towards that end. His new project, Datt, which stands for “Decentralize All The Things,” represents a decentralized platform where users own their content.
Using the core technology behind Bitcoin, Charles envisages a mainstream application that functions like Reddit. Employing the power of Bitcoin’s distributed public ledger, Charles envisages an alternative to Reddit distributed across thousands of computers known as nodes.
“If we pull this off, the goal is to make a mainstream applications where users can directly award each other and achieve that vision of leveraging Bitcoin in a way so that anybody can participate and pay each other for their content,” Charles said.
Charles’ idea calls for a P2P network that runs like a normal web app. Each user funds an app with a small amount of Bitcoin, which functions to download content. Users pay a small amount of Bitcoin to incentivize people to keep the app connected. An upvote triggers a transaction of a small amount of Bitcoin to the content creator.
“I think it will be better for people who want to produce really valuable content,” he said.
At a technical level we have to implement a bunch of stuff to make this possible. However, it is possible in theory. I think we will probably want to integrate the Lighting Network, where users can enable micropayments.
The reason the Lightning Network would be useful is Bitcoin’s limits when it comes to tiny transactions.
“No one has implemented the Lightning Network yet,” Charles points out. “We are going to need to make it user-friendly and integrate it into the world wide web.” Not only technological challenges face Datt. There’s also the ‘community problem.’
Many people have tried to build a community. But if no one uses it, you don’t have a community. It’s harder to build a self-sustaining community through a website or an app than the technology itself is at this point.
There will be similarities in layout between Datt and Reddit.
“The application will look like Reddit, I think, but the technology underneath will be completely different because anyone can run a node and share content and host content sans a central server.” The technology incentivizes users completely differently than Reddit.
“Money will be integrated into the very core of Datt, so the incentives would be much different, inspiring users to produce quality content so they get paid.” Currently, people are frustrated with the tools made available by Reddit, as well as the lack of communication from the company.
Charles posits that Reddit’s centralized nature causes these problems. One of Datt’s goals would be to monetize user content, ensuring it stayed their intellectual property. DATT strives to create a system in which moderators and contributors earn money mostly through a tipping system like ChangeTip.
“Reddit, the company, controls all the content, so it is lose-lose for the moderators and users,” Charles explains.
My system will empower them to own their content, so many of the issues Reddit currently faces are non-issues.
A block chain grounded system would ensure content cannot be removed retroactively. Operators of nodes on Datt would pick-and-choose information they would like to hide. If individuals grew frustrated with a specific nodes practices, they would switch to another node.
“They can just share their own node and moderate themselves without worrying about a conflict while benefitting financially from creating good content.” In Charles’ mind, this is a huge missed opportunity for Reddit.
“This technology makes things possible not previously possible when Reddit and all other social media companies were invented. Back then, advertising was the only way to earn revenue, so the products were all designed around advertisements,” Charles, who publishes his ideas for Datt at Medium, observes.
Bitcoin and related technology makes new business models possible. It’s a missed opportunity for Reddit to make new types of products that could have been revolutionary. If Reddit initiated peer-to-peer payments in the website, there could be a whole Reddit economy possible.
Charles believes the easiest path for this would have been to integrate further with ChangeTip.
Reddit has already seen its market share drop due to redditor’s discontent with recent changes made by the company. Some have signed up for Voat, a Swiss-based Reddit-esque website with a marketing campaign that highlights commitment to free speech.
Venture Capitalist Fred Wilson penned a blog post in which he entertained the notion of something like Charles’ idea, stating there is a “very interesting opportunity to build a truly decentralized media platform.”
Images from Shutterstock.
How have various asset classes performed during previous wars
North Korea, the dictator ruled nation has been threatening the US and its allies with a possible missile attack, which may also have a nuclear warhead on it. The experts are divided on the actual capability of North Korea to undertake the attacks, however, its leader, Kim Jong-un leaves no opportunity to provoke the US and its allies.
- Stocks perform better than average when the conflict starts
- Gold rallies before the start of the conflict
- Bonds have underperformed stocks during previous wars
- The US dollar has fallen on few occasions during a conflict
- The current war, if it starts, can severely impact electronic goods
- The US national debt is likely to balloon if US involves itself in South Korea’s reconstruction after the war ends
Though North Korea’s military prowess is nothing great to write home about, it can still cause extensive damage to millions of civilian lives and the economy of its neighbor South Korea, to some extent Japan and the US territory of Guam. However, in this article, we shall restrict ourselves to the impact of the war on various asset classes and the world economy. We shall use the historical evidence to arrive at our conclusion.
How does the US stock market perform during wars?
The US has fought several wars since 1960 as shown above. While a few ended quickly, others have been a long-drawn affair. Notwithstanding, Barron’s has outlined the effect of the following seven major hostilities on the Dow Jones Industrial Average since early 1980s.
|01||The US invasion of Grenada||1983|
|02||The US invasion of Panama||1989|
|03||The first Gulf War||1991|
|04||The US bombing of Kosovo||1999|
|05||The US War of Afghanistan||2001|
|06||The second Gulf War||2003|
|07||The US bombing of Libya||2011|
The markets hate uncertainty; a proof of this is the average 0.6% drop in the Dow a month prior to the start of the conflict.
However, once the conflict commenced, the Dow quickly turned direction, rising 4% in the first month. The rally did not stop there. Over the next three months, the Dow rose an average 6.7%, and the gains swelled to 7.2% after six months of the start of the conflict.
Therefore, if history repeats itself, a war between the US and North Korea – if it were to happen – will not start the next bear market.
How does gold perform during wars?
Gold is considered as a safe haven during times of uncertainty. Therefore, the yellow metal has rallied from about $1260/toz to about $1360/toz levels, as tensions escalated between North Korea and the US.
But, will gold continue its rally if the war starts?
Economists at Capital Economics have analyzed gold’s performance since 1985, during military conflicts, acts of terror and political tension.
They established that “over the past forty odd years, the price of gold has on average risen by 4.1% in the six months prior to a conflict turning into a full-blown war. However, it barely moved in the months following the event. This makes sense as gold thrives in periods of elevated uncertainty and the start of an armed conflict partly erases that.”
Performance of long-term bonds during wars
Though bonds are also considered as a safe haven investment, their performance has lagged their historical average during wars, according to a study by the CFA Institute. The possible reasons are an increase in inflation during war times and the second is the higher borrowing by the government to fund the war. Due to these two, bond prices fall. Therefore, selling out of stocks and buying bonds fearing a conflict might not prove to be a good strategy. The only aberration was during the gulf war when bonds beat stocks, albeit marginally.
How does the war affect the US dollar?
The evidence of the past three decades shows that the US dollar weakens during war, according to Kathy Lien, Managing Director of FX Strategy for BK Asset Management. The US dollar fell 5% when the Libyan war started and fell 9% during the first three months of the second gulf war. The dollar was weak even during the first gulf war.
However, this time, the situation is more complex and a lot of currency movements will depend on whether China actively involves itself in the war or remains neutral. The Australian dollar, the New Zealand dollar, and the Japanese Yen will see large moves if China supports North Korea directly during the war, else the movement in the currencies is likely to be comparatively subdued.
“As the tensions grow the dollar will suffer and the actual announcement of war could take USD/JPY to 105 but if it’s a swift victory the pair would also recover quickly,” said Kathy.
Though historical evidence gives us some idea about the possibilities, every new war is different because it involves different nations and affects different asset classes.
What sectors will be affected if a war with North Korea takes place?
North Korea, in itself, can’t impact commodity prices. However, it is surrounded by nations that are major consumers of commodities. China is one of the major consumers of commodities, however, it is unlikely that the war will impact China’s consumption materially.
South Korea is a major importer of coal and exporter of steel. Both these commodities will be majorly impacted because South Korea will be severely affected if a war breaks out. Similarly, liquified natural gas prices will be affected, as Japan is its largest importer in the world.
The seaborne trade will also be severely affected because China, South Korea, and Japan receive about one-third of the global seaborne crude supplies. Similarly, 84% of the world’s iron ore and 47% of the metallurgical coal reaches the shores of these three nations through the seaborne route.
The agricultural commodities will also be affected because China is a major importer of rice and soybeans while Japan is of corn.
Economic costs of the war
War has both a direct and an indirect impact on the economy. South Korea is a hub for manufacturing liquid crystal displays, semiconductors, and cars. A war will impact these activities, leading to a shortage across the globe. The alternative suppliers can’t bridge the gap in such a short span of time. Therefore, prices of various electronic products are likely to rise significantly, which will impact the developed economies, including the US.
“U.S. spending on electronic items, including smart phones, cameras, tablets and computers accounts for roughly 1 percent of the consumer price inflation basket. If a war in Korea caused prices of these items to double, it would add 1 percentage point to U.S. inflation,” a report by the research consultancy Capital Economics warned, reports CNBC.
If inflation rises sharply, the Central Banks will be forced to raise interest rates, jeopardizing the fledgling global economic recovery.
Additionally, if South Korea’s gross domestic product (GDP) falls by about 50% due to war, it will reduce the global GDP by 1 percentage point, according to the report.
Once the war ends, South Korea will need huge capital to rebuild its infrastructure. If the US involves itself and ends up spending the same amount as it did in Iraq and Afghanistan, then the federal debt will reach 105% of GDP, the economists at Capital Economics warned.
Though historical evidence suggests that the equity market returns are better than average during a war, the situation might be different this time because of the nations involved. Any jolt to the weak economic recovery across the globe will dent the confidence of the investors. Therefore, we don’t expect the stock markets to rise substantially during the war.
Gold’s performance is somewhat neutral and it can be used to protect the value of the portfolio. Therefore, selling some overvalued stocks and buying gold might be a good strategy if a war seems imminent.
Livestreaming Starts Tomorrow: I’ll Make a Lot of Money or Lose a Substantial Sum
!Notice! Do not copy my trades unless you:
- Are a member of the 33% Club
- Have money to lose in excess of what you are pledging to the 33% Club
This coming week I’ll be livestreaming all my trades using CFD on IG.com. I’ll try to continue with my successful 2% strategy. So far I’m up 18% in the last week starting at 650 000 NOK and ending up with 766 000 NOK on Friday, shorting and buying indexes, currency pairs and gold. The strategy I’m following is highly risky and I do not recommend the same strategy if you do not have money to lose. Remember our golden rule: Never Lose Money. However, if you are in a position like me, with an increasing monthly income, a good bank roll, and are able to pledge 33% of your monthly income to the 33% Club AND pay your debts, this could be a good (or bad) opportunity for you.
I’ll start livestreaming one hour before Dax will open tomorrow at 08:00 CEST. I will end the live session around 16:30 CEST one hour after Dow Jones has opened (if everything has gone my way). I will continue these sessions throughout the week.
You will be able to follow my trades, see when I enter and when I exit a market. See how much money I win or lose. You can copy my trades, but be aware: I’m entering and exiting markets quite rapidly, so stay alert. And be aware: You may end up losing money (just like I may end up losing money).
I will post the youtube link on Hacked.com and on Workplace tomorrow.
Disclaimer: You can not hold me responsible for losses. Always do your own due diligence and only trade with money you can lose.
Obama Ducks Apple/FBI Conflict In Encouraging Innovation At SXSW
President Obama used his historic appearance at the South By Southwest (SXSW) festival Friday in Austin, Texas to expound on the importance of innovation, making a point of not taking a side in the Apple/FBI conflict over accessing the data in the smartphone used in the San Bernardino terrorist attack. He said he could not make an official statement on the conflict at this time.
He did, however, address the question of how to find a balance between privacy and security.
Obama Sees Balance Needed
“We can’t take an absolutist view on this,” he said, recognizing both sides of the argument, according to a transcript of the remarks provided by Fortune Magazine.
He said he is confident the conflict between protecting public safety and personal privacy can be resolved.
The tech community and the people who care about the issue of privacy versus safety will help solve it. “Because what will happen is if everyone goes to their respective corners and the tech community says ‘Either we have strong, perfect encryption or else it’s Big Brother and an Orwellian world,’ what you’ll find is that after something really bad happens, the politics of this will swing, and they will become sloppy, and rushed, and it will go through Congress in ways that have not been thought through,” he said.
Technology Changes Choices
Prior to the invention of smartphones, if a criminal engaged in a terrorist plot, law enforcement had the right to use a warrant to search a person’s home to seek evidence of wrongdoing. “And we agreed on that because just like all of our other rights, there are going to be some constraints that we impose to ensure that we are safe, secure and living in a civilized society,” he said.
Complicating the matter is the desire to prevent terrorism or disrupting the financial system, the air traffic control system or a whole other set of increasingly digitized systems.
People on the encryption side will argue that any key, even if directed at one device, could eventually be used on every device. “That is a technical question. I am not a software engineer. It is, I think, technically true, but I think it can be overstated,” Obama said.
Snowden Disclosure Raised Suspicions
Obama noted the Snowden disclosure elevated suspicion of government oversight. He said the Snowden issue overstated the dangers to U.S. citizens since intelligence agencies are scrupulous about U.S. citizens on U.S. soil. The Snowden disclosures identified excesses overseas.
The President said he understands the importance of privacy, and that government should not “willy nilly” get into smartphones to view personal data. While urging audience members to not take an absolutist view, he said the government will eventually have to make clear that the circumstances by which it is acceptable to bypass security on devices that become part of a criminal investigation.
If it is possible to make a device completely impenetrable, such protection would shield a child pornographer. “How do we disrupt a terrorist plot? How do we even do a simple thing like tax enforcement?” he asked. He said concessions will be needed for law enforcement to get necessary information.
Decisions Are Needed
Setting aside the case between the FBI and Apple, Obama said decisions must be made on balancing “respective risks.” “The dangers are real. This notion that sometimes our data is different and can be walled off from these other trade-offs is incorrect.”
Obama said the answer will come down to creating a system where the encryption is as strong as possible, the key is as secure as possible, accessible by the smallest possible number of people, for a subset of important issues. “How we design that is not something I have the expertise to do.”
The President said he is on the civil liberties side of the debate. But he noted he is not interested in “overdrawing” the values that have made the U.S. an exceptional nation simply for expediency. The dangers are real, and maintaining law and order is important.
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