Bitcoin FAQ / Starter Guide

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What Is Bitcoin?

Bitcoin is two things. It is a currency and a secure payment system. Read on.

Why Use Bitcoin?

Bitcoin is decentralized and peer-to-peer, which makes it beyond the control of any government, central authority, or middle man. It has great implications for financial liberty. The security benefits are also significant. Bitcoin uses public key encryption which means that a Bitcoin wallet address (the public key) is useless to a bad actor without the corresponding secret key. As a result, your payment information can’t be stolen from merchants because they are never in possession of the secret key. In addition, Bitcoin transaction fees (when charged at all) are significantly smaller than typical credit card transaction fees. This means smaller costs that the merchant must pass on to the consumer. These are just a few of the reasons why Bitcoin offers great advantages over any traditional fiat currency.

Where Can I Get a Bitcoin Wallet?

Among other benefits, Coinbase offers free Bitcoin wallets, two-factor authentication for greater account security, smartphone apps, and you can link a bank account in order to buy and sell Bitcoin via ACH transactions.  Quick aside: Coinbase filed for nine patents relating to Bitcoin, which sparked some concern in the Bitcoin community.  I’m somewhat reassured that they will do the right thing based on this response from co-founder and CEO, Brian Armstrong.  Now back to the point.  If you don’t trust a third party to handle your wallet, there are other options to choose from. As with any financial decision, it pays to do your homework.

What’s Next?

You can easily earn small amounts of free Bitcoin in various ways. There are web sites supported by advertising called faucets that give it away. Simply prove that you’re human by solving a Captcha and they’ll deposit some Satoshi (a very small fraction of a Bitcoin) into the wallet of your choice. You can also earn Bitcoin by watching videos, playing web based games, Android games, iOS games, or get a job that pays in Bitcoin.

A Few Words On Mining Bitcoin

Once upon a time, bitcoin mining could yield a decent return. Unfortunately, this is no longer the case. There is a finite supply of Bitcoin by design. New coins are mined by the performance of cryptographic calculations. As more coins are mined, they become harder to find. The rise of Bitcoin’s price and popularity have brought a massive surge in the number of Bitcoin miners and advances in mining hardware. As a result, the level difficulty associated with Bitcoin mining has increased to the point that the required quantities of time, computing power, and electricity to be successful are so great as to render Bitcoin mining a losing proposition for all but the most efficient miners. In short, it is not recommended to attempt Bitcoin mining at the time of this writing. This could change, however. It is supposed that eventually transaction fees paid to miners could cumulatively be valued higher than the value of the new coins discovered my mining as the number of undiscovered coins continues to approach zero. This is because Bitcoin miners are not just looking for undiscovered Bitcoin. They’re also validating the transactions taking place on the Bitcoin peer-to-peer network. Senders of transactions can optionally set a transaction fee for their transactions (typically 0.0001 or 0.0002 BTC). This creates an incentive for transactions with higher fees to be validated faster than transactions with smaller or zero fees.

This post originally appeared as a page on Liberty Compass News before the addition of the Liberty Compass Blog.

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Android Widget for Liberty Compass News!

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Get all the headlines from Liberty Compass News on your Android device home screen with the new Android widget!

Customize your look:

Screenshot_2015-09-24-18-53-50 Screenshot_2015-09-24-18-52-27 Screenshot_2015-09-24-18-51-57

New version 1.0.0 is available as a direct download from Liberty Compass News!

You will have to allow installation from unknown sources as this widget is not yet available from the Google Play store.

Settings > General > Security > Unknown sources

This project is open source.  Source is on github.

Change Log:

  • 1.0.0: Bug fixes.  Ready for prime time!  Please report any bugs/crashes.
  • 0.9.0: More improvements to save battery and data.  Added option to change your colors and reset other options on widgets that have already been added.  Added option to choose your double click speed.  Other general improvements and bug fixes.
  • 0.8.6: Improved performance, decreased data use, and decreased battery consumption.  Bug fixes.
  • 0.8.5: Added choice of how frequently widget downloads news when adding new widget. Added tap right side of widget to check for updated news.  Layout improvements.  Bug fixes.
  • 0.8.4: Added tap left side of widget to view previous headline.
  • 0.8.3: Added check for update option in main menu.  Bug fix.
  • 0.8.0: Added clear widget background option.  Bug fixes: update notification when at latest version and screen rotation in main activity returning to home page.
  •  0.7.4: receive notification when new version is available.
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Mises’ Human Action For Dummies

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I’m excited to read the latest book by economist and author, Robert P. Murphy: Choice: Cooperation, Enterprise, and Human Action.  In a brilliant move, Murphy has written a book which conveys the wisdom contained in Human Action by Ludwig von Mises to the layman. I’m constantly hearing references to Human Action in Austrian circles, so I’ve had a strong desire to work my way through it.  In my first attempt to read Mises’ landmark work, I quickly realized that I had bitten off more than I could chew.  It was simply over my head.  I fell back to Man, Economy, and State by Murray Rothbard, which proved to be much more readable for me.  Still, the desire remained to learn the teachings of Mises.  I believe that Bob Murphy’s book will provide an easier road to that goal.

From Amazon:

Human Action—a treatise on laissez-faire capitalism by Ludwig von Mises—is a historically important and classic publication on economics, and yet it can be an intimidating work due to its length and formal style. Choice: Cooperation, Enterprise, and Human Action, however, skillfully relays the main insights from Human Action in a style that will resonate with modern readers. The book assumes no prior knowledge in economics or other fields, and, when necessary, it provides the historical and scholarly context necessary to explain the contribution Mises makes on a particular issue. To faithfully reproduce the material in Human Action, this work mirrors its basic structure, providing readers with an enjoyable and educational introduction to the life’s work of one of history’s most important economists.

Choice: Cooperation, Enterprise, and Human Action by Robert P. Murphy is available in hardcover, paperback, and kindle format.

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Boom Bust History Repeating

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The Austrian theory of the business cycle describes how booms and busts are caused by central bank manipulation of money and credit.  We’re currently at the point in the cycle where the boom is ending and bust is beginning.  It is feared that this bust has the potential to be much worse than those in recent memory due to the extent to which the US central bank has distorted markets, and because many countries around the world have been engaging in similarly reckless central bank interference.

Looking at the S&P 500 from 1975 to the present, it is readily apparent that, starting in 1995, there have been quite pronounced booms and busts occurring. S&P 500 1975-2015

Naturally, the curious mind wonders what changed in 1995.  The Austrian theory of the business cycle points us to the Federal Reserve.  In a 2006 article, Dr. Ron Paul described M3, an empirical measure of the money supply in the US, as “the most helpful statistic to track Fed activity.”

M3

You’ll note that there is a marked increase in the rate of growth of the money supply beginning in 1995, especially when compared to the period up to 1990, or the 1990-1995 plateau.  The difference is more pronounced if the slopes are viewed side by side as below.

1995 Slopes

This data is all relatively recent.  FRED unemployment data goes back all the way to 1948.

civilian unemployment 1950-2015

This data shows the same boom/bust pattern over and over.  At present, we find ourselves in a deep trough of low unemployment, a condition which historically precedes recession.

August and September have seen the US stock market, which has been hovering at record heights for nearly all of 2015, enter correction territory.  As past performance is the best predictor of future results, it is certainly plausible to think that the stock market levels will be cut in half and unemployment levels will double by the time we reach the bottom of the coming bust.  Further, the multinational scope of the central bank interference, coupled with the unprecedented severity of that interference, could spell even worse conditions by the time the bottom is reached.

So long as policy-makers continue down the same path of central bank manipulation that has brought us here, we can expect boom/bust history to repeat itself.  The upshot is that because we know what is coming, we can take steps to avoid personal losses or even profit from the coming collapse.

Investors concerned over a collapse of the financial house of cards may be interested in an investment strategy designed with theses concerns in mind, such as that described in Crash Proof 2.0: How to Profit From the Economic Collapse by Peter Schiff.

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New Murray Rothbard Book Released: Science, Technology, and Government

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Murray Rothbard, the iconic Austrian school author, professor, and philosopher, continues to amaze.  The author of the landmark libertarian treatise, Man, Economy, and State, now tackles the subject of government interference with science and technology.  From Amazon.com:

In this previously unpublished manuscript, found in the Rothbard Archives, Rothbard deftly turns the tables on the supporters of big government and their mandate for control of research and development in all areas of the hard sciences. What R&D should be encouraged and funded, what inventions should be supported, and what areas should be given research grants, etc.? These decisions can only be decided by markets unburdened by government meddling and intervention. Rothbard shows that science best advances under the free market: the claims to the contrary of the centralizers are spurious. The best course of action for government is to get out of the way …

Science, Technology, and Government by Murray Rothbard is available in Kindle and paperback format.

Be sure to check out the Austrian / Libertarian Reading List.

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Libertarian Web Admin: Property Rights vs. Privacy Rights

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Like many websites, Liberty Compass collects user data in the form of usage statistics and such.  Naturally, being a liberty-oriented website, the question of user privacy weighed heavily on the mind of the creator.

Initially, the method of choice for the collection of these statistics was the Google Analytics suite.  A recent email from a user offered up an alternative to the internet behemoth in the form of an open-source project called Piwik.  Delighted at the opportunity to do away with potentially privacy-compromising Google Analytics, I happily made the switch to Piwik.  In the ensuing email exchange, the more general topic of user tracking and privacy emerged.

As the reader is most likely aware, there are web browser add-ons designed to detect and block potentially privacy-compromising elements of web pages.  As it turns out, defeating most, if not all, of these add-ons from a web admin perspective is a trivial matter.  In other words, with a few simple changes, the admin can continue to track users even if they are using such privacy add-ons.  This came as quite a surprise to me, as I’m an intermediate web designer at best and a novice in the arena of privacy-conscious web design.  The revelation led me to the following dilemma: Whose rights prevail?  My property rights, as the website owner, or the user’s right to privacy?

My initial reaction was to err on the side of privacy.  After all, this whole question arose from the quest to protect the privacy of the users.  It felt unethical to circumvent the efforts of users who had gone to the trouble to protect their online privacy by using these browser add-ons.  I was already crafting a reply email explaining this gut reaction when it occurred to me that this is my website.  It is my property.  I have the best, most legitimate claim to its use and configuration.  It turns out that I want to have accurate statistical data pertaining to my website.

By way of an analogy, albeit a somewhat silly one, let us suppose that I were running a bakery on main street which was open to the public.  Suppose further that a subset of my customer base came in to the bakery wearing wide-brimmed hats in order to provide anonymity from my security cameras.  If I made an adjustment to my security cameras that enabled hat-penetrating x-ray mode, have I done anything unethical?  There is a sign on the front door clearly stating that I conduct video surveillance.  Perhaps it doesn’t say that I’m really good at it, but the sign is there nonetheless.  I would maintain that, as the property owner, it is my natural right to conduct my affairs on my property in the manner in which I see fit.

In the end, I made the changes to the website tracker and updated the privacy policy.  This is not to say that I don’t care about user privacy.  I only collect anonymous data, I don’t share, sell, or rent the data to third parties, and I’ve taken steps to eliminate third party content which may be tracking users, where feasible.  Just know that the reassuring little zero displayed on your privacy add-on may not be telling you the whole story, as I am.

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