Buy The Dip: Bitcoin mining, sanction fatbergs and the secret to US economic strength
Become an Alphaville Certified Crypto Expert™
No preamble this week, just links links links. But I wanted to highlight my favourite Alphaville post of the week, which features this simply sublime bitcoin mining explanation:
Imagine a water balloon hitting a target that’s spinning rapidly at a constant rate, suspended above a teacup. Or, if you’d prefer, look at the post illustration. Now imagine this happening in perfect laboratory conditions, meaning an identical throw of an identical balloon will result in an identical explosion.
Now imagine a game where the challenge is to get as little water as possible in the teacup. Contestants have nearly-but-not-quite-identical balloons and can only change the angle of their throw.
Realistically, contestants have absolutely no way of predicting how much water will end up in the teacup. Some might claim to have strategies but the only good option is to keep throwing slightly different balloons at slightly different angles until the right amount of water lands in the teacup. Once that happens the winner is declared and the game starts again, except this time everyone’s balloons are filled with gravy.
By knowing the exact balloon structure and the exact angle, a person can reproduce the winning throw. But importantly, it’s not possible to work out anything useful from the amount of liquid that lands in the teacup. Each result is random yet replicable. There’s no secret formula. Knowing how the water-throwing round went offers contestants no advantage whatsoever in the gravy-throwing round.
In this analogy, the balloon is a miner’s candidate blockchain block. The spinning target is the hashing algorithm. The teacup represents the difficulty level, where the maximum waterline is the target difficulty. The angle of throw is the nonce.
Congratulations, you’re now an Alphaville Certified Crypto Expert™.
And here’s the rest of this week’s Alphaville output:
📈 Breaking down financial sanction ‘fatbergs’. An interesting guest post from Max Hess looking at the convoluted plumbing of sanctions.
📈 ‘Is monetary policy even working?’ All those rate hikes, and financial conditions are easier than they were before the cycle began ¯\_(ツ)_/¯
📈 Sweden as a global bellwether. One of my favourite bits of being FTAV editor is occasionally being able to sneak in a few jibes at Sweden’s expense.
📈 JPMorgan blames JPMorgan for suppressed volatility. Once more unto the Vix discourse.
📈 BofA FMS TL;DR: (almost) everything is awesome. Charts charts charts.
📈 Office loans ‘living on borrowed time’. Turns out you can’t extend and pretend forever!
📈 The golden age of corporate pizza consumption transparency may be over. Pour one out for Louis.
📈 The Mike Lynch storybook. A gold nugget has tumbled out of the Autonomy trial.
📈 Index providers are massively dull — and massively profitable. A quick(ish) look at the financial world’s most lucrative utilities.
📈 Three cheers for supply? Demand, on the other hand, is not helping US housing markets.
📈 SEC fires ‘AI washing’ warning shot. The US watchdog is on the prowl for machine learning nonsense.
📈 Goldman says immigration helps explain US economic strength. They get the job done.