Tuesday, April 23, 2019

After the Bust, Are Bitcoins More Like Tulip Mania or the Internet?

By Nathaniel Popper


    • SAN FRANCISCO — When you talk to tech industry insiders about where Bitcoin is heading, two vastly different comparisons are inevitable: the tulip bulb and the internet.
    Bitcoin’s critics say the digital tokens are like the tulip bulbs of 17th-century Holland. They generated a wild, speculative rush that quickly disappeared, leaving behind nothing but pretty flowers and wrecked bank accounts.
    Bitcoin believers, on the other hand, want us to think about cryptocurrencies as if they were the internet: a broad technology category that took some time to reach its potential, even though expectations got ahead of reality in the early years. If that’s true, last year’s crash in Bitcoin prices was like the dot-com bust; a temporary setback before the big ideas come to fruition.
    After following Bitcoin for several years, I think neither of these comparisons quite works. Bitcoin is neither an irredeemable flop nor an economic miracle.
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    So what is it? We are still a few years from any sort of clarity about where this technology will fit in the world. If we want to imagine where it might be going, we need to look beneath the gyrating price to understand how it is being used today and who is using it.
    At the most basic level, Bitcoin has introduced a new way to hold and send around value online. Anyone can open a Bitcoin wallet and receive money from a friend or a stranger. The system works without any central authority, thanks to a network of computers that is not unlike the network of computers supporting the internet.
    Even after last year’s bust, Bitcoin users are generally sending somewhere between $400 million and $800 million worth of Bitcoin across the network every day, according to data from the blockchain, the public ledger on which all Bitcoin transactions are recorded.
    That daily volume is less than half the daily average of the payment service PayPal. But it is much more activity than the network handled before the price spiked in 2017.
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    As the proponents of the tulip bulb version of Bitcoin will tell you, most of the transactions today are speculative: people buying and selling Bitcoin in the hope that it will be worth more in the future. A more generous viewpoint would compare Bitcoin to gold, a scarce commodity that goes up and down in value and provides an alternative to national currencies.
    Speculative transactions accounted for roughly 60 to 80 percent of all transactions on the blockchain, according to Chainalysis, a start-up that does analysis of the blockchain for big companies and governments. Most of those transactions are Bitcoins moving between cryptocurrency exchanges around the world.
    There is still quite a bit of mystery about what accounts for the other 20 to 40 percent of the transactions. No one can force Bitcoin users to register their identity, so Chainalysis and other firms are in the dark about many transactions. But they have identified some useful chunks.
    When Bitcoin was introduced in 2009, it was described as a new way to make payments online, without the fees that credit card companies charge. Chainalysis estimates that last year, companies handling Bitcoin payments accounted for 0.3 percent of all Bitcoin transactions, or $2.4 billion.
    This is a healthy dose of apparently legal commerce, but it was not a good sign for Bitcoin that it was shrinking for most of last year when the price of Bitcoin was going down, according to Chainalysis data.
    Many if not most Bitcoin advocates I’ve encountered will admit it doesn’t offer much of an improvement over traditional electronic methods of payment. In several ways, it’s worse. Paying with Bitcoin requires you to become a speculator on its volatile price for the time you are holding on to tokens and waiting to pay.
    The payment data leads to the question of where this technology might gain momentum, beyond speculation. The most compelling use that Bitcoin fanatics talk about is its value to people in repressive countries that have currencies that are even more volatile than Bitcoin.
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    In Venezuela, for example, Bitcoin can offer a way to move savings out of the inflating bolívar. Because of the open nature of Bitcoin, Venezuelans can buy it without the government stopping them.
    There are stories of Venezuelans using Bitcoin to rescue their savings. Venezuelans bought over $230 million in Bitcoin last year on the most popular platform for sales, LocalBitcoins, according to the data analyst Matt Ahlborg. Those purchases were growing even as the price of Bitcoin was falling.
    But it caught on with only a tiny sliver of Venezuelans. And there are reasons to wonder how many of these transactions were really just corrupt government officials or wealthy Venezuelans who had other means of getting their money out of the country.
    People who have traveled to Venezuela have told me that most ordinary people they spoke to would prefer to have their money in dollars instead of Bitcoin.
    The bigger problem facing Bitcoin is that the practical and legal uses have struggled to outpace illegal or clearly unethical activity.
    The list of ways that Bitcoin has proved useful to criminals keeps growing, from the ransom payments on locked-up computer files — or even hostages — to illegal drug sales.
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    Many of these misdeeds are hard to quantify, but Chainalysis has managed to put numbers on Bitcoins used to buy drugs on the so-called dark net. Chainalysis numbers show that drug purchases rose last year, even when the price of Bitcoin was falling.
    The total dark net transactions in 2018, around $620 million, were more than twice the amount that Venezuelans bought on LocalBitcoins.
    Bitcoin fans will tell you that this is a drop in the bucket compared with how much the dollar is used to buy drugs. But all the data I’ve seen suggests that drug purchases account for a much larger proportion of the Bitcoin economy than their proportion of the dollar economy. And Bitcoin has enabled new kinds of deadly drug traffic, like the synthetic opioids that have flowed from China to small towns in the United States.
    Illegal activity, and especially pornography, played an important role in the early internet, but nothing like what we’ve seen from Bitcoin in its early days.
    Bitcoin is accessible to anyone — not so different from the internet. The problem is that, other than speculation, none of its legitimate uses have taken hold at anything like the pace of the illegal activity.
    That the technology hasn’t gained traction with ordinary people does not mean it won’t someday. There are still plenty of areas where, smart entrepreneurs think, the open nature of cryptocurrencies could be useful.
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    Many venture capitalists have made bets on Ethereum and EOS, alternative cryptocurrency networks that can be programmed for more sophisticated applications, like financial contracts, than Bitcoin’s software allows.
    Programmers have already built thousands of so-called decentralized applications, or Dapps, that use the EOS and Ethereum tokens. Many of them can be used today. These Dapps can move money around and record ownership of digital goods, like items in video games, without a central company keeping the records.
    But a majority of these Dapps still focus on legal gray zones, like gambling. The most prominent use of Ethereum so far has been by companies, many of them scams and frauds, that wanted to raise money without complying with securities regulations, through so-called initial coin offerings.
    I have seen little indication that any of the more legitimate uses have worked easily enough to have any appeal beyond cryptocurrency fanatics.
    Perhaps the biggest thing that cryptocurrencies have going for them is that serious people still want to fix the flaws. The value of digital tokens — however volatile they may be — has created incentives for people to work on them.
    The latest big cryptocurrency player is Facebook, which is said to be working on its own digital tokens. So are several other big messaging companies.
    I can’t predict the future of cybercurrencies any more than the holdout dreamers and the naysayers. But with the serious money still finding its way into the market, it is far too early to write the whole thing off.
    Follow Nathaniel Popper on Twitter: @nathanielpopper.

    NYT
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    Monday, April 22, 2019

    The Great Republican Abdication By Paul Krugman

    So all the “fake news” was true. A hostile foreign power intervened in the presidential election, hoping to install Donald Trump in the White House. The Trump campaign was aware of this intervention and welcomed it. And once in power, Trump tried to block any inquiry into what happened.
    Never mind attempts to spin this story as somehow not meeting some definitions of collusion or obstruction of justice. The fact is that the occupant of the White House betrayed his country. And the question everyone is asking is, what will Democrats do about it?
    But notice that the question is only about Democrats. Everyone (correctly) takes it as a given that Republicans will do nothing. Why?
    Because the modern G.O.P. is perfectly willing to sell out America if that’s what it takes to get tax cuts for the wealthy. Republicans may not think of it in those terms, but that’s what their behavior amounts to.
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    The truth is that the G.O.P. faced its decisive test in 2016, when almost everyone in the Republican establishment lined up behind a man fully known to be a would-be authoritarian who was unfit morally, temperamentally and intellectually for high office.
    [For an even deeper look at what’s on Paul Krugman’s mind, sign up for his weekly newsletter.]
    In their chilling book “How Democracies Die,” Steven Levitsky and Daniel Ziblatt call this “the great Republican abdication.” The party’s willingness to back behavior it would have called treasonous if a Democrat did it is just more of the same.
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    Levitsky and Ziblatt say that when mainstream politicians abdicate responsibility in the face of a leader who threatens democracy, it’s usually for one of two reasons. Either they have the misguided belief that he can be controlled, or they’re willing to go along because his agenda overlaps with theirs — that is, they believe that he’ll give them what they want.
    At this point it’s hard to imagine that anyone still believes that Trump can be controlled. But he is delivering on the Republican establishment’s agenda — certainly far more than any Democrat would.
    The key point is that Republicans are committed to a policy agenda that is deeply unpopular. By large margins, the American public believes that corporations and the wealthy don’t pay their fair share in taxes. By even larger margins, the public opposes cuts to safety-net programs like Medicaid. Yet as far as I can tell, every G.O.P. budget proposal over the past decade has combined big tax cuts for the rich with savage cuts in Medicaid.
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    If the Republican agenda is so unpopular, how does the party win elections? Partly by lying about its policies. But mainly the G.O.P.’s political achievements depend on identity politics — white identity politics. Exploiting racial resentment to capture white working-class voters, while pursuing policies that benefit only the wealthy, has been the core of the party’s political strategy for decades. That’s why, in an increasingly diverse country, Republican support has stayed overwhelmingly white.
    In a fundamental sense, Trumpism is the culmination of that strategy. Commentators keep calling Trump a “populist,” but the only way in which he actually caters to working-class white voters is by appealing to their racial animus. He may be successful in doing so partly because it’s the only thing about his political persona that’s sincere: All indications are that he really is a racist.
    His substantive policies, however, have followed the standard right-wing agenda: In 2017 he passed a huge tax cut, largely for corporations, that disproportionately benefited the wealthy, and almost succeeded in repealing Obamacare, in the process gutting Medicaid.
    And these policies have endeared him to the G.O.P.’s money men. “Deep-pocketed Republicans who snubbed Donald Trump in 2016 are going all in for him in 2020,” reports Politico.
    They’re doing so even though they know that Trump was installed in office in part thanks to Russian aid, that his financial entanglements with foreign governments pose huge conflicts of interest and that he consistently shows a preference for dictatorships over our democratic allies.
    As I said, the modern G.O.P. is perfectly willing to sell out America if that’s what it takes to get tax cuts for the wealthy.
    Once you accept this reality, two conclusions follow.
    First, anyone expecting bipartisanship in dealing with the aftermath of the Mueller report — in particular, anyone suggesting that Democrats should wait for G.O.P. support before proceeding with investigations that might lead to impeachment — is being deluded. Trump is giving the Republican establishment what it wants, and it will stick with him no matter what.
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    Second, it’s later than you think for American democracy. Before 2016 you could have wondered whether Republicans would, in extremis, be willing to take a stand in defense of freedom and rule of law. At this point, however, they’ve already taken that test, and failed with flying colors.
    The simple fact is that one of our two major parties — the one that likes to wrap itself in the flag — no longer believes in American values. And it’s very much up in the air whether America as we know it will survive.
    The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.
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    Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman 

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    Friday, April 19, 2019

    NYT

    Reaction to Mueller Report Divides Along Partisan Lines - The New York Times

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    Reaction to Mueller Report Divides Along Partisan Lines

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    In an era of deep polarization, the special counsel’s report quickly became yet another case study in the disparate realities of American politics.CreditCreditErin Schaff/The New York Times

    By Peter Baker and Nicholas Fandos

    WASHINGTON — House Democrats vowed on Friday to pursue the revelations in the special counsel’s report on President Trump but drew little Republican support in a nation still deeply polarized over the investigation that has dogged the White House for two years.

    The chairman of the House Judiciary Committee issued a subpoena demanding that the Justice Department hand over an unredacted copy of Robert S. Mueller III’s report along with underlying evidence by May 1 and promised “major hearings” into its findings. And Senator Elizabeth Warren of Massachusetts became the most prominent Democrat to call for impeachment.

    But most Republican lawmakers remained silent on the report, meaning any effort to force Mr. Trump from office faced long odds barring an unexpected change of political circumstances. The months to come may see more fireworks over the report, including a constitutional clash in court over releasing it in full, but privately some Democrats have concluded that the president’s fate will probably be decided at the ballot box next year.

    [Rudolph W. Giuliani attacked the credibility of the former White House counsel Donald F. McGahn II.]

    While Mr. Trump had initially greeted the report as an exoneration, he spent at least part of the day in Florida stewing about disloyal aides who talked with investigators and sounded more defensive than celebratory. He expressed particular unhappiness over the report’s inclusion of granular accounts of his efforts to derail the investigation based on F.B.I. interviews and notes of his own advisers.

    “Statements are made about me by certain people in the Crazy Mueller Report, in itself written by 18 Angry Democrat Trump Haters, which are fabricated & totally untrue,” Mr. Trump wrote on Twitter. “Watch out for people that take so-called ‘notes,’ when the notes never existed until needed.”

    “Because I never agreed to testify, it was not necessary for me to respond to statements made in the ‘Report’ about me, some of which are total bullshit & only given to make the other person look good (or me to look bad),” he went on. “This was an Illegally Started Hoax that never should have happened, a…”

    At that point he stopped and did not finish the thought until eight hours later: “…big, fat waste of time, energy and money.” He went on to vow to go after his pursuers, whom he called “some very sick and dangerous people who have committed very serious crimes, perhaps even Spying or Treason.”

    The mention of notes appeared to refer to his former White House counsel, Donald F. McGahn II, who told investigators that the president pressed him to have Mr. Mueller fired and complained when he took notes. Mr. Trump’s lawyer, Rudolph W. Giuliani, challenged the credibility of Mr. McGahn’s account later on Friday. “It can’t be taken at face value,” he said in an interview. “It could be the product of an inaccurate recollection or could be the product of something else.”

    But Mr. McGahn had no motive to lie, according to Mr. Mueller, and he rebutted Mr. Giuliani through his own lawyer. “It’s a mystery why Rudy Giuliani feels the need to relitigate incidents the attorney general and deputy attorney general have concluded were not obstruction,” said the lawyer, William A. Burck. “But they are accurately described in the report.”

    On the campaign trail, Democratic presidential candidates condemned the president’s conduct and called for action against him.

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    While President Trump had initially greeted the report as an exoneration, lately he has sounded more defensive than celebratory.CreditSarah Silbiger/The New York Times

    “The severity of this misconduct demands that elected officials in both parties set aside political considerations and do their constitutional duty,” said Ms. Warren, who is seeking the Democratic nomination. “That means the House should initiate impeachment proceedings against the president of the United States.”

    In an era of deep polarization, Mr. Mueller’s 448-page report quickly became yet another case study in the disparate realities of American politics as each camp interpreted it through its own lens and sought to weaponize it against the other side.

    The president’s defenders insisted he was cleared because even though Mr. Mueller confirmed a wide-ranging Russian effort to interfere in the 2016 election on Mr. Trump’s behalf, the special counsel established no criminal conspiracy with his campaign and opted not to decide whether to accuse the president of obstruction of justice. Mr. Trump’s critics called it a devastating indictment of a candidate willing to profit from the help of a foreign power and a president who repeatedly sought to disrupt or end the investigation even if he was not charged with violating the law.

    [Read the Mueller Report: Searchable Document and Index]

    Few Republicans expressed concern about Mr. Mueller’s findings, with most lawmakers out of town for the spring recess studiously avoiding comment. One of the exceptions was Senator Mitt Romney of Utah, who said he was “appalled” that the president’s campaign welcomed help from Russia.

    “I am sickened at the extent and pervasiveness of dishonesty and misdirection by individuals in the highest office of the land, including the president,” he said in a statement. “Reading the report,” he added, “is a sobering revelation of how far we have strayed from the aspirations and principles of the founders.”

    Senator Rob Portman, Republican of Ohio, said the report “documents a number of actions taken by the president or his associates that were inappropriate,” but pointed to the conclusion by Attorney General William P. Barr and his deputy, Rod J. Rosenstein, that the evidence did not warrant charging Mr. Trump.

    More typical among Republicans was the reaction of Senator Marco Rubio of Florida, who has been working closely with the White House on the crisis in Venezuela. “We should ALL be alarmed at how effective Putin was & we should ALL be relieved, not disappointed, that President didn’t collaborate with him,” he tweeted.

    The subpoena issued on Friday by Representative Jerrold Nadler, Democrat of New York and the chairman of the House Judiciary Committee, escalated a fight with Mr. Barr over what material Congress is entitled to see from the investigation even as Democrats continued to pummel the attorney general for effectively serving as the president’s defense lawyer.

    Mr. Nadler asked for all evidence obtained by Mr. Mueller’s investigators, including summaries of witness interviews and classified intelligence — and indicated that he intended to air it to the public.

    “Even the redacted version of the report outlines serious instances of wrongdoing by President Trump and some of his closest associates,” Mr. Nadler said in a statement. “It now falls to Congress to determine the full scope of that alleged misconduct and to decide what steps we must take going forward.”

    The Justice Department dismissed the subpoena, saying that Mr. Barr had made “only minimal redactions” and offered to allow congressional leaders to view a version with even fewer deletions.

    “In light of this, Congressman Nadler’s subpoena is premature and unnecessary,” said Kerri Kupec, a department spokeswoman. “The department will continue to work with Congress to accommodate its legitimate requests consistent with the law and long-recognized executive branch interests.”

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    Representative Jerrold Nadler, the Judiciary Committee chairman, asked for all evidence obtained by Robert S. Mueller III’s investigators.CreditStephanie Keith for The New York Times

    Mr. Barr redacted about 10 percent of the report, blacking out information that would divulge secret grand jury evidence, expose classified intelligence, compromise continuing investigations, or invade the privacy or damage the reputation of “peripheral third parties.” Democratic leaders on Friday rejected Mr. Barr’s offer to show just select leaders a version with only the grand jury material redacted.

    [See which sections of the Mueller report were redacted.]

    Mr. Nadler’s May 1 deadline falls a day before Mr. Barr is scheduled to testify publicly before the Judiciary Committee in what is expected to be an explosive session in which Democrats plan to excoriate his handling of the report and Republicans will urge their colleagues to accept that there was no criminality and move on.

    In addition to Mr. Barr’s testimony and an outstanding invitation for Mr. Mueller, Mr. Nadler said on Friday that he would hold additional hearings to “get to the bottom of this” and “educate the country as to what went on.”

    “The idea is not to decide whether to debate articles of impeachment — we may get to that point,” Mr. Nadler said in an interview with WNYC. “The idea is to find out exactly what went on, who did what, what institutional safeguards were gotten around and how, and then decide what to do about it.”

    Mr. Nadler’s Republican counterpart on the Judiciary Committee, Representative Doug Collins of Georgia, blasted the subpoena as going “wildly overbroad” and encouraged Mr. Nadler to narrow its terms and extend the response time. As written, he said, Mr. Nadler’s subpoena was demanding “millions of records that would be plainly against the law to share” because of investigators’ extensive use of a grand jury.

    “The attorney general offered up a 400-page report that he wasn’t bound to provide,” Mr. Collins said. “The attorney general stands ready to testify before our committee and to have the special counsel do the same. Yet Chairman Nadler disregards all of this good-faith transparency without even taking the department up on its offer to review material under the redactions.”

    Speaker Nancy Pelosi of California has publicly opposed impeachment unless Democrats can attract bipartisan support in the House and the Senate, where 20 Republicans would be needed to achieve the two-thirds vote required for conviction.

    Ms. Pelosi has scheduled a conference call for all House Democrats on Monday to discuss what she called “a grave matter.” Speaking to reporters in Belfast, Northern Ireland, where she was meeting with political leaders on Friday morning, Ms. Pelosi said she would not, as a matter of principle, criticize the president while out of the country.

    But she signaled that Congress would not sit by. “We believe that Article I, the legislative branch, has the responsibility of oversight of our democracy, and we will exercise that,” she said.

    She faces a restive liberal base that is pressing her to go further and open a formal impeachment inquiry.

    “Many know I take no pleasure in discussions of impeachment,” Representative Alexandria Ocasio-Cortez, the closely watched New York freshman, wrote on Twitter. “But,” she added, “the report squarely puts this on our doorstep.”

    Other Democrats were more reticent, arguing that the party was better off litigating the future on the campaign trail.

    “We should certainly see the entire, unredacted report,” said Representative Josh Gottheimer of New Jersey. “But if we spend the next six months obsessed with this alone, instead of job training, health care and infrastructure, that would be a big mistake.”

    Michael S. Schmidt contributed reporting from Washington, and Maggie Haberman from New York.

    Follow Peter Baker and Nicholas Fandos on Twitter: @peterbakernyt and @npfandos.

    A version of this article appears in print on , on Page A1 of the New York edition with the headline: Report Offers No Closure For a Vast Partisan Divide. Order Reprints | Today’s Paper | Subscribe

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