The Effect of the Bitcoin Halving on Online Casinos

On May 11th, 2020, one of the most important events in the history of Bitcoin happened. We’re talking about the Bitcoin halving, when the supply of new bitcoins issued in blocks is halved, reducing the inflation rate and making bitcoins more scarce than ever.

As of May 11th, halving events have happened three times in Bitcoin’s short history. In previous times, the price of Bitcoin has increased dramatically after halving events. Anticipation of another bull run is causing many online gamblers to switch to Bitcoin casinos, many speculators to buy and hold Bitcoin, and many traders to switch to long positions to try to capture some gains.

Let us explain more about the halving, how it affects Bitcoin, and why Bitcoin casinos are more popular than ever before.

The Bitcoin Halving – What Is It and Why Is It Important?

To understand the Bitcoin halving, you need to have a basic understanding of how Bitcoin works. It’s much simpler than you might think, despite being unfamiliar to most people.

Every 10 minutes, a new Bitcoin block is created, which has in it a number of recent BTC transactions. Bitcoin miners run specialized computers 24/7, trying to guess the cryptographic key to unlock the next block. If they guess it correctly, they get all of the transaction fees and the block reward, which is some of the new bitcoins.

Every 210,000 blocks, or about every four years given that a block is mined every 10 minutes, the block reward halves. This is why it’s called the halving. This means that the number of new bitcoins being issued decreases every four years, unlike fiat currencies, which central banks print by the tens of billions whenever they feel like it.

The fact that Bitcoin gets more and more scarce over time makes it attractive to all sorts of people. Speculators, investors, Bitcoin believers, and online gamblers sense the value in a currency that is scarce, especially as central banks flood the world with paper money.

The two previous Bitcoin halvings have been correlated with dramatic price increases in BTC. Here’s what happened before.

  • In 2012, the first Bitcoin halving was followed by a price increase of 8,069% within one year.
  • In 2016, after the second halving, the price of BTC increased by 284% within a year. Ultimately, it reached a record high of $19,786 in December 2017.

Some Bitcoin analysts expect another price rise to well over $100,000 before the next halving. This is why so many online casino players are rushing to try to win some Bitcoin. If you win $10,000 of BTC today, and it really does increase to $100,000 or more per coin, your jackpots will be worth at least 10x more. There are no guarantees that it will, of course, but gambling is all about risk.

Why Bitcoin Casinos Are Booming in 2020

There are a few reasons why BTC casinos are growing rapidly in popularity, and why this halving event (more so than any other) is causing online gamblers to flock to them in droves.

1. Bitcoin Casinos Are Secure

When you gamble online with Bitcoin, you don’t have to share your credit card or bank details with the casino. You deposit BTC straight from your Bitcoin wallet, and when you win, you withdraw to it. The wallet doesn’t give away any details about you, and if a hacker did break into the casino, all they would see is your wallet address and transaction history. Without your private keys, they can’t do anything with your wallet address. Therefore, Bitcoin casinos are safer and more secure than fiat casinos.

2. Bitcoin is Maturing and People Sense It

After the previous two halvings, in 2012 and 2016, barely anyone had heard of Bitcoin. These days, Bitcoin is talked about in the mainstream media often, and the number of users has increased dramatically. Even CNBC hosts and Wall Street legends like Paul Tudor Jones talk about Bitcoin’s bright future. There’s a sense that Bitcoin is reaching a new level of maturity and is being accepted by people who previously dismissed it. Many BTC holders are convinced that institutions such as pension funds will soon buy and hold Bitcoin, so the price increase could be larger than anything we have seen before.

3. Bitcoin Is Changing Gambling for the Better

Bitcoin itself has forever changed money, but it has a number of knock-on effects which are positive for online gambling, too. For example, since all Bitcoin transactions are recorded on the blockchain, it is impossible for rogue casinos to steal your deposits and deny that you ever made them. Likewise, there are now Provably Fair casino games that use blockchain technology and hashing to make sure that game outcomes are truly random and honest. These innovations will clean up casino gaming and squeeze rogue operators out.

Why This Halving Is Special for Online Gamblers

While all of the benefits of Bitcoin casinos listed above are great, the real reason why this halving is positively affecting Bitcoin casinos can be summed up in two words; potential gains!

Gamblers can look at a historical Bitcoin halving chart and see how the price has increased by a lot after both previous halvings. With the maturity of Bitcoin as compared to previous halvings, the potential for price increases this time is even greater. Gamblers are excited because winning some Bitcoin today and holding it for a couple of years could be highly profitable.

In summary, gambling is potentially a fast way to increase your Bitcoin holdings. One lucky spin on a slot machine could give you 1,000 times the bitcoins you risk. Playing Bitcoin poker with a smart strategy could mean your BTC stack grows dramatically. It’s all there for the taking, and it coincides precisely with an event that makes Bitcoin scarcer than ever, and at a time when central banks are flooding the world with paper money.

Could this be the perfect storm for Bitcoin? We’ll soon find out, but for now, Bitcoin casinos like KingBit Casino are more popular than ever, and this halving is only helping them grow in popularity as players see the true value of Bitcoin.

Mycelium Wallet Supports ERC-20 Standard

A lot of community members store ERC-20 tokens these days. As Ethereum remains the most popular blockchain platform for smart contracts and DApps, Mycelium wallet now supports the standard.

Here is the current TOP10 list of ERC-20 tokens by 24H volume:

  1. Tether USD (USDT). The most popular USD-pegged stable coin.
  2. TrueUSD (TUSD). A regulated USD-pegged stable coin.
  3. USD Coin (USDC). A fully collateralised USD-pegged stable coin backed by Circle.
  4. BNB (BNB). A regulated USD-pegged stable coin by Binance.
  5. ChainLink Token (LINK). A token to support the middleware (the bridge between smart contracts, data feeds, APIs, and traditional bank account payments).
  6. Paxos Standard (PAX). A regulated by the NYDFS and fully collateralised USD-pegged stable coin.
  7. ZBToken (ZB). The token of a financial service provider.
  8. VeChain (VEN). A token to support the middleware (an oracle plus IoT integration).
  9. OKB (OKB). A token to support the digital asset exchange.
  10. OmiseGO (OMG). A token to support financial technology.

Hype-pandemic Decreases the Velocity of Money So Unavoidable Hyper-QE Doesn’t Blow Up the World

In the recent couple of decades, financial processes have been dominant. Today, everything else—wars, energy supply, digital technologies, mass media, even politics—all are tertiary, all follow the logic of the global financial center restructuring, foot-to-foot. 

The key event of recent months is the official launch of the FED’s multi-trillion-dollar giveaways (hyper-QE). 

From this moment on, it is impossible to go back to the previous state of the system. Now, only forward! We are heading into the unknown and not yet experienced by anyone. We are facing something for which there is no description, rules of tested behavior. 

The exaggeration of the pandemic (hype-pandemic) serves the need for a sharp slowdown in the real economy. 

A sharp acceleration of financial pumping must not be done without slowing down the real sector. As they are multiplying the increased money supply by the decreased speed of money, at least to some extent they stay commensurate with the second part of the classical equation. This way, the hyper-QE does not [necessarily] lead to immediate hyperinflation.

But why did they end up needing this hyper-QE in the first place?

We should first ask why weren’t they afraid to QE in 2009 and later and why aren’t they afraid to hyper-QE now? The very ability of the Fed to print and throw trillions of dollars into the furnace of the system without inflationary consequences for the dollar does look like a miracle.

The trick is that capitalism (that could be “afraid” of such actions) has not existed for many years already. It’s been dead since a two-circuit financial system has been formed, in which “dollars for capital operations” are separated from “dollars for the consumer market”. The former circulates in the virtual world of large speculations and investments. It does not trickle down to consumers, it never becomes the latter. The money that does sneak into consumers’ pockets is immediately sucked back into the virtual world via the [artificially] “growing stock market”. This is why they’d kill for constant “growth”. To a large extent, it has been a Ponzi for centuries but since about a decade ago, it is a complete and very quickly rotating Ponzi.

Notably, the two-circuit system is one of the core characteristics of the so-called developed socialism. Just as under Brezhnev, under Obama, capital operations ceased to depend in any way on the real economy. The percolation of the “capital” dollars into the real sector, as well as non-cash rubles into cash at the time, is, in fact, a planned (commanded) procedure, since it is determined by budget expenditures agreed in congressional committees.

However, in the bourgeois United States, it is impossible to maintain this separation of the two financial circuits for a long time, even with the full support of deceptive mass media.

Even in the best virtual computer game, there are external limitations and physiological needs of the players. Someone should go into this increasingly dusty and degraded game room and put cheeseburgers in a convenient place so that gamers can pick’em up and eat without removing virtual reality helmets. Someone also needs to change diapers.

In an exciting game of virtual financial “capitalism”, China and other countries of the periphery were needed for this “support” role. The dependence of the real sector of the world economy on the virtual game was created by involving the comprador elites, albeit indirectly, through offshore banks that siphoned dollars leaked to the producing sector back into the global virtual game. There’s plenty of other mechanisms: creating local budget deficits, IMF loans, buying American “treasuries” instead of investments in their own economies.

Until recently, this convergent virtual superstructure over the real economy not only co-existed with classic capitalism but also helped it complete the global expansion. Even the politically closed North Korea is now partly embedded in the world market through smuggling.

Having embarked on the path of QE in 2008, the financial elite of the West could no longer step off it. Rather, attempts to maneuver always ended with the opposite maneuver, leading to the main trajectory — to the collapse of the pyramid.

Every day, the two-circuit system requires bigger and bigger infusions — from several billion a year they came to several trillion in a month. All this time, the real economy has not expanded. 

The hype-pandemic is a gesture of despair. That’s why it feels so caricatured. For 75 years, there has been no place for real despair in our world. The hype-pandemic allows the otherwise split elite to temporarily unite and slowly pump the already punctured bubble of the real economy. 

They now have the formal justification to continue the Brezhnev’s practices and distribute loans without collateral and give away subsidies. 

Ok, for now, they avoided a sharp collapse with the destruction of even relatively healthy and necessary sectors and enterprises. This can be called a success. Gradual deflation is better than immediate death. So far, much of the extra money continues to be sucked out of reality to the “virtual” stock market.

But did the quarantine give time to work out an agreed decision? Did they decide what is going to be the fate of the dollar? Probably so. In such a stressed situation of the “co-located” mutual and universal interest, in a situation when they have time to solve it, there SHOULD be some [temporary] solution. Then, of course, after some time the world will have to look for the next move.

Via Ad-hoc Economy

FIO Protocol Launches Mainnet Simplifying Paying, Sending & Accepting Crypto

Over 2M crypto users will soon be able to utilize FIO enabled wallets to request crypto as well as send without using public addresses.

Denver, United States – XX March 2020, The Foundation for Wallet Interoperability (FIO), the crypto industry’s consortia of wallets, exchanges and cryptocurrency payment processors supporting the FIO Protocol, has announced the launch of the FIO Protocol mainnet (

The FIO Protocol unites the existing blockchain ecosystem with a decentralized delegated proof of stake usability layer that is integrated into existing crypto products such as wallets, exchanges and crypto payment processors. It makes the user experience of interacting with all blockchains as easy and worry-free as the best-centralized solutions today but does so in a secure and decentralized manner. The blockchain-agnostic protocol is already being integrated into multiple crypto wallets including Edge, Trust, Guarda, Scatter, Atomic, Mycelium and Anchor with releases anticipated soon. Over 20 more wallets, exchanges, and crypto payment processors lined up to follow (

Users will be able to send any type of cryptocurrencies by simply sending them to a ‘human-friendly’ FIO Address which somewhat like an email address is a username on a domain like “fio@edge” rather than the traditional incoherent string of 26-35 alphanumeric characters. Unlike other attempts at eliminating user interaction with public addresses, the FIO Protocol eliminates manual mapping to the public addresses, users are not bothered with an incremental payment every time the address is updated and will soon be able to opt-in for complete privacy on their public address mappings. Users can also register their own FIO Domains on which multiple usernames can be applied. Registration of FIO addresses and domains is done right out of the wallets that have launched initial integration such as Trust Wallet.

In addition, the FIO Protocol as a purpose-built usability layer is much more than just human-readable wallet addresses. Out of the box, the FIO Protocol will enable users to send and receive requests-for-payments.

The all-important inclusion of cross-chain encrypted metadata (called FIO Data) combined with FIO Requests enables invoices, order carts, or peer to peer payments to be sent for any token/coin on any blockchain. In all cases, details of transactions between counterparties are private, encrypted and only readable by those two parties. “Friending”, currently in development, will offer functionality that will enable encryption of the mapping of FIO Address to public address expanding the privacy enabled on the FIO Protocol. 

“We believe unifying this functionality will greatly simplify everyone’s experience of using cryptocurrency and help drive adoption with a more mainstream audience,” said Managing Director of the Foundation for Wallet Interoperability, Luke Stokes.

The initial version of the FIO Protocol was built through $5.7m in funding led by Binance Labs that was invested into Dapix, Inc. which created the initial version of the protocol software and transferred ownership to the Foundation prior to the mainnet launch. David Gold, CEO of Dapix added, “The vision of the FIO Protocol is to be a homogeneous usability layer of workflow, data, and information about the sending of transactions on other chains. The future potential of the protocol includes things like recurring payments, fee-splitting, secure multi-sig request routing and more.” The FIO Protocol has gained the support from 28 FIO Members, excited to integrate the Protocol.

The goal of the FIO Protocol is to provide a consistent usability layer for everyone on every chain in every crypto product.

FIO Protocol PR Contact:

Frances Wells

Cryptoland PR 

US: 866–586–5603

UK: +44 020 3908 5686

About FIO Foundation

The Foundation for Interwallet Operability (FIO) is a consortium of leading wallets, exchange, and crypto payment processors supporting the FIO Protocol — a decentralized Service Layer that removes the risk, complexity, and inconvenience of sending and receiving tokens and coins identically across every blockchain. The FIO Protocol is not a wallet and does not compete with other blockchains, rather, it makes the user experience better across every wallet and every blockchain. To learn more visit: or the FIO Protocol Knowledge Base at

England to Issue National Stablecoin

This March, Bank of England has published the discussion paper called “Central Bank Digital Currency”.

The paper considers: as the issuer of the safest and most trusted form of money in the economy, should we innovate to provide the public with electronic money — or Central Bank Digital Currency (CBDC) — as a complement to physical banknotes?

A CBDC could provide households and businesses with a new form of central bank money and a new way to make payments.

CBDC could also be designed in a way that contributes to a more resilient, innovative and competitive payment system for UK households and businesses.

A Central Bank Digital Currency would be an innovation in both the form of money provided to the public and the payment infrastructure on which payments can be made.

CBDC could present a number of opportunities for the way that the Bank of England achieves its objectives of maintaining monetary and financial stability.

It could support a more resilient payments landscape.

CBDC may also provide safer payment services than new forms of privately issued money‑like instruments, such as stablecoins.

Common reproaches against banksters are primitive and incorrect

Crypto-Reddit is full of accusations to banks. They say banksters issue currencies secured with nothing, with zero scarcity parameter. True. Yet, this is not the core problem they create (which bitcoin does not solve).

It is easier to produce than to sell. Ask an entrepreneur who has managed to create something.

It wasn’t always so. At some point about 40 years ago consumers in the Rich West have tasted everything [reasonable] they ever wanted. The global financial oligopoly developed a well-educated intention: 

“We should influence both the production side and the consumer side.”

The former was already a traditional tool. Bankers and the connected elite have always managed things by choosing what businesses to support. The latter was an innovation back in the early eighties but today most of the things people buy they buy on credit. Thus, it is not the goods that compete but rather credit terms. The free market is gone, as Mr. Marx has warned. Capitalism gave way to imperialism.

If you remove ubiquitous credit from our lives, people would buy other products and other brands. Entire industries that sell hollow status items, as well as entertainment, would die out.

Both production and “compulsion to consume” got concentrated in the same hands. The vicious circle of manipulation spins faster and faster. Money goes to those businesses that provide more opportunities for manipulating consumption. To the detriment of everything else, half of the world is now designing, photographing, marketing, and blogging 24/7. Another half spends hours a day consuming pointless content. Millions of scientists, engineers, and entrepreneurs ended up serving this fuss.

On paper, people consume more than produce and the debt is growing. It is artificial. There are no human beings on this planet who can take hundreds of trillions of real valuables out of their pockets to “lend” them to us. It was us and only us who produced what we have already eaten and otherwise consumed.

The artificial debt was once profitable to its designers but not any longer. The skewed demand has lost momentum. The mismatch of consumer “needs” with common sense has led to the common loss of adequacy. Our civilization remains very fragile. Chaos and death will engulf any city on the territory of the Golden billion if electricity is off for only a couple of days — this is what we must not forget.

It’s high time now to write off the pseudo-debt. Everybody needs it including pseudo-creditors. No one ever bent their back for that money, it has always been an accounting stunt. But accounting is a strict discipline. Manageability in writing off the debt is still possible. But risk-free manageability is not. Not any longer. The problem is over-ripe.

They will take risks. They will try to deploy the MMT. One indicator is that the adviser to Bernie Sanders is Stephanie Kelton who is an ardent advocate of MMT.

There is an international division of labor. Some counties perform the functions of the assembly shop. Others — the processing of raw materials and so on. The US does accounting and management. This division works without clear international agreements, outside public control. It’s some sort of private party. As the essence of the current monetary trap is clear to most players, this division of labor is no longer sustainable. Global financiers are being slowly (but surely) removed from real power. The most important thing in business is personnel, not money.

The US is no longer a trusted currency issuer which MMT must imply. The possible outcomes are scary.

Via Ad-hoc Economy

You don’t care about “The Price of the Internet”. So ignore the price of Bitcoin.

By Beautyon

… the price of buying Bitcoins at the exchanges doesn’t matter for the consumer. 

If the cost of buying a Bitcoin goes to 1¢ This doesn’t change the amount of money that comes out at the other end of a transfer. As long as you redeem your Bitcoin immediately after the transfer into either goods or currency, the same value comes out at the other end no matter what you paid for the Bitcoin when you started the process.

Think about it this way. Let us suppose that you want to send a long text file to another person. You can either send it as it is, or you can compress it with zip. The size of a document file when it is zipped can be up to 87% smaller than the original. When we transpose this idea to Bitcoin, the compression ratio is the price of Bitcoin at an exchange. If a Bitcoin is $100, and you want to buy something from someone in India for $100 you need to buy 1 Bitcoin to get that $100 to India. If the price of Bitcoin is 1¢ then you need 10,000 Bitcoin to send $100 dollars to India. These would be expressed as compression ratios of 1:1 and 10,000:1 respectively.

The same $100 value is sent to India, whether you use 10,000 or 1 Bitcoin.The price of Bitcoins is irrelevant to the value that is being transmitted, in the same way that zip files do not ‘care’ what is inside them; Bitcoin and zip are dumb protocols that do a job. As long as the value of Bitcoins does not go to zero, it will have the same utility as if the value were very ‘high’.

Bearing all of this in mind, it’s clear that new services to facilitate the rapid, frictionless conversion into and out of Bitcoin are needed to allow it to function in a manner that is true to its nature.

The current business models of exchanges are not addressing Bitcoin’s nature correctly. They are using the Twentieth Century model of stock, commodity and currency exchanges and superimposing this onto Bitcoin. Interfacing with these exchanges is non-trivial, and for the ordinary user a daunting prospect. In some cases, you have to wait up to seven days to receive a transfer of your fiat currency after it has been cashed out of your account from Bitcoins. Whilst this is not a fault of the exchanges, it represents a very real impediment to Bitcoin acting in its nature and providing its complete value.

Imagine this; you receive an email from across the world, and are notified of the fact by being displayed the subject line in your browser. You then applyto your ISP to have this email delivered to you, and you have to wait seven days for it to arrive in your physical mail box.

The very idea is completely absurd, and yet, this is exactly what is happening with Bitcoin, for no technical reason whatsoever.

It is clear that there needs to be a re-think of the services that are growing around Bitcoin, along with a re-think of what the true nature of Bitcoin is. Rethinking services is a normal part of entrepreneurialism and we should expect business models to fail and early entrants to fall by the wayside as the ceaseless iterations and pivoting progress.

Bearing all of this in mind, focusing on the price of Bitcoin at exchanges using a business model that is inappropriate for this new software simply is not rational; its like putting a methane breathing canary in a mine full of oxygen breathing humans as a detector. The bird dies even though nothing is wrong with the air; the miners rush to evacuate, leaving the exposed gold seams behind, thinking that they are all about to be wiped out, when all is actually fine.

Bitcoin, and the ideas behind it are here to stay. As the number of people downloading the client and using it increases, like Hotmail, it will eventually reach critical mass and then spread exponentially through the internet. When that happens, the correct business models will spontaneously emerge, as they will become obvious, in the same way that Hotmail, Gmail, Facebook, cellular phones and instant messaging seem like second nature.

In the future. I imagine that very few people will speculate on the value of Bitcoin, because even though that might be possible, and even profitable, there will be more money to be made in providing easy to use Bitcoin services that take full advantages of what Bitcoin is.

One thing is for sure; speed will be of the essence in any future Bitcoin business model. The startups that provide instant satisfaction on both ends of the transaction are the ones that are going to succeed. Even though the volatility of the price of Bitcoin is bound to stabilise, since it has no use in and of itself, getting back to money or goods instantly will be a sought after characteristic of any business built on Bitcoin.

The needs of Bitcoin businesses provide many challenges in terms of performance, security and new thinking. Out of these challenges will come new practices and software that we can only just imagine as they come over the horizon.

Finally, when there is no more fiat, and the chaotic transition zone between fiat and Bitcoin has been abolished, then everything will be priced in Bitcoin, and there will be no volatility, because no one uses anything other than Bitcoin to buy or sell. If you know any chemistry, this will be like a reaction’s reagents reaching equilibrium; you can shake it and stir it all you like; the reaction is over, and you’re left with the inert product. Right now, compared to the amount of fiat in the world, Bitcoin can expand and contract very rapidly over a large range, because it is small in volume. It can expand to what for many is an unimaginably high price, and then shrink down again. As it gets bigger and accumulates more mass (its price expressed in fiat), these fluctuations will become smaller and smaller. Through all of this, Bitcoin remains exactly the same; it is its users that are publishing numbers as a signal to react upon.

Read full article >>

Bloomberg: “end to the era of trust in central banks”

By John Authers

Full article >>

After the war, the developed world was governed by the Bretton Woods accords, which tied all currencies to the dollar, which was in turn pegged to gold. It was a looser form of a gold standard, and survived until 1971. That was when Richard Nixon ended the gold peg, realizing that it had become too great a burden for the U.S., and stood in the way of the expansionary fiscal policy he was hoping to adopt ahead of his re-election campaign. 

The result was a huge shock to the world order. With the gold peg gone, the financial system adopted a new anchor, which was oil. In a book published 10 years ago, I tried describing the system that replaced Bretton Woods as an Oil Standard. Effectively, producers tried to defend themselves against the declining buying power of the dollar by hiking prices, so as to keep the price of oil in gold terms effectively constant. The oil/gold ratio measures how much gold you would need to pay to buy a certain amount of oil. As the chart shows, it ended the 1970s almost exactly where it had started, despite the massive increase in dollar terms.

Compared to gold, oil is already close to a 50-year low

The chart uses Bloomberg’s historic oil prices, which appear monthly, and pre-dates the latest market drama. Once updated, it will show the oil/gold ratio reached an all-time low, having already halved this year:

The economics of oil producers have been transformed in two months

The Oil Standard era ended in the early 1980s. Markets — and everyone else — had lost faith in the ability of central banks to control inflation. Paul Volcker arrived at the Fed, raised rates more than anyone thought he would dare, provoked a recession, and convinced everyone that central banks could control inflation after all. In conjunction with the Reagan/Thatcher approach to economic management, and then the collapse of the Soviet Union and the resurgence of China, that ushered in a quarter-century of triumphalism for a new model anchored by broadly trusted central banks.

That foundered in the financial crisis of 2007-09.  Now we have reached a new juncture, where the fear is that central banks cannot control deflation. For the post-crisis decade, the U.S. has managed to stay distinct, thanks in part to the privilege of the world’s reserve currency, and in part to the superior success of its corporate sector. It has done this even as Japan and Western Europe have sunk into negative interest rates, while the emerging markets have stagnated. The twin shocks of the epidemic and the oil price now appear to have wounded confidence that the U.S. can stand alone.

At first, central banks struggled against inflation; now deflation is the enemy

It certainly looks as though the world has at last arrived at a point that it appeared to have reached a decade ago. Some new financial order, to replace Bretton Woods and the system that Volcker built to replace it, is now needed. A decade of monetary expansion has delayed the issue. It is hard to see how it can be delayed much further. It would be wise to brace for disruption to match what was experienced at the end of the 1970s and the beginning of the 1980s. 

… Read full article >>

On Negative Probability (for Mechanism Design)

By Alexander Kuzmin, Mycelium CEO

Those who work in the development of token projects need to model the behavior of people. Primarily, they study the potential reaction to incentives. Developers try to answer the question of what would a person do if he or she expects such and such a reward?

Our own experience and discussions with colleagues across the industry suggest that most inventors forget or ignore that probabilities can be negative. What is a negative probability and why is it important to use it?

At first glance, a probability of less than zero is nonsense. What could that mean if any person can either do something or not? Is the minimum probability not zero? No, if we consider non-observable and conditional events.

A negative amount of money does not seem strange to us. It can be interpreted simply as a debt. But the negative number of, say, apples is less clear a concept. We have an even less intuitive sense of what a negative number of events is (for calculating probabilities). But there is no fundamental difference with money.

Let’s assume you start your day with five apples. You are expected to receive eight more apples during the day, and you are going to give away ten apples. As a result, you will end the day with three apples. Since the final result is quite real, no questions arise.

The problem, however, is that you consider only a fraction of all possible scenarios. You need to limit your behavior so that you either have apples at any given moment, or you don’t need to give an apple to anyone at all points in time when you don’t have any apples. That means (at least) that “apple-nominated debt” is prohibited.

But if you are allowed to have such debt, or—speaking more generally—you can include in your scenarios negative event probabilities, then the system’s flexibility increases.

Few people can replace apples with events in their thought experiments. Can you imagine a negative probability of an “event of the execution of a specific contract”? Difficult, right? But if you simply allow negative probabilities in your calculations, then your model does the work for you without your imagination having to comprehend this speculative phenomenon.

Why is it important to use negative probabilities? Convenience. Research on motivations without using negative probabilities is the same as arithmetic without numbers less than zero. Possible but extremely inconvenient.

Below is a list of classic studies including those where negative probability is applied to finance.

  • Dirac, P.A.M. The Physical Interpretation of Quantum Mechanics. Proc. Roy. Soc. London (A 180), pp. 1–39, 1942.
  • Khrennikov, A. Equations with infinite-dimensional pseudo-differential operators. Dokl. Academii Nauk USSR, v.267, 6, p.1313–1318, 1982.
  • Khrennikov, A. p-adic probability and statistics. Dokl. Akad. Nauk, v.322, p.1075–1079, 1992.
  • Khrennikov, A. Andrei Khrennikov on Negative Probabilities, in Derivatives, Models on Models, Editor Espen Haug, John Wiley 2007.
  • Khrennikov, A. Interpretations of Probability. Walter de Gruyter, Berlin/New York, 2009.
  • Kolmogorov, A. Grundbegriffe der Wahrscheinlichkeitrechnung, Ergebnisse der Mathematik (English translation: (1950) Foundations of the Theory of Probability, Chelsea P.C.), 1933.
  • Kolmogorov, A. and Fomin, S. Elements of Function Theory and Functional Analysis, Nauka, Moscow, 1989 (in Russian).
  • Kuratowski, K. and Mostowski, A. Set Theory, North Holland P.C., Amsterdam, 1967.

Via Ad-hoc Economy