The public will perceive bitcoin miners as bitcoin validators, and it will prevent the framing effect.
This opinion editorial is by Doc Sharp, a Bitcoin product designer who has been funded by Spiral in order to support various bitcoin FOSS projects.
Anyone who has been in the digital asset space for a while knows that almost all projects, with the exception of bitcoin, are able to create effective public relations to promote their decentralized only-in-name (DINO). project. It's not surprising that the tens and billions of dollars raised over the years had to go somewhere. And it certainly did not go towards building new technology.
The public relations aspect of bitcoin is lacking in one area: the way blocks are validated. This is colloquially known as proof-of-work (PoW), or mining.
First, how does mining work?
Bitcoin miners use PoW (which uses energy) to locate a needle in the haystack. They use the needle to create and add new blocks to Bitcoin's blockchain. The miner is rewarded with newly-minted bitcoin when the new block has been added. This is the best way to reach network consensus and create valid blocks. You can read more about bitcoin mining here.
Bitcoin mining is like looking for a needle in the haystack.
Image source
Bitcoin Mining and The Framing Effect
Green narratives are increasingly important in an age where capital is directed according to criteria such as environmental, social, and governance (ESG) scores.
This is why the perceived high energy cost of mining bitcoin and the term mining, which are associated with environmental destruction, have become barriers to bitcoin adoption. DINO projects use this red herring to discredit bitcoin and to pump their cash.
Bitcoin mining is relatively low in energy consumption and is mostly green. These realities are often overlooked by people due to cognitive bias called the framing effect.
"The framing effect" is a cognitive bias that allows people to decide whether options have positive or negative connotations.
The term mining has many negative connotations. See image below. Because of the framing effect, there are many digital assets that offer similar solutions to bitcoin. They have a smaller environmental footprint and can be preferred by naive users.
This is what people think about when they hear the word mining.
Although I won't go into details, the "greener" solution of proof-of-stake is not viable and will eventually lead to centralization. It's not surprising that people choose to make decisions based on superficial reasons such as their views about energy.
The prospect theory is a psychological theory that explains why the framing effect exists.
The prospect theory states that people are more affected by the prospect of losing money than they are by the prospect of earning the same.
The gain of PoW (More energy usage, but decentralized) is more than the loss PoS (Lesser energy use but centralized). It's not difficult to see the loss from an environmental perspective.
This is made worse by sensationalist pieces like "Bitcoin uses more electricity than many countries" that claim climate change is a major societal problem. What is the best way to do that? It is important to circulate frequently. This is how the framing effect manifests, as people are only shown one frame (the environment one).
What can we do to get people to see that bitcoin mining doesn't boil the oceans, but is a smart use of energy? We could learn from the DINO handbook and use narratives with less negative connotations to our advantage.
This could be used to mine bitcoins. It's simple.
Let's call Bitcoin miners, Bitcoin validators
The Ethereum 2.0 merger has seen Ethereum move from mining with PoW to validators with PoS. Ethereum 2.0 merge will eliminate mining and miners as we know, with claims of up 99.5% energy savings.
These energy savings come at the expense of decentralization, which is a red herring. Without decentralization, cryptocurrencies are useless. Even if the energy consumption of a centralized public cryptocurrency is small, it's still 100% wasted because the network has failed. This is what Bitcoiners know and why they will never alter the code.
We are back to the framing impact. Due to the marketing efforts of DINOs, validators has a much higher positive connotation than mining. People will see the term with a lower number of negative connotations. People will be able to see the benefit of PoW (More energy consumption, but decentralized) better than the loss from PoS (Less energy usage, but centralized). This is done by using validator, which is a media-friendly term.
DINO has done the hard work by changing the narrative to PoS > POW. We can leverage this effort to our advantage, just as DINO has done it time and again by using the bitcoins name to justify their Rube goldberg machine.
By calling bitcoin miners bitcoin validators, you can stop the framing effect and shift the narrative to PoS POW. The use of the same term for Bitcoin and Ethereum makes it easier to understand the differences. It is also technically more precise and explicit because validators (miners) produce valid blocks.
Here are some mining terms that we need to change.
Bitcoin mining pools = Bitcoin validater pools
Bitcoin miners = Bitcoin validators
Bitcoin mining = Bitcoin validating
Summary
Re-framing PoW mining as PoW validating will help bitcoin in the long term. This is because it will prevent the framing effect, which is a cognitive bias that causes people to make decisions based on the connotations of options.
Mining = negative connotations.
Validating = Positive Connotations (thanks Ethereum).
Doc Sharp contributed this guest post. These opinions are not necessarily those of BTC Inc.
Frequently Asked Questions
What is the tax on gold in Roth IRAs?
An investment account's tax rate is determined based upon its current value, rather than what you originally paid. If you invest $1,000 in mutual funds or stocks and then later sell them, all gains are subjected to taxes.
However, if the money is deposited into a traditional IRA/401(k), the tax on the withdrawal of the money is not applicable. You pay taxes only on earnings from dividends and capital gains — which apply only to investments held longer than one year.
These rules vary from one state to another. In Maryland, for example, withdrawals must be made within 60 days of reaching the age of 59 1/2 in order to qualify. Massachusetts allows you to delay withdrawals until April 1. New York offers a waiting period of up to 70 1/2 years. To avoid penalties, plan ahead so you can take distributions at the right time.
Is the government allowed to take your gold
Because you have it, the government can't take it. You earned it through hard work. It belongs entirely to you. This rule could be broken by exceptions. For example, if you were convicted of a crime involving fraud against the federal government, you can lose your gold. Also, if you owe taxes to the IRS, you can lose your precious metals. However, even if you don't pay your taxes, your gold can be kept as property of the United States Government.
What are the pros and cons of a gold IRA?
The main advantage of an Individual Retirement Account (IRA) over a regular savings account is that you don't have to pay taxes on any interest earned. An IRA is a great way to save money and not have to pay taxes on the interest you earn. There are some disadvantages to this investment.
If you withdraw too many funds from your IRA at once, you may lose all your accumulated assets. Also, the IRS may not allow you to make withdrawals from your IRA until you're 59 1/2 years old. If you do withdraw funds, you'll need to pay a penalty.
Another disadvantage is that you must pay fees to manage your IRA. Many banks charge between 0.5%-2.0% per year. Other providers charge monthly management fees ranging from $10 to $50.
If you prefer to keep your money outside a bank, you'll need to purchase insurance. Insurance companies will usually require that you have at least $500,000. Insurance that covers losses upto $500,000.
If you choose to have a gold IRA you will need to establish how much gold to use. Some providers limit the number of ounces of gold that you can own. Others let you pick your weight.
You'll also need to decide whether to buy physical gold or futures contracts. Physical gold is more expensive than gold futures contracts. Futures contracts offer flexibility for buying gold. Futures contracts allow you to create a contract with a specified expiration date.
You also need to decide the type and level of insurance coverage you want. The standard policy doesn't include theft protection or loss due to fire, flood, or earthquake. The policy does not cover natural disasters. If you live in a high-risk area, you may want to add additional coverage.
In addition to insurance, you'll need to consider the cost of storing your gold. Insurance doesn't cover storage costs. For safekeeping, banks typically charge $25-40 per month.
If you decide to open a gold IRA, you must first contact a qualified custodian. A custodian helps you keep track of your investments, and ensures compliance with federal regulations. Custodians are not allowed to sell your assets. Instead, they must maintain them for as long a time as you request.
Once you've decided which type of IRA best suits your needs, you'll need to fill out paperwork specifying your goals. The plan should contain information about the types of investments you wish to make such as stocks, bonds or mutual funds. Also, you should specify how much each month you plan to invest.
After filling out the forms, you'll need to send them to your chosen provider along with a check for a small deposit. After receiving your application, the company will review it and mail you a confirmation letter.
You should consult a financial planner before opening a Gold IRA. A financial planner can help you decide the type of IRA that is right for your needs. They can also help reduce your costs by suggesting cheaper options for purchasing insurance.
What is the tax on gold in an IRA
The fair market value of gold sold is the basis for tax. You don't have tax to pay when you buy or sell gold. It's not considered income. If you sell it later, you'll have a taxable gain if the price goes up.
As collateral for loans, gold is possible. Lenders seek to get the best return when you borrow against your assets. Selling gold is usually the best option. There's no guarantee that the lender will do this. They might just hold onto it. They may decide to resell it. The bottom line is that you could lose potential profit in any case.
In order to avoid losing your money, only lend against your precious metal if you plan to use it to secure other collateral. If you don't plan to use it as collateral, it is better to let it be.
How much of your IRA should include precious metals?
When investing in precious metals, the most important thing to know is that they aren't just for wealthy people. You don't have to be rich to invest in them. There are many ways to make money on silver and gold investments without spending too much.
You might consider purchasing physical coins, such as bullion bars and rounds. Shares in precious metals-producing companies could be an option. Your retirement plan provider may offer an IRA rollingover program.
Regardless of your choice, you'll still benefit from owning precious metals. They offer the potential for long-term, sustainable growth even though they aren’t stocks.
They also tend to appreciate over time, unlike traditional investments. If you decide to sell your investment, you will likely make more than with traditional investments.
Should You Open a Precious Metal IRA?
The most important thing you should know before opening an IRA account is that precious metals are not covered by insurance. If you lose money in your investment, nothing can be done to recover it. This includes all investments that are lost to theft, fire, flood, or other causes.
You can protect yourself against such losses by purchasing physical gold and silver coins. These items have been around for thousands of years and represent real value that cannot be lost. You would probably get more if you sold them today than you paid when they were first created.
Choose a reputable company with competitive rates and quality products if you are looking to open an IRA. Consider using a third-party custody company to keep your assets safe and allow you to access them at any time.
If you decide to open an account, remember that you won't see any returns until after you retire. Don't forget the future!
Statistics
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
External Links
cftc.gov
irs.gov
forbes.com
- Gold IRA: Add Some Sparkle To Your Retirement Nest Egg
- Understanding China's Evergrande Crisis – Forbes Advisor
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- Do you want to keep your IRA gold at home? It's Not Exactly Legal – WSJ
How To
Gold Roth IRA guidelines
Starting early is the best way to save for retirement. You should start as soon as you are eligible (usually at age 50) and continue saving throughout your career. It is essential to save enough money each year in order to maintain a steady growth rate.
You also want to take advantage of tax-free opportunities such as a traditional 401(k), SEP IRA, or SIMPLE IRA. These savings vehicles allow you to make contributions without paying taxes on earnings until they are withdrawn from the account. They are a great option for those who do not have access to employer matching money.
It's important to save regularly and over time. You'll miss out on any potential tax benefits if you're not contributing the maximum amount allowed.
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By: Doc Sharp
Title: Bitcoin Miners Don’t Exist — But Bitcoin Validators Do
Sourced From: bitcoinmagazine.com/culture/bitcoin-miners-dont-exist-validators-do
Published Date: Sat, 24 Sep 2022 00:05:00 GMT
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