Virtual currencies and their institutions

Or why Bitcoin and its variants are risky assets.

It’s fair to say that virtual currencies need block chain. Block chain is an essential or necessary innovation behind such currencies. That block chain is not sufficient becomes obvious when we consider the question of how many virtual currencies can exist.

This is pretty much a question in institutional economics. It would be like asking which fiat currency would dominate global transactions.

Ronald Coase’s transaction-cost theory of the firm probably has the answer.

The dominant virtual currency is the one with the least transactions cost. While trust is an unmeasurable element that reduces transactions cost, transaction cost can itself be measured.

There are other factors along with trust that augur well for the dominant virtual currency. Among these factors are:

It should have ‘standing’ with central banks if only because they issue legal tender, whereas virtual currencies are not.

Its value in terms of the dominant fiat currencies must be reasonably stable. For now, the leading virtual currency, Bitcoin, fails.

Also equally important is transparency in its creation and modification. It seems that users of a virtual currency will need at least an unwritten constitution that lays out the fundamental laws of the community of users, even if they wish to be as ‘decentralized’ as possible. Again, here, Bitcoin fails, as can be seen with the ongoing ‘fork’ controversy over Segwit2.

CONCLUSION. It’s too soon right now to say that Bitcoin is here to stay.

Philippines vs China


It seems that we can boil down the legal conclusion of the arbitral ruling as based on only two key questions.

One, what is an island? A rock is not an island. So there. Even if China builds up a rock, it still cannot become an island. It may be a feeler island, but still that’s not an island in the legal contemplation of international law. UNCLOS says that artificial islands are not properly islands. (Otherwise, any oil rig can claim to be an island!)

And there’s the economics of islands. Under UNCLOS (Art. 121(3)), only natural formations that can sustain economic life on its own, can have maritime zones, such as an Exclusive Economic Zone (EEZ).

Two, what is an archipelagic state? It is one composed of many islands. PH is archipelagic. China is not. It appears that China conceded its status as a coastal (non-archipelagic) state when it signed the UNCLOS because the UNCLOS classifies countries in only two ways — archipelagic or coastal. The Tribunal ruling, in para. 573, categorically restates that China is a coastal state.

The answers to these two questions determine the EEZ, which is 200 miles from the coastline of a non-archipelagic state; and 200 miles from the archipelagic baseline of an archipelagic state. The baseline is a point-to-point boundary that encompasses or includes the islands of an archipelagic state.

An outlying island in the South China Sea, even if it could be claimed as territory of China, cannot result in an expanded EEZ based on archipelagic baselines because China is not an archipelagic state. (Consider the following related question: Can the US consider the waters between Hawaii and Los Angeles as “internal waters” using the archipelagic baseline approach? The answer is in the negative because, like China, the US is not an archipelago.)

The EEZ of an outlying island is 200 miles around that island because such an island is treated like any other land territory (Art. 121(2)). The EEZ cannot extend beyond the 200 miles (beyond this, there would be continental shelf (something else) or open international waters (high seas)). And an EEZ could be delimited if competing EEZ’s from other nearby states exist.

The ruling states that the disputed territories are not at all islands, and therefore cannot provide China an EEZ. Practically all the major disputed territories are inside the EEZ of the Philippines because it is an archipelagic state. Therefore, even ‘rocks’ can be useful to the Philippines, if they are located within the EEZ based on the archipelagic baselines of the Philippines. These useful rocks include Scarborough Shoal, Second Thomas Shoal, Johnson Reef, McKennan Reef, Hughes Reef, and Mischief Reef. Some of the disputed rocks are outsize the EEZ of the Philippines.

An important caveat is that territory and sovereignty are matters of international law not subject to the UNCLOS. Nonetheless, disputes relating to the EEZ are pointedly the subject of the UNCLOS.


EEZ means maritime zones (not necessarily territory in the usual ‘conquest’ or ‘historic’ sense) that we can, under international law and UNCLOS, consider as usable only by us. We can, by negotiation, lease or allow others to use the EEZ, but the extent to which the Philippine Executive can do this is governed by the 1987 Constitution.

NB: The map of PH EEZ is from Wikipedia.

PH EEZ Screen Shot 2016-07-14 at 2.07.29 PM


The value of Facebook

Early on, I saved a small bundle on hard copy subscriptions. Realizing that mainstream media was into ACDC was a bonus.

Of course, there remain honest folk in mainstream media. The trick is to know.

Someone smart said we need mainstream media to sort out the trash. True enough. Mainstream has to maintain at least the credibility and gravitas of a piece on its face. The troll and clickbait sites are uncovered soon enough, unless you’re too willing to be trolled.

So, what to do?

Find good friends and enemies. Find good people to follow.

What makes for “good?” It’s when they point you to something credible, or hint that something is unduly biased. Those with opposing views are best because you have to work against your own grain.

In the end, free expression is just a clause that works when people think.

Star wars log – the return of the PCOS

The age-old problem

Since the 2010 elections, there has been the danger of a re-cranking of the machinery to fix elections, something all can admit as an open secret in the decades before automation. Then it was called dagdag bawas, and every insider knew how it worked. We now have draconian laws criminalizing electoral sabotage, but the crime is a conspiracy that is hard to prove unless an insider sings. We need to invent a videoke machine for them, along with a truth serum to spike their beer. I hear there’s a new brew called San Migz Light; it will at the right moment make you admit there is cheating, and at another moment allow you to proclaim you had no part in it. Even better, imbibing it will allow you to run for election all over again, just like nothing happened! Of course, if you believe the Rules on Evidence, the first is an admission, the second a neat self-serving statement.

The ‘nightmare’

Continue reading “Star wars log – the return of the PCOS”

Reversible error

The law school dogma is that the Supreme Court cannot commit reversible error.

Wrong, according to Rene Saguisag.  The people can reverse.  Here’s an excerpt:

I share the view that we cannot add to constitutional qualifications. Hence, my reservation on bank waivers. Total obliteration of any zone of privacy, the right to be let and left alone, is the aim? Only the rascals who park their money in their children’s names, for instance, may go to, and remain in public life. The JBC can set policy and may ask for the transparency vow. We, the people, have the right to know.

Sandbagged Rene is to get the credit for the new transparency? We might as well thank Osama Bin Laden for our anti-terrorism law and safeguards.

Happy Independence Day!

Star wars log – seldom wrong, always right, but a doozy

Or maybe a bit of Looney Tunes.

Does Teddy Boy (TB) make sense? Here’s my two pesos’ worth:

However you look at it, TB argues Tu Quoque. In effect, if you get caught, it should be OK to get acquitted because allegedly everyone else does it. As a rule, Tu Quoque cannot fly because it is a recipe for taking the law into one’s unclean hands.

But TB claims to argue Equal Protection, supposedly because laws should apply equally to all. In fact, the Senate followed Equal Protection because it meted out dismissal on that clear precedent of a court clerk who failed to declare a sari-sari store. Ms. Flores, dismissed for her SALN misfeasance, has become a celebrity poster girl for justice for the little guy.

What TB really wants is an even broader net to be cast, which is fair. But neither mandamus nor injunction can control how the Executive enforces the laws (because the matter is a political question). That’s life, TB, even if it seems unfair. As Sen. Marcos has said on tv, ‘ang pikon, talo.’

TB’s remedy, if any, is to claim ‘grave abuse’; not so easy after the Senate President put a proper ziplock (Ted Te’s word) on the process and due deliberation by the Senate. The sole question on certiorari is limited to whether the Senate was ‘whimsical.’

The SC cannot find reversible error because the Constitution does not carve in an appellate jurisdiction for the SC in an impeachment case. (Theoretically, Congress can add or expand the SC jurisdiction, but can do so only through legislation; not through a ‘mistake’ by the Senate.)

But as always. Let’s take our grain of substitute salt. TB is seldom wrong, always right. Right.