How consensus protocols make crypto assets more secure.
#891 May 23, 2018
  • Feature: Understanding Blockchain Technology: Consensus Protocols, Part 1 by Van K. Tharp, Ph.D.
  • Workshops: Forex Is Back! August and October Events
  • Tips: The Line In The Sand That The Market Just Won’t Cross (Yet…), by D. R. Barton, Jr.
  • FREE BOOK!: Trading Beyond the Matrix
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The Mission of Peak Performance 101

Our mission at the Van Tharp Institute is to help people transform not only their trading, but also their lives, and the Peak Performance 101 Workshop is the key workshop we use to teach people how to do it. Peak Performance 101 is Dr. Tharp's core psychological workshop for over 25 years.

If you want to know how great traders think, behave, and act so you can achieve consistent and profitable results, without stress, then this workshop is for you. You will not only learn what makes a great trader great, but you will also find out what is holding you back. There are many ways you could be sabotaging your market experiences: overtrading, not pulling the trigger, over confidence or lack of confidence, or just making mistake after mistake. Van Tharp designed this workshop to help you break down barriers, as well as teach you specific tasks and strategies that will improve your trading results overnight.

If you learn how you control your trading results, you've accomplished something that will help you immensely over the whole span of your trading career. Nothing you learn will go out of style, not match any new market you decide to trade, or not apply to any new system you want to try. What you learn applies to all trading and lasts forever!

To learn more about our upcoming Peak Performance workshops, scroll down to our workshop's section. We have one coming up in August and another in October in London.

Feature Article

Understanding Blockchain Technology:
Consensus Protocols, Part 1
by Van K. Tharp, Ph.D.
Van's Photo
I personally think that the blockchain, and some cryptocurrencies, represent the opportunity of a lifetime. Consequently, I plan to do monthly updates on the cryptocurrency world. These will include some education so you can begin to take advantage of this opportunity as well as an overview of what is happening in the cryptocurrency world for the last month. We are also developing special programs for those in the Super Trader program to take advantage of this unique opportunity and we are encouraging each Super Trader to have some stake in the world of cryptocurrencies. Why? Because the opportunities are staggering and cryptocurrencies are not highly correlated with other types of investments. These updates will come out the 3rd Wednesday of each month and will cover developments over the prior month. And the format, of course, will evolve over time. The update went out last week on the 16th.

This week I’m following up with fairly extensive information on my continuing series on Blockchain Technology. This week is Part One of a two part instruction on Consensus Protocols.

During the 2007-2009 Global Financial Crisis, we saw the dangers of lots of power in big banks and in central governments. Big banks had invented products that were insane and sold them to unwary parties. The result was a market collapse and a major change of the world’s wealth. Big government and big banks had to work together to salvage everything and those institutions that didn’t play the game well were allowed to fail — think Lehman Brothers and Bear Sterns. The crash really pointed out the dangers of everything being centralized. Furthermore, the Internet once held great promise of decentralization but it had just furthered the centralization. A few companies started to dominate the Internet and they became the dominant force for concentrated power online. Here I’m referring to names like Apple, Amazon, Google — all of which now have artificial intelligence devices (i.e., Siri, Alexa, and Hey Google, respectively).

As the dangers of centralized money and power became more obvious, someone named Satoshi Nakamoto (who has never been identified and was possibly a number of people) released a whitepaper about a concept for decentralized money, namely Bitcoin. The idea was open sourced and soon the first Bitcoin (BTC) appeared. Rather than concentrate money in one power such as a central bank, the idea behind Bitcoin was to make it everywhere by anonymous individuals and useable by everyone.

In the first of these articles, we covered blockchain technology as a decentralized ledger and its advantages. We also made the following statements:

  • We talked about Internet protocols (which are very few) versus blockchain protocols which are many.
  • We talked about the blockchain as a decentralized (distributed) ledger.
  • We also talked about how blockchain technology makes it expensive to cheat and profitable to cooperate and how it might eliminate the major concerns of the Internet today — hacking and stolen secrets. A website can be hacked. A cryptocurrency exchange can be hacked, but a cryptoasset’s blockchain is very, very difficult to hack.
  • We described what blocks of transactions were and how they are chained together — hence the blockchain.

In this two part article, I’m going to explain the glue that holds cryptoassets together – the block consensus protocols or the verification process. There are several verification processes and these make the differences between certain classes of tokens or cryptoassets.

Consensus Mechanisms: How Decisions Are Made in the Blockchain

We have explored how the blockchain is a decentralized peer-to-peer system with no central authority figure. That means there is no corruption from a single source but it also creates problems in how decisions are made and how anything gets accomplished.
In the types of organizations we are accustomed to, decisions are made by the leader (CEO, President, etc.) or by a group of leaders (i.e., the board of directors). But without a leader, organizations must make decisions by some sort of consensus mechanism. Consensus is a dynamic way of making an agreement that could benefit the entire group as a whole. The method whereby this is achieved is called the consensus mechanism.

According to Wikipedia, some of the objectives of consensus include:

  • Agreement seeking: it should bring about as much agreement as possible.
  • Collaborative: All the participants should work together to achieve the results that put the best interest of the group first.
  • Cooperative: Participants should work as a team, not putting their own interests first.
  • Egalitarian: Each vote should have an equal weight.
  • Inclusive: As many people as possible should be involved in the process. People normally don’t vote because they feel their vote doesn’t have enough weight to matter and this must be avoided.
  • Participatory: The consensus mechanism should be such that everyone should actively participate in the overall process.

Before Bitcoin, many decentralized currency systems failed because they faced what’s called The Byzantine Generals Problem and they couldn’t solve it.

Imagine a group of generals who must attack a city. The generals are scattered so a central authority is impossible. If they all attack together, victory is assured. But if some attack and others don’t, then defeat is probably likely. So the solution might be to send a messenger to the other generals to co-ordinate the attack. But all sorts of things could go wrong: 1) who sends the messenger and decides and what if each group each sends a messenger with different instructions; 2) what if the messenger comes and says attack on Wednesday and the next general says “No, we aren’t ready until Thursday.” 3) What if the messenger gets killed or captured? What’s missing is a consensus mechanism.

Imagine how this would apply to a blockchain. Say you want to send 30 NEO from your wallet to another address. How do you know someone isn’t going to mess with the transaction and send 3 to your requested address and 27 to another address? Again, what’s needed is a consensus mechanism.

Proof of Work Consensus: Satoshi Nakamoto, Bitcoin’s inventor, solved the problem by inventing the proof of work consensus protocol. It works in the following manner:

  1. Bitcoin miners must solve a complex crytpographic puzzle in order to “mine” a block of transactions and add them to Bitcoin’s blockchain. These problems are difficult, taxing on the system, and require an immense amount of energy and computational usage.
  2. When a miner solves the problem, the miner presents it to the network for verification. It requires about 30 verifications to pass and the verification process is very simple.

So Proof of Work was one method of consensus — but with some serious drawbacks. First, POW eats up a lot of power, a huge amount of electricity. Second, people with faster and more powerful computers have a better chance of mining blocks than others. Right now about five Bitcoin mining pools account for 65% of the hashrate (i.e., the speed at which a compute is completed in the Bitcoin code). Ethereum currently relies on a proof of work process but is planning a move to proof of stake in 2018. Let’s look at that method next.

Proof of Work Consensus is the first method invented. However now there are eight other consensuses emerging, each with their own strengths and weaknesses.

Next week we’ll pick up this topic and go into detail on the other methods we should all understand to better navigate the securities in place for crypto assest investments.
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Trading Tip

The Line In The Sand That The Market Just Won’t Cross (Yet…)
by D. R. Barton, Jr.
D.R. photo
A potentially explosive standoff played out in the sands of northern Egypt some 2200 years ago. Chronologically, our story occurs smack in between the 323-year period between the death of Alexander the Great and the birth of Jesus.

As we tune in, an invading force in Egypt (at that time a Roman protectorate) is being presented with a “leave or suffer the consequences” ultimatum signed by none other than the Roman Senate.

Some historical figures just seem to be on the wrong side at every turn. In today’s story, an ancient and ill-remembered king is going to give us the key to trading the current market properly — and as a bonus give us the cool origin for a phrase that will be familiar to everyone reading this.

Antiochus IV Epiphanes, the sovereign of the Seleucid Empire (modern day Iran, Iraq, Syria and parts of central Asia) made a pre-emptive attack on Ptolemaic Egypt, which had previously demanded a return of captured lands.

Let’s get the players straight: After the death of Alexander the Great some 150 years earlier, the power void was filled by four of his generals that would, after intrigue and wars aplenty, turn Alexander’s conquered lands into four kingdoms. Two of those would become the Seleucid Empire ruled by this article’s focal point, Antiochus IV and Egypt ruled by the Ptolemaic dynasty.

In 170 BC, Antiochus’ captured all the major Egyptian cities save the capital city of Alexandria. He left behind a puppet government trying not to invoke the ire of Egypt’s protector — Rome.

But in 168, Antiochus could not leave well enough alone and returned to finish the job of conquering Egypt. Meeting little resistance, he and his army crossed the river Eleusis. This was the last natural barrier separating them from their goal of Alexandria — a mere four miles out. It was there that were met by Rome’s envoy, Gaius Popilius Laenas. He did not have an army with him — just a demand signed by the Roman Senate that Antiochus withdraw or be considered at war with the Roman Empire.

Antiochus held out his hand as a friendly greeting to the elder statesman from Rome. Instead of receiving a handshake in return, the Roman historian Livy records what happened next:

Popilius, however (instead), placed in his hand the tablets on which was written the decree of the senate and told him first of all to read it. After reading it through, he said he would call his friends into council and consider what he ought to do. Popilius, stern and imperious as ever, drew a circle round the king with the stick he was carrying and said, "Before you step out of that circle give me a reply to lay before the senate." For a few moments he hesitated, astounded at such a peremptory order, and at last replied, "I will do what the senate thinks right." Not till then did Popilius extend his hand to the king as to a friend and ally.

So, we have the first ever recorded event of someone “drawing a line in sand”. It’s a phrase that means a boundary or limit to what one will accept. Popilius’ line, if crossed, meant a declaration of war.

The U.S. stock market has done the same for us, though the war is between the bulls and the bears. The market has shown us that there is currently a “line in the sand” over which it will not cross. Let’s take a look (and revisit Antiochus and his audaciousness one more time) …

This Line Has Held Every Test for The Past 2.5 Years…

The market has made a major shift since late January. After years of a moving almost straight up, we finally got a significant pullback. The S&P 500 dropped 13.4% from its January high to its February low. The collapse of the inverse volatility trade did what no news item or global economic trend could do — it created the first market correction in almost two years.

But there was one line it would not cross…

Then, from mid-March until early April of this year, the talk of trade wars and the derailing of the Trump Growth Narrative was the main focus of traders and investors.

But the market refused to stay below the “line in the sand”.

And then there was more trade war “sturm und drang” leading into early May that drove the market down for almost two straight weeks.

But the market once again respected the now infamous “line in the sand” …

And what is this market moving “line in the sand”? It’s our old friend, the 200-day moving average (MA). Let’s take a look:
DR Chart 1
Much like Popilius’ demarcation drawn using his walking stick, our line in the sand is just a mental construct, a relatively arbitrary calculation drawn on the chart. What, then, makes it so useful? I can answer that question with one word.


Loads and tons of eyeballs are watching this line. As I’ve told you in past articles, when lots of people are looking at an indicator, it becomes an important reaction area. And for two years (as we’ll see below), the reaction of the market to pulling back to this line in the sand has been to rebound up.

But before we look at that longer-term chart, let me give some quick comfort to those of you who might be thinking, “But D.R. — price has dropped below the 200 day moving average several times over the past three months. How can you say that it’s a true ‘line in the sand’?.”

One of the key lessons I had to learn in applying technical analysis is that indicators are not discrete points on the chart. They are zones or levels where we need to pay attention.
Bear in mind that the prices on the chart are determined at a second-by-second auction. Market prices are not just the combined psychology of all market participants at any given moment. As we all know — psychology is far from an exact science. So our tools need to match the flexibility needed to understand that underlying psychology.

And though we’ve had intraday trips below the 200-day MA and even had one close below it, the price has certainly not been able to sustain a consistent move below that level.

Now let’s look at that longer-term chart. Here’s the S&P 500 going back two and half years:
DR Chart 2
When we do get a decisive break below the 200 day moving average, the probabilities are that price will continue down another 5 – 15% (or more) below that level.

Until then — as long as the market’s “line in the sand” holds — pullbacks are to be bought.

I always love to hear your thoughts and comments — and especially your additional insights(!) — please send them to drbarton “at”

Great trading and God bless you,

D. R. Barton

P.S. My Jewish friends (and lovers of history in general) will recognize Antiochus IV Epiphanes for a very different reason than our “line in the sand” example. Because not long after leaving Egypt, Antiochus found time to outlaw Jewish religious practice in Israel — in a significant departure from his Seleucid and Ptolemaic predecessors. He went so far as defiling the Temple in Jerusalem. So not only was the first recorded “line in the sand” drawn around a belittled Antiochus in 168 BC, he also kicked off the Maccabean Revolt in Israel later that year.

That revolt would end four years later. And it was during the re-dedication of the Temple in Jerusalem that the original Hanukkah miracle occurred.
2 More Opportunities in 2018 to transform
your trading and your life

JULY 13-15, CARY, NC
These Students Just Finished This Course Last Weekend And Had This To Say

I gained an understanding of how beliefs are created and how to work on myself to bring about awareness. I realized how feelings can impact us and learned how to identify my parts and work on them.


The highlights of this class for me were learning some new position sizing ideas, the marble game, and the invaluable opportunity to talk to Van about my trading.


What Can You Expect to Learn?

Seven money-making benefits are waiting for you. They’ll help you keep your losses smaller, make more consistent profits and be more relaxed about your trading.

1.The three ingredients of success.

You must know this information, at least unconsciously, if you are to prosper. These three mental ingredients are a must in any task you do in order to perform like a "Market Wizard." Most people don’t even know about them, which is why success is so difficult to duplicate. But after the Peak Performance Trading Course, you’ll thoroughly understand how these three key ingredients can control your life. Most of all, you’ll know how you can control them.

2. The components of a low-risk idea.

The trick to compounding your personal wealth is to trade low-risk ideas. Low-risk ideas are found everywhere—not just in conservative investments. In fact, a great deal of wealth is made from following low-risk ideas in highly speculative arenas like options and futures. But you must understand what makes up a low-risk idea. It’s not what you think.

3. Why position sizing™ strategies are so critical to your bottom line results!

Few people understand this critical concept, yet it means the difference between consistent top performance and mediocre performance for most people. We’ll teach you how to do position-sizing-based trading so that, if you want, you will have the same risk and exposure in the market day after day. Think how calm you could be, knowing that your risk is always the same.

4. 15 ways to develop rock-solid discipline in your trading.

Discipline really means controlling your mental state. Unfortunately, most people allow their mental state to control them. In contrast, real winners maintain discipline that allows them to charge ahead of others in the field. If you play in a zero-sum trading game like futures, you need to know every trick. These are the real secrets that separate successful traders and investors from the average person.

5. Dr. Tharp’s Top Tasks of Trading for successful trading and investing.

Here is a partial list of the ten tasks we'll help you master: developing low-risk ideas, stalking, mental rehearsal, self-analysis, action, aborting, and, best of all, taking profits. At Peak Performance 101, Dr. Tharp will help you install his model so you can trade like other successful traders. You’ll have tools at your disposal that the average investor or trader never even thought about.

6. How to act quickly with sureness and confidence.

One trait all the best traders and investors have in common is extreme confidence in what they’re doing. Confidence is the one quality you must develop to attain your peak level of performance. At the Peak Performance 101 Workshop, you’ll learn how to develop the kind of confidence only the best traders and investors have.

7. How to develop a plan for trading that will set you way above the crowd.

There are certain disciplines—certain techniques used within a specific structure—that give the professional trader and investor the edge over amateur investors. Dr. Tharp understands these disciplines. He is an expert at coaching others to use them.

This workshop is the primary portal to apply for the Super Trader program. Rates for the Super Trader Program increase the first of August. Attend the July event in the US if you wish to apply for the program in time to get the current price before the increase.

June 2018 - US
The Basic and Advanced Options workshops have now been opened to the public (this workshop is traditionally a Super Trader Only workshop). However, to attend there are certain qualifications you must meet. Please call us at 919-466-0043 so we may speak with you regarding your level of experience trading.
July 2018 - US
Learn the Mental Secrets for Getting What You Really Want!

The material covered in this course will be information you can use to improve your life and your effectiveness.

The material will also be cutting-edge. It's not the sort of thing you can learn anywhere else. This workshop will probably be the only place that you could possibly pick up all of this unique information together.

Most importantly, the material will be presented in a practical way with plenty of exercises so you can incorporate the strategies you learn right into your daily life. When you leave the workshop, the most important strategies will become part of you.

Remember, this is a very exclusive workshop. It requires that you’ve attended Peak 101. We will be doing a lot of work with sub-modalities so you should at least have a little experience working with submodalities.

In addition, you can expect highly motivated, like-minded, success-oriented traders like you to join you in this incredible experiential workshop.
August 2018 - US
The Forex Trading Systems Workshop teaches three robust Forex Systems. All three systems are based on the concept of trend-following. Each system is based on similar “ingredients,” but each has a different recipe to capture a different part of the trend. Consequently, the systems are complementary to each other and together offer several trading setups nearly every day of the year. Two locations to choose from, Cary NC in August and London, England in October.

No matter what time frame you trade or what method you use to measure them, Sideways markets happen between 59% and 65% of the time! And even though they appear a majority of the time, Sideways markets are rarely discussed, even in professional trading circles. Until now....
September 2018 - US
The How to Develop Winning Systems Workshop teaches you what you need to know to develop your own system. The material you will learn is not market or time-frame specific. So whether you trade stocks, futures, currencies, gold, etc., or whether you place 50 trades per day or 50 trades per year, you will learn all of the components that work in any system. With this knowledge you can both modify existing systems to fit you or the market type better, or master your own system development.
Two locations to choose from, Cary, NC in September and London, England in October!
October 2018 - US
November 2018 - US

Free Book

FREE Book!
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When you add the free book to an item already being shipped there is generally no extra shipping charge (of course, depending on your location).

Read Van’s Latest Book —
The Red Pill for Traders and Investors

Eleven traders tell their stories about transforming
their trading results and lives, in this 400 plus page book.

Below is a brief video on how powerful this book is to traders.
Watch our Trading Beyond the Matrix Video
Cary, NC Workshop Information
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