Vault of Satoshi– a Canadian-based bitcoin and alt-currency exchange – made huge news this past February by announcing their approval as a Money Transmitting Business (MTB) with FINTRAC.
In a nutshell: adoption through heightened legitimacy. One of the biggest barriers bitcoin (and bitcoin businesses) face is legitimacy. Businesses that operate in a non-transparent manner (Mt. Gox) scare people out of even considering bitcoin as a currency. Government agencies are not going to proactively reach out to bitcoin businesses to partner with them; if bitcoin businesses want to be adopted, and for this innovation to truly ‘stick’, we need to actively pursue partnerships with key decision makers, such as FINTRAC.
Kyle Kemper, co-founder of and partner in Bitcoin Strategy Group, a Canadian Bitcoin consulting, government relations and strategic communications firm, says “This is a strong precedent being set. This is showing that bitcoin is now being taken very seriously. FINTRAC was not even interested before and now they are providing a framework for which [bitcoin businesses] can be approved. It sets an example for Canada and the world.”
When these strategic partnerships are solidified, consumers will begin to feel more comfortable with the idea and adoption of bitcoin. Consumers need to feel like businesses are open, transparent and doing good if they are to even consider getting involved in what is often considered a risky and volatile field. Businesses need to be like the protocol they love: transparent.
Why Vault of Satoshi continues to be a world-leader in Bitcoin adoption
Vault of Satoshi has always taken extra steps to work closely with important agencies to bring legitimacy to the bitcoin sphere. Both owners Mike Curry and Ryan van Berneveld understand that legitimacy is key to adoption and they put in the extra hours to ensure Canadians and the world see bitcoin for what it is: revolutionary.
Their partnership brings Bitcoin into the realm of “regular” currency exchanges. Vault of Satoshi “operates inside all Canadian regulations on financial services” and once again shows other exchanges the best way to do things to bring bitcoin forward in a legitimate way.
Next Steps
Vault of Satoshi has been working with FINTRAC since October 2013 on this registration. “It’s been an uphill battle,” Mike Curry, co-founder, says. “[Our approval] opens the door to many opportunities, including listing several other fiat currencies on our site. This also marks the beginning of our re-entry to the United States of America.”
VoS reluctantly pulled their services from the U.S.A. after deciding the “regulatory environment in the US [was] becoming increasingly hostile toward Bitcoin,” the company reflected in a Facebook status update on March 6th.
What other businesses can learn from Vault of Satoshi
I wrote a story about Vault of Satoshi a few months ago and described the values this business follows that allow them to pave the way for bitcoin adoption in Canada, namely clarity of purpose, legitimacy and cooperation. Once again, they are proving to us that they value and actively pursue legitimacy and cooperation to bring bitcoin to the mass adoption level.
Other businesses need to follow suit by actively pursuing relationships with key industry players and regulators. Positive action is important right now; we cannot passively accept regulations forced upon us based on lack of education.
More information on Vault of Satoshi’s MTB registration
Registration number: M14807589
Date of registration: 2014-03-25
Date of expiration: 2016-04-30
Full Disclosure: I have not been retained or otherwise compensated by Vault of Satoshi to communicate this news.
Hive, the creators of an open-source wallet for Mac OS X, are looking for developers to contribute to the company’s expansion.
Earlier this year, Hive announced that Hive for Android will be available in late spring, 2014. iOS support is out of the question due to their decision to remove Bitcoin wallets from the app store.
With the release of their original OS X wallet, many have asked about a possible Windows or Linux wallet.
Wendell Davis, the self-proclaimed “pseudo-CEO” of Hive, has stated that a Windows or Linux wallet will never come to existence “unless an exceptional developer steps up.”
Now for a little background on the wallet. On the website, it is described as thus: “Hive was designed to be easy to use, and aims to be an ideal starting point for anyone new to Bitcoin.”
In addition to the app’s attractive, people-oriented interface and Tor support for enhanced anonymity, Hive includes an integrated application platform that gives new users a tightly integrated way to discover exchanges, merchants, games, and more. Developers are welcome to create apps for the platform.
Wendell made the initial sketches for Hive wallet, put up initial money, and put development team together. Essentially, he integrated the vision for the wallet. It is safe to say he believes in it.
I found Wendell to be particularly reachable. If you’re a developer looking to contribute, contact him. Hive is doing some exciting things.
Since the introduction of Bitcoin the crypto-community has achieved exponential growth strongly driven by monthly meetups, yearly conferences, and exciting events. With a focus on the global Bitcoin economy, organizations like the Bitcoin Foundation and Bitcoin Embassies in the US and around the world have continued to provide education and support to the Bitcoin ecosystem. Now more than ever there is an increased number of conferences and expos scheduled in regions that would have been nearly impossible years ago. With a strong focus on the future of Bitcoin and virtual currencies, upcoming conferences like the upcoming Central Europe Bitcoin Expo (CEBE) in Vienna and Bitcoin Expo 2014 in Shanghai prove the point that Bitcoin is here to stay.
This summer, CEBE will focus on Bitcoin in Central Europe, primarily on businesses in countries including Australia, Czech Republic, Germany, Hungary, Poland, Slovakia, Slovenia and Switzerland. It will be the first and biggest Bitcoin conference in the area, and will introduce the potential of Bitcoin and virtual currencies to individuals and businesses that are not familiar with its potential. The Central European Bitcoin Expo will take place from May 31st to June 1st and will feature speakers from leading companies in the Bitcoin space, along with other local European speakers.
Speakers will include Dan Held, Developer of Product for Blockchain, Stephanie Murphy of Let’s Talk Bitcoin, VP Product Development for Yacuna AG Stanislav Wolf, and many others. The two-day conference has a full schedule of events for any person wanting knowledge and experience with Bitcoin and virtual currencies. CEBE’s main aim is to spread information about Bitcoin throughout the region of Central Europe and find new entrepreneurs, innovators and customers. Also scheduled to take place at Austria Center Vienna is a Bitcoin Run, entitled RunaBit along with the region’s first Bitcoin party.
If the CEBE leaves you wanting more Bitcoin, there will be more to learn at another future event taking place in September 2014 in Shanghai. Bitcoin Expo 2014 will be the second conference to take place in China, but will predominantly focus on providing the bridge for start-ups, service providers and established traders that will bridge the Asia-gap. Shanghai is the financial center for one of the largest economies in the world. “We believe the conference in Shanghai will help many western entrepreneurs make new connections, explore the potential and cooperate on new projects,” a spokesperson stated.
Much like the conference being held in Central Europe, Bitcoin Expo 2014 will feature speeches from leaders in the industry as well as others from around the world. The three-day event will be one of the largest Bitcoin conferences to take place in China this year, and will help to drive the awareness of cryptocurrency, its benefits, challenges, and Bitcoin’s potential for the future of business. The conference will also allow businesses to present their ideas in order to search for potential investors and mentors.
Both CEBE and Bitcoin Expo 2014 are being organized by the same group that brought Bitcoiners the Bitcoin Expo London in 2013. Both conferences are aiming at the same goal – promoting mainstream adoption between individuals and businesses to express the potential Bitcoin can provide to the future global economy. The Central Europe Bitcoin Expo is currently selling advance tickets for the event, and it is expected that over 500 will be in attendance. Moreover, Bitcoin Expo 2014 China will look to surpass 5,000 attendees during the three-day event in September.
For those seeking more Bitcoin knowledge, these two events will be filled with expertise and experience from some of the community’s most innovative and brightest minds.
The Bitcoin Foundation, an organization focused on growing the Bitcoin economy, has welcomed another Gold Member to its ever-expanding community of Bitcoin innovators and supporters. BitPay, the newest Bitcoin Foundation member, has shown continuous support since the dawn of virtual currency. As a popular Bitcoin payment processor, BitPay has given businesses across the globe the ability to accept Bitcoin as payment. Additionally, the company’s key spokespeople have also played a large role in the future of Bitcoin in the United States and abroad, speaking out and spreading knowledge of the benefits of virtual currency.
As a Gold Member of the Bitcoin Foundation, BitPay will join other key contributors and innovators within the Bitcoin space. In a recent press release, Bitcoin Foundation Executive Director Jon Matonis stated, “BitPay paved the way in international merchant processing for the Bitcoin community; their clients rely on BitPay as a trusted and responsible partner. That trust will keep the Bitcoin ecosystem growing … We look forward to helping their efforts for global bitcoin adoption.”
BitPay was founded in 2011 by Stephen Pair and Anthony Gallippi, and since then has grown to service over 26,000 merchant clients. Headquartered in Atlanta, GA, with additional locations in New York, San Francisco and Buenos Aires, the company specializes in e-commerce, B2B and enterprise solutions for Bitcoin. Additionally, the company is also fostering open source development with its bitcore.io platform. In order for Bitcoin to continue to be adopted globally, payment security must be at the forefront, which is why BitPay is implementing secure standards such as Bitcoin Payment Protocol and Multi-Signature Transactions. With the support of the Bitcoin Foundation, a growing global community can continue to make payments that are reliable and secure.
The Bitcoin Foundation thrives to standardize, promote and protect the use of the technology around the world, which aligns perfectly with both past and future work done by BitPay and its expanding number of partners. The Foundation and its members envision the potential of Bitcoin at a global level. By focusing on Bitcoin’s technology and community, citizens of countries large and small can increase purchasing power, while businesses of all sizes create additional opportunities for growth and economic sustainability.
For everyone in the Bitcoin community, the Foundation’s efforts in growing adoption, education. and fundamentals have played a large role in the future of the Bitcoin economy. We have witnessed many challenges and barriers to entry as Bitcoin has evolved – hackers, inaccurate reporting, and malicious network attacks. Because these events play a role in how the world views Bitcoin, many view the Foundation as instrumental in legitimizing Bitcoin and bringing decentralized money to mainstream adoption.
For those willing to accept it, Bitcoin has the capability of revolutionizing the global economy. At the root of Bitcoin lies core principles of independence, openness and establishing a non-political economy. These principles are underpinned by peer-to-peer organizations like the Bitcoin Foundation and the increasing support from its members and partners. Bitcoin and its virtual currency counterparts have made stunning progress, but must continue to forge the path ahead to grow adoption, the community, and the global economy.
There has been an absolute explosion in the number of companies entering the ATM part of the space. With all this entrepreneurial activity we’ve even seen innovation around the very idea of what an ATM should be.
In these last few days alone Diamond Circle has sought to distinguish itself from the pack: announcing its ‘cashless ATM’ concept. The unit will allow users to buy bitcoin with a credit card, and sell bitcoin with their bank account.
Singapore based producer Tembusu announced its seed funding round of close to USD 300,000 on the back of its machine debut.
Interest in the space is high. While the regulators struggle to comprehend Bitcoin and its implications, an ever-increasing number of ATM manufacturers have begun the struggle for market share. The lack of regulation does not seem to be deterring investors or entrepreneurs.
After the reported financial success of Robocoin’s premier machine in Canada it’s easy to understand why interest is so high. There is money to be made.
MBTC Corporation S.A., a Costa Rica based company, is the latest entrant. The enterprise is an initiative of Mundo Bitcoin, a Spanish and Latin American resource for news & information about crypto-currencies. Mundo Bitcoin has become the leading crypto-currency resource in Latin America.
They have teamed up with Barcelona based Bitcoin hardware company BTC Point. The partnership aims to deploy Bitcoin ATMs globally: a lofty goal.
Mundo Bitcoin claims an extensive network and experienced international team, to ensure simultaneous deployment in key locations worldwide. Mundo Bitcoin is careful to note that they do not want to focus their efforts only on the Western world.
Mundo Bitcoin is a Costa Rica company. So they are uniquely positioned to understand the intricacies and challenges faced when bringing Bitcoin to the developing world.
Most interestingly, Mundo Bitcoin has stated that their ATMs are available for immediate (within two weeks) deployment to Latin America, Africa, the Middle-East, India and the Philippines. In an industry that has grown accustomed to significant delivery delays for hardware, this prompt shipment would certainly be a treat.
The ATMs are security audited, and compliant with regulations in most countries.
The company states that they can deploy very large numbers of Bitcoin ATMs on very short notice.
In an even bolder move, the ATM’s will be connected to Mundo Bitcoin’s own Bitcoin Exchange: ‘Live Coins’. However, the exchange is yet to go live.
The company is now actively seeking partnerships with international operators.
These machines are two-way, allowing users to buy & sell bitcoin instantly in their local currency, and spend the money directly in their store. The machines recognize over 180 different types of bank notes.
The bitcoins are sent to a user’s personal wallet, or alternatively it creates a paper wallet. The Bitcoin users can cash their Bitcoin immediately into fiat, and spend it on location. The customers may also use Bitcoin in sending and receiving remittances.
In terms of KYC/AML compliance, the machine recognizes ID’s such as National ID’s and Passports and has a front-facing camera. This should be enough to meet regulatory requirements and standards in most markets.
The Bitcoin protocol is strong cryptographically (to the best knowledge so far), and we wish the world encompassing its network and users were as secure. In this article, we will review several classes of attacks, how a feature of the Bitcoin protocol in conjunction with online wallets will help prevent them and we’ll end with an overview of why fraud detection is a difficult endeavor.
To avoid any confusion, in the context of this article, “fraud” refers to a transfer of funds to a destination not authorized by their legitimate owner. Double spending or transaction malleability have been covered extensively elsewhere.
Pretty much everyone reading this article will know Bitcoin transactions are technically irreversible and this makes them very attractive for merchants because the received funds are immediately spendable. In some jurisdictions it might be possible that the merchant is forced, through a court order, to refund a transfer, but this case is a legal matter, completely unrelated to the method of payment (nonetheless, for consumers it is a good resort to have in the rare case of rogue merchants).
Bitcoin’s use of digital signatures ensures transactional integrity and non-repudiation. The network, which verifies the transaction, cannot check however whether the private keys were provided by the legitimate user or another party. That step is outside of the protocol’s boundaries and is the wallet’s responsibility to authenticate the user and unlock access to the private key. The wallets or the users are therefore the targets of malicious attacks.
Attacks Against Wallets
The level of security provided by wallets varies with the implementation, in terms of both features and quality. Naive implementations will simply store the wallet unprotected or weakly protected (once the file is stolen, a short PIN can be trivially brute-forced) and this is why wallet-stealing malware is one of the easiest attack paths. In fact it is so obvious (reminiscent of Willie Sutton’s famous yet apocryphal answer: “because that’s where the money is”) that two researchers, Pat Litke and Joe Stewart, have recently catalogued 146 distinct Bitcoin-stealing malware, out of which only half were detected by anti-virus scanners (read a good summary or, better, the original paper). Even if the wallet is coded diligently, given that run on a software stack, the underlying layers can have vulnerabilities which, however difficult, will be found given time (the money to be stolen is a great motivator).
Several approaches exist to mitigate this risk. A common one is using two-factor authentication (requiring a telephone with a registered phone number which will receive a one-time code via SMS or a voice call. Google Authenticator is a popular choice). It is a good complement for computer-based wallets, but less so for mobile wallets residing on the same phone which can be stolen. By the time its owner removes the authorization for the phone, the funds might be gone. How can a thief know the wallet password? The same techniques as for stealing the PINs of physical cards: “shoulder surfing” or cameras filming the user while performing a legitimate transaction (a club’s bar is a high-risk location, for instance). Keylogger malware is another popular approach.
Other approaches consist of “brain wallets” which do not store the keys but generate them from a (hopefully long) passphrase memorized by the user. This is harder in practice, not only because occasional users may rightfully be wary of forgetting it (carrying a paper with it in the physical wallet would negate the security but it will happen nonetheless) but also because a good passphrase would be about 50 words long and this would make frequent use cumbersome.
Lastly, paper wallets and hardware wallets are more secure, but they are more suitable for the cold storage of funds, rather than daily use. Diligent users will employ them, but do not expect this to be the norm.
In fact, the wallet does not have to be stolen to be used as a source of money. Ransomware, malware that encrypts user files and demands a payment for unlocking them – CryptoLocker being the most (in)famous — can provide a steady source of income through ransoms, regardless of whether the private keys are obtained. It is unlikely that such malware will be written for Bitcoin wallets specifically (why limit the attack?), but wallets will be taken with all other personal files. This is where cold storage of most funds, Bitcoin’s equivalent of “don’t keep all your money as cash with you”) as well as backups are absolutely essential.
So far we’ve talked about user wallets. On the other end of the wire, any online site storing bitcoins, be them wallets, merchants or exchanges, should be prepared for advanced persistent threats and followers of the excellent Krebs on Security blog will be familiar with how indirect attacks can be, going through third-party suppliers of the target (overused pun not intended). Indeed, attacked have they been. Most high-value attacks today are profit-motivated and supported by organized crime (by the way, someone tried to impersonate Gavin Andresen on the PGP key servers). Although PCI-DSS is not perfect, its recommendations are mostly applicable to Bitcoin businesses.
Attacks Against Users
Why hack the user’s computer when you can persuade him to pay you? Scamming is as old as the world. A Bitcoin address does not have any identification about its owner so simple persuasion to send money to the scammer’s address can work well (side note: what at times is a feature is, at others, a usability shortcoming. However, the idea of a resolution mechanism to associate a computer-friendly wallet address with the human-friendly social networks identities or a directory has faced considerable critique for fear it would create a two-tier system that will eventually destroy Bitcoin. A good decentralized solution is still in the future).
Every event involving a loss of bitcoins or even a service outage has the potential to be used by scammers for phishing (or fake Twitter accounts soliciting donations) and as Bitcoin becomes more popular, we can expect the wave of donation requests to fraudulent addresses following earthquakes or other disasters.
To be clear: this is not a vulnerability in the Bitcoin protocol. After all, the legitimate owner of the funds decided to make a transfer. It’s a plain scam, not a hack. Nonetheless, if the ecosystem will have features reducing the incidence of such scams the trust in the system and the adoption will be higher.
A different type of attack is one in which a Bitcoin-accepting website is hacked and the destination address modified to be the attacker’s. The attack cannot last long for merchants, whose checkout process will notice the funds have not arrived to their address but sites accepting donations may be exploited for longer times.
Transaction Screening
The conceptual answer is to have the transaction screened for fraud outside of the device originating the payment which can be under the control of an attacker or malware. This is similar in principle to how a credit card transaction initiated by the consumer is vetted and, to implement it, Bitcoin has an elegant mechanism: multi-signature transactions, requiring more than one party to sign a transfer. While they serve multiple purposes (escrow being a typical example), in this case a second party would be a service that screens transactions for fraud and only if the transaction is okayed by it, then it is broadcast to the network. Vitalik wrote an excellent (as usual) primer earlier this month and I’ll invite you to read it rather than covering the same topic here. The tutorials by James D’Angelo’s on YouTube are also highly recommended.
Who can be that other party screening the transaction? The web wallet is the first choice and, in fact, this feature is already implemented and promoted by CryptoCorp right on the front page, a proof that fraud prevention can have marketing value and not just make the finance department happy. Notably, the use of a web wallet provides more data points since the IP address and device information can be used as inputs and detect, for instance, if the network location of the user’s wallet has jumped across an ocean within minutes. Security-conscious users will prefer not to use online wallets, yet I think it is a safe bet to say that the convenience will keep them popular, as with cloud-based email or file storage. The wonderful thing is that multi-signatures, by requiring both the user and the exchange to cooperate, make this option arguably more secure than single-signature local storage given the permanent threat of having the hot storage hacked.
After an initial period in which online wallets implement their own solutions, if at all, I do expect some consolidation to follow in time, with fewer third party fraud detection services being used by more wallets. It’s part economics (pay-for-service is often cheaper than build-your-own, particularly a build-your-own-complicated-system), part efficiency. Collaborative fraud detection is already used by the payment industry, with merchants and financial institutions sharing fraud data with a number of vendors or among themselves with the goal of reducing it for everybody (disclosure: I’ve been involved in building such systems, but none of them is public or commercial and I hold no financial interest in any such vendors. Nonetheless, I have not named any companies).
Why Fraud Detection Is Not Easy
Fundamentally, detecting fraud is hard precisely because it is rare, dynamic and not necessarily obviously fraudulent. I think we can safely say there will not be a perfect fraud detection system. What is a perfect such system? One that detects 100% of all fraud without ever mistaking a legitimate transaction for a fraud. 100% sensitivity and 100% specificity, the Nirvana of classifiers, to throw in a little bit of statistical jargon here (it goes well with crypto).
Perhaps all techniques have been tried in the quest for a “better fraud trap”. Rule engines, neural networks, genetic algorithms, random forests, hidden Markov models, clustering, support vector machines, outlier detection — and I will stop here. Why this many? One reason is that new techniques are being invented. For instance, random forests are a development of the last two decades, enabled by the increase in computation power.
Another reason is brought about by the rarity of fraud. Suppose 1 transaction is 10,000 is a fraudulent. In order to train a binary classifier (the system that answers the question “is it fraud or not?”), past data, for which known fraud transactions are marked as such, are fed in to tune its parameters. When an algorithm is trained on 99.99% good data, the remaining 0.01% is just noise, not making a dent in its parameters. In other words, the needle is just noise in the haystack.
There are ways around this – after all, fraud detection is done almost exclusively by software today – the point is that it is not easy, particularly beyond catching trivial fraud. The fundamental tension of all binary classification systems, equally applicable to other domains, such as detecting cancer signs in mammograms or classifying galaxies, is between the ability to detect the target and the avoidance of false alerts. The more sensitive a test is, the higher chances of false positives. When this relationship is plotted it is known as a ROC curve and used to rank different strategies. In business terms, attempting to catch too much fraud will eventually inconvenience customers who will have legit transactions blocked or delayed and finding where to draw the line takes time (a good read straight from the real world: Coinbase’s own blog post on this topic).
Why this exposition on fraud detection here? Because the inclusion of fraud detection capabilities, while desired, will increase the complexity of a provider’s operations (a provider being a wallet or exchange). On one hand, it brings trust and financial value. On the other, the system will need to be maintained, kept up-to-date with changes in fraud patterns (more complex and expensive systems adapt automatically) and business processes will need to be defined to deal with the algorithms’ imperfections.
What about the future beyond the immediate? Well, for one human nature will not change and fraud attempts will continue to occur as long as the block chain will exist (will “before the block chain” be the next generation’s “before the web” placeholder for the prehistoric times?) and securing the entire ecosystem, even more so when more complex features such as smart contracts are added, will continue to be part of it, along with mining and development. The price of security is eternal vigilance, decentralized worlds included.
Disclaimer: The author of this interview owns a few PesetaCoins.
Many of us saw this coming: local cryptocurrencies. Following the steps of Auroracoin and Mazacoin, here comes PesetaCoin, the Spanish crypto (pesetacoin.info). With 6 million unemployed, youth unemployment over 50%, booming debt, rampant corruption, oppressive laws and an economy predated by bankers, Spain is not looking good. However, Spaniards are amazing fighters. And CryptoMP is one of them. He’s the father of this new cryptocurrency.
Néstor Romeral Andrés:Who is behind PesetaCoin?
CryptoMP: The design of the currency as such, the first coin, the first services and some other things are my creation, but this coin has come where it is now thanks to the community that has joined the project and taken all the necessary roles to make it happen: developers, miners, forums, translators, business that have accepted it as payment…
NRA:What is your goal?
CMP: We wish it to be the most widely used cryptocurrency in Spain, even above Bitcoin. Not only for online payments, but also in brick and mortar stores. Globally, we want it to be used and respected. But we know Bitcoin is the king.
NRA:What are its specs and why?
CMP: PesetaCoin is a Scrypt algorithm coin that generates blocks every minute. The value of the block is 166,386 PTC and difficulty is adjusted automatically each block using the famous “Kimoto Gravity Well”. There will be a total of 166 million PTC in circulation and the block reward halves every year. Some of the most notable advantages over Bitcoin: Difficulty setting is more advanced which prevents instant mining by large MultiPools, transaction confirmation time is much faster: 1 minute (Bitcoin is 10 minutes) and, at least by now, it is resistant to ASIC so it cannot be mined with massively specialized chips, making it accessible to the general public.
NRA:What was the spark that ignited the idea?
CMP: In December there was an explosion of new coins that continues these days, but must of them are just pump and dump scams. I thought it was time to start a slightly different project that wouldn’t seek an explosive coin, but a modest currency that slowly finds its way into the community.
NRA:Is there a distribution plan? Which population groups are expected to adopt the currency in the first place?
CMP: A few coins were distributed in the early days through “give-aways”. They started at 50 PTC, but they’ve now dropped to 1 PTC as we’ve run out of funds. Early adopters were mostly people related to the crypto community, but we’ve managed to catch the attention of other sectors and groups of users that had no previous contact with this technology and have evolved into experts in GPUs, servers, exchanges and other aspects of this the crypto world. Most of these users are members of the ‘Forocoches’ forum. Our next target is the e-commerce sector, that we hope to engage soon thanks to the tools that are being developed at this very moment.
NRA:Why the rush on mining? Why not pre-mine more coins before the launch?
CMP: Releasing a coin without pre-mining ensures that the distribution will be fair right from the start. If you’re one of the thousand early-miners then you’ve earned a good amount of PTC on your own merit, hardware and energy spending for creating something valuable.
NRA:Is it similar to other local cryptocurrencies such as Aurora or Mazacoin?
CMP: It’s been designed to be a local cryptocurrency. But the similarities end there. Its main difference is pre-mining. Aurora’s idea is innovative and apparently altruistic, but it arises many questions. Are all Icelanders going to receive their coins. What about the unclaimed coins? An advantage of cryptocurrencies is decentralization. If we put 50% of the coins in the hands of a single person then it is not decentralized and it’s more similar to FIAT. I believe that adoption must come from the knowledge of how scarce and hard to get a coin is. If you’ve got it for free then is very hard for it to gain some value (beyond the speculative value, as we’ve seen lately).
NRA:What is your opinion about SpainCoin? A possible rival? The website is not even in Spanish.
CMP: SpainCoin looks like a classic pump-and-dump scam. A few people will make a bunch of money in the early stages. Then bye-bye coin.
NRA:What are your estimations for the short and long term?
CMP: In the short term, in about two months, with the creation of payment services and tools for sellers, we believe we can get to be about 100 or 200 shops accepting the coin (websites and brick and mortar stores). In about 12-18 months with more stable price, we expect that online stores not accepting it will be a minority.
NRA:What are your thoughts about a more than possible regulation by the government in the short term?
CMP: We must see the contents of that regulation first. I believe there is no need for any regulation. Maybe only for the exchanges in order to protect customers. We know that in Spain banks are politicized and corrupted. I’d ask them to keep on stealing money by the regular channels, but leave cryptos alone.
Editor’s Note: There is another Spanish cryptocurrency called SpainCoin with a launch plan similar to Auroracoin.
This puzzle is based on my game Tau (2011). TAU was evolved from another game of mine called OMEGA (2010) as a tool to help me teach my students how to multiply in binary base. It exploits a mechanic called ‘multiplicative scoring’.
Let’s start by drawing a square grid of any size (10×10, for example) and filling it with coins, one on each cell. This is our bitcoin field.
FIGURE 1: a 10×10 bitcoin field
Now let’s split the field in two, by drawing a horizontal line like this:
FIGURE 2: two groups
Two groups of coins (above and below the line) have been created. In order to calculate our score, we multiply the number of coins of each group: S = 30 x 70 = 2.100 points.
Now let’s draw a vertical line like this:
FIGURE 3: four groups
Notice that now there are 4 groups. The new score is: S = 12 x 18 x 28 x 42 = 254.016.
By drawing this second line, we’ve managed to increase the score significantly. If we keep on drawing lines (creating groups) the score will keep on increasing for a while, but if we draw too many lines, it will start dropping!
In fact, if we draw all possible lines, the score will drop to 1 (100 groups of size 1 each)!
FIGURE 4 : 100 groups
Notice also that drawing no lines produces a score of 100.
If a set of horizontal and/or vertical lines produces the highest possible score, this set is called a ‘solution’.
Challenge 1: Find a solution for a 10×10 field.
Challenge 2: Find a solution for a 1.000.000 x 1.000.000 field. Describe it instead of drawing it!
Let’s introduce an interesting twist now. What if some of the cells were empty?
FIGURE 5: field with some empty cells
Challenge 3: Find a solution for the field in figure 5. Empty groups have a value of zero!
And another twist: let’s mix bitcoins and dollars.
FIGURE 6: bitcoins and dollars
In this case, we define ‘solution’ as the partition that produces the highest possible bitcoin score and the lowest possible dollar score.
Challenge 4: Does a solution exist for the field in figure 6? If it does, can you find it?
Challenge 5: Find a partition for the field in figure 6 so that both the bitcoin and dollar scores are maximum.
Please post your answers in the comments section or here:
March 22, 2014 (Dublin, Ireland) – The Irish company behind the Bitcoin prediction market Predictious is announcing the private beta launch of a new colored coin web wallet Coinprism.
Colored coins use Bitcoins to represent other assets and store them on the Bitcoin Blockchain. Colored coins can be used to represent anything, such as stocks, bonds, smart properties, securities, precious metals, commodities, other currencies (such as dollars, pounds or euros), and even other crypto-currencies.
A company which wants to do an IPO can do so with colored coins in a matter of minutes and practically for free: they can use Coinprism to create and issue shares. The shares can then be exchanged as easily as Bitcoins through the Blockchain, across the world, instantaneously and with minimal fees.
Colored coins also enable people to create smart properties. A deed for a house can be represented on the Blockchain as a colored coin. The owner of that coin is then the legal owner of the house. Transferring ownership of the house becomes as simple as making a Bitcoin transaction.
Coinprism is the first world-ready colored coin wallet. Focusing on user experience and simplicity, Coinprism works like a traditional online Bitcoin wallet, with the difference that users have the ability to issue, send and receive colored coins at will, and for free.
A strong focus has been put on security, and Coinprism only holds keys that have been encrypted with the password of the user, which is never sent to the server. All the transactions are signed on the client machine.
“Colored coin is not only a technology; it is a platform”, said Flavien Charlon, Founder of Pixode; “there are thousands of different ways it can revolutionize the way we consume and do business today”.
Several other projects have been working in enabling custom currencies like colored coins. However, unlike other 2.0 protocols, colored coins do not require additional infrastructure. Anybody can use colored coins as long as they own a small amount of Bitcoin. This is a significant advantage given the size of the Bitcoin user base compared to everything else.
Coinprism is currently in invite-only beta, and invitation codes will be distributed through various events.
About PIXODE
Pixode is a startup founded in 2010 and based in Dublin, Ireland. Pixode is in the social and mobile application space. It released several Facebook games and applications for business pages (Forum for Pages), as well as mobile games (Warp for Windows Phone 8, YouTube DJ for Windows 8/RT). More recently, Pixode launched Predictious, now the number one prediction market operating in Bitcoin.
As a victim of the Target credit card hack, and having to work with the bank to replace the stolen identity, this writer can speak first-hand about thinking twice about giving out my credit card again. Not just to Target, but to any store. As the Venture Capital Partner from Andressen Horowizts, Marc Andreessen recently tweeted:
Corollary: Giving your credit card info to online merchant in 2014 is data equivalent of unprotected sex. For the love of God, please stop.
It was uncovered recently that MasterCard discovered a security breach for the State of California Department of Motor Vehicles for credit card hack. This went on for over SIX MONTHS. They found it necessary to send the alert to various financial institutions, but what about the public? Consider the loss of confidence that should be taking place as they cover up the mess as quietly as possible. It is in MasterCard’s best interest to quietly sweep this under the rug, but consumers might do well to question if this tactic is also aligned with their own best interest. US Attorney General Eric Holder has now called for new laws for consumer protection that mandates companies disclose data breaches.
Merchants lost 190 BILLION in 2012 due to credit card fraud according to a report in Forbes. The financial institutions and financial news networks make sensationalistic headlines about the relatively tiny bitcoin market while underreporting the credit card fraud on a massive scale. By way of comparison reporting: The Mt. Gox fiasco estimated loss might be $300 million to customers (depending on the outcome discovered from the hidden wallet). Credit card fraud was about a 630 times bigger problem than Mt. Gox. Put in another way, credit card fraud would be roughly the same as Mt. Gox filing for bankruptcy every 14 hours. Every. Day. Of. The. Year.
Where were Senators Charles Schumer and Joe Manchin and their white horse riding in to rescue when we needed them from that mess? Bitcoin makes no campaign contributions.
While BusinessWeek ran a thorough piece analyzing what went wrong at Target, some consider it troubling that these companies fail to report the security breaches for days or weeks while they prepared their damage control and rehearsed their public relation campaigns. In the meantime, the problem compounded as user data was auctioned and sold on the black market. Trusted financial news markets such as CNBC and Fox Business news concentrated on the positive news of how well companies were doing to improve security measures but fail to report how bad the situation was to begin with. Bitcoin pays no advertising for these news channels.
Are the organization and their created rules that govern which companies can participate on credit card network and what security standards they must comply to benefit from the inclusion on the payment network. Among those represented are Visa, MasterCard, American Express, and Discover. The organization regularly issues guidelines and rules to update and augment the recertification for increasingly complex security requirements for the merchants. The validation checklist for the security audit includes a 218 page book containing 399 steps expected to be performed quarterly. Only the largest organizations with an on-site specialty compliance department might have the resources to undertake the task. For smaller companies, they must use an independent qualified and certified third party company. As one might expect, this doesn’t come cheap.
Comments from HP’s security and payments expert Slava Gomzin are gaining traction. He’s written the book “Hacking Point of Sale” and is a frequent critic of the PCI implementation of security at the point of sale. He’s compared a PCI-Compliant merchant environment as “A poorly designed nuclear reactor ready for meltdown.” It is important to remember that Target and Neiman Marcus were reported to be PCI compliant at the time of their security breaches. Slava’s suggestion was to keep several credit cards each with small limits. Small limits can limit the damage. Even if banks let you off the hook, through fees and interest passed on to everybody else, we all pay. Banks don’t repay those funds out of the goodness of their hearts. Gomzin has indicated he sees a future with a more mature version of a bitcoin-like digital currency system providing solutions.
An annual report issued by Verizon Enterprises indicates that a whopping 82 percent of companies were not compliant with PCI requirements that are said to be “non-negotiable”. An 89% failure rate was found for companies able to maintain PCI compliance between quarterly audits. Computerworld magazine openly questions if being “PCI compliant” even means anything anymore as for the security of the customer. Is it fair to question if all of the regulations, formulas, requirements, updates and revisions have now become unmanageable? Are they now too complex or have they spun out of control? Does the industry seem ripe for a paradigm shift?The Credit Card Payment Network’s point of sale systems are largely running on Windows XP. Alarmingly, merchants only have until April 8th to decommission all Windows XP devices or upgrade now before Microsoft ends all support and updates for the operating system. One possible solution might be a paradigm shift that one day might come from the fruit being born from digital currency research and experimentation – once it is scaled and matured enough to handle to volume.
Waiting to see who dares to use a credit card after April 8th reminds me of a scene in the classic movie Jaws. The scene takes place at the Amityville Beach on the fourth of July. After several reported deaths from shark attacks, who will get into the water first? The crowd gathers at the beach but nobody dares enter the water. One family is finally convinced to be first and soon everybody else on the beach feels safe and joins them. But it’s an uneasy and uncomfortable time in the water with skittish people. Once even the hint of a shark is muttered, everybody panics and rushes back to the beach for safety.
Is it possible that with credit cards it will be the same? April 8th is where the beach meets water. Hackers and virus makers have circled April 9th on their calendars. They may be lurking in the depths of the internet like a predatory shark unseen beneath the ocean surface. Bad actors have likely saved their own viral “masterpiece” to be released on the “special” day they know that venerable Windows XP computers will no longer supported or updated. Even if their devious efforts aren’t felt at first, we know through recent experience that the embarrassing problem of breached customer data records might not be disclosed for days or weeks – until it has become the last resort. By then the damage is done. A new round of consumers will have been bitten.
Who among us is brave enough or foolish enough to use a credit card on April 9th until some point down the road when the blood has cleared the water and the “all clear” signal has sound? I for one was bitten during the Target fiasco, so it will not be me.
This week the new fastest USB bitcoin miner of the world will release: The hex•fury 11+ GH/s USB stick miner. This one is seen as the big brother of the bi•fury, the USB miner which released in October last year. Despite of the fall of MtGox there is still a big demand for USB miners, and as there are just a couple of bi•furies left now, this successor takes a perfect timing to gain the market share.
The first announcement about the hex•fury appeared a few days ago on the Bitcointalk.org forum, the place where you can find all the latest news about Bitcoin stuff. Immediately a lot of people showed their interest, and the price guessing almost turned out into a game. Since a two days ago we know how much that this new toy for Bitcoin lovers will cost £160 (that is around $265) and now it’s just waiting for the day of release: 26th of march, to be fast enough to get one into the pocket.
At first some basic technical information about the hex•fury:
– No. of chips: 6 Bitfury chips,
– Hashrate: ~11GH/s out of the box, up to 15GH/s overclocked,
– Power usage: ~0.86W per GH,
– Dimensions: 26x60mm without usb plug,
– Voltage: 5V
– Power requirement: 2-2.5A
– Supported software: cgminer 3.8.2 and up, BFgminer 3.7.0 and up.
Same as the bi•fury, this beautiful and very efficient USB miner is developed by intron and c-scape. They made it to fix some amazing work again. The first release about the building process of this nice little piece of art is for Bitcoinmagazine.com. I had the honour to ask intron some questions about the hex•fury.
Christien Havranek: Please tell me something more about the guys (or quite little animals – as I look to your profile pictures at Bitcointalk.org) who made it to develop the fastest USB bitcoin miner of the world.
intron: c-scape made the firmware, and I did the hardware. And the production has been done in China. We both studied Computer Technology on the Delft University of Technology (TU-Delft) and we are already working together for years to develop embedded electronics. LordTheron, from England, is the person that made the production possible.
CH:How did the developing process go this time?
intron: One of the stumbling blocks you always have when designing a Bitcoin miner is the power supply, the energy supply system of the chips. To prevent too much warmth generation, the supply voltage of the chips is kept as low as possible, normally around 0.85 Volts. When the number of these chips increase to make a bigger miner some technical difficulties with this power supply emerge.
With the hex•fury we solved this on an entirely unorthodox way with connecting the chips totally different. This is a very special feature of the bitfury chip and is called ‘string configuration’, something that I have never seen before. It makes a part of the design very simple and the price of the new miners much lower than that of the traditionally designed ones.
We did not know about the working of this new way of configuration before, but after a long time of designing and testing (with the help of tytus from Poland) we knew how to make the strings. We helped building the biggest Bitcoin miner of North America, which is even one of the biggest miners ever. It makes 1,000 trillion calculations per second and mines around $8 million dollars a month (Please take a look at this video of the miner: https://www.youtube.com/watch?v=ELA91d_mx80) This resulted into the connection system which is used for the hex•fury now and after this also has been used for the One String Miner.
We did not use this technique for the bi•fury, because this miner just got two chips so a string configuration does not make sense. Just when the total sum of the voltages per bitfury chip is the same as the main power, a string design can be very useful. (For the nerds among us: 5 Volts with an USB miner yields 6 chips and the 12 Volts of an OSM has 15 chips.)
CH:Why is the hex•fury produced as it is now, and for example not as a big device that is even faster?
intron: We wanted to make a miner that fits into an USB port. So it should not be too big and it has to work with the 5 Volt USB power. After some counting this means six chips in a string: one bitfury chip got a maximal approximate hashrate of around 2.5 GH. So a bi•fury with 2 chips reaches 5 GH and a hex•fury with 6 chips reaches 15 GH.
CH:What are the hex•fury biggest concurrences at the moment?
intron: There are a lot of other USB miners at the market, for example the bi•fury, the predecessor of the hex•fury. But the hex•fury is the fastest miner of the world at the moment. It has a speed of 11 GH/s when used normally and with overclocking it can even reach a speed of 15 GH. The overclocking is made possible very simply by increasing the supply voltage from 5 Volts to up to 5.5 Volts.
CH:When people want to start mining bitcoins, and this hex•fury is their first tool, what do they need to get started?
intron: They need a USB hub with an external power supply and a PC running a mining app. And they should log in at a mining pool like BTG Guild or Eligius or one of the many others out there. And I would like to recommend a good forced air cooler. Because this thing is getting hot when overclocked.
A beefed-up USB hub. The low-cost adjustable 5V/5A power supply allows for easy overclocking.
CH:Did the fall of MtGox had influence on the building process of the hex•fury? And do you think it will have influence at the sales?
intron: The fall of MtGox had no influence at the development of the hex•fury as it has nothing to do with what is happening with the diverse exchanges and other Bitcoin related authoritative sources. All the people who worked on the hex•fury still believe in the power of Bitcoin. I got no idea how the sales is going to be. Of course it can turn into both directions. People can get afraid because of certain big accidents like the one of MtGox and avert to crypto currencies. But they can also discover that they are part of a very exciting, worldwide game and realize that they would like to go on participating in it.
A large group of hex•furies, the big brothers of the bi•fury.
On an island northwest of continental Europe, at midnight, the people of Iceland will experience a spectacle of light coming over their country as auroracoins fall from the sky. Not literally of course, but the 330,000 citizens of Iceland will finally be able to receive 31.8 auroracoins worth approximately $380. That’s totaling 125 million dollars worth of coins, just given away.
The coins will be distributed two main ways:
The first way is as follows, since 80% of the Icelandic population is on Facebook, Icelandic citizens will be able to claim their coins simply by logging into Facebook through a gateway.
Once the user logs into the site, the user will be required to provide their Facebook information. The user’s information is then used to match their National ID number. This has been implemented as a safeguard against fraud. Once this information is verified the user will receive their 31.8 auroracoins.
The gateway is available on the auroracoin website (http://auroracoin.org/) but will only be available to access in Iceland.
The second way for an Icelandic citizen to receive their auroracoins will be through SMS. The person’s cell phone number will then be matched with their National ID number and once verified the user will receive their auroracoins.
Once a person’s national ID number is used it cannot be reused.
The initial airdrop is only available for four months, then any unclaimed coins will be divided by 330,000 and be redistributed through another airdrop that will last another four months. This process will take place one more additional time, again lasting four months.
After all three airdrops are completed if there are more than 630,000 coins those coins will be destroyed. The remaining coins (630,000 or less) will then be split evenly between a development fund and/or an Auroracoin Foundation formed by the community and the remaining half will go towards different charities elected by the Auroracoin community. This information can be found at http://auroracoin.org/blueprint.php.
Baldur Odinsson is hopeful auroracoin will revolutionize his country’s monetary system, since the Icelandic krona has dropped 99.5% relative to gold in the last 50 years.
In recent news the Financial Supervisory Authority, Central Bank of Iceland, The Consumer Agency, Ministry of Finance and Economic Affairs and Ministry of the Interior of Iceland have issued a joint statement only warning the public of digital currencies. The document noted that transactions of digital currencies have been limited due to the country’s strict financial controls, until now as they stated.
Verso is a really interesting new hardware gadget that seeks to make your bitcoin life convenient and secure. Calling it a gadget is somewhat of a misnomer, its just a piece of plastic (yes just like a credit card) with bitcoin keys and QR codes on both sides of the card. One is your public key and the other is your private key (sorta).
Unboxing, The Experience
But first let’s get to the unboxing. More accurately the envelope opening. Remember it’s just a little card so they ship it in an envelope. By the way, even though it comes from Switzerland it took less than a week to show up in the USA. The envelope please:
The envelope, it came from Switzerland
The “letter” with Verso card attached
Physical Design
Now let’s examine the actual card. Printed on one side is the QR code for the public key of your address, and on the other side the private key. But WAIT A MINUTE! If someone knows the public and private keys of one of your bitcoin addresses then they could steal all your coins! right? Well no so quick. It turns out that the private key is encrypted (with AES-256).
Yes, it’s a piece of plastic, but quite nice
Both sides of the card look identical, however they are subtly different. The portion with the QR code is printed with a textual texture. On one side it says “PUBLICPUBLICPUBLIC” and on the other “PRIVATEPRIVATEPRIVATE” such that it attractively creates a texture. It actually looks pretty good and has a nice functional design.
The “PUBLIC” and “PRIVATE” textured sides of the Verso card.
Buying the Verso Card
Let’s backtrack and bit and explain the Verso ordering process. Go to the Verso site at: https://versocards.com/
Verso home page
The “buy” page
You are presented with a nice looking web page which is very simple to use. Kudos to the Verso folks for creating a very usable site (NOT TRIVIAL). I purchased the “silver” card not the “gold” one which apparently offers some capability of reconstructing your wallet if you lose it, but I don’t really know anything about it so won’t say anything else.
After you click the button “Add a Verso Silver” to your cart a popup appears on your web page. It asks you for a name for your card, which can be something simple like “Sandy”, and then you must also enter a password. Do not enter a simple password! This password that you create before you buy your Verso is the actual private key that you must know in order to access the new bitcoin address that will be created (and printed) on your Verso card. It is VERY VERY VERY important that you create a strong password, i.e. one that can not easily be guessed, and one that you will remember. If you forget the password you lose your bitcoins.
Popup asking for card name and password, part of purchase process
The card is in many respects the simple part of the Verso system; the real magic of making this thing useful is the app. Along with the Verso card you need to install the Verso Wallet app on your smartphone. There is an app for Apple iPhones and Google Android phones. I’ve only used the iPhone version so I can’t say anything about the Android version.
Using the Verso App
Launch the app and you’re presented with a login screen.
Verso app login screen
Press the login button and it then asks you to scan the PRIVATE side of your Verso card. Then you’re logged in! You do not have to type in the password just to login and that turns out to be just fine. You can receive bitcoins using the PUBLIC key but you can’t spend bitcoins without the password. The Verso folks have done a great job balancing convenience with security. Typing the password is a pain, as is any long sequence on the phone, but you only need to do it when spending bitcoins. Again, from a usability point of view, it works great. You simply login (or the app can remain logged in until explicitly logged out) by scanning the card and boom, you’re in.
By the way the Verso web site has a very cool practice area that lets you pretend you have the card. You download the actual app and they will send you a tiny fractional amount of bitcoin to practice using it. It lets you practice using the app before you have the card. You can then donate the fractional coin to a charity, nice touch! It’s a very effective way of holding your hand and convincing you to buy the card before you actually have it. It worked on me!
Now let’s spend!
On the bottom of the app are three icons for the three modes of the app: Account, Receive, and Send. Click the Send and let’s spend some coin. The destination field is actually blank when you go there for the first time. Scanning a bitcoin QR code or typing in a bitcoin address tells the app where to send the coins. Next, you type in the amount of bitcoin you wish to send. Finally you click send and now you are presented with a confirmation screen in which you must type that private key password. Remember it’s the same password you created when you bought the Verso card in the first place.
The destination (where you will send coins) screen
The confirmation of the destination screen
To receive bitcoins you select the Receive icon (the + sign) and you are presented with a screen that has an image of the PUBLIC key side of the Verso card. This would let you simply hold up the phone to someone who wants to send you bitcoins and scan right from your phone. Alternately you can send the address via email. It’s quick and convenient.
The “receive” screen
Summary
In summary the Verso card folks have managed to create a product that gives you the security of cold storage with the convenience of a hot wallet. It’s way more convenient than a paper wallet and can easily sit in your physical leather wallet ready for use. The encryption of the private key and presentation as a QR code make it secure and convenient. It doesn’t matter if you lose the card or if someone steals it, they won’t get your coins because they need your password. The real magic that ties all the functionality together is the Verso Card app. It lets you access your wallet to send and receive bitcoins quickly, efficiently and most importantly securely. The Verso card lets you not compromise convenience for security, and that’s not a simple trick.
We’ve talked with the Bitcoin enthusiast Amuda Goueli, CEO and co-founder of Destinia.com, one of the top 5 online travel agencies in Spain that is now accepting bitcoin as a payment method for flights, hotel bookings and train tickets, becoming the first agency in Spain and second in Europe accepting bitcoins.
Less than 24 hours after accepting Bitcoin, Destinia sold the first hotel+flight package with this cryptocurrency and, since then, almost daily are receiving sales. They’re now using BitPay to process payments.
For Stephanie Wargo, BitPay’s VP of Marketing, the attraction of Bitcoin in the tourism sector is that one of the biggest benefits to Bitcoin is that it is borderless and ideal for people who travel. Potentially, there could be no need to exchange currencies and she informed us that at this moment BitPay has a few merchants in the travel and tourism space and finds this space appealing to many merchants, especially those online because with Bitcoins they can take a payment from any country.
This news proves that Bitcoin is hitting hard in the tourism sector where the pioneers Cheapair and BTCtrip have had a very good market response, breaking the misconception that bitcoin owners hoard their bitcoins.
Ferdinand Reyes:What we can buy in Destinia with Bitcoin? Amuda Goueli: Since January 28 we’re accepting payment with bitcoins, you can buy flights, hotel reservations, flight+hotel packages and Renfe’s train tickets. Currently there are some restrictions, as some hotels only allowed payment at reception and some flights where the airline will only accept payment by credit card. Gradually we will expand the product base available in BTC.
FR:Why has Destinia decided to use Bitcoin as payment method? AG: At Destinia, we’re convinced that bitcoin is the beginning of a change. Just as the Internet has revolutionized our lives, our way of doing business … everything! It is true that bitcoin is today a volatile niche market, and that raises many questions, but people judge this virtual currency with the mentality and the eyes of the present and not with farsightedness. In the future, there will be different payment methods called Bitcoins or not, but virtual currency will be a clear protagonist, and we want to be prepared when that change occurs.
FR:Do you save the Destinia’s bitcoins or are you changing all bitcoins to FIAT? AG: Yes, we accept BTC payments, and we’re converting them into euros. It is a way to avoid the current volatility of virtual currency and ensure the stability of the company.
FR:What is the customer response to the bitcoin payment option? AG: The reception is still spectacular, better than expected. Every day we have reservations with BTC and we believe that it’s because bitcoin communty is gaining confidence in the currency and in us. Even a German has broken all records to pay for their summer holiday (flight and hotel for five people) in BTC! Remember that we don’t charge any additional cost to our customer to use this payment system.
FR:In a legal level have you had some impediment with the Bitcoin adoption? AG: None. Our platform is adapted for any payment method, either global or local. In fact, our website offers prices in 59 currencies plus bitcoins. For bitcoin, we offer it as one more option to pay and, if a client chooses the option to display the prices in Bitcoins when he enters our page, the system chooses this payment method as a default for booking.
FR:What future do you see Bitcoin at medium and long term? AG: As I said at the beginning, we believe that is the beginning of a change. Payment methods of the future will be different as we know them now so I am optimistic.
What happened next was amazing, even by the highly charitable standards of the Dogecoin community. First, Hood showed up in the chat room dogechat.net and gave away 1 million Doge to users. He then proceeded to /r/dogecoin where he started this thread and used the Reddit Dogecoin tip bot to tip over 1.5 million Doge to members of the subreddit, asking only that they comment with the phrase “save them hood”. Most of the tips totaled 10,000 Doge and were followed by the message: “twitter follow @savethemhood if we are aligned. health and peace to you. please upvote.”
There were some unique tips, however. Showing a keen sense of humor, Hood tipped /u/mohland (creator of the Reddit tip bot) so that he could “buy some faster hardware” for his famously overwhelmed creation. Then, when Hood was prompted to help out with the Dogecoin community’s Doge4Water initiative, he made a donation of 100,000 Doge and said “let them drink, everyone deserves water. everyone. the 1% could solve this, yet they drink and feast without concern. savethemhood, i’ll, try.”
Hood then moved to twitter and outdid all the giving he had already done (over $1,700 worth of Doge at that point) with this one tweet:
The tip, worth around $11,000 at the time, brought Doge4Water to their goal of raising 40 million Doge and instantly set the record for most money donated or sent directly via a tweet.
After the tweet, Hood went quiet for a few days before reappearing on Twitter to post a video of him/her handing out cash to various people on the streets of San Francisco. Two days later another round of Doge tipping was started with this tweet:
Struggling? Reply to me with a picture of food stamps or an overdue bill, include #savethemhood in the pic. Don’t expose your personal info.
In total over 4 million Doge was given away to needy Twitter users including a new mother and father, people overwhelmed by medical bills, and a man trying to keep the lights on at his house. Hood implied the donations were made because he empathized with the users’ financial situations, tweeting:
when i was younger i had to declare bankruptcy, it took me years to rebuild, better days are ahead, friends, keep believing. #savethemhood
Not much is known about the identity of Hood except that they have an affinity for helping out the needy, dislike the 1%, and (judging by Twitter followers) enjoy street art, a medium with its roots in class struggle.
A disagreement followed Hood’s appearance on Dogechat.net, with a user claiming that he was tipped 2 million Doge (later 2 billion), when in actuality the tip was for 10,000. The exploitation temporarily cleared out Dogechat’s wallet, but a mod informed Bitcoin Magazine that the situation has since been rectified.
While there has been some controversy over Hood’s implication that the donated money was acquired through ill-gotten means (“taking from the greedy”), the irrepressibly positive Dogecoin community seems mostly content with knowing that their coin is being used to help those in need.
At the time of this article’s writing the Twitter account seems to have gone silent, but it would not be surprising to hear from him/her/them soon. During the Reddit visit Hood said “this is just the beginning”. So far about 20 million Doge has been donated ($14,000).
Merging Bitcoin and art can be a difficult task, but for Pierre Bourque the task is creating art that aims to support the colorful and innovative Bitcoin community. Based in Ottawa, Canada, this artist has set out to construct art influenced by leaders throughout the crypto-community, and from this, help promote the growth of virtual currency.
Aside from artistic ability, Bourque hails himself as a news junky and internet pioneer, with an interest in Bitcoin, writing and racing. His eclectic interests show through in what he creates, and his portfolio includes currency, leaders, figures and abstract art. Pierre was recently introduced to Bitcoin, and has since composed related artwork like “Bitcoin Jesus,” which depicts Roger Ver and is currently available for purchase at BitPremier. In addition, Bourque has also designed Canada’s first legal Bitcoin stamp.
Bitcoin Magazine had a chance to interview artist Pierre Bourque, and gain insight into the individual behind the art.
Bitcoin Magazine: What sparked your interest in Bitcoin?
Pierre Bourque: I was introduced to Bitcoin summer 2013 by a friend who raved about the technological implications behind Bitcoin. The more I learned about Bitcoin, the more I wanted to learn more about Bitcoin.
I should add that I am not a technology guy, I’m more interested in the societal impact bitcoin will have.
And what’s fueling all of this is the incredibly unique sense of community spirit and enthusiasm wrapped around all things bitcoin. I really haven’t seen anything like it since the late 90’s era of the Internet. That uncompromising sense that anything and all is possible.
BM: Why did you choose art as your medium?
PB: I’ve been an artist forever using the various traditional tools of the medium: charcoal, oils, acrylics, photography, etc. and more recently digital tools like my MacBook Pro, iPhone, and artistic software.
The evolution of Bitcoin is being played out by a colourful and eclectic array of prophets, evangelists, and merchants. They deserve to be chronicled visually for both notoriety and posterity. Roger Ver is my first.
BM:Where did the idea for the Bitcoin stamp come from?
PB: Postage is the first international transmittal tool of value. It is today something that most anyone anywhere around the world can relate to. It is mainstream society. I wanted to stamp bitcoin onto society in this symbolic way. The cool thing is the bitcoin stamps I created are legit canada post stamps. A sign of things to come, I say.
PB: Generally, talking to non-bitcoiners about bitcoin entails sifting through the various public failures bitcoin has suffered and continues to periodically endure. What I find striking is with the exception of a couple status-quo entrenched billionaires, nobody dismisses bitcoin out of hand. They mostly want to know more. Which is pretty cool.
BM: Where do you see the future of virtual currencies?
PB: Virtual currency is here to stay and will become a bulwark of tomorrow’s society.
BM: How has Bitcoin changed the way you create?
PB: It has opened up the geographic and remunerative boundaries of my artistic marketplace. But it has inspired me to artistic exercise because of the incredible energy and optimism it represents.
BM: What are the benefits of using Bitcoin for both business and consumer?
PB:Once you trade your fear of the unknown for the fascination of the possible, you can embrace the ease of transmittal and diminishment of middleman.
The state of Bitcoin in China is still up in the air. However, this spring will mark the first Bitcoin conference to take place in China. The Global Bitcoin Summit will be held in Beijing from May 10 to 11, and will be produced by Bitfund.pe and UBM China. Also supporting the event will be Bitcoin Magazine, which will serve as the event’s Premier Media Sponsor.
The two-day conference will shed light on future Bitcoin trends in China and provide the latest information in the industry. The Global Bitcoin Summit aims to provide the ideal platform to obtain insights for the current development of the Bitcoin market in China, while providing networking opportunities to those in attendance. Topics are not limited to trading platforms, safety, security, laws and regulations and DACs (Distributed Autonomous Corporations).
Bitcoin Magazine is proud to support China’s first Bitcoin conference, the Global Bitcoin Summit. The conference will give the opportunity to witness the Bitcoin market and exciting innovation happening throughout the country. Additionally, the Summit will feature many knowledgeable and experienced members of the Bitcoin community that will enlighten attendees on future trends of Bitcoin in China and abroad.
The conference will provide a flexible schedule for speakers with multiple time periods and will include lectures, panels and workshops. Panelists and speakers will include infamous Bitcoin investor Roger Ver; Founder of Bitfund.pe Li Xiaolai; Aaron Koenig, General Secretary of the Global Bitcoin Alliance; Executive Director of the Bitcoin Alliance or Canada Anthony di Iorio; Founder of Invictus Innovations Daniel Larimer; Charles Hoskinson of Ethereum; Bitcoin evangelist Chang Jia; and Bitstamp CEO Nejc Kodric.
“Bitcoin is a stunning invention and an innovation opportunity for China. Bitcoin startups began flourishing in China at the end of 2012,” Li Xiaolai stated in an invitation letter regarding the first international summit in China. “In one-year’s time, there have been a number of bitcoin teams that have come to the forefront and are driving the industry both in China and internationally. The Global Bitcoin Summit aims to showcase the latest news and innovations in the bitcoin world and to let the world learn about the development of bitcoin in the China market.”
The Summit will promote the future of Bitcoin and virtual currencies throughout the world. As the Premier Media Sponsor, Bitcoin Magazine will work to provide industry information and future trends that come from the Global Bitcoin Summit. The event will help position Bitcoin businesses in the industry by opening a new level of communication to the global Bitcoin space, while also aiming to promote business development and growth.
The Global Bitcoin Summit could help drive government and community acceptance of Bitcoin and virtual currencies around the world. By opening the means of communication and providing authoritative information, the conference will attract both sides of the argument surrounding the use of Bitcoin.
Registration is currently open for the event, with an early bird special until March 25. For more information or to attend visit www.globalbtcsummit.com
The quest to bring Bitcoin to the world is taking us on a journey of discovery. We have not yet found our way to mass recognition or adoption. Granted, these are new technologies and it takes time.
Much of the focus now is on ‘the other 6 billion’: a catchphrase that refers to the potential of p2p value-transfer technologies to enrich the lives of the unbanked and underbanked. Key applications would be remittance and micro-finance.
However, there is a lack of advancement here that is often lamented. Bitcoin, five years into the experiment, is still used by a relatively small group of Western, tech-savvy males with full access to credit and finance.
Here is an opportunity. Perhaps mass adoption is better suited to a Western demographic: The Hipster. At the very least they represent a unique marketing opportunity for enterprise.
Definition and Demographics
In an undergraduate research paper on Hipster Identity Kelsey Henke gives a definition of the term ‘hipster’ and its origins. From this we can draw key market demographics.
Henke notes that ‘Hipster’ is an identifier with origins stemming back to the gentrification of “poor urban enclaves” in major US cities by “young adults priced out of city neighbourhoods”. These “creatively inclined individuals” possessed the “skill-set to renovate neglected housing.”
For an understanding of the identifier as it applies today, something less academic is also useful.
From the urban dictionary (can’t get less academic than that) we understand ‘Hipsters’ are “typically in their 20’s and 30’s” and “value independent thinking, counter-culture, progressive politics, an appreciation of art and indie-rock, creativity, intelligence, and witty banter.”
A clearly identifiable demographic emerges: one that overlaps heavily with existing Bitcoin users.
Today’s hipster is young (20’s and 30’s), progressive, politically aware and not averse to intelligent discussion. The Hipster emerges from the most progressive cities of the Western world.
Today’s Hipster is defined by consumption. Most importantly, as Henke notes, the Hipster exhibits “a greater behavioural trend of discovering, filtering, and assessing obscure cultural products.”
Bitcoin is an obscure cultural product. The hipster represents the lowest hanging fruit for entrepreneurs and startups focused on escalating Bitcoin adoption.
How to Market to a Hipster
Henke’s analysis notes three key cultural characteristics. These characteristics relate to capitalism, class and material culture.
The Hipster is a creature of contradictions. This is the key.
The hipster is characterised by an anti-capitalist and pro-consumerist position. Bitcoin is capitalist in the purest sense of the word. However the word itself has been co-opted.
Capitalism is routinely confused with corporatism. It is actually corporatism that hipsters despise. Bitcoin is fundamentally anti-corporatist.
Any market positioning should play on this strength. Confusing terms should be avoided. It is likely that a Hipster will believe himself to be anti-capitalist, due to confusion over the term. Marketing should be sensitive to that.
The anti-corporatist part of Hipster identity Henke epitomizes in phrases like “you’ve probably never heard of it” or “I liked…before it was cool”. In this sense Bitcoin’s relative obscurity, though growing brand recognition, is a unique strength.
The “compulsion to seek out the obscure” to project a “non-conformist” image is the key to successful product positioning for this demographic. So the importance of Bitcoin’s obscurity here cannot be overemphasised.
The Hipster will willingly adopt the rhetoric of the space if it can be shown that Bitcoin use “individualises him as transgressive” so that he can maintain his “rebel consumer” perception of himself.
The Hipster wants to latch on to something before it is cool. Hipsters are “less a subculture” and more a “consumer group”. If they are using their capital to purchase “empty authenticity and rebellion” then packaging Bitcoin’s real authenticity and rebellion is an easy sell.
Henke further characterises the Hipster by a simultaneous upper-class and marginalized group affiliation: another contradiction.
The upper to middle-class affiliation is a necessity, as “the conspicuous display of stylistic deviance” requires “both time and money”. As a result, the hipster necessarily has access to the technologies that make Bitcoin feasible: smartphones, computers and Internet.
However, Henke goes on to note that the Hipster “aesthetic…does not reflect a high socio-economic status”. Instead, the hipster borrows from marginalized groups. The ‘Bitcoin community’ is focused on elevating these same marginalized groups. So Bitcoin is an easy sell again.
It can be positioned as participation in a system that will inevitably contribute to the betterment of the marginalized groups the hipster already mimics through consumption.
For the Hipster “exclusivity and elegance aren’t cool”. However, “exclusivity dressed up in the…guise of the downscale and democratic”, well, “that’s the coolest thing of all.”
The Bitcoin community as an identity group offers exclusivity and early adoption simultaneously. The hipster can use Bitcoin before it’s cool: learning about it through an exclusive group that is focused on democratic empowerment of the downtrodden.
If the hipster is consumption driven, anti-corporatist and in search of the obscure then Bitcoin is uniquely perfect. Bitcoin is a medium of exchange that represents an opportunity to consume in an obscure way, while simultaneously ‘sticking it’ to a despised kleptocracy.
Hipsters, Employment and Bitcoin
From the Hipster Handbook we learn that “ideally, the Hipster is able to avoid work altogether.” More specifically creative fields and online work, such as blogging, are pursued: anything that, as Henke notes, allows the Hipster to “escape regular work hours, corporate attire, and normal levels of commitment.”
As cash for the internet, Bitcoin opens up a world of possibilities to earn income for creative work online and be paid directly.
Even traditional financial activities, such as trading, are readily accessible. Hipsters can trade crypto-currencies online and learn finance, while avoiding “corporate attire”.
This offers a unique value proposition for the Hipster that can be exploited.
Final Thoughts
The Western world is in real need of economic salvation: the kind that Bitcoin can provide.
It is true that the US dollar, Yen and Euro are more reliable than most national currencies. So, the need may not be as great as in other parts of the world. However, we do suffer from systemic inflation and the social ills that result.
A new generation familiar with the use of crypto-currencies would be a win. If it is this easy to sell to a new generation through a key demographic, then it should be done. It will be a net positive for society, despite the motivations of the demographic for adoption.
This Hipster demographic is ripe for adoption. All the prerequisites exist. Any business that successfully positions a Bitcoin product to this group will succeed.
In a space so rich with entrepreneurship and startup activity, a single hipster not using Bitcoin is unacceptable.
Mark your calendars for April 8. It’s been a target day of dread for thousands of companies’ IT departments counting down the days before they cross the “finished” line. There are currently armies of IT folks throughout the world in a race to upgrade Microsoft Windows XP operating systems to modern versions of Windows before Microsoft officially pulls the plug. Windows XP is now a 13 year old operating system released only a month before the 9/11 attacks. This was arguably Microsoft’s most popular and longest lasting trusted version of Windows they’ve published. It is so popular that even though they stopped selling it to the public years ago, company IT departments have been slow to migrate to new versions of Windows including Windows 7 or the unpopular Windows 8.
A recent PCWorld Magazine poll shows Windows XP still running on almost 30% of all installed PCs. This is over four times the install base of the 18 month old Windows 8. For the bitcoin community, this matters because of one extremely important factor: PCI compliance. April 8 is the last date Microsoft will publish the latest round of security fixes for Windows XP known in the IT departments as the monthly “Patch Tuesday”. The first reported vulnerability after that date means the computer is unsecured and no longer compliant with the laws established by the PCI organization that grants authority to use the credit card payment networks.
The credit card industry’s authority organization has issued rules and requirements designed to ensure that ALL companies that process, store or transmit credit card information maintain a secure environment. As of April 9, any PC continuing to run Windows XP without the expensive extended Microsoft support contract will likely be considered non compliant. https://www.pcisecuritystandards.org/documents/PCI-WindowsXPV4_(1).pdf
As such, they may be barred from being allowed on the payment network. This includes ATM machines, which the organization estimates to be over 420,000 in the US alone and 95% of them are estimated to be running various versions of Windows XP underneath. This could spell the end for many merchants and ATM machines throughout the world that rely on credit cards or the payment networks under the control of the PCI organization. This message has been communicated regularly by the PCI Security Council but has been largely ignored by the retail industry until the last few months. Visa credit card has been updating its merchant banks on the various security mandates since 2007.
With no legal ability to process credit card transactions, businesses that rely on credit cards to run their operations could be in serious jeopardy. The backup plan has traditionally been cash, or written checks for the few that continue to accept them. Since the internet age, credit cards and Paypal have been the only payment options available to merchants. Many merchants have been in a state of denial about the Windows XP and PCI Compliancy predicament. Without a large IT organization to advise them, smaller companies may find this deadline comes as an unwelcome surprise.
It may be a good time to hold on to your bitcoins, or better yet – stock up.
Directpool.net officially launched a Bitcoin Mining Pool. Its goal is to prevent any future 51% attacks on the bitcoin network by redistributing the total network’s hashing power.
Directpool comes in as the next generation mining pool to further redistribute total network hashrate while giving back to the Bitcoin community.
New York, NY (PRWEB) March 18, 2014
The Bitcoin community raised concerns about a pool reaching the 51% network hashpower. That pool can potentially control double-spend transactions, affect confirmations and prevent miners from mining valid blocks. Satoshi himself was opposed to centralization of the Bitcoin protocol. The pool had responded by limiting new miners to their respective pool all the way to raising pool fees. Ultimately, the choice for miners was to move their equipment to other pools to greater diversify hash power across the network. The purpose of a mining pool should be to expand bitcoin to better the economic structure. This is where Directpool.net comes in as the next generation mining pool to further redistribute total network hashrate while giving back to the Bitcoin community.
Directpool founders brought together a skilled team to provide a Bitcoin pool that will match the services of larger pools and further distribute hashing power. The pool is merge mine ready for Namecoin so miners get rewarded with two coins not just Bitcoins. It features a PPLNS payment system and variable difficulty for better worker load. The team is fully capable of keeping miners’ information and bitcoins safe by using responsible security practices. Directpool sits behind a fully Secure Sockets Layer (SSL) connection to make sure miners’ information stays encrypted and implemented DDOS mitigation for robustness.
Another main goal behind starting Directpool was that the founders wanted to give back to the Bitcoin community as that is the key to the future of Bitcoin itself. They have taken the initiative to fund Bitcoin related projects through any donation that may be collected at Directpool. Directpool is collaborating with Bitcoin Business Alliance (BBA) to work out a structure to handle the donations for worthy projects. More information on this will be provided in the near future.
Donald (x3maniac), lead developer:
“Directpool’s focus is to serve the bitcoin mining community, since we are all miners to begin with. I joined this project to ensure that the bitcoin mining community has an awesome pool that is extremely reliable and secure. Thanks to our web development team, the website looks neat and fresh. I like how my stats are displayed and I can easily access the most used features of the pool in the Quick Stats menu.”
About Directpool:
Directpool.net is a modified version of Eloipool Engine which is capable of handling computing power from GPUs to the largest of ASIC equipment as well as any size mining farm. The pool is running on private dedicated equipment and moderated by talented admins to make it safe, secure, and highly stable. For further information please visit DirectPool.net
Imagine, waking up each morning and not knowing whether or not you could reach for a glass of clean drinking water. Unfortunately, this nightmare is a reality for thousands of innocent individuals around the world. While most of us take running water and clean drinking water for granted, it is a luxury for many around the world.
This winter into the spring, the BitGive Foundation has partnered with the Water Project to collect donations in BTC to empower and enable individuals to live healthier and longer lives with clean water. As the donation drive is hitting a benchmark, I encourage you to consider donating to this phenomenal project today.
Together we can continue to utilize the gift that keeps giving (Bitcoin) for good to help empower and strengthen those in need.
The BitGive Foundation issued the following press release on its partnership and support for the Water Project:
BITGIVE FOUNDATION – FUNDRAISING CAMPAIGN FOR THE WATER PROJECT
Charitable giving in Bitcoin.
(Sacramento, CA – February 24, 2014) – The BitGive Foundation is partnering with The Water Project to promote charitable giving through a fundraising campaign to bring clean, safe water to a community in Africa.
The BitGive Foundation has kick-started the campaign with a 2 Bitcoin donation ($1,248 USD equivalent) towards the $10,000 goal. You can check out the campaign and its progress, and donate by visiting the BitGive Fundraising Campaign.
The Water Project Inc. is a 501(c)(3) non-profit organization unlocking human potential by providing sustainable water projects to communities in sub-Saharan Africa who suffer needlessly from a lack of access to clean water and proper sanitation.
The Water Project recently began accepting Bitcoin donations and especially accommodated a crowd-sourcing campaign in Bitcoin for the BitGive Foundation’s effort. The Water Project’s President, Peter Chasse, is also a fan of crytocurrencies and recently released this blog Welcome Cryptos to encourage crytocurrency donors to give to The Water Project.
The BitGive Foundation is pleased to be working with such a worthy organization and to support their new acceptance of Bitcoins with a $10,000 fundraising campaign. This is the young Foundation’s second major fundraising effort. They also raised $4,850 worth of Bitcoins for Save the Children’s Typhoon Haiyan Children’s Relief Fund last November.
Madeline Finch, Board Member and Secretary of the Foundation says, “We are very pleased to be working with The Water Project and happy to kick-start the campaign with 2 Bitcoins. We are a fairly new organization, and The Water Project is perfectly aligned with our mission.”
To share their vision and continue to educate audiences about Bitcoin, Connie Gallippi, Founder and Executive Director of BitGive, recently presented on a ‘Future of Giving’ panel at the Startup & Tech Mixer in San Francisco with thousands of attendees, and she has also presented at several Bitcoin conferences and events in the US and South America. She and Madeline also serve as leading women in the Bitcoin community, which is known for being light on female representation.
The BitGive Foundation, launched last year, is a charitable giving organization leveraging the power of the Bitcoin community to improve public health and the environment world-wide. BitGive received several early significant donations from Bitcoin mining companies KnCMiner and Butterfly Labs, as well as in-kind donations and services from Perkins Coie, LLP and BitPay, Inc., who also processes Bitcoin donations to charities at no cost.
The Foundation will soon be launching a Founding Donors Campaign to raise capacity-building funds to sustain the organization and support its mission. The Foundation has a multi-million dollar long-term goal for global giving and is confident that the Bitcoin community will support that bold vision.
Writing for the New Republic, Evgeny Morozov has written a brief critique of what he dubs America’s “innovation fetish.” While not really spelled out in the article, there are some pretty obvious reasons to fetishize innovation. A look to the developing world reveals why. Innovation unleashed in a liberalized India, for example, has accelerated economic growth to 7 percent per year. Compounded, this growth will eliminate the very worst of Indian poverty in a generation of twenty years. Liberalization of the Chinese economy has pulled hundreds of thousands from grinding rural poverty to urban universities in a single generation.
All this is not to say innovation solves all problems. It’s undeniably true that a rising tide lifts all boats. But as the left is good about pointing out, the analogy is imperfect, as it misses the other undeniable truth about innovation. Some boats start out higher than others, and a rising tide lifts higher boats further and faster than lower ones.
Which one might assume would be the point here. Instead, Morozov makes several points, which seem to stem from some fundamental confusion concerning the role of the state, creative destruction, and cost-benefit analysis in innovation.
Morozov is concerned that the left’s infatuation with innovation mars its ability to regulate tech well. Unfortunately, “well” here is undefined. Morozov dislikes the assumption that innovation—and, by extension, economic growth—should be the default yardstick by which we measure the success of technology policy. He wants a “robust technology policy” which is “independent of Silicon Valley and serves social goods greater than flying cars and longevity pills.” Social goods like what?
He gives a clue when discussing email, which he posits might better be provided through taxes and fees than advertising, for the purpose of (and I am not making this up), privacy. The drawbacks of allowing government to do to email what it did to snail mail are pretty clear. “Such solutions might be bad for innovation.” Well, yes. “But the privacy they afford to citizens might be good for democratic life.”
At this moment, the federal government is warrantlessly mining our private emails and providing the data to agencies such as the DEA which are using the illegally obtained evidence to arrest people but not revealing where the evidence came from so it can’t be challenged in court, all while lying to us and Congress about it. But yes, definitely an email service provided by the federal government would be more private.
The second big misunderstanding, after privacy, concerns the role of creative destruction in making government funded semi-monopolies like the USPS “bad for innovation” and freewheeling innovative technologies like email excellent.
Morozov gives innovations such as Skype and YouTube their due for their untold contributions to what he calls “civic purposes.” But warns, “Companies that have beneficently provided the platforms are intent on maximizing their own commercial agendas.” Why does this matter? “These products might disappear as swiftly as they appeared, eliminating the information infrastructure that we already take for granted.”
Yep, Geocities disappeared, pissing off many a netizen. But in what world is WordPress not a good enough replacement? Yes, creative destruction destroys. But a focus on what’s lost as opposed to what’s gained leads us to a candle-lit, horse-and-buggy driven world, which helps no one but candlemakers and buggy drivers.
This skepticism toward markets and naive view of government leads to some weird conclusions about innovations in money as well. Morozov quotes the Mercatus Institute’s Eli Dourado as saying that Bitcoin can “do for finance what the Internet did for communication.” True enough, and powerful. But he’s unsure.
It’s as if there is no difference between AT&T and the Federal Reserve, since both are gatekeepers. That one is a profit-hungry private company and the other one is a political institution erected to carry out a public mission does not seem to matter.
Like with privacy, this statement seems utterly disconnected from what the government is actually doing in money. Actually both AT&T and the Federal Reserve are profit-hungry semi-private companies. But while one mostly profits by providing services to willing customers, the other uses the Treasury to inflate the currency in a way that is proven to benefit big banks and wealthy asset holders while discouraging savings and stealing purchasing power from the poor and middle class.
The oddest thing is that Morozov seems to understand that regulation and policy are kryptonite to innovation. But he appears to be making the case that shielding favored products and services from the powers of creative destruction and inhibiting private companies’ ability to profit from innovation makes the tradeoff worthwhile. This view might work if one totally and completely ignores tradeoffs such as easier data mining for government agencies, email as easy for customers to use as the USPS, and a monetary policy which by-design favors the rich over the poor.
But those are pretty serious drawbacks, which should probably be taken into account. And when weighed against the advantages, this case against an innovation fetish completely falls apart.
Sean’s Outpost is a Pensacola, Florida based charity for the homeless. It is well known as one of the first organisations to embrace Bitcoin for charitable giving. Jason King is its founder. He is a regular speaker at events and is highly respected for his work.
The organisation has, to date, used Bitcoin donations to successfully supply 60,000 meals, secure nine acres of property and open a thrift store. So, Sean’s Outpost’s first birthday this week should have been cause for celebration. The local government of Pensacola, Florida has messed that right up.
The City of Pensacola has been a nuisance to the charity for some time, actively seeking to hinder the efforts of the program. Now, in an escalation of their efforts, local county commissioners have authorised the county attorney to file an injunction on Sean’s Outpost in relation to its land.
This vote was approved 3-0. The county is seeking relief against Sean’s Outpost in relation to the property (the so called ‘Satoshi Forest’) for alleged continued violations of Code-of-Ordinances and the County Land Development Code.
This follows a Notice of Violation and Cease-Desist issued to Sean’s Outpost on January 14th. The alleged violations include nuisance conditions, trash and debris, and the unpermitted erection of tents and other structures on the property.
The ‘Satoshi Forest’ is land that Sean’s Outpost allotted as a safe environment for the homeless to stay. The authorities hope to compel removal of all unpermitted structures and tents on the land, until the organisation obtains approval for the intended use of the property through the proper process: Development Review Committee approval.
Sean’s Outpost is claiming that they have done everything to abide by the law and follow regulations. Further, they claim the timing of the vote is tactical. It comes while Sean Outpost’s attorney and key staff are all out of town.
If the authorities file an emergency injunction they will only have 48 hours to appear. If it is not an emergency injunction they will have time to prepare the case.
Sean’s Outpost claims that the allegations are falsified. They allege that, in line with a previous ruling, a health inspector and code enforcer are being paid to inspect the property weekly. Not only have no violations been reported, but it is alleged that the latest report specifically states that the property has remained clean and orderly and is not in violation of any laws.
The situation gets even more intriguing and sordid. This website claims to have found video of the commissioners inquiring on how to replace and possibly terminate the special magistrate that ruled in favour of Sean’s Outpost at an emergency hearing in January.
This magistrate did not side with the county at this hearing. Instead, Sean’s Outpost was permitted to allow campers to remain on the property. This was so long as they had a health inspector and county code enforcer to inspect the property weekly.
This seems to corroborate Sean’s Outposts claim. If the weekly inspector did indeed find the property as clean and orderly, as Sean’s outpost claims, then one really has to wonder what the problem is.
On behalf of Bitcoin magazine I’d like to wish a big happy birthday to Sean’s Outpost. An organisation that does such tremendous work deserves support. It is with regret that we learn of this constant nuisance from the local authorities. We hope that anyone reading this will click here and give generously to Sean’s Outpost as you continue to fight the good fight.
Well I’ve been “into” Bitcoin for nearly a year and like most people I’ve simply been hoarding my coin. It’s time to start spending! I recently had the opportunity to register for Bitcoin2014 (come join me! http://bitcoin2014.com/) in Amsterdam and naturally since the option of paying via bitcoin was available I had to try it. I had never actually bought anything with bitcoin before so I was in virgin territory. The process was surprisingly simple, straightforward and painless, partially due to good web design and partially due to luck.
The bitcoin portion was run handled by BitPay and when I clicked to pay, a “bitcoin:” URL was created and executed by starting up my wallet (a Multibit wallet) that happened to be on the computer I was using to register. Multibit asked for my wallet password (very reassuring), the payment was made, and all was right with the world. There was no long delay – it all worked fine.
A day or two later I decided to purchase a “Verso Card” which is a cool hardware gadget about the size of a credit card that you can use as a cold storage wallet but with the convenience of an online wallet because you link it to an app on your phone. Anyway I went through the usual purchase process and at the end it printed a bitcoin address and said please pay first before clicking button. So I had to manually go into my wallet, put in the address, and then wait for 10-15 minutes for the transaction to be confirmed until I hit the button on the Verso card page. This is totally unreasonable for normal purchases. If I had hit the button the page said they would not mail the card, so I was warned but this is not a “ready for prime time” way of conducting business. I don’t know what the difference is between the BitPay managed purchase which happened instantly, and the Verso card purchase, both of which used my same bitcoin wallet. So that part will remain a mystery until I investigate some more.
Last but not least, I’ve been reading about Overstock.com accepting bitcoin. I had never purchased anything from Overstock but I headed over to give it a whirl. I created an account in about 30 seconds…surfed to buy some piece of clothing. Place it into my shopping cart. Clicked the pay with bitcoin button, and the transaction was very smoothly handled by coinbase (which I had previously setup to handle the bitcoin URL transactions, rather than use my wallet).
Overstock.com purchase confirmation
The system asked for my 2 factor coinbase authentication (also reassuring). I authenticated, and it was all done fast! Back to Overstock with a “Your Order Was Successful” message! Hey you know what the bitcoin thing might have legs.
Coinbase confirmation
All in all however, it was an interesting set of experiences I have no doubt the growing pains of using bitcoins for real purchases will be smoothed out and are in fact rapidly getting smoothed out. Just keep your eyes open for some bumps in the road but start shopping!
In support of the continued growth of Bitcoin, BitPay has expanded its operations and opened offices in San Francisco and New York. The expansion means that the company will now have four locations throughout the world.
Headquartered in Atlanta, the Bitcoin payment processor specializes in providing solutions to businesses looking to accept the virtual currency. The offices in San Francisco and New York will give BitPay the opportunity to spread knowledge of Bitcoin, and will supplement the company’s headquarters to handle implementation, operational support and sales for BitPay’s merchants.
The San Francisco office will be located near Silicon Valley, the nation’s technology hub. Paige Freeman, BitPay VP of Sales stated in a recent press release, “BitPay has many merchants accepting bitcoin throughout Silicon Valley so we are thrilled to extend our exceptional sales and customer support by opening an office in San Francisco. We look forward to expanding into various markets both here in the U.S. and internationally.” Also joining Paige Freeman in San Francisco is John Dreyzehner, the company’s west coast leader of Client Operations.
In New York, the company also announced the addition of Regional Sales Manager Andy Goldstein. Mr. Goldstein will be heading up merchant accounts throughout the eastern United States and eastern Canada. With a strong background in the payment space, Goldstein spent 15 years with Visa, Inc. as a Senior Business Development Leader for merchant sales and merchant support operations.
The office in New York will enhance the company’s presence in the United States and Canada, as well as internationally. New York’s prevalent financial sector will also increase visibility of Bitcoin throughout the financial industry.
From left to right, John Dreyzehner, Client Operations; Eric Martindale, BitPay’s Developer Evangelist, Paige Freeman, VP of Sales, Tony Gallippi, co-founder and CEO and Stephen Pair, co-founder and CTO.
BitPay currently has a staff of 31 employees around the world, with 22 in Atlanta, six in Argentina, two in San Francisco and one in New York. The company’s continued growth and expansion will help support the growth of the Bitcoin ecosystem, providing merchants a way to accept the virtual currency. In addition, BitPay also works with over 26,000 active merchants, including TigerDirect and the Sacramento Kings.
As more merchants and consumers around the world seek additional payment solutions like Bitcoin, it is likely that BitPay will continue its strong growth, both in the U.S. and abroad. Although virtual currencies are still very new, companies in the Bitcoin community are focused on driving adoption through education and business solutions.
In the 1970s and 1980s, E. F. Hutton was one of the best known brokerage houses in the United States. A Madison Avenue ad-maker came up with the tagline, “When E. F. Hutton talks, people listen.” The same could be said about successful people in general. When a successful man makes a decision, it’s a good idea to listen, if you want to be successful also.
Hairdressers, sandwich shops, spas and even escort services have all jumped on the bandwagon to accept bitcoins. Lawyers have been slow to embrace the digital currency that is sweeping through the marketplace. As Bitcoin has grown in popularity, attorneys from Wall Street to Main Street are starting to take a look at this new digital currency.
One driving force behind the legal profession’s attention is the continual need to maintain client confidentiality. In New York there is a criminal defense lawyer who accepts bitcoins. Checks and credit cards can create an unwelcome paper trail, a problem that is eliminated with Bitcoin.
Noted criminal defense attorney, Arkady Bukh, specializes in cyber criminal cases. Bukh has begun accepting the digital currency as payment helping ensure the privacy his clients expect and demand.
Bukh, attorney for alleged Boston Marathon conspirator, Azamat Tazhayakov, has also represented Russian cyber criminals and international hackers. As Bukh met with his clients, he became aware of the potential for bitcoins in his law firm. Listening to his clients talk about their experiences with the currency, Bukh’s interest was ignited. As an attorney representing high-tech cyberhackers, Bukh was intrigued by the online-based currency. The ability to protect client confidentiality was a side benefit which led to the decision.
Bukh says that using bitcoins doesn’t put him or his firm at any more risk than accepting cash. “In my field, people want to keep things as hush, hush as possible,” Bukh says. “I don’t see a downside, it is traded on public exchanges.”
Bukh, in addition to Tazhayakov, has also represented Russian digital pickpockets and international hackers, like Igor Klopov, Oleg Nikolaenko, Sergey Tsurikov, Dmitry Naskovets, Dmitry Smilyanets, Vlad Horohorin, and a host of others.
A partial reading of his client list, and their accomplishments, is like reading the names of the recent inductees into a Criminal Hall of Fame.
Igor Klopov, targeted Forbes 400 individuals including a close friend of former President George W. Bush; Oleg Nikolaenko, dubbed “King of Spam” by the FBI. Nikolaenko was responsible for one-third of the world’s spam before being arrested in 2009.
Sergey Tsurikov led a ring that hacked into RSB ATM’s and walked away with a cool $9.5 million dollars over a twelve-hour period; Dmitry Naskovets ran a website that was an online garage sale for identity thieves. Designed to bypass the normal security measures that banks and businesses have, Naskovets helped over 2,000 hackers swipe millions of dollars.
Dmitry Smilyanets, most widely known as the founder of a championship electronic gaming team called Moscow 5, traveled the world for competitions. Smilyanets was able to steal over 130 million credit cards.
Finally, Vlad Horohorin, who was described by the US Secret Service as one of its five most wanted cyber criminals globally.
Bukh’s success with these clients? While collectively they were facing hundreds of years in prison, most received sentences of less than ten years. One got probation.
Bitcoin and International Transactions
Bukh says that deciding to accept Bitcoin was a smart decision for dealing with some of his international clients as well. International financial exchanges can be huge headaches. Wire transfers are expensive and time consuming. Bitcoin offers a lower rate than routine wire transfers. With credit card processing, typical processing fees can be as high as 3-5 percent whereas Bitcoin services are usually less than 1 percent.
The Ethical Issues of Accepting Bitcoin
Bukh explained how attorneys can accept Bitcoin from clients and covert them into dollars while still complying with rules on professional responsibility. If an attorney is paid in Bitcoin and its value is $1,000, the lawyer can take the digital legal tender and convert it into $1,000 today. The Bitcoin value may change, but once converted, the $1,000 credited to a bank account remains stable. That factor makes the acceptance of Bitcoin legal and ethical.
Bitcoin can be accepted for legal services just as precious metals or other valuable. The Model Rules note that a fee for legal services must be “reasonable.” When accepting Bitcoin, a practice should be sure to use the current Bitcoin/USD rate exchange as a guide. When it comes time to billing clients most attorneys include a simple line in the contract such as “$1,000 USD or its present Bitcoin equivalent.”
While the Model Rules allow it, the reader may want to double check with specific jurisdictional rules for more information.
Bukh believes that over the next 12 months more security around Bitcoin will be developed. He also sees the possibility of global regulation on the digital currency. While recognizing the current issues surrounding Bitcoins, Bukh feels that the quicker that issues facing Bitcoin are defined, the quicker the digital currency will have a stabilized market and value. Until then, Bukh has no plans to abandon, bitcoin or the privacy, the digital currency offers his clients.
Just how successful is Bukh? On February 27, 2013, Oleg Nikolaenko, the “King of Spam” walked away with a three-year probation. Igor Klopov, who targeted members of the elite Forbes 400 got three-and-a-half years.
Are you looking for a way to buy and sell Bitcoin? Many in the Bitcoin community have their routine of where they go to trade Bitcoin. Whether that is through an exchange, local sources, or selling goods and services, we want each source to be trusted. What if there was a place you could go that would search your friends and see who wants to buy or sell Bitcoin? A new platform called CoinTouch does just that.
CoinTouch is a service that connects with your Facebook friends list and searches for active Bitcoiners within your own trusted group of acquaintances. Created by Chris Beach, CoinTouch allows users to bypass a third party and deal directly with the people you trust most. Additionally, the platform is free of fees and provides a way to buy/sell to your extended network. Even further, CoinTouch does not ask for payment information or personal information, aside from requesting access to your friends list.
CoinTouch adds another layer to finding friends who trade Bitcoin. The service also searches friends of friends to provide an even more expansive list. Using CoinTouch, users navigate a easy-to-use menu that allows you to place a “bid to buy” or “offer to sell” to your own Bitcoin community within your friends list. Additionally, CoinTouch also supports a long list of altcoins and other virtual currencies, including Dogecoin, Auroracoin, NXT, Litecoin, Namecoin and more.
The new platform also gives users the ability to set their own rate based on BitStamp, BTC-E, Coindesk and Coinbase, which can also be bought or sold anywhere between -20% and +20% of the current rate. In terms of local currency, CoinTouch supports nearly 20 currencies from around the world, most popularly USD and EUR.
The idea behind CoinTouch could prove to be yet another popular way to buy and sell Bitcoin and other virtual currencies locally, much like localbitcoins. With a platform that only allows you to trade with your extended friends list, one would think that the amount of successful transactions would increase, simply because a user is more likely to know the individual directly.
For those just getting started, it could also serve as an easy way to gain a grasp on virtual currencies. On the other hand, there may be evident security risks, especially for inexperienced users. Users could choose to share secure information via Facebook and not through the platform provided, which could open them up to hacking attempts and theft.
It will be important that if you use CoinTouch to remember not to share sensitive information via Facebook or any other social media platform. It would be recommended that these transactions happen in-person, which should be simple, because they will likely be someone you have a direct relationship with.
CoinTouch delivers an interesting platform that can decrease the barrier to entry for those just getting started with Bitcoin. Additionally, creating something that severs the ties to exchanges and third parties will allow even the most experienced Bitcoin enthusiast to buy and sell virtual currencies throughout their own community of friends.
Last Friday, The Internet Corporation for Assigned Names and Numbers (ICANN) put a process in motion that would transition the role of the United States Government in the Internet’s unique identifier system. The plan marks an important moment, meaning the US Government would relinquish their remaining control of the Internet, and transfer important technical functions of the Internet to the global Internet community.
Presently, the government’s current responsibilities include the role of administering changes to the Domain Name System’s (DNS) root zone file, which is the database of top-level domains (.edu, .gov, .mil). Additionally, the US Government also oversees the historic data regarding unique identifier registries for Domain names, IP addresses and protocol parameters. A recent ICANN article stated, “the US recognized ICANN’s maturation in becoming an effective multi-stakeholder organization and requested that ICANN convene the global community to develop the transition process toward a global community consensus-driven mechanism.”
Apart from the US transition, ICANN’s role as administrator of the Internet’s unique identifier system remains unchanged. These are just the first steps in a long process and will likely take until the contract between the Commerce Department and ICANN is up next year.
Pressure to relinquish US control has been building for nearly a decade and was strongly driven by last year’s backlash about the National Security Agency’s role in surveillance, mainly uncovered by Snowden. However, the US stated that the decision had nothing to do with the firestorm caused by NSA spying revelations and the controversy that followed. Whether you believe that or not, the move has sparked discussions of cryptocurrency, more specifically the algorithms behind Bitcoin and Namecoin.
In a draft ICANN Report released late last month, the organization spoke of Byzantine algorithms like Bitcoin and Namecoin, and the future of an Internet not controlled by the US Government. This could mean that the organization is exploring the possibility of a global multi-stakeholder accountability process.
In the previous section, we discussed the political feelings that make countries want to own a root server organization. These concerns may or may not be well founded, but there is no question that the current root operation is based in the US and subject to US jurisdiction.
In simple outline, the root is updated in a sequence:
ICANN receives update requests from TLDs, and vets them for errors
ICANN submits the changes to the Department of Commerce
ICANN sends approved changes to Verisign
Verisign generates a signed root and distributes it
Is there a technical way to think about sharing control over the root? Some theories have been advanced. One school of thought is that data should have N multiple signatures. And then M/N, signatures are required to authenticate the data. Of course there are arguments about M and N, and whether different crypto is needed/desirable.
It’s not our intention to argue for a specific system here, but we do feel that a good design could allow the political process of deciding how control should be shared to start. Our vision is the creation of a toolbox for shared zone control, not only for the root, but also for other zone coordination problems.
We note that the DNS Operations (DNSOPS) working group in the IETF has two proposals for coordinating DNSSEC signing information, but wonder if it might be better to create a general facility rather than a solution to this point problem. Coordination of forward and reverse addresses might be another application.
The participants could then each do a standard algorithm to generate consistent state. This might seem like a fantasy, but Byzantine algorithms like Bitcoin [Andreesen 2014] and Namecoin show that such systems are possible today.
(Note that we aren’t proposing the rules, just a distributed system for implementing whatever rules the community wants.)
However, some have raised concerns of ICANN’s stewardship based on their expansion that added new domains to the Internet’s infrastructure. Those opposed to the changeover have made statements regarding the abundance of domain names, which may increase dishonesty and allow phony website creation that appear to be trusted brands.
It is obvious that the changeover, when it happens, will need to be done carefully. If a global multi-stakeholder accountability process is adopted that includes technology currently used by cryptocurrencies like Bitcoin and Namecoin, the security and trust of the internet should grow, but we will have to wait and see. There will always be risks. Users need to begin taking extra precautions toward Internet security and the sharing of personal information, instead of trusting that their information is safe.
Bitcoin is often called “Gold 2.0” because they share many of the same traits. As we have magazines dedicated to “head to head” matchups in cars, motorcycles, computer parts, cell phones, etc. – perhaps we should have a head-to-head matchup between gold 1.0 and gold 2.0, Metal vs Digital. Money is commonly recognized to have six essential elements that make it ideal for transferring value between parties. These will be our criteria.
· Durability
· Portability
· Divisibility
· Fungible
· Limited supply
· Acceptability
History
Gold was used as a currency for 5,000 years. The US confiscated the citizens’ gold in 1933 then arbitrarily raised the recognized the set price by 40%, thus giving the country 40% inflation overnight. They continued to redeem dollars of gold in foreign affairs. The US printed dollars to pay for World War 2, then the Cold War and the space race to the moon. But the world became increasingly worried about non-stop spending and by the mid 60’s there were open conversations between nations worried about the US’s ability to service its debts. The common mantra of the US was the “dollar was as good as gold” because those nations could convert one to the other at will. Eventually the leaders figured the better value was opted to take the gold instead.
A speech given in 1965 by France president Charles De Gaulle speaking of America’s spending and debts sounds like it could have been given last week. He spoke of the “dollar crisis” as it allows the US to get into debt for free at the expense of other countries as the US insisted on paying in printed dollars. Nixon gave a speech in 1971 in an address to the US that announced the closing of the “gold window” that had been allowing countries to convert their paper dollar debts to gold. The US strategic supply was dwindling. This effectively took the US off the Gold Standard that had been holding printed dollars to any kind of discipline. Nixon’s speech to the world indicated that the move was temporary and that if the US continued to only buy American products, they wouldn’t feel a price difference. He insisted that the dollar would be worth just as much tomorrow as it was that day. He blamed the move on “International Speculators” betting against the dollar.
Durability
Gold has proven itself to be one of the most durable substances on earth. It doesn’t degrade. Every ounce of gold ever mined is still around. (Excluding the small portion sent out of orbit) Gold has proven to be truly precious.
Bitcoins can only be destroyed for a brief moment in their creation during mining under unusual circumstances which likely has not happened. But if the hard drive containing the private key is buried in a landfill, those units are forever gone. You could argue that a pirate treasure chest of gold buried on an island beach and long forgotten is the same end. The bitcoin units exist on the public ledger which is copied into the cloud and thousands of hard drives around the world. We can’t predict what may happen to bitcoin in a few hundred years but for today’s generation, so far so good. But because bitcoin is officially an experiment, we’ll have to give this one to gold.
Winner: Gold
Portability
When talking about enough money to buy an average house or more, there is hardly a comparison to make. For the price of a $200,000 house you need about 12 pounds of gold. But then you have to have somebody verify that it isn’t fake with Tungsten metal core that has been uncomfortably common recently. Then you have to deal with security and insurance to move it. If you are moving even larger quantities, and across country borders, you also have to declare it, and pay all kinds of other fees and assessments in addition to even higher costs of security coordination between several entities. After you also include the cost of currency conversion (after all, how many people will accept gold directly as payment in full), all the friction may cost an additional 10 to 15%. If that $200,000 house is in another country, you’ll need another 2 pounds of gold just to cover the overhead.
Bitcoin, you can transport anywhere in the world with Internet access although companies like Bitgold are trying to change that. It travels at the speed of light. It really doesn’t need to move as it is in a public ledger. The only thing that moves is the location of the private key required to unlock them for spending. The key can be copied, written down, or memorized. It needs no third parties, insurance, or fees. It’s “frictionless”. You can transport it across borders without effort in something as simple as your memory. Paper wallets can be a string of numbers so small as to fit on a scrap piece of paper the size of a fortune cookie. Hundreds of thousands of places will accept bitcoin for payment without needing to convert it to cash. It can be done with your smartphone.
Winner: Bitcoin
Divisibility
Gold can be subdivided but at great cost and labor. Not just anybody can subdivide it into ounces, or half ounces, etc. You can subdivide it down to the gram which is 1/31 of an ounce in physical form. Currently $45 is your smallest physical unit so if somebody would take gold as payment, making change for a $20.00 movie ticket would be tricky at best. Technically gold is very divisible with scientific know how and expensive equipment, but practically it is not.
Anybody can subdivide bitcoins as far as 8 magnitudes of order and can go deeper if needed. This is handled without effort by the computer system you are using. The charges happen automatically through the transactions. You can create any amount of free wallets to store your value into sub pennies of bitcoin to thousands of free wallets if you like. There is practically no limit.
Winner: Bitcoin
Fungibility
Having one unit exactly like and worth the same of a second is important. Pulling a dollar out of your wallet is the exact same value as the second dollar pulled out of your wallet. Gold isn’t as simple. There can be dilutions of the metal. Coins can be struck at 90% gold, 100% gold or other variations. Weights and measurements can be off. Counterfeits using tungsten metal have occurred. There are price differences depending on the country or mint that issued the coin. Premiums are also found with the age and condition of the coins. The smaller that you break the gold down, the more expensive the portions get. 10 1/10th ounce gold coins cost significantly more than a single one ounce coin.
Bitcoins have none of these problems. Each bitcoin has been recorded and cannot be counterfeited logically without billions of dollars invested into doing so for even a temporary benefit. It is practically impossible. One unit is always valued the same as the other sitting in the public ledger beside them. All of the pieces of a bitcoin add up 100% to the value of the whole.
Winner: Bitcoin
Limited Supply
Gold has a recognized limited supply. All the gold ever mined in history would fit in a cube block the size of a tennis court. It is getting even harder to find as the easy spots are thought to have been found. But there could in theory be a new big find which would depress the price.
Bitcoin supply is strictly defined. At a year, likely long after our death, bitcoin will finally reach the end of its new issuance in 2140. That is “hard-coded” into the currency. The rate at which it will be spawned into the system is also predictable. We can write contracts based on the known amount that will be issued. There is no need for speculation forward contracts. It is in much more restrictive limited supply than gold.
Winner: Bitcoin
Acceptability
Gold is accepted for payment in gold stores for swapping for other precious metals. For realistic commerce very few places around the world accept gold for payment as the hassles of verifying it are real, and the security required to maintain it and handle the aspects make it not worth the hassle. The smallest unit sold is a gram for around $45-60 dollars. You can’t make gold change for less than that. If your purchases don’t come in multiples of 50’s you might be out of luck getting change.
Bitcoin is accepted in thousands, if not millions, of locations already. There are exchanges all around the world and some with direct linking into your regular banks. The trend is for more companies to get on the bitcoin bandwagon as the technology and sophistication is allowing new generation’s access. Confidence in its value remaining steady or expectations of ever raising price values also increases its acceptance. As main street and Wall Street investors begin to invest large amounts of money into the system the network effect will allow it to get more attention of more merchants, which will have a domino effect for those that do not take it will suddenly be forced to accept it in ways all merchants eventually gave way to taking credit cards; if they didn’t they lost business. There is no movement to return our currency back to the 18th century. Outside the gold-bug crowd, gold as money is as foreign sounding to the new and upcoming generations as doing commerce with rocks.
Winner: Bitcoin
With a score of five to one, the clear winner is bitcoin. Gold bugs like Peter Schiff and Doug Casey might burst a vein in their head for you to say it, but their world of degrading bitcoin to prop up their business models will not last much longer as the tide turns. With more luck, we can finally pull all the gold stored underground in vaults back up above ground and melt it back into art and jewelry to be admired by all humanity.
We are now only charging 5USD, 3.11 GPG and 3,65 Euros per magazine when purchasing directly through Amazon.com. As we are currently printing our 20th Issue, Issues 1 through 19 are available on Amazon for you to enjoy.
Since we first released our first print magazine issue, the Bitcoin currency has grown to a significant level of prominence. We encourage you to purchase back issues on Amazon.com and then in turn sign up for a subscription to regularly receive copies of our newest issues! We encourage you to renew your subscription in full for another year OR start up a subscription TODAY!
As the Bitcoin currency continues to flourish and as digital currencies become the norm, you will want to regularly receive your copy of Bitcoin Magazine and also back copies of the magazine for a full history of this decentralized movement.
As we continue into Bitcoin Magazine’s second year, we have expanded to now have a digital edition and have welcomed and continue to welcome some new writers to the team.
We plan to keep you informed on the latest news in the Bitcoin community and provide more in depth articles on this fascinating digital, decentralized cryptocurrency through a monthly tangible copy of Bitcoin Magazine!
If you have any questions about the current status of your subscription, please contact us at [email protected].
Robocoin, a Las Vegas based company specializing in the first bi-directional Bitcoin ATM, will be unveiling California’s first Bitcoin ATM at the 500 Startups’ Bitcoinference. On Thursday, March 20, the company will make buying and selling Bitcoin possible, all from a single machine. Held in Mountain View, California, the sold-out conference will by a half-day “un-conference” featuring industry leading companies throughout the Bitcoin community, as well as speakers from all aspects of cryptocurrency.
Speaking at the Bitcoinference will be Dan Held, Co-founder of ZeroBlock, Connie Gallippi, Founder of the BitGive Foundation, Dave McClure and Sean Percival of 500 Startups, among many others. The 500 Startups’ conference gives attendees the opportunity to join 100+ commerce startups, e-retailers and thought leaders in the industry.
Robocoin will head to Mountain View, the epicenter of technology, to introduce the Robocoin Bitcoin ATM. The company’s technology itself allows customers to exchange Bitcoin and cash. The bi-directional approach provides the ability to both buy and sell Bitcoin, combining the trust and automation of online exchanges from a single ATM.
“We’re setting the precedent for bitcoin ATMs and demonstrating to California’s citizens and regulators just how this exchange should be run with respect to Anti-Money Laundering compliance and consumer protection,” Robocoin CEO Jordan Kelley stated. “Our Robocoin Operator shares our vision of bringing bitcoin to the world the right way.”
Robocoin allows customers to buy Bitcoin by using various security measures to verify the user’s identity; all that is needed is a government ID, palm print, email, face and cash. Additionally, Robocoin also gives users the ability to sell Bitcoins by using the same security measures and by sending Bitcoin to Robocoin, receiving a ticket and waiting for one bitcoin confirmation.
The growth of the unique platform has continued since late last year. In October of 2013, Robocoin introduced its first Bitcoin ATM in Vancouver, which shortly followed its first ATM in the United States, in Austin, TX. And just last week, the company sent 10 Robocoin units overseas.
The 500 Startups’ Bitcoinference will take place on Thursday, March 20 at 444 Castro Street, #1200 in Mountain View, California. The event begins at 2:00PM.
About Robocoin
Las Vegas-based Robocoin is a bi-directional ATM that lets customers buy and sell Bitcoin. Robocoin combines the trust and automation of online exchanges with the convenience of in-person transactions. The software and hardware behind Robocoin’s Bitcoin ATM is creating consumer accessibility to digital currency. The inclusion of Biometric hand scanning, government issued ID scanning and webcam were built to adhere to FinCEN law, anti money laundering (AML) and Know Your Customer (KYC) compliance.
This week, the state of Illinois General Assembly is holding a hearing regarding virtual currencies and the state’s Transmitters of Money Act. Introduced by Republican Elizabeth Hernandez, the proposed amendment to the act will attempt to further clarify the role of virtual currencies throughout the state.
For Bitcoin, the hearing marks a time where legislators and lawmakers throughout the nation are asking the same questions. Do Bitcoin and virtual currencies have a future in terms of becoming a viable currency? If so, how will an individual state’s legislation play a role in the adoption of virtual currencies as a form of legal tender?
In recent months we have witnessed many states reach out to find clarity in virtual currencies – the benefits, risks, and economic implications. Many are aware of the hearings in New York, where supporters of virtual currencies spoke out to the Department of Financial Services to further clarify the benefits of Bitcoin. Connecticut also released a report in late February that focused on Bitcoin and virtual currency. The report aimed to provide a summary of the use of bitcoin as virtual currency, the laws that govern it and other states’ attempts at regulation. Also in February, California proposed an amendment that would legalize Bitcoin, virtual currencies and community currencies that can be redeemable for lawful money of the United States. This proposed amendment stated:
“A person shall not issue or put in circulation, as money, anything but the lawful money of the United States. Nothing in this section shall prohibit the issuance and use of alternative currency that is redeemable for lawful money of the United States or that has value based on the value of lawful money of the United States but a person shall not be required to accept alternative currency.”
However, many of these documents fail to state the difference between money and currency, which puts in question the motivation behind these updates. Because of Illinois’ obvious stance on virtual currency, its decision to amend the Transmitters of Money Act to include virtual currencies is not surprising. What is surprising is the verbiage used in the amendment:
Sec. 110. “Virtual currency. Virtual currency does not have legal tender status. For the purposes of this Section, “virtual currency” means a medium of exchange that operates like currency in some environments, but does not have all the attributes of real currency.”
This statement raises the question of how “real currency” is defined. In finance, real currency is ‘the purchasing power in today’s currency of future nominal currency to be disbursed or received.’ If we use this to further evaluate the stated amendment, it seems that state lawmakers believe Bitcoin and other virtual currencies can be used in speculation or as a means of exchange. This may be true, but evaluating virtual currencies in terms of investments is a small piece of the puzzle. It would be worth stating that although Bitcoin is not yet “legal tender,” it and many other virtual currencies carry every trait of a sound currency. Bitcoin has the ability to stay valuable over time, because the network, software and payment system have value. Additionally, Bitcoin has a limited supply (only 21 million will ever exist), and is easily divisible and portable. The argument that virtual currencies aren’t “real money” is tough when many of them consist of the same technology and traits.
By defining “virtual currency,” the state is probably seeking legislative clarity. On the other hand, based on the proposed amendment, it is obvious that Illinois lawmakers have a certain outlook on the future of virtual currency within their state. Past legislative efforts have been more focused toward gaining knowledge of virtual currency, much like the two-day hearing in New York and the research report from Connecticut. States like Illinois are taking it among themselves to find a definition on their own.
For those who want to attend regarding the Transmitters of Money Act, the Financial Institutions Committee Hearing will take place at 3:30PM, Wednesday, March 19th at the Stratton Building, Room 413 in Springfield, Illinois.
Giving was in the air at the Texas Bitcoin Conference. The groundbreaking event was held at the Circuit of the Americas Race Track in Austin, Texas on March 5th and 6th. Attendees had the opportunity to network with nonprofit vendors and speakers, listen to a panel on Bitcoin philanthropy, and contribute to Bitcoin organizations through a charity luncheon. In perfect time for South by Southwest fever, conference attendees were able to rock out at the Bitcoincert fundraiser or catch a screening of a documentary style reality show which was produced in part with Bitcoin donations by a local 501(c)3 tax exempt organization. The nonprofits represented were diverse and unique and told a story of a community that genuinely cares about doing good. After attending this event, one could not help but be convinced that the Bitcoin movement loves to provide mutual aid.
When I arrived at the Texas Bitcoin Conference to help set up our vendor booth, I immediately noticed that the Capitol Area of Texas Food Bank had a presence at the event. This well established local Austin nonprofit is one of the latest charitable organizations to start accepting Bitcoin, and according to My Fox Austin, they are the first food bank in the United States to accept the cryptocurrency as a donation.
This particular nonprofit serves over 8,000 people per week and provides the distribution of groceries to over 300 partner agencies. For over 31 years this agency has been helping hungry families in Central Texas, but they have not grown stagnant. My Fox Austin reports that a spokesperson from CATFB stated, “We haven’t ever been afraid to try new and innovative things and we thought ‘if this is something that people can engage in to help fight hunger, then we want to make it easy and we want to make it possible’”. The Capitol Area of Texas Food Bank is leading the way in the nonprofit sector by showing others that an old dog can learn new tricks!
I wasn’t able to attend the Charity Panel hosted by my friend M. K. Lords of Bitcoin Not Bombs, but she reports the discussion was inspiring. On the panel were Davi Barker of Bitcoin Not Bombs, Teresa Warmke of Fr33 Aid, Jason King of Sean’s Outpost Homeless Outreach, Rassah of Bitcoin100, and Angela Keaton of AntiWar.com. Megan asked the panelists what inspired them to start their nonprofit, what challenges or benefits they have received taking bitcoin, and what projects they have planned for the future. Megan told me her favorite part of the panel was hearing Jason King describe the founding of Sean’s Outpost. I found a highlight of the panel discussion online and transcribed what he said here:
“It’s named after Sean Dugas who was my best friend. He was murdered in 2012 over a theft of Magic the Gathering cards. I wasn’t living in the same town as him at the time and my wife and I found out he died on CNN. We struggled for months after this loss, trying to figure out what to do to keep his memory alive. Another homeless outreach in Pensacola was shutting its doors and the person who ran it was friends with Sean. We decided we could honor him by keeping those meals going.”
Jason pointed out that we are all one life travesty or accident away from becoming homeless and finding ourselves struggling to get by. Part of the outreach conducted by Sean’s Outpost is providing a safe haven for people who find themselves without a home through a new project called Satoshi Forest. Homelessness has been made effectively illegal in Pensacola, FL so Jason and his family decided that feeding those in need was not enough, they are now paving the way for homeless outreach by utilizing bitcoin to provide a safe place for those in need to regroup without the added anguish of state-initiated harassment.
M.K. Lords, the host of the charity panel, is from Pensacola and is a part of Sean’s Outpost in addition to Bitcoin Not Bombs, an organization put on the map by their “Hoodies for the Homeless” project. Over 325 hooded sweatshirts were purchased through a unique fundraising campaign where donors purchased a t-shirt for themselves and Bitcoin Not Bombs used the funds to purchase a hoodie for a homeless person. The group plans to make the donation drive an annual event and they are excited to see the numbers grow in 2014.
In addition to their hoodie project, spokesperson Davi Barker told me that Bitcoin Not Bombs has helped several nonprofits get set up to accept Bitcoin donations, hosted a fundraiser to send representatives from their partner nonprofits AntiWar.com, Free State Project and Fr33Aid to the San Jose BitCon, and have participated in the creation of educational materials such as the Bitcoin Start Guide. For a relatively new organization, they are utilizing Bitcoin to achieve quantifiable results in the nonprofit space. Their efforts have not gone unnoticed. Sparkled throughout the conference were people wearing the BNB signature orange Bitcoin Bomber hoodies and holding the Bitcoin Start Guide. It was obvious to me that the organization was well respected by the conference community.
@Thebitmom working the vendor booth with Jessica Arman and Bill of the Blush Family.
Allie Arman, Bill and Aliana of the Blush Family at the F1 Track
Bandanas at the Charity Luncheon at the TX Bitcoin Conference
Charity Luncheon Decor
Catherine Bleish @thebitmom with Tatiana at the BitCoincert
Catherine Bleish @thebitmom selling a t-shirt to Davi Barker of @bitcoinnotbombs at the BitCoincert for Charity
Keep Bitcoin Weird Center Pieces!
The Blush Family (@thebitmom and @sovbtc) screening the Bitcoin episode of @SovereignLiving www.sovereignliving.tv
Theresa from @Fr33Aid, @BitcoinMom and Stephanie Murphy from @Fr33Aid
The charity luncheon was hosted by Sean’s Outpost, sponsored by the Texas Bitcoin Conference, and organized by Bitcoin activist Michelle Seven (@BitcoinBelle). The room sparkled with Bitcoin orange and honored the Austin event location with “Keep Bitcoin Weird” centerpieces (A play on the “Keep Austin Weird” tradition). Each chair was draped with an orange bandana and attendees were encouraged to wear them to show their support for Sean’s Outpost. Speakers Stefan Molyneux and Dr. Robert Murphy were seen wearing their bandanas well into the evening. Pua Pyland (@BitcoinWife) made 200 of her signature Bitcoin cookies which provided a tasty sugary addition to the decor.
The event sat approximately 175 people and honored five organizations: Sean’s Outpost, Fr33Aid, Bitcoin Not Bombs, Antiwar.com and Bitcoin 100. Funds raised at the event were split evenly between the organizations. One generous donor “bought” a bandana from Sean’s Outpost at the cost of 1 bitcoin. Brook Royse-Maller(@Bitcoin Mom), who helped set up the event, stated that the highlight of the event was the overwhelming support given to Lyn Ulbricht. Lyn is the mother of the alleged Silk Road founder, Ross Ulbricht. During the lunch she stood up and the room exploded with applause of support. “I thought it was remarkable that she came to the conference to reach out to the Bitcoin community,” said Brook. Jordan Page played music for the attendees as they enjoyed their meal, giving them a hint of the music to come at the BitCoincert later that evening.
Before packing up our booth and moving to the Coincert, our family put on a screening of Sovereign Living, a reality-based show produced by The Center for Natural Living, a 501(c)3 organization based out of Austin, Texas. The show follows our family as we attempt to get off of all centralized grid systems and to live a more natural and voluntary life. This means centralized healthcare grids, electric grids, food supply grids, and monetary systems! We screened episode four which explores alternative currencies, specifically silver and Bitcoin.
In the episode, viewers follow our family from the homebirth of our second child to the annual Porcupine Freedom Festival held in Lancaster, NH. This event is put on by the Free State Project (another Bitcoin loving nonprofit) and provides lovers of alternative and crypto currencies the opportunity to participate in a 100% open and free market. Last year we had a no FRN challenge (spend no Federal Reserve Notes aka “dollars”) at the event. We were able to buy food, souvenirs and apparel for silver and bitcoin! We even paid our friends to help watch the kids with alternative currencies. The episode features interviews with Erik Vorhees and Dr. Robert Murphy leaves the viewer ready to jump into the Bitcoin world!
Our goal is to take these alternative ideas and present them to mainstream America in a TV ready format. We have been able to create the show, in part, because of generous Bitcoin donations. You can watch episode one for free at www.sovereignliving.tv. Hopefully the screening will come to a conference near you!
The final charity event at the Texas Bitcoin Conference was truly my favorite part – the Bitcoincert! Vendors were allowed to set up and sell their wares at the coincert in exchange for a 25% donation to the nonprofits being supported. Our family moved our vendor booth from the slow moving Conference vendor area and were slammed with business from concert attendees wanting to wear our Come and Take Bit and We Can Do Bit T-shirts. I had a blast dancing to the tunes of Tatiana Moroz and Jordan Page with my children while mingling with other Bitcoin lovers. The real treat of the night was hearing Carolyn Malachi serenade the Conference organizer, Paul Snow. The independent, Grammy-nominated artist expressed a deep wisdom and appreciation for cryptocurrency from the stage and her presence brought the room to its feet.
In addition to the generous support given to philanthropic organizations, a Hackathon took place allowing programmers to work in teams to design innovative uses of the Bitcoin Blockchain. My friend Mike Baysek was on a team that won third place and received $250,000 to help finance the development of their project. Their creation? A decentralized peer to peer transportation platform utilizing GPS technology and the Bitcoin Blockchain. Overall $1.25 million was given to a total of five teams.
When you unite the revolutionary technology that is Bitcoin with the selfless generosity of the Cryptocurrency Movement, you have everything you need to ignite a cultural Renaissance for modern civilization. For those who think Bitcoin is rooted in greed, they need to look no further than the vast multitude of nonprofits and charitable organizations currently occupying this space. I am grateful to have experienced the Texas Bitcoin Conference, which showed me the Bitcoin community is as compassionate as it is innovative.
Here are some details about a few of my favorite organizations that are already changing the world with Bitcoin:
Bitcoin Not Bombs Website:www.bitcoinnotbombs.com Twitter: @BitcoinNotBombs Mission: We are a launching pad for NGOs and social entrepreneurs who wish to enter into the financial freedom of the Bitcoin economy. Notable Actions: Hoodies for the Homeless, gave away 150 hoodies to homeless people in addition to hundreds of toothbrushes and meals!
Sean’s Outpost
Website:www.seansoutpost.com Twitter: @SeansOutpost Mission: Pensacola Homeless Outreach, fueled by Bitcoin Notable Actions: Served 30,000 meals to the homeless in 2013. Launched Satoshi Forest, a nine acre homeless sanctuary. Running across America to raise awareness.
Fr33 Aid Website:www.fr33aid.com Twitter: @fr33aid Mission: Fr33 Aid was created to help individuals organize projects that educate people about the value of mutual aid. Our main activity involves providing voluntary first aid and educational services at liberty-related events. Notable Actions: Disaster relief project in the Philippines raised over $20,000 in BTC. Hundreds of demos on how to use a cardiac defibrillator and perform CPR if someone has a cardiac arrest.
Capitol Area Food Bank of Texas Website:www.austinfoodbank.org Twitter: @cafbtx Mission: The mission of the Capital Area Food Bank is to nourish hungry people and lead the community in ending hunger. Notable Actions: Food and grocery products to more than 300 Partner Agencies in 21 Central Texas counties. In Fiscal Year 2011-12, CAFB provided more than 22 million pounds of food. The CAFB service area covers 19,064 square miles in Central Texas.
Center for Natural Living Website: www.centerfornaturalliving.org Twitter: @thec4nl Mission: demonstrate the value of voluntary cooperation and natural living in the areas of sustainability, family, and health by creating educational media and helping families to fulfill their basic needs. Notable Actions: Community Garden in Austin, TX, Fluoride Filter Give away to families in need, Producing a TV-ready documentary style reality show called Sovereign Living (www.sovereignliving.tv). For full disclosure, my husband John Bush of the SovereignBTC.com podcast is the executive director of this nonprofit!
A colleague commented to me recently: if you’re ever explaining Bitcoin to someone and they’re getting it, start talking about Ripple, just to confuse them again.
Of course, this was in jest. But, there can be some confusion about Ripple and how it operates. Ripple, just like Bitcoin, is an open-source consensus network and ledger. It achieves consensus every few seconds, making it much faster than Bitcoin. The network creates lines of trust to trade assets between people who are comfortable with each other’s default risk.
XRP is the native currency of the network and the only native asset. It exists for a variety of network functions, not least of which is to combat spam.
‘Gateways’ are real world organisations that allow people to get real world assets, like cash, into and out of the Ripple network. Arguably the best feature is that you can trade absolutely any asset that you like through the network.
The system is interesting and it works. However, as of now, there are very few companies using it.
One of the first companies to operate a gateway is Ripple Singapore. They are the first Ripple gateway in Asia, with Bitstamp being the most well known gateway in Europe.
Ripple Singapore offers trading in precious metals through the Ripple network. The bullion is housed in Singapore. This is the first asset they’re focused on applying to the network. Bullion can be traded into and out of other assets quickly and easily.
Now that the service has been operational for a little while we were pleased to ask the company’s James Cox a few questions about the service.
Why did you decide to use Ripple over other available network technologies?
Ripple seems like the most versatile of all Fintech solutions. Ripple is a math based value exchange, in which any user can exchange any item of value, with anyone, anywhere, anytime, basically for free in 5 seconds.
Right now I believe that makes Ripple unique. I honestly think having a Ripple address will be as normal as having an email address in 5 years time.
You launched the platform a few weeks ago. How has it been performing? Has there been much interest?
We launched in January 2014. We have over 200 trust lines and our customers have bought gold, silver and platinum. They all seem to be trading on Ripple at a premium to the Comex. This is understandable because anyone who buys physical gold and silver knows that you will have to pay a premium. However, the physical price varies a great deal country to country. Ripple is a great way for Chinese and Indian people to buy gold at Singapore prices.
Why are you operating this service out of Singapore?
Ripple is all about Trust. We started off with some basic questions: Historically, what are the most trusted sources of value? What is the safest jurisdiction in the world? We believe it is Singapore.
Its government is transparent and pro business. Singapore is also the financial hub of dynamic South East Asia, and there is huge demand for physical gold and silver in Asia.
What advantages does your service offer clients over other bullion dealers?
Our advantages are that people can hold Investment Grade Bullion in their online wallet and pay their bills in whichever currency a merchant requires – either digital or fiat. Our other advantages include:
0% Vault Fee.
0% Sales Tax.
0% Capital Gains Tax in Singapore.
0.2% Transaction Fee.
100% Backed Investment Grade Bullion.
Private vaulting in one of the world’s safest jurisdictions.
What are your plans for the future, in relation to working with both Ripple and other similar technologies?
Our goal is simply to expand our user base at the moment. This is a great service – the benefits of the long term store of value and the latest in exchange and payment systems makes this super convenient.
Ripple Labs are also working on a great deal of smart contract services. We look forward to providing these options to our users.
image credit: modified from Lightspring @ shutterstock
“Most tellingly, though, member nations of the International Monetary Fund are starting to revolt… As one of the major organizations spawned from the post-war financial structure, the IMF’s original goal was to ensure the smooth development of a new global financial system. …
India. China. Just about everyone imaginable is pushing for major IMF reform… These people [USA] have their heads buried in the sand so deep that they can’t even hear the rest of the world SCREAMING for a new financial system…
This grossly misses the point. The rebalancing of IMF voting process and the change that it entails is a very small part of what is wrong with the world. Fractional reserve banking, the debasement of FIAT currencies by the “member nations of the International Monetary fund”, currency controls, haircuts, retroactive laws, and 50% or more taxation is the problem.
The governments of the word have had their chance at managing money and balancing budgets. My children would’ve done better. The world exceeds 100 Trillion in debt (http://www.bloomberg.com/news/2014-03-10/debt-exceeds-100-trillion-as-governments-binge.html) for governments to wage war, while children still go to bed hungry, and not everyone knows how to read or has access to clean drinking water.
Changing the voting structure of the IMF is very much like “rearranging the deck chairs on the Titanic”. A new financial system is coming. It is one that will be peer to peer and it will disrupt banking. It is one in which banking still exists, but for the original reason for its invention, security. To ignore the advent of Bitcoin and Crypto currencies in general, as this article does, glaring evidence of the fear of not only the establishment, but the counter establishment as well.
We aren’t interested in what you’re selling. We will build a new world alongside the old and we will withdraw from the financial ruins you have brought upon yourself and upon us. The new financial world will be based on transparency. Transparency of finance, transparency of government, transparency of law. It will be a society of fairness because society will be watching and evil will no longer be able to hide in the shadows.
It will be a better world. You are welcome there, but you are not in charge. No one is. That’s the point.
Come, join us, we have milk, cookies and love. They’re delicious.
Bitcoin is commonly regarded as a truly democratic form of money. Interestingly enough, however, there seem to be various explanations supporting this characterization. Furthermore, at least one of these interpretations have caused some to doubt whether Bitcoin does in fact still represent the democratization of money, or whether it has perhaps become susceptible to less democratic forces throughout the years since its inception. In order to understand why this doubt is understandable yet unjust, it is helpful to recognize which two types of democracy, as distinguished by political theorists such as Cambridge professor John Dunn[1], are often attributed to Bitcoin, and why the most important of the two is still very much intact today.
The first main form of democracy, as set apart by Dunn, is essentially a form of government. Hence, at its core, this type of democracy is ultimately a technical procedure, rather than a political value. This procedure basically encompasses the formation of government through the ritual of elections.
In regard to Bitcoin, this democratic feature is commonly attributed to Satoshi’s proposal for a proof-of-work system, which would function on basis of a “one-CPU-one-vote” mechanism. But as we all know, this democratic feature did not really hold up. Due to the introduction of ASIC-miners and mining-pools, hardly anyone who uses Bitcoin today actually has any vote in this specific procedure at all, while those who do have a major one.
But even though this process of specialization has probably weakened the decentralized nature of the Bitcoin-infrastructure to some degree, the “one-CPU-one-vote” mechanism should hardly be regarded as a fundamental ideal bolstering Bitcoin in the first place. Instead, it primarily reflects one specific function within the protocol: the proof-of-work system. And although that specific function is obviously a fundamental technological innovation, as it helpes to solve the problem of double-spending, it seems to have little to do with ideology.
Moreover, this characterization of “democracy” as “majority vote” is a quite limited interpretation of democracy in the first place. Rather, the ideology of democracy, as developed throughout centuries of work by political philosophers and culminating in both the American and French revolutions of the eighteenth century, consists of various Enlightenment ideals. And this latter version should probably be regarded as the more important of the two types of democracy as distinguished by political theorists such as Dunn. Fortunately, this value is still very present in Bitcoin today.
One of these inherent Enlightenment ideals imbued in both democracy and Bitcoin, is the notion of equality. Fundamentally, this ideal inhabits that all men should enjoy equal rights under the law, and includes issues such as freedom of speech and property rights. This, of course, is very present within the Bitcoin-protocol. As opposed to bank-money, which can be censored at will (as the Wikileaks Banking Blockade has shown the world) it is absolutely not possible to censor payments with Bitcoin, since these payments do not require a middleman, and literally consist of cryptographically protected information – a pure and therefore very equal form of free speech if you will. For similar reasons, arbitrary confiscations of wealth – as seen in Cyprus – are simply out of the question as long as bitcoins are stored securely.
Moreover, the organizational structure behind Bitcoin guarantees an incredibly high level of equality in itself. Fundamentally, no one person has more influence over the protocol than anybody else, nor can anyone bend its rules to his or her own advantage. Not even the inventor, Satoshi Nakamoto, or huge stakeholders, such as the Winklevoss twins, are able to change the Bitcoin-code without reaching a consensus among users. Hence, in stark contrast to the immense power financial lobby-groups have exercised over the monetary policy of many nations, or the apparent Too Big To Fail status of modern-day superbanks, each and every Bitcoin-user is truly equal to the network.
A second inherently important principle underpinning modern Western democracy is the ideal of popular sovereignty. The basic tenet of this principle, which dates back to Thomas Hobbes’ social contract, is the legitimization of the rule of law by the consent of the governed.
And regardless of the legitimacy or desirability of this contract regarding present-day nation-states, central banks run their operations with questionable consent at best. Not only are they purposely removed from the democratic political process (in some cases – like the EU – even quite literally), but merely a tiny fraction of the populace understand what these institutions do in the first place.
Moreover, it stands beyond the slightest glimmer of a doubt that private banks do not manage the money-supply by our consent, at all. And yes, they do manage a tremendous amount of our money supply – much more than most people realize. As opposed to the popular misconception, banks don’t actually lend out central bank issued money; not even indirectly, as the money multiplier model suggests. Instead, they actually create money as credit themselves.[2] Yet, private banks are not accountable to the public at all, as the absolute lack of prosecuted bankers in the wake of the financial crisis has clearly shown. To put it bluntly: our current monetary system makes an absolute mockery out of popular sovereignty.
Bitcoin, on the far opposite side of the spectrum, quite literally exists because of the consent of its users; if they did not consent on the rules of the protocol they would not use it in the first place. And this use, in turn, is what makes this currency itself valuable. After all, Bitcoin would be nothing but source code without its users. Indeed, Bitcoin does not even rule by our consent, it effectively exists by our consent.
By extension, unsatisfied Bitcoin-users can simply elect to withdraw their consent, and perhaps bootstrap a new currency. And this has in fact happened a couple of times already, of course. Unsatisfied with Bitcoin’s mining-algorithm, some have left to (at least partially) support Litecoin. Unsatisfied with Bitcoin’s “waste” of energy, some have left to (at least partially) support Peercoin. And unsatisfied with Bitcoin’s community, some have left to (at least partially) support Dogecoin. Many more might withdraw their consent from Bitcoin in the future, only to transfer it to an altcoin they feel does represent them. They can vote with their feet.
Lastly, the third and arguably most important political value underpinning modern Western democracy is the principle of self-governance. And it’s not much of a stretch to argue that the organizational structure of open source programming is, by far, the best way for common people to organize themselves ever invented. Not only is anybody free to contribute to the rules – the code – of the system, this power does not even need to be transferred to anyone else in order to make it work. With Bitcoin, we now for the first time don’t need to delegate a small group of people to govern the rest, but we can instead transfer this power to universally verifiable open source code, written by and for the people. This is a truly revolutionary form of self-government.
Of course, some of the smartest economists alive today have argued that this is actually not a good thing. According to them, money should not be governed by the people at all. They believe that money should be carefully managed by experts in order stabilize the value, for instance, or to guarantee economic prosperity. According to these economists, if the people are supposed to have any say in this regard, it should be a very indirect influence at most.
But guess what. That’s precisely what some of the smartest political thinkers of previous eras – including the likes of Plato, Montesquieu and Hobbes – argued about democracy itself. All of them expected society to end up in a terrible mess if governmental power wasn’t at least partially claimed by some type of autocratic leadership. Indeed, up until the 1800’s, the term “democracy” was actually a fringe word, only perpetuated by the “insouciant and incorrigible dissidents,” as John Dunn put it: “Those who chose to do so placed themselves far beyond the borders of political life, at the outer fringes of the intellectual lives of virtually all of their contemporaries.”
Sounds remarkably familiar, doesn’t it?
Sources:
[1] John Dunn, Setting the People Free: The Story of Democracy (London 2005). (Final quotes on pp. 71.)
[2] Paul Sheard, ‘Repeat after me: banks do not and cannot “lend out” reserves’ (New York 2013). (PDF)
BOOST is a series of Bitcoin parties taking place across Asia. The first event was held in Hong Kong earlier this month. It was so well received that the BOOST crew decided to take the idea regional: Bitcoin parties – Asia wide.
The idea is to provide a fun and informal atmosphere to promote and educate. The focus is on the benefits of Bitcoin and related technologies for consumers and merchants.
Newcomers are helped to set-up wallets, get some bitcoin and spend them immediately (at max. within 10 minutes) at the party. After all, doing is better than explaining.
The event is sponsored by Anson Zeall’s CoinPip: Asia’s regional payment processor. Local enthusiasts, Jehan Chu and Leonhard A Weese also contributed greatly to the Hong Kong event.
Anson Zeall is a leading Bitcoin entrepreneur in the region. He is quick to point out that he is also a lean startup practitioner. Which means that he is very hands-on. He goes and talks to his customers face-to-face, to find out what their problems are.
This approach has led him to the conclusion that there is a chicken and egg problem. As he notes: “Customers don’t want to adopt bitcoin because they don’t see enough merchants. Merchants don’t want to adopt because they don’t see enough customers.”
The other main problem he has identified is that newcomers, who aren’t in tech., find it very hard to buy bitcoins.
For him and his startup CoinPip “it was a very natural step to host a party, for merchants to see how eager the customers are to spend bitcoins, and for the customers to have fun!”
Anson was expecting a mix of both positive and negative feedback. But he notes that the response from their first event was “way more positive…than negative.”
Anson goes on to say that “Bitcoiners really want to find ways to spend their bitcoins. BOOST offers an environment, for newcomers and people that already have bitcoins, to have fun all in one place.”
CoinPip, based in Singapore, is part of a very vibrant startup scene. But there is more Bitcoin specific activity in Hong Kong. Anson is from Hong Kong and based in Singapore. So his startup is active in both markets simultaneously.
Kuala Lumpur’s population is 1/4 of Hong Kong and BOOST has already received as many RSVPs as the Hong Kong event. So from a population perspective, Kuala Lumpur’s Bitcoin scene is very vibrant.
BOOST’s mission is to introduce potential new users to the technology. Experienced bitcoiners are obviously needed at the party, to guide the newcomers. “Learn by doing” is BOOST’s motto.
Anson notes that “for CoinPip to do well, we need more people spending bitcoins, and more merchants to come onboard anyway. So BOOST and CoinPip go hand in hand.”
BOOST is already in preparing for its next Hong Kong party. Singapore, Jakarta (Indonesia), and a few more are also on the way. BOOST is an integral component of CoinPip. And for Anson, “the most important component of a startup is to have fun.”
The modern workplace is all about productivity. What can we get done now, and how can we plan for the success of future business endeavors? Luckily, thanks to many innovative SaaS (software-as-a-service) platforms like Slack, Dropbox, Evernote, and most recently Glip, key members of all businesses have began taking efficiency and collaboration to the next level. Additionally, in what is another first in the Bitcoin community, Glip is planning to accept Bitcoin as payment for their SaaS platform, which is focused on team productivity.
Glip is a conversation platform built for teams and businesses that contains built-in productivity tools to keep everyone apprised and connected. The SaaS platform also integrates document sharing, task management, shared calendars and universal search capabilities within the conversation, which works to further increase the user’s productivity. Glip also interfaces with email, calendar and document applications to help teams and organizations stay informed on multiple touch points. According to Founder and CEO Peter Prezaris, “Glip is designed to support content-rich, fast-paced and collaborative teams; and is ideal for creative teams, marketing, software development and remote teams.”
Collaboration, productivity and communication across all business levels are especially important within Bitcoin companies. For businesses, SaaS platforms like Glip and other productivity-based applications could do wonders for software developers, salespeople, executives and other key roles, by establishing a consistent level of communication that could ensure the completion of time-sensitive tasks.
By adopting team productivity software, many developers within the Bitcoin community may become increasingly efficient, which could drive continued success of Bitcoin and virtual currencies. However, a single piece of software will not completely solve the productivity puzzle. For applications like Glip to be successful, it will require tenacity of users within the business, a level of structure and guidance, as well as an already existing communication structure. That being said, Glip seems to be a very simple and manageable productivity tool for teams looking to increase collaboration, communication and productivity throughout their business.
Bitcoin and SaaS
SaaS makes sense for organizations and businesses in the Bitcoin community, as many are in the “start-up” stage, or evolving into the SMB space. Because the Bitcoin ecosystem is growing, Bitcoin businesses and organizations are growing as well – at an incredible rate. Due to consumer and merchant demand, many businesses in the community have achieved exponential growth in the past year. This makes the usability of Glip and other SaaS platforms increasingly worthwhile.
“Bitcoin helps bridge the currency gap for international customers which can help them handle payment quickly and get back to work,” said Mr. Pezaris of Glip.
Apart from consumer adoption, the wide acceptance of Bitcoin as a currency will depend on how apt businesses of all sizes are to using virtual currency. SaaS platforms may be the springboard needed to bring Bitcoin into the eyes of business owners, from start-up to Fortune 100. This means that SaaS providers must keep innovating and developing solutions for users, and much like businesses within the Bitcoin community, must continue to look to the future. Companies like Glip just want to be sure your business can do so productively.
CEX.IO and company CIO Jeffrey Smith believe that mining equipment should be sold at a fair market price. Currently in beta stages, CEX.IO is one of the first commodity exchanges, allowing users to trade mining facilities and fully maintained GHashes (Gigahash). The company has a unique approach to trading, and through this approach provides a way to trade on the increase or decrease in GHashes, while those mining facilities mine bitcoins for the user.
The company’s commodity-based model enables Bitcoin users to receive profit from trading GHashes, while also generating revenue from the mining power while they trade. According to CEX.IO, there is no waiting when trading GHS (gigahashes per second), because all mining equipment is purchased from trusted partners like the GHash.IO mining pool, which enables users to trade and mine simultaneously. The GHS are liquid, which means they can be sold for Bitcoin, Litecoin and Namecoin at any time and market price.
A recent interview was conducted with CEX.IO’s Jeffrey Smith by Polish news portal bitcoin.pl, and further discusses the company’s future plans regarding mining and GHS trading, in addition to the future of commodity trading in the Bitcoin community. Following are portions of the interview with Jeffrey Smith.
Bitcoin.pl: When did you learn about Bitcoin, and how did CEX.IO get started?
Jeffrey Smith: The founders of CEX.IO actively participated in the development of the first FPGA mining chips and made substantial progress in this field. However, due to technological progress, they moved to ASICs and started developing the exchange platform in early January 2013.
BPL: Where are you located and what countries do you accept customers from?
JS: Our official representation is located in London, UK and our users are all over the world. USA hits the top of the list, but Poland is a close second in terms of user signups and overall exchange activity. We want to make sure CEX.IO can be used in all countries around the world.
BPL: How is CEX.IO innovative and what distinguishes you from other Bitcoin exchanges?
JS: Our core advantage lies in the unique scheme of joint GHS Trading and Cloud Mining. The purchased mining power can mine new Bitcoin (and some other altcoins, thanks to merged mining), while users trade on the CEX.IO exchange, gaining profit on the price difference. CEX.IO is the first commodity exchange of this type in the Bitcoin community.
BPL: How do you view the current legal status of Bitcoin?
JS: There is little space for manoeuvring in the virtual currency world, but we need strong Bitcoin supporters. We need to unite our efforts to expand Bitcoin and virtual currencies.
BPL: What are the biggest problems with Bitcoin from your experiences?
JS: At this stage Bitcoin isn’t perfect. In terms of usability and user interaction, it is still rough around the edges. Not all users have the proper knowledge of the Bitcoin protocol and how it works. Another big issue is that lots of users underestimate proper account security, making unauthorized access possible. We need to fight all that.
BPL: How do you view the role of the Bitcoin Foundation for organizing activities and initiatives around Bitcoin?
JS: We (CEX.IO) think they are doing a great job. It is hard to create a centralized organization in a decentralized community. We are also considering participating in the Bitcoin Foundation sometime soon.
BPL: How do you view the position of the traditional banking system toward Bitcoin?
JS: The financial system evolved, so banks should evolve as well. Traditional banks need to look into the future and start studying, testing and experimenting with cryptocurrencies. There are lots of services which banks can offer in the Bitcoin community. All they need to do is gain confidence in this aspect.
BPL: What are your plans for the future and where do you see the development of the Bitcoin ecosystem heading?
JS: We need to stay up to date with the crypto-world and provide services that people require. Right now, BTC mining and GHS trading are in demand. Soon scrypt mining will kick in and we might add some additional scrypt related features to CEX.IO. We also need to build the bridge between CEX.IO and fiat currencies. Additionally, we have several side projects that will be prominent in the Bitcoin economy as well.
Every day new infrastructure is being built and new services are being introduced. Let’s keep our faith in crypto.
Throughout the interview with bitcoin.pl, Mr. Smith also discusses Bitcoin’s position in the global system, regulation and the state of the economy, along with the role of Bitcoin as an investment and the importance of education in terms of broader adoption of virtual currencies.
In less than a month, Mediabistro will return to New York to host the second New York City Inside Bitcoins Conference at the Javits Convention Center. Whereas last July, the Inside Bitcoins Conference drew in several hundred attendees, the April 7-8 conference is expected to draw over 4,000 attendees. In addition to the slate of over 50 speakers, the conference will also feature a Bitcoin Trading Café for a Satoshi Square like experience for attendees. Keynotes for this year’s conference include Jeremy Allaire of Circle and Nicolas Cary of Blockchain.info.
The conference is set to take place on the tails of the New York State Department’s announcement of its consideration of permitting regulated Bitcoin and virtual exchanges in New York. NYSDFS superintendent Benjamin Lawsky has taken a further interest in Bitcoin and digital currencies, especially following the NY hearings this past January. Following last year’s Inside Bitcoins Conference in July 2013, the NYC Bitcoin Center also launched to transition the tri-state area into a Bitcoin hub. Who knows what will transpire in 2014 as Bitcoin continues to grow in prominence.
Mediabistro issued the following press release:
Mediabistro’s Inside Bitcoins Heads to NYC in Less Than a Month – Get 15% OFF
After thousands gathered at Inside Bitcoins in Berlin, Germany on February 12-13, this innovative Bitcoin event is returning to New York City on April 7-8 at the Javits Convention Center.
“Inside Bitcoins has become the largest trade show for virtual currency worldwide and the New York City event in April should be the single largest Bitcoin conference that has taken place anywhere” stated Alan M. Meckler, Chairman and CEO of Mediabistro. “The New York City Inside Bitcoins conference will have over 50 speakers and will include Jeremy Allaire and Nicolas Cary as keynoters. In addition we expect over 40 organizations to exhibit and over 4,000 attendees.”
With “Satoshi Square” events popping up worldwide, Inside Bitcoins is excited to announce the addition of a special space, Bitcoins Trading Café, in the middle of the trade show floor where attendees can meet in a comfortable café setting to buy and sell Bitcoins. In addition to trading, this space will allow Bitcoin enthusiasts to network, relax, and discuss the cryptocurrency.
We’re excited to have partnered with Inside Bitcoins NYC to offer 15% OFF full conference passes with code MAG15. Plus, if you register before March 19, you’ll save an additional $400 with early bird prices – Register now!
Mediabistro will soon announce firm dates for additional events taking place in 2014 in Hong Kong, China; London, England; and Las Vegas, Nevada.
The fascinating emergence of Bitcoin has been powered largely by a “for us by us” dynamic, the growth of specialists intimately involved with cryptography, embraced by highly technical people of a wider variety. Eventually this bubbled up to the venture capitalist world, with a concerted attempt to “bring Bitcoin to the masses,” including PR campaigns like that recently waged by Marc Andreessen in the New York Times.
Although the “for us by us” approach has been successful in many instances, it also presents very large barriers to mainstream adoption. One of these that surfaces the most frequently is the political issue, exemplified by the strong libertarian leanings of many involved in the Bitcoin community. Although venture capitalist backers of Bitcoin (i.e. Marc Andressen, Chris Dixon, Fred Wilson) have sworn that they have mainstream political opinions (i.e. that they voted for Obama), there remains a strong core of dissenters who believe that government involvement destroys the principle of Bitcoin (i.e. Roger Ver, Erik Voorhees).
The Politics of Cryptocurrency
With the Mt. Gox collapse, it seems like the “move to the center” VC contingent is winning. Whether or not this is a good thing for Bitcoin is not clear. Much of the early adoption of currency is based on a certain degree of political radicalism. AuroraCoin has recently exploded largely on this basis. It’s a direct threat to an existing political order. What makes it dangerous is also what makes it exciting. Although I am doubtful that this is the best model for the long term, I did acquire a handful of AuroraCoins to be part of this important historical moment.
Navigating these political issues is one of the most important aspects to cryptocurrency growth, but so far there have only been two options. Like many things, it seems to be either “let’s get rid of the government” or “move to the center.” The first puts people in a perpetual state of clashing and conflict with state authorities (i.e. via Silk Road). The second is “pure business,” which is to say, it compromises the exciting disruptive power of cryptocurrency.
I have a more radical proposal. What if we evolve the nature of governance itself? For thousands of years governance was primarily ethnicity based. With the birth of the American republic, it moved back to a doctrine of “free assent.” Practically, however, it remained primarily location based. This means that all government has effectively been “opt out” instead of “opt in,” and many times you can’t even “opt out.”
I believe in the fundamental principle of human freedom, but I also believe that “with much freedom comes much responsibility.” The growth of high growth, high volume networks for transferring money means that we need to evolve frameworks that provide greater accountability and trust than the current financial system. Although decentralized networks are an amazing start, we also need to re-align incentive structures so that people are not encouraged to “cheat the system.”
Some of the fundamental innovations which are part of Cryptocurrency 2.0, especially Ethereum and Mastercoin, allow us to build the structures that we need to move out of a phase of dependence on existing infrastructure for accountability, to new structures which complement human freedom and work on the basis of free assent. Simply “moving to the center” by tweeting that one voted for Obama or “welcoming regulation” as has Charlie Schrem, are, I believe, fundamentally short-sighted.
The Big Picture
One additional set of very important concerns regards macroeconomic policy. Price volatility in a distributed asset on the free market is a major concern, particularly when there is both no underlying asset and no coherent long-term demand. Creating long-term demand via the adoption of a particular nation-state is extremely risky, as boom bust cycles will inevitably hurt the most vulnerable. In the event of a downturn, engaged traders who constantly watch the markets in this globalized “open society” will be the first to dump the assets. Like so many other recent financial cases, mom and pop will be left footing the bill, while the new George Soroses of Bitcoin fund campaigns for even greater “openness.”
Although Bitcoin is touted as a “store of value,” comparable to gold, it’s not at all clear that Satoshi thought the same way. I personally think of it more as a pioneering experiment on what can be done on a purely anarchistic model, potentially with the awareness that transition to a true “currency” that serves as both a unit of account and means of exchange will require a good deal of tweaking and evolution. Thankfully, within Bitcoin we have minds like Vitalik Buterin, who is currently bending his rather considerable mental faculties to one of the more difficult current problems of cryptocurrency, the creation of incentive-aligned non-volatile cryptographic asset.
Without this “regulative principle” in place within the network, you have the possibility and perhaps even likelihood of a “subprime 2.0” unfolding on an epic scale within the Bitcoin world, as people move their Bitcoins into the next alt coin of the month. My own expectation regarding Bitcoin volatility is that, perhaps ironically, it has been limited because of the lack of liquidity in the Bitcoin market. The easier it is to move from fiat to Bitcoin, the potential greater shock each new time we are goxed or find out that the Bitcoin Foundation board members are not as virtuous as we once suspected.
“There goes my hero,” goes the lyric, and, for better or worse, in this post-modern age, we have done away with heroism – hopefully we had a low expectations to start with. But, perhaps, something else is stirring on the Blockchain, a blending of ethereal wisps and slumbering embers into a movement that has the potential to stir the intellectual fires we need to solve the problems that previous generations have left us with.
There have been many political movements in the centuries that emphasized the will of the people and mass propaganda. Currently democracy worldwide seems to be increasingly tablotized and incapable of asserting its full strength. But I what I see in the Bitcoin world gives me great hope in the incredible power of humanity to address the problems in the world ahead of us.
One of the most promising aspects concerns the mass of intellect currently concentrating their mental efforts on these problems. Increasingly, the first generation of cryptocurrency enthusiasts has either become aware or been complemented by folks intimately aware of the larger macroeconomic issues that are necessary to address to have a currency that works at a larger global scale.
These problems include faster transaction clearing times, increased in-network trust, exchange rate stability, secure programmable contracts, distributed consensus systems, and rewards proportionate to value provided to the network (in which hashing power provided is not the only definition of “value”).
Platform
One of the most important shifts accompanying cryptocurrency 2.0 is the movement from tokens to platforms. A token is something you can trade. DogeCoin is a tradable doggy. Much excitement. Such wow. To the moon.
The problem with trying to get to the moon (or, my own goal, Alpha Centauri) you need a pretty big engine, and you need to be able to build it in stages. You need a rocket that gets you to the atmosphere and another that puts you into outer space. Cryptocurrency 1.0 provides the first stage of the rocket; Cryptocurrency 2.0, by iterating on itself, has the potential to provide the 2 … n stage.
That’s because it provides a platform. A platform gives you the power to create whatever application fits the need that you have. It’s a toolkit that enables people to build what they need to solve the problems that we face every day. Even at this moment, I am closely engaged with people building the next generation of reputational currencies, distributed systems of trust that were not possible prior to Ethereum.
What changes can we expect to see as cryptocurrency shifts in this direction? The first is a shift from hostility towards existing political structures to a movement to create new consensus systems that make many types of contractual arrangements no longer necessary. It’s a move from antagonism toward governments, to a metalayer that increases trust within a network.
Part of this will be necessary. Although governments, especially irresponsible governments, will not necessarily be able to totally shut down alternative currencies they perceive as threats, they will be able to make life very difficult for people using currencies that are designed to serve as replacements for nation-state money. Along these lines, I suspect AuroraCoin and MazaCoin will be interesting experiments that will illustrate the pros- and cons- of this particular model.
That said, there is another exciting future possibility for cryptocurrency. One of the major shifts in the last half century has been the near extinction of the middle class. Why have artists and artisans and workers faced wage stagnation and loss of power globally? Part of it has been a natural consequence of globalization. In an open society, “the world is flat,” and there is perfect competition on low cost jobs. Even where there is a minimum wage for citizens, you can bring non-citizens across the border and pay them under the minimum wage. Kickbacks are promised for votes by the financing class, which finds that legislation that would bring life back to main street is never passed.
Who wins in this scenario? It’s certainly not the people. Instead, it’s always the infrastrustructure providers who take the tolls on the highway that you ride. In a monopolistic situation, something that has been artfully designed by the global banking elite, you also get to decide just how high the tolls will be. Unsurprisingly, they have decided that it should be quite high.
For instance, it’s almost unimaginable today that a single wage earner would purchase a house and provide for a family only a few years out of university. Property costs have risen far in excess of purchasing power, creating a cycle of debt and choking productive growth.
What’s Next?
The next phase of cryptocurrency evolution needs to be “for the people, by the people.” This is, among other things, because nerds are already doing just fine in the present system. They build the infrastructure that you use and make the money that could be yours. In the Bitcoin context, they even make money trading the latest currency of the month. But, more often than not, they do not create valuable content.
Take Youtube as an example. Nerds built the infrastructure. You provide the content. Is it free to create the content? No. YouTube will make money advertising. You will make nothing, unless you make something that gets millions of views, and even then you will get a fraction of what Youtube does.
Is that fair? Is that the world we want to live in? Everything is free, except massive amount of advertising that is presented to you by the end user. That’s fundamentally wrong, it’s counter to the idea of flow, and the idea that the people who contribute to the success of a platform should share in the success later on.
One powerful new idiom that is emerging via cryptocurrency is micropayments. The costs of transacting in a digital currency are already extremely low compared to existing payment solutions. Through third party APIs (including that which we provide at Evergreen) they can be literally nothing. This allows the easy monetization of any digital content, a conceptual shift we are already seeing with the tipping culture of Bitcoin and DogeCoin. It’s recognizing that economic streams need to be just that, streams that flow from high places to low places, filling in the places where there is need and providing the irrigation that leads to long term growth.
Perhaps there is something we can learn from ditching the quarterly earnings reports of contemporary post-modern economics and cycling back to the seasonal approach of agricultural society. Water rains, things grow.
Here there is time, but it is not the moment that is privileged, nor the expectation of an immediate return. What is privilege is the concept of flow, a harmony that is attained by a deep appreciation of nature.
Did I say we need governance? We do, but it must be governance that facilitates human freedom rather than constrains it, that facilitates flow rather than erects blockades and toll collection booths, that inspires us to create new realities instead of forcing us to live in fear.
That’s still “for us, by us,” but it’s no longer a small group of technical people trying to create an alternate reality, it’s a new global paradigm re-inventing and bringing flow to money. That’s a revolution and it’s happening right now on the Blockchain.
On the 28th of February, just two weeks ago, Mt. Gox officially filed for bankruptcy. Mt. Gox had not been processing withdrawals properly for some time. As a result there were persistent rumours of financial trouble long before this filing.
The reported ‘loss’ of 850,000 Bitcoins (yes, Bitcoins, not dollars) is now well reported. This has quite obviously left a lot of stakeholders out of pocket. It has also resulted in a US based class action law-suit.
The allegations are of fraud and negligence, with a court order for a temporary freeze on the assets of MtGox, Mark Karpeles, and the parent company Tibanne KK.
Class action law-suits take time to process. It’s the nature of the judicial beast. If Mark Karpeles and his company have denominated assets in Bitcoin then it could be even more difficult to secure anything from them. This is virgin legal territory for the judiciary also, as Bitcoin is such a new and unique asset class.
These are the early days in the unfolding of this saga. In the meantime, victims are left out of pocket and, depending on their exposure to Mt. Gox, in a potentially dire financial position.
One person who was ‘Goxed’ (losing 200 Bitcoins) has refused to simply roll over and die. In a creative comeback, he opened http://mtgoxvictim.com to appeal to the good will of the Bitcoin community.
Though he began by asking for donations, the site has now been ‘re-branded’ in the hope of offering substantive value, not only to Mt. Gox victims, but to present and future Bitcoin users as well.
Some of that value is emotional support for victims. By blogging his feelings in the aftermath of the fiasco, the author hopes that fellow victims might find relief in solidarity.
My Raspberry Pi and an SD card arrived Thursday… I’m setting up to implement offline wallets for cold storage (a-la a “ColdPi” implementation on my Raspberry Pi) of the few Bitcoin that I haven’t lost. – mtgoxvictim.com
More of that value may be in the ideas. Links and suggestions are being added to the site regularly, regarding digital asset protection, responsibility and security.
The site also has products available for purchase with Bitcoin.
Ultimately the online community will make up its own mind as to the utility of this effort. The concept of a ‘Goxing’ support group seems, on the face of it, to have merit. Some may, after reading his story, choose to write him off, while others may have more compassion for his plight. Regardless, the story stands on its own merits here.
In the appeal on his website we are assured that, while devastated, this particular victim is not down-and-out. His belief in the fundamental promise of Bitcoin and related technologies remains. For him Bitcoin will still “be an economic equalizer for the common man.” This incident in his life “has been a wake-up call” and has acted to firm his resolve.
His tone obviously carries a certain amount of aggression. This is to be expected from a man who has lost a large sum of money. However, interestingly, his anger is not directed, for the most part, at Mt. Gox or its CEO. Rather he blames “the crooks, the slime-bag hackers” whom he sees as robbing him and thousands of others “by stealing…bitcoin fraudulently and deceitfully from the MtGox exchange.”
He has a special message for Mt. Gox itself: “You presented yourself as a secure and reliable storehouse for my Bitcoin. Let’s see what you will do to begin restoring what you carelessly lost of your clients coins.”
And for the Bitcoin community the world over a direct appeal to: “offer some support to the less fortunate, the less astute, the less “plugged in” folk…who actually caught the vision for Bitcoin early on, but through whatever combination of circumstances, bad timing, ignorance, procrastination, lack of effective assistance, and whatever, have been caught up in the MtGox debacle?”
He asks the Bitcoin community directly to “consider allocating a miniscule percentage” of their Bitcoins holdings to those less fortunate victims of this incident. Otherwise, there is a Bitcoin Shop which may appeal.
He is quick to point out that he is more interested in providing value than asking for charity and “would definitely prefer…patronage in the Bitcoin Shop” over donations.
This direct appeal from a victim puts a human side to an otherwise sterile corporate bankruptcy. It does so in a very real and very visceral way.
An ASIC is an Application Specific Integrated Circuit. They are specially designed pieces of hardware for performing the hashing algorithms necessary to mine a specific coin and verify hashed transactions. These pieces of hardware are designed and manufactured to perform necessary hashing and nothing else.
With the increasing valuation of Bitcoin, in fiat terms, the economic viability of ASICs begun to make sense some time ago. The development of ASICs to do SHA256 became a reality. There were issues along the way with bringing them to market, but ASICs have arrived.
With the increasing valuation of any coin the same is true: ASICs become a viable option. It is difficult and some would say impossible to avoid ASIC development in the face of viable economic incentives.
ASICs are considered undesirable for a variety of reasons, not the least of which is that they concentrate mining power too heavily and diverge from the original ‘one cpu one vote’ intention of Satoshi.
The proof-of-work also solves the problem of determining representation in majority decision
making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone
able to allocate many IPs. Proof-of-work is essentially one-CPU-one-vote. The majority
decision is represented by the longest chain, which has the greatest proof-of-work effort invested
in it. – from Satoshi Nakamoto’s white paper on Bitcoin.
There are two main mining computations for crypto-currencies in use at the moment: Scrypt and SHA. Scrypt was most popularly implemented in Litecoin in 2011. It was an attempt to resist ASIC development as much as economically possible, through memory hardness.
Litecoin has been wildly successful, achieving a market cap of over 1 billion dollars last year, at its peak. It has an emerging chart pattern that mirrors the market price movement of Bitcoin. So, the economic incentives are now there to develop ASICs for Litecoin.
They have signed a partnership with German Company Dream Chip Technologies. Dream Chip Technologies is a German engineering company with a strong track record in System on Chip and embedded Software design.
The PLATINUM FPGA Litecoin SCRYPT miners will be embodied in two products , the 10 MH/s device and the 30 MH/s device. Shipments are planned to start in August of 2014. Pricing for their mining gear is available on their website.
The company is taking pre-orders. As always, in line with the principles of Caveat Emptor, consumers are encouraged to conduct all the necessary checks and due-diligence. Check the scam list on bitcointalk.org.
These promise to be high performance and very efficient Litecoin miners. The company will be taking only 35 percent as a deposit payment. There is no full payment for pre-orders needed. These Scrypt Litecoin miners will able to mine Litecoin, and all other Scrypt cryptocurrencies like Dogecoins, Feathercoins and many others.
Mining ASICs Technologies B.V. (MAT) is providing its mining and Cryptocurrency expertise while Dream Chip Technologies will handle hardware development, production, and quality assurance.
FPGAs and ASICs for Litecoin mining would represent a significant increase in computing power backing the Litecoin network. At present, most mining of different Scrypt coins takes place on regular graphics cards/GPUs, as did Bitcoin mining before ASICs become popular for mining.
Mining ASICs Technologies B.V. (MAT) has begun with an FPGA conceptualization of Litecoin’s primary Scrypt hashing algorithm, before designing dedicated ASIC hardware.
All specifications at the moment are pre-release and subject to change. Mining ASICs Technologies B.V. (MAT) has additionally announced the start of development ‘Titanium’: a new-generation of powerful ASIC Bitcoin miners using 28nm chips that will provide at least 6 TH/s of power.
Any images currently floating around of the miners are only representative of the device. The actual final product may look different.
Full information, details and contact information is available from the companies website.
Bitcoin made it to US TV this week as a comedy skit on late-night show ‘Conan’.
The skit is very funny. I urge you to watch it. The premise is that Bitcoin has a Chief Operating Officer and he is going to attempt to explain Bitcoin for the layman. As such, it pokes fun at the difficulty in understanding Bitcoin as a concept.
The byline reads: “Bitcoin may be too much for our puny minds to comprehend; luckily the training video explains all.”
Bitcoin can at times seem complicated to the uninitiated. It can be difficult to come across concise and elementary explanations. The ability to explain Bitcoin properly, in lay terms, is important.
Let’s take up that challenge. Bitcoin really needs to be more accessible, outside of technology and libertarian circles. If Bitcoin is to grow, then those less interested in its fundamentals need to understand it and its value proposition.
This represents an attempt to provide an explanation that makes Bitcoin accessible to your grandparents.
Try this analogy
When sending $100 to your friend you don’t mail them the cash. Instead, you tell your bank to send the money. The bank does not mail them the cash either. Rather, the bank has a ledger.
The bank sends a signal to your friend’s bank to increase his side of the ledger by $100. The bank also decreases your side of the ledger by $100. The transfer is complete.
The banking network is poor, so this ledger update can take a while. For overseas transfers it can take many days. It will also cost lots in fees and charges.
This is where Bitcoin comes in. Bitcoin is simply a ledger too. However, this ledger is not controlled by one person, corporation or group.
Instead, this ledger is controlled by a network of computers, all over the world. The Internet controls this ledger. A copy of the ledger is on computers all over the world. Anyone who wants to keep it can do so.
When you want to send money to your friend, you send a signal to this computer network to update the ledger. The network increases your friend’s side of the ledger and decreases your side, just like the bank.
The transfer is complete. With Bitcoin this process is instant. Yes, instant!
It is free to send Bitcoins. Anyone, all over the world, can use Bitcoin. You don’t need permission to use the system. You can come on and off at will.
But PayPal Does that
Now of course, PayPal can send money instantly too. So, why Bitcoin? Well, PayPal is centralised. So, you have to trust PayPal.
They can block your account, refund without permission and decide disputes how they wish. If you do trust PayPal, that’s fine. But many don’t. Also, remember, there are fees.
Most importantly however, Paypal blocks access to over 60 countries worldwide. So, it’s not an option for lots of people around the world.
With Bitcoin the money you are sending isn’t Dollars, Euros or Yen. You are sending ‘Bitcoins’.
Dollars are the money on the bank’s ledger and network. Bitcoins are the money on the Bitcoin ledger and network.
Bitcoins are money because you can use them to buy good and services. In fact, there is very little you can’t buy online with Bitcoin these days.
The ability to transfer value instantly, anywhere in the world, at no cost, regardless of the amount, is useful.
There are physical Bitcoins to represent the ledger entries, just as there are physical notes, to represent the ledger entries at your bank. But in both cases they just represent the ledger entries.
As there is no single entity in control of the Bitcoin ledger, only you control your money. No one can block access to it or stop you from using it on anything you want.
The Bitcoins come onto the ledger via a process called ‘mining’. It is the same as gold mining. Like mining gold out of the physical crust, you mine Bitcoins out of the Internet’s digital crust.
Bitcoins are very rare. There are only 12 million of them at the moment. Companies and individuals invest in very expensive mining equipment to dig the Bitcoins out of the Internet’s digital crust. As they get deeper into the Internet’s digital crust it gets harder to dig up Bitcoins. This is the same as gold. The process is exactly the same.
The bank gets the dollars for its ledger from a central bank that prints far too many of them. For this reason, Bitcoin is better money.
I hate change. Cumbersome and anachronistic, coins are the Zeppelins of the monetary world. And the worst part is they jingle in my pocket.
Unfortunately, high transaction costs make using a credit card for small purchases impossible. Acutely problematic in the world of e-commerce, this sad state of affairs has been the ghastly bane of economic existence for too long. It’s time for a paradigm shift. It’s time for bitcoin.
Online content
Bitcoin was created in and for the digital world. It makes sense, then, that a paradigm shift would start there. Did you like that article or blog post? Tip the author! Micro-payments—tiny transactions of a few cents or even a fraction thereof—can be transmitted easily with bitcoin.
Tipping has the potential to revolutionize social media. Imagine a “tip” button beside the “like” button on Facebook. Instantly, bitcoin gives you the ability to monetize your witty, insightful content. Or your cat pictures. Zynga is already exploring and implementing the possibilities.
Banner ads are quickly becoming a thing of the past. Unsightly and just plain annoying, they will be eclipsed by pay-per-view and membership models. Don’t think you’d pay for content and apps? Think again: At prices less than one cent per “item,” who wouldn’t gorge themselves in a gluttonous orgy of ad-free internet?
Art
Walking down the street on a balmy evening, you hear an enchanting melody being played on a saxophone. You’d love to drop a dollar in the street performer’s tip box. Looking through your wallet, however, all you can find are twenties, plastic, and a car salesman’s business card. Alas, you pass on by. But what if the performer had a small poster with a QR code? Would you stop and scan it with your smartphone, instantly sending a few cents or dollars securely to the musician’s bank account?
The same principle applies to museums and galleries. Do you always put a dollar bill into the donation box? Probably not, but even if you do, you’re not giving it (or at least any substantial part of it) to the individual artists. Imagine a world in which you could send a couple bucks to the artist of a particular painting you enjoyed. Bitcoin makes that possible.
Consumer Goods
Farmers’ markets attract people in droves, myself included. Isn’t it incredibly annoying, though, that you can’t pay with a credit card? Even those tech-savvy merchants with souped-up tablets are forfeiting too-large percentages of their earnings to credit-card companies. Bitcoin enables low-fee or feeless electronic payments even at outdoor vegetable bazaars. Forget the trip to the ATM; all you need is your phone.
Due to the small size of each individual purchase, credit card transactions are also impractical at vending machines. You need to have cash. Thankfully, bitcoin can save the day again. Electronic payment for impulsive munchers—brilliant!
There’s also an intriguing possibility for grocery stores (and all consumer goods stores, for that matter). Bitcoin’s low transaction costs and logistical ease (scan a QR code to send money anywhere in the world) allow consumers to communicate with producers without the need for middlemen of any sort. Perhaps a shrewd entrepreneur will develop a business model in which consumers pay to enter the store (there are many other possibilities) and then remit payment for each individual item directly to its producer.
Charity
Walk into a store in December and what do you see? Bell ringers, of course, courtesy of the Salvation Army. With nothing more than a QR code needed, the Salvation Army could unlock the potential for preposterous gains. No change? No problem. The novelty of the idea alone would be enough to make me donate to each jingler I encounter.
Then there’s what I call “Walgreens” giving. You know what I’m talking about: scan your credit card, and before the transaction goes through, you’re prompted to donate to some cancer concern, veterinary clinic, or non-profit du jour. Here’s the problem: the lowest amount I can donate is a dollar. No thanks. However, if I had the option to donate just a few cents, I might do so. Now, instead of getting nothing from a whole bunch of people, they’ll a get a little something from a few. And that adds up.
Finally, there’s international charity. Horror stories abound of institutional organizations bamboozling well-meaning contributors (remember Kony 2012?). It’s commonplace for only a small percentage of your donation to reach the children of Africa (or wherever it was originally destined). With bitcoin, monetary resources can be sent wholly and directly to the individuals who need it, regardless of location.
Bitcoin promises a non-violent coup d’etat of the existing economic reality. The frequency of small payments will increase; new options previously precluded are now possible. The pieces are in place for a revolutionary paradigm shift.
The US exports inflation through the US Dollar’s status as a reserve currency. Over time as countries adopt Bitcoin as legal tender alongside their FIAT currencies, whether voluntarily or not, the Eurodollar inflows will rise as the world shifts from USD to BTC as the reserve currency. As those inflows rise, the value of the dollar falls precipitously, creating runaway inflation, perhaps “hyper”.
The US at that point has no choice but to join the rest of the world in the BTC camp.
Under that calculation it actually behooves the US to lead that transition rather than follow. At least in leading it, the US would be able to influence the speed of adoption and the manner in which the Eurodollars are repatriated.
Bitcoin Momentum
As BTC increases in value, adoption and market cap it becomes a “critical infrastructure” component alongside the telecom links and switches along which interbank communications run now.
But this component has a very critical difference from current StratOps infrastructure. It doesn’t actually reside in the US borders. Certainly a part of it does, but the bulk of it, now and potentially in the future would not. There are only 300 million people in the US and 6.7 Billion, or more, in the rest of the world. While hash capacity won’t correlate to per capita distribution, it’s unlikely, IMHO, that more than 51% of the blockchains hash will reside in the US.
In addition, tying a FIAT currency to BTC creates other issues. As BTC value fluctuates external operations are affected. Cost of borrowing changes quickly, intra country settlement becomes time sensitive, whole industries might become unprofitable. (The Philippine Call Center/BPO industry is a good example). This then affects internal operations. Industries close, people are thrown out of work, kids go hungry, protests and riots can happen. This is serious. This can make governments fall, and in troubling times a “better” government is not certain.
But it’s not as if countries can actually stop BTC. When Bitcoin was first introduced and the difficulty was low you could mine on your CPU. Even if suppression of BTC was effective, which is highly unlikely, over time the difficulty would fall and GPU and CPU mining would become profitable. If that happened every computer and every video card could be used to mine Bitcoin. This would at some point establish equilibrium between suppression and difficulty resulting in a stable Bitcoin anyway. Granted a precipitous fall of difficulty like that is an unlikely scenario, but about as unlikely as any sovereignty’s ability to actually stop the use of BTC.
Example of an international cryptocurrency attack
In addition, the beginning of any new warfare in the 21st century not initiated by the US will almost certainly begin through cyber and economic means. The US eschews economic warfare (though not cyber) because it is the richest country in the world. Trade benefits the US disproportionately. On the other hand, other state actors and non-state actors are more likely to use asymmetric warfare tactics to disrupt communication and logistic streams prior to and perhaps in lieu of physical warfare.
So imagine the scenario: Beijing decides to flex its muscle and see how the US would react if they tried to make a move on the Spratleys. They spend time seeding the block chain with small transactions so that we all accept “dust” as a normal course of business and mapping the BTC landscape and actors. Now they turn up the volume and start dusting the block chain growing it very rapidly and increasing contention, bad blocks, and orphan chains causing problems for mines and pools. The block chain begins to fracture with separate orphan chains appearing in different places, a lot of unsettled and unconfirmed transactions, and increasing confusion and loss of trust in the block chain. People start to sell. As BTC falls, older unprofitable miners go off line.
Then they direct all of their miners (a significant % of the global total, with perhaps reserve dark hash capacity in their order of battle), to one pool, and use that pool to establish a consensus leadership position over the global block chain. Alongside this they dispatch their fleet to the Spratleys on a “training” exercise, and use their cyber warfare capability to disrupt US NOC operations, transoceanic switch nodes, US mining pools, and US banks in general.
Achieving surprise and superiority over the global block chain they write bad transactions to the chain, disrupting global BTC economies. They use the topological map previously discussed likely using the dusting method in evidence last week. This by the way also gives China plausible deniability in case they decide they don’t really want this fight. They can blame the block chain and cyber-attacks on “private actors”, and call the naval movement a “training exercise”.
The US reacts by disconnecting China from the Internet Exchange Points, by initiating their own offensive attacks, and by rolling back the US BTC chain to prior to the attacks. But we are not organized as China is. Our “private” actors truly are private and unless the BTC chain is declared as a “critical infrastructure” component previously to this initiation of action, and we have a “reserve” mining corp that has existing 3CI infrastructure in place, we’ll be slow to react.
It’ll take days to stop the attack and days or weeks more to roll back the bad changes while leaving in real transactions. In the meantime people would resort to trading USD instead of BTC using old fashioned means, but the damage would have already been done.
One of the scariest components of the scenario outlined above is the “plausible deniability” component. Something of that nature makes war more likely IMHO, not less, and above all, as a Buddhist, I am against initiation of force.
Scary thoughts and idea. I welcome public discourse on this topic.
Over the past month we have seen a large number of Bitcoin services dramatically fall over into the abyss. Silk Road 2, the intended successor to the Silk Road anonymous marketplace that was shut down in October last year, lost $2.7 million worth of BTC consisting of all of its users’ account balances and is struggling to figure out how and if it will ever be able to relaunch. MtGox, once the world’s largest Bitcoin exchange with over 90% market share, stopped processing withdrawals early in February and has since shut down entirely, admitting to having lost a staggering 750,000 BTC. Flexcoin, an old “bitcoin Bank”, shut down after having lost 900 bitcoins, and a site called Poloniex gave its users a Cyprus-style haircut after finding out that it was short around 75 BTC
Some people, initially including myself, are seeing this as a “changing of the guard” moment for the Bitcoin community, where it was amateur and badly managed services that were at fault for their own thefts and professionals would soon come in and take over. If this was a mere one or two thefts, then this would indeed be a reasonable, and fully satisfactory, explanation. In reality, however, Bitcoin users and services are losing substantial sums of bitcoin every week, and without chargeback-like consumer protections there are several high-profile stories of companies particularly in the mining industry taking users’ bitcoins and only delivering a low-quality product several months too late, if at all. Given the sheer number of these cases, and the sheer difficulty that even highlycompetentindividuals face trying to secure their funds, a large portion of the intelligentsia, and the press, is willing to pronounce Bitcoin 1.0 dead.
As it should be; Bitcoin 1.0 has been around for five years and given what we know now is already very much an outdated technology. Rather, now is the time for Bitcoin 1.5 to shine.
Enter Multisig
So what is Bitcoin 1.0, and what is this Bitcoin 1.5 that I am so boldly claiming will come to replace it? In short, Bitcoin 1.0 can be described as a simple send-receive system. In a Bitcoin account, there is a set of 34-character Bitcoin addresses, like 1JwSSubhmg6iPtRjtyqhUYYH7bZg3Lfy1T, that you can use to receive bitcoins, and each address has an associated 64-character private key, in this case c4bbcb1fbec99d65bf59d85c8cb62ee2db963f0fe106f483d9afa73bd4e39a8a, that can be used to spend bitcoins that are sent to the address. Private keys need to be kept safe and only accessed when you want to sign a transaction, and Bitcoin addresses can be freely handed out to the world. And that’s how Bitcoin wallets are secured. If you can keep the single private key safe, everything’s fine; if you lose it the funds are gone, and if someone else gains access to it your funds are gone too – essentially, the exact same security model that we have with physical cash, except a thousand times more slippery.
The technology that I am calling Bitcoin 1.5 is a concept that was first pioneered and formalized into the standard Bitcoin protocol in 2011 and 2012: multisignature transactions. In a traditional Bitcoin account, as described above, you have Bitcoin addresses, where each address has one associated private key that grants the keyholder full control over the funds. With multisignature addresses, you can have a Bitcoin address with three associated private keys, such that you need any two of them to spend the funds. Theoretically, you can have one-of-three, five-of-five, or six-of-eleven addresses too; it just happens that two-of-three is the most useful combination.
Choose Your Own Arbitrator
So how can multisig be used in practice? The first major use case of the protocol is consumer protection. When you make a payment with a credit card, if later on you do not get the product that you paid for you can request a “chargeback”. The merchant can either accept the chargeback, sending the funds back (this is what happens by default), or contest it, starting an arbitration process where the credit card company determines whether you or the merchant have the better case. With Bitcoin (or rather, Bitcoin 1.0), transactions are final. As soon as you pay for a product, your funds are gone. And in Bitcoin 1.0, we saw this as a good thing; although it harms consumers to not have chargebacks, we would argue, it helps merchants more, and in the long term this would lead to merchants lowering their prices and benefitting everyone. In some industries, this argument is very correct; in others, however, it’s not. And in Bitcoin 1.5 we recognize that, instead providing a real solution to the problem: escrow.
Multisignature escrow works as follows. When Alice wants to send $20 to Bob in exchange for a product, Alice first picks a mutually trusted arbitrator, whom we’ll call Martin, and sends the $20 to a multisig between Alice, Martin and Bob. Bob sees that the payment was made, and confirms the order and ships the product. When Alice receives the product, Alice finalizes the transaction by creating a transaction sending the $20 from the multisig to Bob, signing it, and passing it to Bob. Bob then signs the transcation, and publishes it with the required two signatures. Alternatively, Bob might choose not to send the product, in which case he creates and signs a refund transaction sending $20 to Alice, and sends it to Alice so that Alice can sign and publish it. Now, what happens if Bob claims to have sent the product and Alice refuses to release the funds? Then, either Alice or Bob contact Martin, and Martin decides whether Alice or Bob has the better case. Whichever party Martin decides in favor of, he produces a transaction sending $1 to himself and $19 to them (or some other percentage fee), and sends it to that party to provide the second signature and publish in order to receive the funds.
Currently, the site pioneering this type of approach bitrated.com; the interface at Bitrated is intuitive enough for manual transactions such as contracts and employment agreements, but it is far from ideal for consumer to merchant payments. Ideally, marketplaces and payment processors like BitPay would integrate multisig technology directly into their payment platform, and Bitcoin wallets would include an easy interface for finalizing transactions; if done correctly, the experience can be exactly as seamless as Bitpay or Paypal are today.
So all in all, given that this multisig approach does require intermediaries who will charge fees, how is it better than Paypal? First of all, it’s voluntary. In certain circumstances, such as when you are buying from a large reputable corporation or when you’re sending money to an employee or contractor you have an established relationship with and trust, intermediaries are unnecessary; plain old A to B sends work just fine. Sending to charities is a similar circumstance, because charities don’t really owe you anything when you send them money in any case. Second, the system is modular. Sometimes, the ideal arbitrator for a particular transaction is a specialized entity that can do that particular job much better; for example, if you’re seling virtual goods the ideal arbitrator would be the operator of the platform the virtual goods are on, since they can very quickly determine whether a given virtual good has been sent. At other times, you might want a generic arbitrator, but you’re in an industry where mainstream providers are too squeamish to handle the task. And, of course, at other times a generic Paypal-like institution is indeed the best approach. With multisig, you can easily choose a different arbitrator with every single transaction, and you only pay when you actually use arbitration; transactions that go through as planned are 0% fee.
Solving the Bank Problem
Although multisignature escrow is a very interesting application in its own right, there is another, much larger issue that multisignature transactions can solve, and one that has been responsible for perhaps the largest share of Bitcoin’s negative associations in the media, dwarfing even Silk Road, in the last three years. That issue is the concern of security and trust.
One of the larger philosophical divides throughout the course of human history has been one between two different methods of achieving security. One of these is individualism: every person having the power, and responsibility, to directly protect themselves and their families by putting the ultimate, base-level tools for doing so directly under their control. The other is delegation: trusting centralized authorities with high levels of resources and expertise to manage security for everyone. In the United States, this is the dichotomy between every family keeping a gun in their cupboard and not having any civilian-owner guns at all and letting the police do the work. In Cyprus, it’s the question of whether to store one’s money under one’s mattress or in the bank. In every case, both sides of the debate have their merits and both sides have their faults.
And the same situation is true with Bitcoin. Some people, faced with the large number of exchanges getting hacked, see technologies like paper wallets, offline laptops and brainwallets with prepended usernames and twenty-character passwords as the solution; essentially, a return to the tried-and-tested best practices for storing gold in the twentieth century, plus a bit more complex technical magic built in. Others, however, see the sheer difficulty that even technically skilled individuals face properly securing their funds, and see better centralized services, like Coinbase, as the solution. In the case of physical security, either the wholesale victory of one strategy or some crude linear combination of the two – centralized storage of 90% of one’s cash and local storage of 10%, or keeping a gun but having it locked up in a safe in the basement, are the only possibilities. And in the case of Bitcoin 1.0 exactly the same holds true as well. In the case of Bitcoin 1.5, however, we are dealing with a world of factum law and decentralized technology, so we can be much more clever with how we combine two approaches – arguably, in fact, it is possible to get the best of both worlds.
Leading the Charge
The company that is currently taking the lead on bringing Bitcoin 1.5 technology to the world at large is CryptoCorp, created by Tradehill co-founder Ryan Singer. CryptoCorp’s core offering is something that a large number of people, including myself, have been trying to implement and push forward for nearly a year: multisignature transaction wallets. The way that a multisignature wallet works is simple. Instead of the Bitcoin address having one private key, it has three. One private key is stored semi-securely, just as in a traditional Bitcoin wallet. The second key the user is instructed to store safely (eg. in a safety deposit box), and the third key is stored on the server.
Normally, when you want to spend your funds, your wallet would make a transaction and sign it locally, and then it would pass the transaction on to the server. In the simplest implementation, the server would then require you to input a code from the Google Authenticator app on your smartphone in order to provide a second verification that it is indeed you who wants to send the funds, and upon successful verification it would then sign the transaction and broadcast the transaction with two signatures to the network.
What CryptoCorp is doing is taking this basic idea, and applying two major improvements. First of all, CryptoCorp is introducing a technology that it calls “hierarchical deterministic multisignature” (HDM) wallets; that is, instead of having three private keys, there are three deterministic wallets (essentially, seeds from which a potentially infinite number of private keys can be generated). Address 0 of the HDM wallet is made by combining public key 0 from the first seed, public key 0 from the second seed and public key 0 from the third seed, and so on for addresses 1, 2, etc. This allows the CryptoCorp wallets to have multiple addresses for privacy just like Bitcoin wallets can, and the multisignature signing can still be performed just as before
Second, and more importantly, CryptoCorp is doing much more than just doing two-factor authentication. Every time the CryptoCorp server receives a transaction to co-sign, it will run the transaction through a complex machine-learning fraud-detection model taking into account the amount, the frequency and amount of prior transactions and the identity of the recipient, and will assign the transaction a risk score. If the risk score is low, the server will simply co-sign the transaction without asking. If the risk score is higher, the server can ask for a standard two-factor confirmation via Google Authenticator or by sending a code as a text message to the user’s phone number. Email confirmation is another option. At very high risk levels, the server would flag the transaction for manual review, and an agent may even make a phone call or require KYC-style verification.
What is important to note is that none of this is new; such risk metric schemes have been in use by mainstream banks and financial institutions for over a decade, and they have existed in low-tech form in the form of withdrawal limits for over a century. All that CryptoCorp does is marry these benefits of the traditional financial system with the efficiency, and trust-free nature, of Bitcoin – even if CryptoCorp denies your transaction you can still process it yourself by getting your second key from your safety deposit box, and if CryptoCorp tries to seize your funds they would not be able to, since they only have one key.
The Future of Cryptocurrency
So what will the Bitcoin world of 2015 look like? First of all, if either CryptoCorp proceeds according to plan or CryptoCorp fails and some competitor decides to take charge, nearly every address will start with a ‘3’. The question of “where do you store your funds?” will be dead; instead, the question will be: “what are the withdrawal conditions of this account, and what is the policy of each key?”. Consumer wallets will all be 2-of-3 multisig, sharing the keys between either a low-security local-storage key, a high-security key in a safety deposit box and a central provider, or two central providers and a low-security key. The way CryptoCorp is designed is as a highly modular “verification oracle” service that anyone can plug in. If a user wants to make their wallet have CryptoCorp as one of the keyholders, they will be able to. If a company wants to have CryptoCorp, and a similar competitor, serve as two of their five treasurers, they will be able to; the underlying math is exactly the same.
In the long term, the multisig story gets even more interesting once cryptocurrency 2.0 technologies go into full tilt. Next-generation smart contract platforms allow users to set arbitrary withdrawal conditions on accounts; for example, one can have an account with the rule that one out of a given five parties can withdraw up to 1% per day, and three out of five parties can withdraw anything. One can make a will by setting up a account so that one’s son can withdraw any amount, but with a six-month delay where the account owner can claw the funds back if they are still alive. In these cases, CryptoCorp-style oracles will play an even larger role in the cryptocurrency world, and may even fuse together with private arbitration companies; whether it’s a consumer-merchant dispute, an employment contract or protecting a user from the theft of his own keys, it’s ultimately all a matter of using algorithmic and human judgement to decide whether or not to sign a multisig transaction. As we sit here today on the other end of what may well come to be known as the “great crisis of MtGox”, the merger of cryptography and finance is only just beginning.
If you want to play around with the multisig technology yourself, feel free to either check out CryptoCorp or use one of my own tools:
There has been a large amount of interest in multisignature transaction technology in the past year, especially with the recent announcement of CryptoCorp. If you want to play with multisig technology yourself on the command line, here are the gritty details of how to do it. First, run sudo pip install bitcoin to install the Python Bitcoin library. Then, to generate the three private keys, run the following:
You now have three private keys and three public keys; run echo $k1, echo $p3, etc to see these values in the raw form. Now, we make the multisig script and address:
Due to randomness, your values will be different, but of the same general form. Notice the 3 at the start of the address. Now, send some BTC to your address, and run the following to make sure you actually received the funds.
Aimed at becoming the ‘eBay for Bitcoin,’ Cryptoauction was launched by Daryl Cusack in November 2013. Since then, we in the vast crypto-community have witnessed a plethora of events that have shifted focus toward expanding security. Some say these recent happenings, like the theft of Bitcoin from Flexcoin and the saga of Mt. Gox, may symbolize the end.
However, these incidents have enabled continued growth in transaction and personal security, and new innovations within the Bitcoin network. As cryptocurrencies are widely adopted, these events will have to be addressed, which will lead to a payment network that is stronger than ever, stable and sustainable.
Why did Cryptoauction disappear?
Cryptoaution became increasingly focused on security since the November launch, and shortly after chose to take the site down shortly after launch. Registered users were notified of the situation and the company’s plan to ensure the success of the site, its users and auctions. Due to the events within the community that surrounded security risk, the company made a decision to implement a full multi-signature escrow system that supports Bitcoin, Litecoin, and Primecoin, whereby each party maintains a key for added payment security.
The company is currently planning to relaunch Cryptoauction later this week, and will provide users with a full multi-signature escrow service for all three supported currencies.
Advanced multi-signature escrow
To mitigate against eBay’s common ‘I did not receive my payment’ problem, Cryptoauction will employ a multi-signature escrow platform. The service will allow users to send and receive payment only when a product or service is received. These types of transactions are encoded within the protocol and will be completed after both the user and Cryptoauction finalizes the transaction via their unique key. This will allow for increased security in virtual currency transactions and eliminate a single point of failure.
In terms of fund security, the company has stated that it keeps as little Bitcoin, Litecoin and Primecoin online as possible, while also trying to minimize the time a user’s funds are held.
Security and adoption
The company believes that if the community moved toward a multi-signature approach where possible, it would decentralize control of funds and reduce the risk of a single point of failure, an issue that has risen in the past months. In order to provide additional transaction security, the virtual currency auction site will also implement other useful security measures such as strict two-factor authentication.
“This is extremely important if Bitcoin and Cryptocurrencies are going to compete in the mainstream. We have developed and implemented a complete and fully functioning multisignature escrow system to do just that. Hopefully others will follow suit,” a Cryptoauction spokesperson stated.
For Cryptoauction, there is a strong belief in driving mainstream adoption of cryptocurrencies by establishing a community focus of increased invulnerability, ensuring users that their private information remains protected when using virtual currencies like Bitcoin and Litecoin. Additionally, founder Daryl Cusack also worked with Maxcoin developers and recommended various RPC (Remote Procedure Call) features that will make coding multisignature transactions easier for developers to implement.
As Bitcoin and cryptocurrencies as a whole become widely adopted, the importance of security for both the individual and business will remain a high priority. Cryptoauction’s focus on this may lead the way toward establishing additional payment protocols that support the end goal: to bring virtual currencies mainstream for the common user.
It started as a simple request. Would my old favorite economics teacher be willing to sit down and discuss Bitcoin with me? A quick chat where I could hash out some ideas that had been going through my head is what I had in mind.
No such luck.
“I am not interested in talking about bit coin. After its market collapse this week, the arrest of one of its directors for facilitating money laundering, the disappearance of thousands of bit coin in what looks like continued shady deals, and the disappearance of one of its directors this week in light of the vanishing bit coin …. I don’t think there is much to credibly say about it as a store of real value.”
So much for that.
To be fair though, I could’ve picked a better week to try and start a conversation. The Mt. Gox debacle has left the community shaken with plenty of talk in the news about the death of the young technology. Of course, this is also nothing we haven’t seen before.
Nonetheless the interaction left me disappointed. Whether or not Bitcoin succeeds is not something that should be very important to economists. They should be fascinated by the fact that this system exists at all.
Economics depends on having a definition of what money is. That has been easy for the past hundred years because money has been a pretty simple tool. It has been issued and its value enforced by a sovereign nation, usually in the form of paper notes or coins. The internet changed things a little bit by allowing for electronic transfer of physical currency, but the system is still based around a central government.
Bitcoin has changed all that. Here is an excerpt from JP Morgan’s research piece The Audacity of Bitcoin:
“Therein lies bitcoin’s limitation: with due apology to anarchists, there is no common power like a government to compel the public to use bitcoin as universally as its own fiat currency. Recall that currencies don’t become widely used spontaneously or through a grassroots campaign. They become widely used nationally because a government declares them legal tender, and they become widely used internationally because they are legal tender in a significant economic area with large, unrestricted capital markets…In the area of transactional demand for a currency, incumbency is an incredibly high hurdle to jump.”
And yet Bitcoin has jumped that hurdle. For some reason, without any sort of coercion, millions of people world-wide are deciding to pay for and provide their goods and services with the cryptocurrency. Economists are focusing on the fact that it is not already a perfectly formed currency while ignoring the development that the by-product of a computer program released 5 years ago can now be used to buy Persian Rugs on Overstock.com simply because people have agreed that it has value.
JP Morgan is right, currencies have not historically become widely used through grassroots campaigns. But that is what is going on.
Meanwhile the economics community at large is disregarding this amazing development (there are exceptions, check out this great article from Stanford). They have chosen to ignore what can at the very least be described as an awesome social experiment in economics and the meaning of money by choosing not to educate themselves about the most basic details of the system.
This is exemplified by my teacher, the most brilliant economist I’ve had the pleasure of meeting, not doing enough research to know that Bitcoin has no “directors”.
Why is this?
The answer lies in a fear of change. If Bitcoin does succeed in becoming a worldwide phenomenon it will flip economics on its head. Keynesianism, the basis of modern economics, places the actions of a central bank at the forefront of its model. Bitcoin removes the duty of a central bank.
That is why you see the closest thing to a rock star that economics has to offer in Paul Krugman coming out with an article entitled Bitcoin Is Evil in which he attacks the Libertarian slant of the technology. Or why Yale economist Robert Shiller dismissed Bitcoin as a “bubble” and said he is “amazed by how people are so excited about it”. Instead of embracing a cool new development in the world of economics they attack it because it doesn’t sit with the assumptions they have built their careers around as scientists.
And that’s bad science.
These are people who recognize that their chosen area of study has problems. Shiller predicted the recent crash and Krugman argued in 2008 that much of the past 30 years of macroeconomics was “spectacularly useless at best, and positively harmful at worst“. My old teacher once agreed with my statement that the profession seems like it needs a revolution.
So why not look at this organic, world-wide, economy that is rewriting the history of money before our eyes and admit that something important is happening?
It’s simple. Change is scary. No one wants to see their life’s work relegated to the dustbin of history.
But in the end it won’t matter. The world will move on with or without the permission of Nobel laureate economists. One can only hope that these brilliant minds let go of their fear and take some time to appreciate a fascinating development in their field as it happens.
BitcoinBourse.eu is a decentralised escrow and trading system for Bitcoin to Euro (SEPA) transfers, developed by Bitcoin SARL. They are based in France and have just released their updated Bitcoin Bourse site.
The trading engine has been completely redesigned and reworked.
Decentralised crypto-currency exchange is understood to be the holy grail of exchange. By eliminating trusted third parties, the technology can achieve something closer to the ethos of Bitcoin itself.
As Satoshi himself noted in his white paper, “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party”.
The raison d’etre of Bitcoin was to provide “an electronic payment system based on cryptographic proof instead of trust.”
There are a number of higher-level technological projects working on purely peer-to-peer exchange mechanisms and systems based on cryptographic proof. In the meantime, other approaches are always welcome.
The essential characteristic of a decentralised exchange like Bitcoin Bourse is that bitcoins and fiat currency are exchanged person-to-person with the arbitration of a third party when disputes arise. The recent Mt. Gox saga illustrates the shortcomings of centralized exchanges.
Person-to-person Bitcoin exchanges like Bitcoin Bourse can also offer faster settlement directly between bank accounts.
How does Bitcoin Bourse achieve this? Well, it works like a secure escrow service, where Bitcoin Bourse freezes Bitcoins until the transaction is finished between seller and buyer. Each user gets temporary Bitcoin addresses to fund their Bitcoin Bourse account with Bitcoins.
Users can sell their Bitcoins to any other user, who accepts his ASK rate, or to any user whose BID rate the seller accepts.
Bitcoin Bourse is announcing some new features. Buy and Sell orders now have an expiration time of 72 hours. Share trading is now also open to the public.
Users and System shareholders of Bitcoin Bourse can now trade shares with each other in the platform provider itself and on the exchange directly, through share buy and sell orders.
Bitcoin Bourse also allows third Party shares to be bought and sold on the platform. Companies interested in listing their Shares at Bitcoin Bourse should contact the company for further advice.
The Bitcoin Bourse system embraces a 0% fee structure for buy, sell and deposit and a withdrawal fee of 2%.
Security and legality are hot topics in the space at the moment, since the network transaction malleability issue affected a number of Bitcoin exchanges in some way. Bitcoin Bourse’s approach is to process withdraws manually. This removes any potential transaction malleability issues and, the company hopes, will act to comfort users of the platform.
Overall this is a useful approach and implementation of the decentralized exchange concept, given where the ecosystem is at technologically.
Bitcoin is quick to note, in light of the recent Mt. Gox bankruptcy, that Bitcoin accounts are never stored online on any of their servers. All Bitcoins are in cold-storage and offline. Further questions about the exact nature of the cold storage can be directed to the company itself.
Traditional centralised Bitcoin exchanges have business models similar to traditional financial services enterprises. They take deposits of fiat currency, which they hold in control.
Bitcoin Bourse aims to provide a different product and service: eliminating the need for trusted intermediaries, a worthy pursuit.
The company has a well designed, functional and operational platform for SEPA users and an affiliate program to compliment it. The system tracks referrals and pays commissions for every client referral. There is also a long cookie duration, so if a customer comes from to the merchant’s site and then comes back to purchase one month later the referee is still paid.
They have streamlined the entire affiliate process to ensure ease of use, while still maintaining extremely accurate affiliate tracking.
Yesterday, the Bitcoin Foundation announced an additional Board of Directors seat up for election. This seat represents the seat vacated by Mark Karpeles.
Please see the Bitcoin Foundation blog post below for more information:
There are now two vacant industry seats available on the Board of Directors for this upcoming election.
Here’s the overview:
Nomination Deadline: April 7, 2014
To nominate, you must be an industry member of the Bitcoin Foundation. Become a member here.
For this election, only Industry Members can nominate and vote for the Industry seat. See more specifics below in the “Details” section.
Email Greg Egan [email protected] to have your nomination added to the list. Each member can only nominate once; it is okay to nominate yourself.
All nominees will be required to fill out, sign, and mail in a physical form declaring their willingness to run for a seat and serve on the board if elected. The form will be provided upon acceptance of nomination.
Membership Sign Up Deadline for New Enrollment of Industry Members: March 31, 2014
If you are not already an industry member of the Bitcoin Foundation, you must become a member by March 31, 2014, to vote in this election. Details on becoming a member can be found here.
Voting Begins: Week of April 21, 2014
Details on how to vote will be sent to all members by email in advance of the first vote.
If we have a large pool of nominees, multiple voting rounds may be necessary.
Details:
What seat are we voting for?
The purpose of this election is to fill a vacant industry seat on the Board of Directors. Only Industry Members can nominate and vote for the Industry seat.
Who is on the current Board of Directors?
The two new board members elected will join the current board:
Micky Malka, Founder of Ribbit Capital (Industry Seat)
Gavin Andresen, Chief Scientist (Individual Seat)
Jon Matonis, Executive Director (Individual Seat)
Elizabeth Ploshay, Manager of Communications of Bitcoin Magazine (Individual Seat)
Peter Vessenes, CEO of Coinlab (Founders Seat)
You can see details and background on the current board here.
Do I have to be a member to nominate, vote, and run for election?
In order to be eligible to vote in this election, you must be a current industry member of the Bitcoin Foundation, which requires full name, valid email address, and valid mailing address. Only Bitcoin Foundation industry members may nominate someone for this election. However, in order to provide for the widest range of capable candidates, nominees are not initially required to be industry members, but are expected to become industry members of the Foundation upon election.
How will the nominees campaign for the election?
We have set up a special section of our members-only forum where nominees can post their own threads to describe their platform and interact with our members.
What will the responsibilities be for an elected board member?
The Board of Directors for the Bitcoin Foundation is responsible for providing leadership and conducting business on behalf of the organization. As such, here is a brief outline of what will be expected of a board member:
Review and abide by the by laws. The bylaws are the basis for the organizational structure of the Foundation, and all board members must be well versed in their details and impacts on Foundation business.
Attend all board meetings. Board members are expected to attend all board meetings. Currently, our regular meetings occur once per month via video conference and are scheduled to accommodate a wide range of time zones of the participants. Interim meetings may also be required from time to time.
Occasional travel may be required. Board members may at times be required to travel on behalf of the Foundation. Approved travel costs will be paid by the Foundation.
Perform officer roles as assigned. Board members can be assigned officer roles in addition to basic board obligations, and are responsible for all tasks related to those roles as outlined in the bylaws.
Act in the best interest of the Foundation and its members. As the public faces of the Foundation, board members should conduct themselves responsibly in addition to actively seeking to further the goals of the Foundation.
If you are an industry member or know of an industry member who would be interested in serving on the Board of Directors, please email Greg Egan [email protected] with any questions about the expectations and responsibilities of being a member of the board entails.
A recent publication from HMRC (Revenue & Custom Brief 09/14) shows that HMRC and the UK are favourable towards Bitcoin businesses and the emerging Crypto-currency economy.
From summer of 2013 there has been concern as to whether HMRC (Her Majesty’s Revenue & Customs, the UK tax office), would be forcing merchants, vendors (only sells bitcoin) and brokers (buys and sells bitcoins), to add on 20% to the value at which they were selling their Bitcoins, as Value Added Tax (VAT) for tax purposes.
As numerous Localbitcoin sellers and other brokers have stated, this would have created huge mark-ups for their merchandise, making them unable to compete with the surrounding market.
The following practices implemented are specifically designed to cover “Bitcoin miners, traders, exchanges, payment processors and other Bitcoin service providers”.
For those Bitcoiners who take part in Bitcoin Mining, all mining income from Bitcoin (and other crypto-currencies) will be classified as exempt from tax, meaning that it remains untaxed.
Bitcoins and Crypto-currency themselves do not count as Capital Gains for the purposes of Capitals Gains Tax (CGT). It is only at the point of conversion to fiat that CGT becomes recognizable (when to pay).
Gains and losses incurred on Bitcoin or other cryptocurrencies are chargeable or allowable for Capital Gains Tax if they accrue to an individual or, for Corporation Tax on chargeable gains if they accrue to a company.
So if miners keep their mined Bitcoins as Bitcoins (or other similar Crypto-currency), then they are not liable to CGT. However, it is very understandable that in today’s world, most miners have to convert their mined coins to meet their various needs that can only be met with fiat.
1.Income received from Bitcoin mining activities will generally be outside the scope of VAT on the basis that the activity does not constitute an economic activity for VAT purposes because there is an insufficient link between any services provided and any consideration received.
Items bought with crypto-currency will not be liable for CGT, unless those items are then sold onwards (for a profit) for GBP. The profit made is liable for CGT, it becomes a tricky situation if the GBP value is kept entirely out of the equation. Though keep in mind, that CGT is only applicable when your profit reaches certain thresholds.
The tricky situation comes when you’ve bought a (relatively expensive) item, and you should be declaring the CGT. However, do you value those Bitcoins as you bought them for £100 each, or do you value them at halfway through the year when the value is triple, or quadruple that amount? Depending on how one declares acquisition of Bitcoin, and at what value, will affect the CGT that is applicable.
And here we can highlight the beauty of the Blockchain. If ever a government tax office requires proof of purchase, the date and time can easily be shown by the individual in question, and the relevant tax applied to the letter. However, proving the value at which that individual purchased the Bitcoin would depend upon where and how they were purchased.
If an individual wanted to show such information, the pseudonymous nature of Bitcoin puts that power into the hand of the user.
Miners and mining have been given a “liberum transitis” for all intents and purposes. The earnings from mining Bitcoin (or any other crypto-currency) is VAT exempt, “because there is an insufficient link between any services provided and any consideration received.”
The DAC entity otherwise known as The (Bitcoin) Protocol is not a recognized entity at this time. Delving through UK statutes and regulations (The Financial Services and Markets Act 2000 (Regulated Activities) 2001) and FCA Guidelines we can surmise that this is due to the decentralised nature of Bitcoin and similar crypto-currencies.
The following describes transaction fees.
2. Income received by miners for other activities, such as for the provision of services in connection with the verification of specific transactions for which specific charges are made, will be exempt from
VAT under Article 135(1)(d) of the EU VAT Directive as falling within the definition of ‘transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments.
So the earnings from the protocol (at the time of this article, 25 Bitcoins per every 10 minutes) are not taxable, and the transaction fees included into the mining rewards are also exempt from VAT. But it might be fair to say, that HMRC simply has no idea how such fees would be taxable, probably because it is not possible to tax them.
How do you tax something that requires participation agreement to being taxed? The P2P nature of Bitcoin and its Opensource quality means that any invasive ‘tax software’ would be shunned by those who did not willingly want to pay the tax.
3. When Bitcoin is exchanged for Sterling or for foreign currencies, such as Euros or Dollars, no VAT will be due on the value of the Bitcoins themselves.
Anyone using an exchange to change currencies from Sterling to Euros, or any other foreign currency will not be charged VAT. Does this signify the end of Thomas Cook and similar exchanges? If you can exchange your Sterling into Crytpo and then into Dollars or another fiat currency, at a much lower exchange rate than the standards foreign currency exchanges, then what does the future hold for Thomas Cook style businesses and the future of (fiat) currency traders when they discover this market en masse?
And concerning any additional costs incurred,
4. Charges (in whatever form) made over and above the value of the Bitcoin for arranging or carrying out any transactions in Bitcoin will be exempt from VAT under Article 135(1)(d) as outlined at 2 above.
Any individual sellers, brokers and vendors (who are selling Bitcoins from their own personal stock, having mined, earned or bought the coins) that charge any extra charges relevant to their transaction will be exempt from VAT. Additional charges such as travel expenses, extra fees, or unusual costs, that are relevant to any transaction in Bitcoin, are exempt from VAT.
It should be noted that Exchanges operating within the UK are still liable to pay VAT on the services they provide, this being the commission fee, and that all business in this emerging new Crypto financial sector should be aware of the last words,
The tax treatments outlined in this brief are for tax purposes only. They in no way reflect on the treatment of cryptocurrencies for regulatory or other purposes.
Given the evolutionary nature of these cryptocurrencies, HMRC will issue further guidance as appropriate.
What is next for the UK scene, how useful will this be with the anti-bitcoin banking blockade still in full action? Has the UK taken a very pro bitcoin stance, or is the case really that Bitcoin could not be taxed even if they tried?
I for one see it as a positive outlook when compared to other countries such as China and Russia; the options are still here for a beautiful partnership between the current financial sector to bridge into the new and inevitable crypto world. Many businesses are waiting for this moment; it will come, sooner rather than later.
Disclaimer: I believe in tax, but I prefer a willing system, not a coercive one – and especially to be able to choose what your tax money goes towards.
With the media frenzy in full tilt after the closing of MtGox, there have been quite a few articles coming out declaring the death of bitcoin and an equal number reassuring us that it will be just fine. I won’t link to the former ones because they’re so painfully uninformed and rely on tired scare tactics. I have come across one article of a different vein, though, and it seeks to bring in the toxic philosophy of privilege checking as a critique against the Bitcoin community. I could wax philosophic about the specific problems with the academia class developing a divisive practice based on classist, racist, and sexist premises, but I specifically want to address the claims of the author of this piece.
There’s no shortage of commenters decrying the inequality of the Bitcoin community from their ivory towers, but to say Bitcoin is “by the privileged, for the privileged” is a new low. The author, Annie Rose-Strasser, claims that Bitcoin is a boy’s club and cites statistics that show men dominate the sphere, but this is neither new nor compelling news. The tech field is dominated by men because more men prefer tech work than women for several reasons, similar to how more women dominate other fields such as nursing and teaching. I’ve argued before that these preferences are not a bad thing and believe they represent a natural division of labor that arises when you have a relatively free economy in which people are not forced into specific fields of work.
Even though men make up the majority of Bitcoiners they do not work to exclude women, people of color, or those in poverty; in fact, the fastest growing sector of the Bitcoin economy is charities—each of which equally feature women in prominent roles and some of which feature no men on their teams. I am in the unique position of being in one of these myself (Bitcoin Not Bombs) and working closely with the other ones—mainly Sean’s Outpost Homeless Outreach, Fr33 Aid, and Antiwar.com. BitGive, Shire Sharing, Bitcoin100, and Good-Bits are other charities/nonprofits that also use bitcoin to help others. Bitcoin100 actually lists dozens more charities that accept bitcoin on their site, and to date the charities I have mentioned have helped thousands of people locally and globally suffering from poverty whether due to homelessness or natural disasters like the typhoon in the Philippines.
It is no longer a hypothetical theory that bitcoin can be used to help the downtrodden; it is a reality that takes place every day. Sean’s Outpost Homeless Outreach has served over 50,000 meals to homeless residents in Pensacola alone and has bought a nine acre property that will be used as a safe camping space for the homeless, Bitcoin Not Bombs clothed and fed hundreds in their Hoodie the Homeless project, Fr33 Aid sent medical supplies and aid to hundreds afflicted by the typhoon in the Philippines, and Shire Sharing fed over 1,000 people Thanksgiving dinner in New Hampshire. The ability of bitcoin to be sent internationally in a matter of seconds directly to individuals in need for nearly free is ushering a new era of mutual aid and global cooperation. Strasser supplied zero evidence that bitcoin harms the poor, and it is abundantly clear that bitcoin is being used for the very things she claims it isn’t used for.
Strasser makes the extremely ignorant assumption that due to this male dominance, Bitcoin users are hostile to the unbanked and other oppressed groups. You would have to be living under a rock feasting solely on anti-Bitcoin propaganda to think that Bitcoin is only about making money and oppressing the lesser privileged. In fact, Bitcoin can help the unbanked more than government agencies. You do not need a driver’s license, bank, or even a place of residence to start using bitcoin. There are homeless people in Pensacola, FL who have literally used bitcoin to pull themselves out of poverty—good thing they have their home now so they can check their privilege.
After speaking with Jesse, one of the men featured in the Wired story, their biggest hurdle to getting into a home was going through the costly regulations imposed by the state. When you speak with other homeless people in Pensacola, you learn that coding regulations prevent them from living in abandoned buildings and anti-homeless camping bans prevent them from camping on secluded public property.
The state is standing in the way of one of the largest unbanked groups gaining financial and physical independence. The anti-homeless camping bans are not unique to Pensacola, and there’s even an actual state representative that physically destroys the property of homeless people in Hawaii. The homeless population is being physically oppressed by the very state Strasser argues is necessary for women of color to rise out of their situations.
Now to possibly the most offensive part of the article, Strasser actually argues that women of color in particular are dependent on the current welfare state and desperately need government programs to help them. If that isn’t laying the paternalism on pretty thickly, I don’t know what is. I mean, really, does the author expect women to buy this garbage? “I’m so sorry the institutional racism perpetuated by the state is causing you to suffer. Here have some more state because you are woefully unprepared to help yourself.”
Strasser claims that women comprise the majority of the unbanked and that unregulated financial institutions oppress them. I’m thinking she forgot about how the government she loves so much forced banks to give loans to low income individuals who could not pay them back before the housing crisis. Or, how those predatory banks that stole the income and homes of those same disadvantaged people were then bailed out by the government. But remember that time HSBC executives got jailed for financing Mexican drug cartels who killed about 19,000 people, many of which were women? Oh wait, no, they totally got away with murder.
Government in its current form isn’t so much an arm of justice as it is a way to keep those with wealth in power and immune from the laws everyone else is forced to abide by. None of the regulations on the books or proposed are going to stop powerful banking interests from committing crimes on a massive scale because of the licentious relationship between banks, corporations, and government.
And how about that drug war that disproportionately jails black men for having the wrong plant? I can’t imagine why there are so many struggling, single mothers who are forced to get assistance just to survive. Good thing state sponsored thugs are there to jail their partners, brothers, fathers, and children. I fail to see how Bitcoin is more threatening than the ineffective, unjust drug war and also how Strasser fails to mention this as an influencing factor in the poverty among women of color.
Strasser asks, “Why isn’t the crypto-currency of the future taking hold among communities other than the elite?” Excellent question–bitcoin is. One of the most oppressed groups in this country are Native Americans. The Ogala Lakota Nation, a sovereign Native American tribe, announced interest in Bitcoin specifically because they think it can lift them out of poverty. It’s not really surprising since the government has historically persecuted the Lakotas and other tribes. The Lakotas launched the BTC Oyate Initiative Project to raise awareness about Bitcoin and even designed their own cryptocurrency called Mazacoin that is now their official currency.
If we really want perspective on privilege, the global implications of an easy to use payment system must be taken into account for its efficiency in providing aid directly to people all over the world—especially disadvantaged women, many of which must raise families on low resources while their partner finds work in more economically healthy areas.
The ability for affordable and quick remittances is one of the most promising aspects of Bitcoin. There’s no comparison with Bitcoin and Western Union when it comes to being a cheap, effective money transmitting system. You can’t beat 1% or less transaction fees versus the 12% it takes to send money via Western Union to the poorest parts of Africa. Bitcoin Not Bombs is currently printing Bitcoin quick start guides in Spanish so that people here and across the border can use it to send money to their families back home and avoid high fees. These fees eat up a good portion of what they are able to send to their families back home (and depending on the service, the transaction can be denied), and Bitcoin eliminates these problems.
In many cases, being unbanked is a choice made by people who have been historically disenfranchised by banks, and I think it is important not to discount the distrust many still correctly have of banking institutions. Let’s not forget the failure of the Freedman’s Savings Bank, which was set up under Abraham Lincoln. After its failure, depositors–the majority of whom were freed slaves– did not get properly compensated for their losses. I would even say it’s arguable whether the FDIC has the funds to replenish bank deposits in the instance of a modern bank run, but if you trust corrupt banks with your money I guess that’s a risk people are willing to take.
Bitcoin doesn’t rely on trusting a third party with your money; its structure forces the individual to be their own bank. While some debate whether that is a flaw or feature, for the unbanked already used to controlling their own money independent of banks it is familiar and easy to transition into.
Those “privileged” Bitcoiners are enthusiastic about helping the unbanked get set up with Bitcoin and many spend hours assisting those curious about the protocol and currency. Knowing about the drive, mission, and concern of the individuals in the larger community specifically for the unbanked and less privileged is crucial before you can outright dismiss all Bitcoiners as selfish libertarians twirling their Monopoly man mustaches.
The fastest way to get someone started with bitcoin is to help them open a wallet and give them a small amount. I have done this and seen it done numerous times; the community literally gives away money to anyone willing to set up a wallet. Indeed it is how many current Bitcoiners got started. And bitcoin is affordable because you don’t have to buy a whole one at a time, you could buy fractions of a bitcoin depending on your budget. For those unbanked who rely on under the table paid work, Bitcoin is a great way to accept a variety of currencies and actively participate in a new economy–one which rewards bitcoin friendly businesses with consistent patronage.
Bitcoin as a payment system/network and as a currency (lowercase b) is also not necessarily trying to replace the current flawed system, as Strasser claims: “It wants to replace our current economic system and practices in their entirety — changing the way we buy goods and distribute money.” My sides! So, you mean to tell me exchanging a currency for goods and services just like you can with cash, credit cards, PayPal, wire transfers, and checks is replacing the current economic system entirely? Strasser doesn’t appear to have used bitcoin or she would know that it is a currency that functions just like any other method of payment, and sometimes more smoothly with less of a chance to commit fraud and steal from merchants like you can with credit cards. Right now, the Bitcoin economy functions parallel the mixed economy, but is superior in many ways.
It’s unfortunate to see such inaccurate claims about Bitcoin’s ability to rectify societal inequalities because if anything Bitcoin breaks down these barriers erected between individuals by the corrupt banking institutions and government. The entire paradigm of centralized control of finances and aid is shattered when you can send funds directly to someone in need.
Millennials are another group that Bitcoin has helped; the fact that these people regardless of race or gender have made some money out of investing early in bitcoin is great news—not something to feel shame over. It’s appalling that Strasser is saying these same people are somehow terrible because they narrowly escaped the financial destitution many in our generation face after going into massive debt for college degrees with little demand in a struggling economy.
Bitcoin should be lauded as a success story for the Millennial generation, and while I have not personally made massive gains like some, Bitcoin has helped me secure some financial independence as a female Millennial who was priced out of college and struggled in numerous dead end jobs for years. This is not an uncommon occurrence, my friend Amanda BillyRock talks about how Bitcoin helped her as an unbanked individual in this thought provoking video. Not all Bitcoiners are wealthy venture capitalists; many are graduates or students faced with crippling debt whose incomes are whittled away by government programs designed to siphon money from the poor and middle classes to older generations. The class implications alone are worthy of considering when talking about Bitcoin’s ability to help the disadvantaged.
The Bitcoin world is not all rainbows and roses, and yes you do have to be concerned with criminal elements. The criminals active in Bitcoin are dangerous, but concern over the 0.5% of transactions associated with black market activity is laughable compared to the destruction wreaked by even just one facet of the empire—war; the swiftest way to increase poverty worldwide. For countries torn apart by war, Bitcoin is an excellent way for people outside the conflict to give direct aid and remittances for families who aren’t able to return to their countries (or conversely, escape). This function is really what makes Bitcoin disruptive–it threatens the forces that keep people enslaved by warfare.
Strasser is correct in thinking Bitcoin is dangerous; it is dangerous to war profiteers, corrupt banking institutions, unethical banking practices, usurious money transmitting services, tyrannical governments, failed foreign aid programs, and systems that keep people in poverty.
Strasser is attempting to force Bitcoin into the mold of social engineers that use buzzwords such as privilege to shame people for doing benign activities like having bitcoins. While shame no doubt has its place for dissuading harmful activities, the privilege argument against Bitcoin is incredibly weak. Privilege is simply defined as a special right, advantage, or immunity granted or available only to a particular person or group of people. Bitcoin cannot possibly be limited to only the privileged as anyone (even people in Kenya) can gain access to it through standard cell phones, a tool which the developing world has increasing access to.
I challenge Strasser and others to go beyond the thinking that Bitcoin is bad because white dudes predominantly use it and they are “bad”; it is intellectually lazy and insulting to the thousands of non-white, non-male, non-libertarian human beings that use and benefit from the use of Bitcoin every day.
The barriers to entering the Bitcoin economy are lower than getting a bank account or drivers’ license making it an ideal system for the unbanked and impoverished. Social justice advocates would be keen to embrace Bitcoin with open arms as it—in real time not theoretically—is leveling the playing field and providing the most disenfranchised with opportunities previously unavailable.
San Francisco’s CoinSummit is less than a month away. This is a two day event connecting virtual currency entrepreneurs, angel and VC investors, hedge fund professionals and others looking to learn and network in the virtual currency industry.
The event is shaping up to be one of the best, certainly in North America, and perhaps globally. CoinSummit is both proud and humbled to have Marc Andreessen of Andreessen-Horowitz as the keynote speaker.
They have also announced that they will host Jackson Palmer. He is probably best know as the co-founder of Dogecoin. Mr. Palmer will be making his first public speaking appearance at the conference. Much wow!
The speakers list reads like a who’s who of technology glitterati, including Roger Ver, Nicolas Cary, Chris Larsen, Nejc Kodric, Vitalik Buterin, Patrick Murck, Angel investor Ben Davenport, Ribbit Capital’s Micky Malka and Nick Shalek, Naval Ravikant, and Jeremy Liew.
There will be several others representing the investment community, among other heavy hitters from Silicon Valley.
What we are seeing at the moment is an explosion of startup activity in the digital and crypto currency space. This is expected to continue. It is very exciting and CoinSummit hopes to capture that excitement.
New products and services will continue to come onto the market. Mixing services are one area of particular interest in this regard. No doubt this topic will come up at the event, just as it was raised at the recent NY hearings.
Mixing services seek to maintain user anonymity and privacy in a climate where much activity is focused on appeasing regulators. Security will also be a theme of the conference.
The event seeks to focus on quality and innovation. To that end possibly the most exciting part will be the The Startup Showcase. The showcase will offer 10 hand picked startups in the space the opportunity to present in front of the entire CoinSummit audience.
Interested Startups should apply here with their pitch deck. They will be selected on the basis of the size and attractiveness of the business opportunity, the strength of their team, and their traction, metrics and achievements.
The selection panel will consist of leading investors: Ben Davenport, Jimmy Furland, Pamir Gelenbe, Firat Ileri, Martin Mignot, Alex Morcos, Jez San, Nick Shalek and Santiago Subotovsky.
The deadline for applications is March 17, 2014 and the selected start-ups will be announced on March 19, 2104. Attendance for the presenting CEO/Founder of the selected start-ups will be free-of-charge.
CoinSummit is aiming to define the standard for all events globally. The mission is to bring passionate people together: entrepreneurs, investors and anyone interested in the ecosystem, in an environment conducive to cooperation and collaboration. Participants will discuss, network and make things happen.
The event will take place on the 25th and 26th of March at the Yerba Buena Center for the Arts in San Francisco.
Numbers are strictly limited, so there is an application process. Early Bird prices are US$500 for pre-series A Entrepreneurs and US$1500 for all others.
Bitcoin related news out of the Middle-East is rare on all fronts: merchant services, finance and technology. However, a quick search of coinmap.org reveals over 50 regional locations to spend Bitcoins.
Most regional Bitcoin businesses are confined to Israel. Egypt is still sorely lacking in Bitcoin establishments, but now it has its first.
AMECO is the Middle East’s oldest and largest disposable syringe and hypodermic needle manufacturer based in Cairo. Established in 1984, they have an 80% share of the local Egyptian market.
Exporting to 15 countries globally, their sales reached US$60 Million in 2013.
AMECO is a privatized family owned business. The owner, Mr. Omar El Fata, is an enthusiastic supporter of Bitcoin and is excited about the potential for businesses in the region.
Mr. El Fata notes that he is “a strong believer and user of Bitcoin…”
AMECO we will be the first medical factory in the world to accept Bitcoin as a form of payment.
The factory is based in Cairo, Egypt. Egypt has gone through a difficult economic and political phase after its 2011 revolution. The Egyptian pound has declined 15% and the tourism sector, on which the country is dependent, is at an all time low.
Furthermore, Standard & Poor’s has downgraded Egypt’s credit rating. International banks are now more hesitant to trade with Egyptian banks.
AMECO gets its raw materials from over 10 different countries. All suppliers used to extend credit to the company. Now the receiving banks demand a full payment transfer before shipment. This spells disaster for medical factories.
Mr. El Fata notes that this particular incident “brought light to how efficient my business would be if I dealt with Bitcoins.”
Mr. El Fata is quick to point out that, In Egypt’s case, due to the economic situation, there is a lack of hard currency. To transfer say 300,000 pounds to the UK, for example, he has to list his company in the bank’s transfer queue and wait from 3 to 5 weeks until they can arrange Sterling pounds for the transfer.
Of course, with Bitcoin his funds arrive anywhere across the globe in seconds.
This is further real world evidence that the potential of Bitcoin is real, even if ‘developed’ countries, with relative economic and political stability, may have trouble recognising this.
Mr. El Fada also recognizes the value proposition from the Bitcoin inflation model. He notes that “no matter what your country/region is going through, no matter how corrupt your government is, there is no way your currency (Bitcoin) will inflate.” He goes on to say that “this directly means stable businesses and no rising living expenses and costs.”
For his business Bitcoin means market reach, free trade, no inflation, and no interest rates.
According to Mr. El Fata many other businesses he works with are very keen to work with Bitcoin, especially ones who almost went out of business due to inflation and banking bureaucracy.
ThinkProgress has published a blistering critique of bitcoin called Bitcoin: By The Privileged, For The Privileged. It’s full of misunderstandings, misinformation, and, most distressingly, a few points that are actually really spot-on and important for bitcoin foes and friends to understand. The piece points out the unfortunate fact that bitcoin is now primarily held and used by the most privileged people. This is unfortunate because its greatest promise, I would argue, is for the people at the bottom.
The fallout from an argument made ignorantly is that people who know better then feel free to dismiss the entire premise. Right now people who actually know something about bitcoin are tearing the piece apart, and rightly so. But just as Annie-Rose Strasser has more to learn about bitcoin, there is no doubt that the bitcoin community has more to learn about privilege.
So, first, the corrections, mostly culled from my numbered Twitter rant, where I for some reason missed #5. The first misunderstanding is a common one, and can be found in my first writings about bitcoin. For the uninitiated, bitcoin is the currency, Bitcoin is the protocol.
Then Strasser writes, “The whole idea behind Bitcoin is that it segregates economic markets and currency from a country’s government.” The truth is that there is no one “whole idea” behind bitcoin. And that seemingly minor point is actually key. While some person or group of people manage other currencies, bitcoin is decentralized. No one controls it. Bitcoin does have a creator, but he or she never laid out a plan to separate money from government. The plan was only to create an open-source decentralized network on which one can build a currency, and more. So if there were one idea behind bitcoin, it would be that.
“It wants to replace our current economic system and practices in their entirety.” Sounds sinister, doesn’t it? But bitcoin is a currency. It doesn’t have agency, so it’s not aiming to do anything. Some people would like to see it upset the extremely unfair and inefficient economic system. Others want to use it as an escape hatch for oppressive regimes. Many are interested in mircopayments and near-feeless remittances abroad. Retailers are interested in a more-secure-by-default online payment system with no chargebacks and low transaction costs. Many people are interested in trustless systems.
Describing bitcoiners: “They’re the same people who want to ‘end the fed.’” As a libertarian I’ll go ahead and let you know that those people generally prefer gold. And it doesn’t take a libertarian mindset, just a pinch of critical thinking, to realize no one should trust the government to handle their money.
One thing Strasser isn’t totally wrong about is bitcoin’s demographic makeup:
According to an online poll from Simulacrum, the average user is a 32.1-year-old libertarian male. By users’accounts, those men are mostly white.
Breaking that down, about 95 percent of Bitcoin users are men, about 61 percent say they’re not religious, and about 44 percent describe themselves as “libertarian / anarcho-capitalist.”
In my personal experience, bitcoin developers are not overwhelmingly, or even mostly, white. Almost none of the developers who’ve reached out to me were. They are all, however, male. What explains the demographics, whatever they are? “Well, there’s a fair amount of privilege built directly into the currency: In order to buy the sometimes wildly expensive currency, Bitcoin users need to be wealthy.”
In fact, for years the price of a bitcoin remained under $10, not quite the sign of something meant to block the less-well-to-do by design. Maybe she meant to say that if you were smart enough to get involved in Bitcoin early, that you are now wealthy? (You also don’t need to buy an entire Bitcoin, so any amount of any other money is sufficient to get you that-much-worth of Bitcoin. It’s like complaining money is expensive.)
I’ll just add on that ironically, one of bitcoin’s best qualities is making microtransactions possible. If you have to be rich to use anything, it’s a credit card.
Despite the fact that Strasser is wrong in her identification of why (and maybe whether) bitcoin is overwhelmingly white and male, It matters who uses it.
It matters because, as Strasser also correctly points out, “The unbanked, comprised of women and people of color, are much more frequently turned down for auto loans, mortgages, and investment advice.” And bitcoin has the potential to bank the unbanked, if they use it. To understand why, we must first understand why some people lack access to credit.
Lending and check cashing are a game of risk-versus-reward. Risk is determined primarily through error-prone credit scores. Reward is reaped through interest rates and fees. The unbanked are primarily made up of people who have poor credit scores, people for whom the risk of non-repayment or bounced checks is high. Unfortunately, banking regulations make it impossible for banks to charge high enough interest rates to make up for the risk these people pose.
As Strasser points out, “Instead [of using banks], they’re taken advantage of by unregulated banking — unbanked households on average spend over $2,400, about 10 percent of their income, to use services like payday lending and check cashing.”
Even though payday lenders can charge higher interest rates than banks, they still are barred by law from automatically deduct payments from a delinquent customer’s checking account. This artificially makes lending much more expensive by drastically raising the cost of recovering funds.
So while payday lenders are calling up customers and sending angry letters, both of which cost time and money, bitcoin contracts can be set up in such a way as to automatically transfer bitcoin to repay a loan. It also obviates the need for check cashing, as bitcoin can be sent immediately from employer to employee, and spent, without fees, or trust. There is no easier or cheaper way to transfer currency from person-to-person than bitcoin right now, except maybe an in-person cash transfer.
So how do we get the unbanked on bitcoin? Here’s where privilege comes in.
Using bitcoin right now requires either a patient guide or a fair amount of computer literacy. The gap in computer literacy between blacks and whites is nearly 20%. According to “Exploring the Digital Nation,” 76 percent of white American households use the Internet, compared with 57 percent of African-American households. In addition, people with some college experience and household income of more than $50,000, you know, the people who are most likely to be white and male, are high heavier internet users.
Not growing up in a white, middle-class household vastly decreases your exposure to computers and computer literacy.
As does being female. Women are told, subtly and less subtly that they don’t belong and aren’t needed in tech and bitcoin. True, there are people tellingwomen that they do belong. But messages of exclusion, and instances of harassment, however limited they may be, are extraordinarily powerful.
One more reason the privileged may get into bitcoin first is that they can afford the risk. The spectacular crash of Mt. Gox put millions of dollars of wealth into the hands of thieves. Not everyone can afford to put that kind of money on the line. But rather than paint people as villains for having the time and energy and risk capacity to get screwed by Gox, we should instead thank these people. Through their sacrifice we’re learning how to build a better currency, which, eventually, will tremendously benefit everyone.
Strasser doesn’t make bitcoin her beat. It’s understandable that there’s a lot about the complex currency that she doesn’t understand. But what Strasser clumsily points to are real challenges that will absolutely need to be overcome for bitcoin to really help the unbanked and reach widespread adoption.
Bitcoin enthusiasts don’t generally spend any time thinking about privilege. But greater computer literacy among the poor and easier-to-use interfaces, along with addressing tech’s gender problems should be a goal we all strive toward.
It’s not essential, or possible, that the privilege crowd fully understand bitcoin or that the bitcoin crowd fully understand privilege. What would be very helpful, however, is for both parties to admit the vast sums which comprise what they do not know.
As global popularity of Bitcoin grows, many Bitcoin companies are taking notice and expanding operations into other countries. Earlier this week, merchant payment processor BitPay announced the opening of its Latin America headquarters in Argentina. The expansion is one of the first for the Atlanta, Georgia based company and comes at an important time for the future of currency in the region.
In Argentina, BitPay will employ five software engineers in addition to business development manager, Alberto Liver Vega. “As a technology enthusiast, I see Bitcoin as a big opportunity for companies to gain a competitive advantage,” says Vega. “BitPay is the perfect match and the natural platform for businesses to be able to use bitcoin easily and risk free in a voluntarily, open source and decentralized way.” The company’s Latin American headquarters will be located within The Bitcoin Embassy Buenos Aires, which contains the Fundación Bitcoin Argentina and several other Bitcoin companies.
In a recent press release, BitPay also announced that Matias Alejo Garcia, nuclear engineer and founder of popular global movie recommendation site Cinefis.com, will lead the five-person development team in Argentina.
Bitcoin has enjoyed growing success within the region, which may be due to the instability of the Argentine peso, high e-commerce penetration, or the massive regulations surrounding purchasing US dollars. With these challenges, it is evident that change needs to occur and as Latin America’s adoption of Bitcoin continues to grow, the country is beginning to see the benefit of utilizing the new currency. Currently, a range of businesses within Argentina and throughout Latin America accept Bitcoin, including hotels, new publications and a large number of e-commerce merchants.
The expansion will allow the continued growth of Bitcoin in Latin America and help decrease reliance on the Argentine peso, which is expected to devaluate another 50% by the end of the year. In fact, the value of the Argentine peso decreased 17% versus the American dollar (USD) in January 2014. Additionally, inflation within the region has increased over 25% annually, further establishing the importance of a new store of wealth within the country.
In a region plagued by staggering inflation and continuously decreasing currency value, it seems Bitcoin makes perfect sense. What the virtual currency provides allows for decreased dependence on the peso, and will enable businesses and individuals in the region to achieve sustainable wealth and future prosperity.
We have only begun to see the effect Bitcoin will have on Latin America. Either way, as more and more countries continue to support the adoption of Bitcoin, we will get a realistic glimpse at how nations can benefit from cryptocurrencies around the world. Organizations like the Bitcoin Embassy Buenos Aires, Fundación Bitcoin Argentina and BitPay will help support prosperity in Latin America by helping companies gain competitive advantage and spread Bitcoin knowledge throughout the nation.
In a society that is increasingly reliant on mobility, the privacy of information is of utmost importance. Now, thanks to FreedomPop, there is a solution that gives mobile users government level security. With a platform that is based on privacy, FreedomPop’s Privacy Phone, nicknamed “The Snowden Phone,” allows mobile users to take advantage of encrypted mobile service.
The Snowden Phone is able to protect your privacy from hackers, government agencies and spyware, ensuring your internet, voice calls and texts are secure and encrypted. In a company press release, FreedomPop stated, “We launched the phone to specifically protect Americans’ privacy, thereby providing the peace and assurance [of] knowing your data is not being compromised. The phone is a response to the growing frustrations and concerns around privacy infringement, call monitoring and Internet tracking.”
For users, FreedomPop’s service can provide peace of mind and ensure private information remains in the right hands. “In light of recent violations in consumer’s privacy across social networks and mobile devices, privacy is becoming increasingly important to many Americans and we all have a right to communicate anonymously,” said Steven Sesar, COO at FreedomPop. “Large carriers don’t have the flexibility, desire or creativity to invest in privacy. We don’t agree with this approach and felt it was up to us to create a truly private mobile phone service at an affordable price.”
The Snowden Phone is one of the first of its kind and has benefits for both the common consumer and individuals in the many cryptocurrency communities. The platform behind the service leverages FreedomPop’s VoIP network, and allows for private communication, anonymous internet and online security.
To ensure private communication, FreedomPop utilizes 128-bit encryption, which helps encrypt calls and text messages, prevents online marketers from tracking web activity and defends against data monitoring and eavesdropping, amongst many other benefits surrounding communication privacy.
The service also can protect users with advanced mobile security that protects your device from viruses and malware attacks. Additionally, FreedomPop can protect privacy by blocking unsolicited calls and text messages, and blocks malicious and phishing websites from accessing and stealing confidential data. Also, all application and internet data is sent through a secure and encrypted virtual private network (VPN).
The Snowden Phone costs $189 and is built on top of the Samsung Galaxy II smartphone. Service comes with unlimited voice and text, plus 500 MBs of data for three months and costs $10 each subsequent month after that.
Although FreedomPop’s Privacy Phone may not be for everyone, there is no mistaking the importance of keeping your information out of the wrong hands. The nature of the information age makes anyone susceptible to confidential data theft and other attacks that spring forth from the increasing availability of sensitive personal information. What FreedomPop has provided is a solution to the problem, providing a device with built in VPN, anonymous voice and data, all of which can be purchased with Bitcoin.
Like Bitcoin, FreedomPop seems to support the same foundations that cryptocurrencies have been built upon – security and anonymity using a platform that allows for world-wide adoption. By shining light on the importance of information protection, this service could change the way we think of personal security, which can be extended not only to mobility, but also the conventional methods we use to pay for goods and services. http://www.freedompop.com/theprivacyphone
Over the past few months, Bitcoin Decentral, the new Toronto-based Bitcoin community center and coworkingspace that has been operational since the start of the year, has come to take center stage in the Canadian Bitcoin economy. Progress toward renovating and furnishing the upper floors of the four-storey house are well underway, and even now the location serves as the headquarters of KryptoKit, the Bitcoin Alliace of Canada, the organizing committee for the upcoming Bitcoin Expo and the Canadian arm of Ethereum as well as the site of a weekly meetup that attracts 50-100 attendees. The site is one of three similar locations in Canada, alongside the Bitcoin Embassy in Montreal and a smaller community center, also named Decentral, located in Vancouver, and the concept of a “Bitcoin embassy” is rapidly taking hold in countries all around the world. Now, Bitcoin Decentral has announced that it is launching its newest program: a Bitcoin and cryptocurrency 2.0-specific startup accelerator.
The program, entitled Bitcoin Decentral Accelerate, is a standard three-month startup acceleration program, in which participating startups will be able work together at Bitcoin Decentral and enjoy the benefits of specialized in-house legal counsel, shared office resources and the assistance of and a number of expert mentors, investors, and business owners experienced in the cryptocurrency space. Startups will receive these benefits, alongside an upfront injection of a yet-to-be-determined quantity of cash, in exchange for a seven per cent stake in the company, and will also be eligible for an additional larger investment at the end of the three-month program. Managing the Bitcoin Decentral Accelerate program is A. Traviss Corry, who previously managed the Toronto-based incubator program Incubes until a dispute with Incubes CEO Ben Zlotnick led to his departure. Also involved are Anthony Di Iorio, founder of Bitcoin Decentral, as CEO and William Mouyagar, founder of Startup Management as special advisor.
In addition, the program has signed up over 100 mentors, including:
Erik Voorhees, a long-time Bitcoin advocate well-known for his involvement in a number of Bitcoin startups, including BitInstant, SatoshiDice, KryptoKit and his current main project, Coinapult. Coinapult is currently a service for sending bitcoins by SMS and email, but intends to soon become a powerful international Bitcoin exchange.
Andreas Antonopoulos, a Bitcoin security expert and frequent speaker at Bitcoin conferences, also serving as a permanent co-host at the Bitcoin podcast Let’s Talk Bitcoin and more recently the Chief Security Officer at blockchain.info.
Tony Gallippi, founder and CEO of BitPay, a Bitcoin payment processor that allows merchants to accept Bitcoin payments and optionally have the funds immediately converted into local currency in their bank account, thereby instantly protecting them from all Bitcoin price volatility risk. The company charges processing fees of only 0.01-0.99%, and now has over 25,000 merchants signed up.
Jason King, founder of Sean’s Outpost, the now famous Bitcoin-accepting homeless outreach program in Pensacola, Florida, and the associated permanent shelter Satoshi Forest.
Although there have been several startup accelerator programs that have started including a Bitcoin component, Bitcoin Decentral Accelerate is the first in the world to be a cryptocurrency-specific program right from the start, and the first program or sub-program to specifically target ventures related to the rapidly growing concept of “cryptocurrency 2.0” – using Bitcoin-like cryptography and blockchains for more than just money, including applications such a decentralized domain name registry, smart property and smart contracts, cross-chain currency exchange, online democracy, custom branded currencies and blockchain-based financial contracts. The program is now accepting applications from startups; anyone interested in applying is enouraged to submit the application form at bdaccelerate.com at
The most exciting part of financial planning these days is exposing, educating and incorporating bitcoin into clients’ portfolios. But the confusion starts when clients go out into the world to start purchasing and trading the currency by themselves. Most clients return with a list of questions about how to best purchase bitcoin, which exchanges are the most reputable, and whether it’s better to purchase through a BTM or from someone online, or if there’s another way to go about it.
Here is a brief analysis on three ways to purchase bitcoin in Canada (and it’s also applicable for citizens of other countries!). You will need a bitcoin wallet to use any of these methods.
Tip!Please consult your financial planner or advisor before purchasing bitcoin to see if/where it fits into your financial plan.
BTMs: Bitcoin ATM’s
BTM’s are ATMs, but for bitcoin. The process is quite simple.
First, figure out if there is a BTM in your city (Google can help with this.) Next, go to your bank and withdraw the amount in cash that you will want to trade into BTC; because most, if not all, BTM’s do not currently allow us to use our debit or credit cards. We must still feed cash into the machine to buy bitcoin.
When you arrive at the BTM with your cash in hand, follow the straightforward instructions on the machine to verify your personal information. All financial transactions require what is called KYC compliance – “know your client” – so you will have to enter your mobile number, name, e-mail address, the like.
Next, link your wallet API key (example: 14BwoQ4d6kVZCkdCZnrnryjGeww8NzAVxQ) enter the amount of bitcoin you would like to buy, feed the machine the equivalent fiat (CAD, USD, etc) money, and you’re in! Congratulations! Ottawa, Toronto, Winnipeg and Vancouver are a few Canadian cities that currently have BTMs.
Pros: Very fast; very convenient.
Cons: Rates tend to be higher; BTM companies take a spread on the transaction; safety is challenging when carrying around large amounts of cash.
Tip! Consider bringing a friend with you when you go to the BTM if you are depositing a large amount of cash.
Peer-to-Peer:
This is really what Bitcoin was designed for – the direct transfer of value from one individual to another without a third party intermediary. You can buy and sell bitcoin to people by finding them through friends or on the internet. Use a site like Local Bitcoins to discover individuals who are willing to sell bitcoin to you. You can typically pay these individuals in person with cash (recommended!) or using many online methods, including Interac e-Transfer and wire transfers (but be careful, there are many reports of scams when it comes to online transfers.) That being said, Local Bitcoins is a Twitter community favourite and currently operates in over 5,280 cities and in over 215 countries, so there is likely a community near you to buy into.
Pros: Easy to find buyers/sellers. No fees. Ability to buy at different prices from a variety of different individuals. Many online and offline purchase options.
Cons: Sometimes people feel uncomfortable trading with others directly, due to lack of personal information. This lack of personal information can lead to law enforcement entrapments and potential fraud, scams and identity theft.
Exchanges:
Like buying and selling stocks, exchanges exist to buy and sell bitcoin and other cryptocurrencies. The most important part of using an exchange is really doing your research in deciding which exchange to use. Recently we have had some issues in the bitcoin world with two exchanges – Mt. Gox, which WAS located in Japan, and BitStamp, located in the UK; individuals were having problems taking their money out, and the sites suffered from what is called transaction malleability (which you can read more about here.)
Update!: Mt. Gox is now shut down. Please read here for a reputable Canadian exchange that you may want to consider. They allow you to send money from your bank account to their exchange.
Other exchanges that are popular include BTC-E and Coinbase. If you are a Canadian, you are unable to link your bank account to Coinbase.
Establishing an account with an exchange is similar to opening a stock account: sign up using your e-mail address, send in the required verification items (government issued ID, such as a drivers license, passport, SIN/SSN, etc.) and wait for your account to be verified. Some exchanges are now allowing us to link our bank accounts with their exchanges, but most will require you to wire money into them.
Tip! Once you’ve transacted into bitcoin or another currency, transfer your money out of the exchange and keep it in your own secure wallet.
Pros: Trade at any time, anywhere, usually in any amount. Assumed level of protection in working with a third party.
Cons: Fees. It takes time to open an account with a fairly lengthy verification process. Lack of regulation. If you don’t do your homework (or even if you think you have), you may still be subject to theft!
In early January, if you would have asked Overstock CEO Patrick Byrne when his company would reach $1 million in Bitcoin transactions, his response would not have been “in two months.” Of course, not all businesses could be so lucky, but as one of the largest Bitcoin merchants, Overstock has set the bar high, proving that Bitcoin can help achieve business growth and customer acquisition.
On Tuesday, Overstock.com announced that it surpassed $1 million in purchases using Bitcoin. This news came at an important time, further establishing the company as a leader in the e-commerce space. For many, Overstock and other large retailers gave people a reason to start using Bitcoin. Being able to offer an additional payment method gives merchants the chance to stand out in the crowd. And because individuals within the Bitcoin community enjoy trying new things, most businesses see increases in sales.
For Overstock and other merchants, the real value add comes from the potential to attract additional customers. In January, new and existing Bitcoin users were provided a source to spend their digital cash, a majority of which were new users. According to a company statement, “over 60 percent of sales were from new customers.” Additionally, more than 4,300 consumers made purchases using Bitcoin on Overstock.com in only two months.
What other currency could provide this type of growth?
Bitcoin allows businesses to engage with an expanding market, filled with passionate individuals willing to try virtually anything. For most within the Bitcoin community, Overstock.com was something they had heard of, but never used. When the announcement was made in January, Bitcoiners everywhere wanted to be part of the action. Although Bitcoin consists of less than a percent of the company’s sales, CEO Patrick Byrne is optimistic, stating in an interview that he expects Bitcoin sales to reach up to $15 million by the end of the year.
In addition to growing sales and new customers, Byrne also believes that over time, there will be a derivatives market for Bitcoin that allows commercial end-users like retailers to hedge their risk. This could create and establish a completely different business venture for Overstock, which could cause many other companies to follow suit. In a recent filing with the Securities and Exchange Commission, Overstock stated, “In the future, we expect to transact in Bitcoins directly and intend to hold Bitcoins. This will subject us to exchange risk which may have an adverse effect on our results.”
As one of the first major online retailers to accept the virtual currency, their support for the growth and further adoption of the Bitcoin ecosystem is obvious. Overstock currently holds ten percent of each transaction in Bitcoin, and in the future intends to offer it as payment for vendors and employees.
Overstock.com is a great example of how Bitcoin can revolutionize the way we do business. Bitcoin puts the power back into the hands of the business owner and can play a major role in a company’s growth, further establishing a global marketplace. The implications of virtual currency also give businesses the ability to securely transact with customers around the world. The example set by Overstock and the tens-of-thousands of Bitcoin merchants will assist in forging the path for future adoption of Bitcoin, for both e-commerce and brick-and-mortar businesses. Will Overstock reach $15 million by year’s end, or have they underestimated again?
In less than twenty days Auroracoin, Iceland’s own national cryptocurrency, will be distributed throughout the entire population of Iceland. The “Airdrop” commencing at midnight March 25th marks the first local cryptocurrency to be distributed country-wide. Will Auroracoin establish the trend of country-based cryptocurrencies? In reality, it seems to be the case, with local currencies like MazaCoin and private money like Evergreen, all centered on a combination of various cryptocurrencies.
Recently, the Lakota Tribe residing in areas of North and South Dakota have began adopting MazaCoin, a Bitcoin derivative, as its national currency. The confederation of seven Sioux tribes have created MazaCoin with the hope that it will help lift the tribe out of poverty.
MazaCoin is a fork of ZetaCoin and unlike Bitcoin, is inflationary, making it possible for new coins to be mined over time. This is a controversial aspect of the new virtual currency, but according to a recent Forbes interview with Bitcoin developer Payu Harris, “I think crypto-currencies could be the new buffalo. Once, it was everything for our survival. We used it for food, for clothes, for everything. It was our economy. I think MazaCoin could serve the same purpose.”
The Lakota nation has pre-mined 25 million MazaCoin as a national reserve, and an additional 25 million to establish a Tribal Trust, which will issue grants to local businesses and tribe members. Because MazaCoin is pre-mined, the computer power required is drastically reduced, making it more environmentally friendly and sustainable for the Oglala Lakota Nation.
What does it mean for citizens?
Local cryptocurrencies like MazaCoin and Auroracoin have the ability to give every citizen the chance of ownership. Currencies such as these allow for the future redistribution of wealth, especially in regions like the Oglala Lakota Nation. Additionally, country-based currencies also can spawn growth of local commerce. With MazaCoin, businesses and citizens can reduce their dependence on the dollar, and instead establish wealth that puts individuals in control.
For societies like many Native American tribes, poverty continues to be an issue. Within the community, many believe that this can be overcome by establishing local cryptocurrencies. For instance, Payu Harris believes that MazaCoin will help alleviate poverty by propelling the Lakota Tribe into the global market, stating in a recent interview, “This is going to be the next generation of payment processing, investments, currency transactions. We will become the working model for a world-wide embracement of cryptocurrencies in general.”
Much like Bitcoin, these currencies have the ability to make global payments possible and can redistribute wealth in ways that conventional means cannot. However, local currencies are under continued scrutiny and can pose many future challenges, both nationally and individually.
Disadvantages and challenges
Many question the implementation of local cryptocurrencies, and in tribal nations especially, the main challenge lies in the current volatility of virtual currencies. Some believe cryptocurrency is not the solution for tribes, simply because they can’t afford to invest in anything that consistently changes value. That being said, MazaCoin, Auroracoin, and Evergreen may be an exception. Because the value of each is supported by individuals within the country or region, the question of volatility may not carry much weight.
Another challenge, as we have seen with Bitcoin, is the challenge of government intervention. For communities like the Oglala Lakota Nation, having complete control of a local currency without the risk of government involvement is very important. “I want to get my people educated and show them this is the next level of finance,” Harris stated. “Let’s make the rest of the world play catch up. Let’s be leaders and rebuild the economy on our terms.”
A viable future?
Re-establishing a national economy based on cryptocurrency may hold the key to individual financial responsibility and decreased reliance on conventional stores of wealth. Countries like Iceland and the Oglala Lakota Nation are some of the first to make an attempt at the idea, and the future will only tell what becomes of local currencies.
The increasing individual support within these regions can help the acceptance of virtual currencies throughout the world. Whether you are a believer in pre-mining and eco-friendly cryptocurrencies, or you believe that Bitcoin is the only solution, constant innovation is a catalyst for progress. MazaCoin, Auroracoin, other local currencies, altcoins and Bitcoin don’t have to compete- instead, focus should be on a viable future, no matter the payment protocol.
This week Blockchain.info showed us just how easy it is to acquire a company. The company purchased the encrypted currency trading platform RTBTC, in what was the first 100% Bitcoin acquisition. From the buyout of RTBTC, Blockchain.info has launched the ZeroBlock trading platform, combining a world class currency trading platform with the most popular Bitcoin mobile app.
The undisclosed amount of the all-Bitcoin sale will be distributed over a period of time to compensate for the volatility of the virtual currency. This will allow for ZeroBlock, subsidiary of Blockchain.info and leading market price aggregator and news app, to completely acquire the company. Dan Held, co-founder of ZeroBlock and Director of Product of Blockchain stated in a recent press release, “Acquiring RTBTC was a perfect fit for ZeroBlock’s existing product. Our features and services are highly complimentary, and we are excited to bring additional functionality to our users.”
RTBTC was built by Clark Moody, one of the best and brightest in the Bitcoin economy, and after the acquisition, Blockchain hired him to head up product strategy and vision for ZeroBlock. The ultimate goal is to build a comprehensive trading platform for Bitcoin, an attempt to build “the Bloomberg of Bitcoin,” explained Blockchain CEO Nic Cary. ZeroBlock, which Blockchain acquired in December, hopes to be a professional-level trading platform with both mobile and desktop versions.
Since RTBTC launched in July 2013, the company has facilitated over $150 million in trading volume across multiple exchanges, further solidifying the decision for ZeroBlock to acquire the company. When paired with Blockchain’s over 1.1 million users, the platform that RTBTC adds to ZeroBlock will continue to allow the spread of information between individuals and create a unique approach to Bitcoin trading.
For both veterans and newcomers to Bitcoin, ZeroBlock has the ability of becoming the most popular trading platform based on reputation alone. The current ZeroBlock app has over 10,000 daily users and is the most downloaded Bitcoin mobile application, with over 55,000 downloads between iOS and Android. For users wanting unlimited trading, ZeroBlock Pro will provide unlimited trading and a mobile application that will eventually enable mobile trading, all for a monthly subscription of $20 per month.
Don’t worry iPhone users, the application itself might have a chance in the App Store, because Apple currently has a host of Bitcoin trading platforms within the app store. Time will tell if Apple and its notorious stance on Bitcoin apps will have an effect on the eventual mobile trading platform. Eventually, ZeroBlock may become the first mobile Bitcoin trading platform, which could drastically increase the continued adoption of virtual currencies.
The partnership between the three companies aims to provide users with a holistic and professional approach to Bitcoin, including trading, price data and news. According to Cary, “by merging a world class trading platform with the most popular mobile Bitcoin app, Blockchain will lead the way for institutional investors.”
Additional features of ZeroBlock were not made in the announcement, but there is speculation of support of additional exchanges and exciting trading features. This is exciting news for the Bitcoin ecosystem and has the possibility of establishing ZeroBlock as a trusted trading platform.
Will the acquisition propel the growth of Bitcoin?
Perhaps it’s best that Magic: The Gathering, An Online Exchange has now ungathered and lost its magic; it is sad that so many people have lost their fiat and bitcoin to this poorly-managed exchange. I trust this tragedy acts as a reminder to the bitcoin community to do our research and due-diligence in selecting and trusting a third-party entity with our money. It is far too easy for pretty-looking websites to consume our funds and simply vanish. Remember – we are the ones doing the feeding.
Despite our best analysis, businesses will always come and go. The best we can do as consumers is vet companies as best as we can and trust that all will go well. In the downfall of Mt. Gox, an exchange like Vault of Satoshi is a breath of fresh air. The Canadian-based cryptocurrency exchange exemplifies three key principles to success that all bitcoin businesses (and businesses in general) should embrace: clarity of purpose; effort to legitimize; and cooperation in the community. I believe that we bitcoiners have the power to demand that companies work on values-based models. Indeed, it is our duty as consumers to research and support businesses that do. This article will examine Vault of Satoshi from a high-level perspective and explain three aspects of their business operations that I believe are essential to all business practices.
1. Clarity of Purpose
A great business is built on clear and unshakeable purpose. With this clarity, a business can more easily navigate the downturns they are all sure to face. Purpose infuses their work with a sense of urgency, importance and care. Even though the computer screen, I can feel the passion Michael Curry and Ryan van Berneveld- the two founders of Vault of Satoshi – have for bitcoin: “we… care deeply about creating positive change in this world. We are eager to support new ideas that evolve us as a collective.”
Both co-founders believe that our current financial systems are broken. Their purpose is to change the world by helping drive Bitcoin adoption through empowerment: “So many of the problems we have in this world come down to wealth and wealth distribution,” Ryan explains. “Crypto-currencies can change the power structure of the world. It takes control of money out of the hands of the few and gives it to the many. Institutions have way too much power in the world to affect people’s lives, with very little oversight. Bitcoin, for me, is about empowering people.”
Having and remembering one’s purpose is the most important principle for success: it ensures your decisions are good ones and the path forward is an ethical and beneficial one. I believe Vault of Satoshi has a defined clarity of purpose.
2. Legitimacy
While important in any business, the legitimacy principle is especially crucial for Bitcoin businesses. Mike explains the emphasis legitimacy plays in VoS, even since inception: “At the start, we [hired] Andrea, our compliance officer. Right from the beginning, we have focused on following suit and keeping up with compliance documents the staff have to follow. We want to legitimize it,” Mike explains. Indeed, VoS is the first company to cooperate with Equifax, despite friction in the beginning. “We reached out to Equifax. They heard the word ‘bitcoin’ and said, ‘how about no? We’ll talk to you later’. It was a really quick call and I was pretty upset.” However, after sending their pile of compliance documents, Equifax called them back and said, “we’ve never seen this level of compliance from a bitcoin exchange.”
It is an exciting time to be involved in bitcoin, and it feels like things are moving at a breakneck speed. However, businesses fail when they move to market too fast. They can’t move forward in a sustainable way unless they take the time and necessary steps to create a solid plan and focus on legitimacy.
Legitimizing the bitcoin experience encourages adoption, as it removes some of the fear associated with the purchasing process. “[Fear of the process] is a big barrier for adoption,” Ryan explains. “A lot of people see it as sketchy, and it is kind of sketchy! A lot of these exchanges, you don’t really know what’s going on behind the scenes. Is this just a 13-year-old kid in his basement trying to run off with a bunch of bitcoins? And that actually happens! Exchanged have been launched in China that just shut down their doors and disappeared! We are trying to bring some legitimacy to this field.” Mike said this before Mt. Gox took their Japan-based website down last week.
Ryan and Mike are unsure about the regulations that are coming for bitcoin, but they believe the best way to legitimize it is to be at the forefront of the changes, and do “everything in their power to comply with everything.”
Let’s face it. It’s easy to trust a site that has a “trust” or “secure” badge on their site. Dig deeper and work with the businesses that are seriously building something around the principle of legitimacy. Businesses also need to take the time to develop a solid, functional, and safe site. Gaining legitimacy is a job for both consumers and businesses, and it is the second essential principle for business success. I think Vault of Satoshi has done a good job in building and sustaining a legitimate business and I believe they will continue to do so.
3. Cooperation
The last principle for business success is cooperation: cooperation internally, with shareholders, stakeholders, other players in the industry, and in the community. Indeed, Ryan contributes a “big part” of their success to community engagement: “We will respond to anything. Criticism and praise… We like to engage our users.”
This engagement, communication and spirit of cooperation is a key differentiator for VoS as a business, and one that sharply contrasts them from a business like Mt. Gox, who appears to have left a simple site up instead of actively engaging and responding to their hysteric clients who have no idea what is happening with their funds. However, it must be noted that Mt. Gox apparently had great customer support in the beginning, until they became busier. I assume that VoS will become much busier with time as awareness and adoption increases; I believe the exchange will scale their customer support to keep pace with the growing need.
There are aspects of Vault of Satoshi that I admire. Do you want to tour the facilities? Show up to their Brantford office. Their address is on the site. They’ll walk you around with smiles on their faces. You can meet all their team members; their pictures are also on the site. When you call the business, they pick up their phone. When you write in, they respond, usually within 24 hours. Would this business ever throw up a generic website, telling you not to contact them and to read the site for further news? I sincerely doubt it. I do get the feeling that if anything were to go wrong internally, they would actively be responding, instead of rebuffing efforts of the community they serve, like this. This kind of transparent, accessible cooperation is essential for a company to succeed, especially in a technology as vulnerable as bitcoin.
Furthermore, VoS is part of the bitcoin community. Have you been on Reddit? They’re all over it. They constantly engage their users. In fact, during the development of their site, they allowed users to “give it to the site, hack it” for 6 months so they could understand user experience, desires, concerns, reliability and safety of their exchange: “We gave everyone access to [the site], and now it’s open to you as a very safe, safe site. We have zero fraud and zero loss to date,” Mike explains.
This kind of active cooperation with the bitcoin community (as well as with other key players in the industry, like Equifax) achieves multiple things: it builds trust and confidence amongst the users of the exchange; it helps promote wider adoption, as the exchange is seen as reputable and willing to work with others to overcome the obstacles that Bitcoin faces; and it shows consumers that the business is receptive and flexible to feedback, so we work together to create the best bitcoin experience for us all.
If our purpose for being involved in bitcoin aligns with Mike and Ryan’s, we understand that the key to adoption is an easy, simple and trustworthy user experience. We understand that adoption is hindered when fear is present. There can’t be trust and confidence when we are scared of the process.
So, as a community, we need to search for and promote businesses that follow essential principles like the three described above. Bitcoiners, please do your homework before committing your funds to anyone, even a site that promotes trading “with confidence.” Unfortunately, that’s not enough. This homework – due diligence – will take time, but it may save us misery and money. To the bitcoin businesses out there, please ensure you are operating for good reasons. Bitcoin exists because of a network of people who want for something better. Help, don’t hurt. And remember that transparency and accountability is what this is all about.
To Mt. Gox: thank you for the lesson. To Vault of Satoshi, and others like you: here’s to the future of Bitcoin.
Disclosure: I called a handful of Greater Toronto Area-based businesses to interview them for Bitcoin Magazine and Brantford-based Vault of Satoshi was one of them. I did not have an account with them, trade with them, know them from anywhere before. However, after interviewing them and getting to know the owners and seeing their operation, I have opened an account with Vault of Satoshi and now trade within their platform to understand their operations more fully.
The mining of Bitcoin consumes 1,000 mWh of electricity every day, the energy which could be provided to 30 thousand families in the United States. The idea that enormous energy will be used by the Bitcoin network to simply solve mathematical questions has always been severely criticized. Satoshi remained silent on this problem, or maybe never considered it a real one. This is indeed not a problem, or supercomputers designed merely for this sake would be a reckless misuse of the electrical power needed by an electronic currency payment system, whose transaction volume exceeds that of Western Union, and would be considered a waste. Mining is done because it is profitable. Users will turn off their mining machines if the market value of Bitcoin shrinks to that of PPcoin, just like diggers in Pilbara Australia who stand idle during the slack season. If Bitcoin were worthless, mining machines would be as energy-saving as fireflies.
That being said, fans of the perpetual motion machine are still trying to create some environmentally-friendly crypto-currencies, represented by PPcoin (Peercoin), which uses PoS (Proof-of-Stake) for minting and transaction processing. Sunny King, its inventor, believes that the path of crypto-currency has forked into two; one is energy intensive and the other energy efficient. In a distant future (more than five years from now), the latter will begin to challenge the former with its cost advantage. Sunny King claimed to create the concepts of PoS and Coindays1 on his own, as early as October 2011. But just like the concept of PoW was not invented by Satoshi, PoS was not invented by Sunny King. The concept was actually raised in the Bitcoin community by Quantum Mechanic on July 11, 2011: The voting right no longer comes from the calculation power of miners, but aggregates in trustable representatives. New Bitcoins and transaction fees are distributed to these representatives either randomly or periodically.2
Cunicula believes that the reason Satoshi didn’t use PoS for Bitcoin is that before 2009 there was no digital property that could safely interact with cryptographic protocols. Paypal and online credit card payments have a history of more than 10 years but these systems are centralized, and the PoS created for them would provide opportunities for the suppliers of Paypal and credit cards to cheat.3 Cunicula’s criticism actually struck home, as these digital property authentications that are both environment-friendly and secured, are provided by some reliable third-parties, which are unexceptionally centralized. PPcoin and Nextcoin (NXT), disguised in the form of P2P, cannot avoid the problem of centralization, as they depend on those who have the largest stake to verify transactions in the network.
The delusion of PoS is that it is a superficial decentralized system, in which everyone could mine and the payment you gain for maintaining the safety of the network is only related to your coindays, instead of the actual performance of your computer.
An ideal decentralized authentication system should allow users to verify transactions by opening the client willingly, otherwise it is not sustainable. A motivation mechanism is set in PoS, not by asking verifiers to accomplish a certain amount of calculation, but by requiring them to show the ownership of a certain amount of money. Sunny King even believes that PoS exhibits a philosophical sense of aesthetics, as money itself means a proof-of-work to the past. So logically speaking, PoS could replace PoW.
The mistake made by Sunny King here is that in the PoS system it is not sustainable for everyone to mine, which can create winner-take-all scenarios. Let’s say the cost of electricity is 3 coins. The 10,000 coindays of Big User gives him 100 coins for interest, while the 100 coindays of Small User gives him 1 coin for interest. Coins gained by Big User are much larger than Small User, and consequently Small User would be inclined to close the client, while Big User would be inclined to aggregate coindays and obtain more coins for interest, which is a fatal equilibrium. (Table 1)
So this is PoB. If you don’t use these coins, they would be destroyed in some unusable transactions and after a while, would be used to create a new block. If you open the client to verify transactions, you would obtain new coins or transaction fees, the value of which is higher than that of the coins destroyed. Let’s still say that the cost of electricity is 3 coins. Big User loses 100 coins by holding 10,000 coins in a certain period, during which Small User loses 1 coin by holding 100 coins. Otherwise Big User receives 120 coins by mining while Small User receives 2 coins. So if you are Big User, you must always have the client open to mine, while Small User will be more than happy to take a lift. (Table 2)
We could tell from the analysis above that neither PoS, PoB or PoD are a real decentralized currency, as fatal equilibrium could be found in all of them, namely the centralized big-user mining mode. These are all variants of the Boxed Pig Game. Assume that a big pig and a piglet are put in a box. A lever is set at one end of the box to dispense food into a trough at the other end, so that the pig that presses the lever must run to the other end to eat. Let’s say that whenever the lever is pressed 10 units of food fall into the trough, and the one who presses the lever first pays 2 units of food. If big pig arrives at the trough first, the ratio of food gained by the big pig and the piglet is 9:1. If they arrive at the same time, the ratio is 7:3. If the piglet arrives first, the ratio is 6:4. Given that both are wise, the best result would be if the piglet chose to wait. (Table 3) No matter if the big pig chose to move or wait, the piglet’s best choice is to wait. In environmentally-friendly crypto-currencies, the payment of verifying transactions is positively correlated to the amount of coins (or coindays) owned by users, and not related the cost of electricity. So no matter if the Big User chooses to open or close the client, the best strategy for Small User is to close the client.
A good friend questioned that the amount of coins owned by Big User are indeed increasing, but their proportion to the total amount of coins remains unchanged, as everyone’s coins are increasing proportionally. I must make additional remarks that people’s demand is not a linear function curve, but a convex one. The increased rate of utility is diminishing with the increase of revenue. (Graph 1) For example, let’s say someone dispersed money proportionally. The rich could receive 10,000 coins while the poor could receive 1 coin, as long as they open the client. Obviously, the poor do not have enough desire to receive the money but the rich would be happy to, which would also lead to centralization. For someone who owns only hundreds of PPcoins, it makes little difference to open the client or not. But for those owning hundreds of thousands of PPcoins, it makes a huge difference.
Gavin Andresen, the chief scientist at the Bitcoin Foundation, made a concise comment, as he wrote on Twitter: “I think proof-of-stake is hard coded, ‘the rich get richer’ and is deeply unfair. The supporters of PoS argue that [with Bitcoin,] the rich could invest more on mining equipment and gain more bitcoins by mining, which is the same ‘the rich get richer’ system.”4
The answer is that in Bitcoin mining there is an economic question related to the cost of electricity and hardware. Miners cannot increase mining power endlessly, and the soaring difficulty only leads to increasing costs. The gains from mining would be far less than paying for the machines. There is no eternal winner in the mining competition. ASICMINER, which previously controlled 20% of the market share, now controls less than 1%.
Here I propose a ternary paradox, that the natures of decentralization, security and environment protection constitute an impossible trinity. (Graph 2) A crypto-currency which is both environmentally-friendly and secured would definitely need to be centralized, like PPcoin, Nextcoin and Ripple. These coins either contain aspects of centralized structure, or their decentralized structure is not sustainable, with a Paypal-like centralized verification mechanism. A crypto-currency which is both environmentally-friendly and decentralized would be unsecured, like P2P currencies of ‘one-IP-address-one-vote,’ which are already excluded by Satoshi. He believed that if the majority were based on ‘one-IP-address-one-vote,’ it could be subverted by anyone able to allocate many IPs.5 If one designs a secured decentralized currency, it must come with the cost of consuming energy and calculation power. PoW is the first solution to construct a verification system in the form of decentralization, and will probably be the only one.
LONDON, ENGLAND — London Theatre Direct Ltd, a leading online ticket retailer, announced that the company will now be accepting Bitcoin payments for tickets to the best theatre London has to offer. The company is the world’s first ticket agency to offer customers the ability to pay for entertainment using the sought after virtual currency.
London Theatre Direct is focused on providing tickets to the world’s most popular stage shows, including musicals, plays, opera and ballet, in addition to some of London’s popular attractions. As Bitcoin continues to explode in worldwide popularity, London Theatre Direct is poised to lead the way in supporting the Bitcoin ecosystem.
“Bitcoin is an exciting, experimental, decentralized digital currency that enables instant payments to anyone, anywhere in the world,” London Theatre Direct Managing Director Francis Hellyer stated. “We want to embrace new methods of accepting payments online.”
The company will utilize BitPay’s Bitcoin Payment Gateway API to provide customers with a Bitcoin payment solution at point-of-sale. London Theatre Direct can help drive the acceptance of Bitcoin at a worldwide level, enabling theatre lovers and tourists to spend Bitcoin on real, tangible and high-quality products. The company is among the first in the United Kingdom to accept Bitcoin as payment, which can help drive continued adoption of Bitcoin across all platforms and business sectors.
In the months to come, London Theatre Direct plans to accept other emerging digital currencies, continuing their support of crypto-currencies and the future economy. By accepting Bitcoin, the company will be able to expand their payment network and reach customers at a global scale, while eliminating fraud and security risks often associated with other payment methods.
Hellyer stated, “It is our belief that the costs saved by more and more people adopting payment methods like bitcoin can be passed directly on to our customers, resulting in cheaper prices and more secure, faster and more mobile-friendly transactions.”
Customers can enjoy discounted tickets to London’s most crowd-pleasing entertainment, including perennially popular shows like Disney’s The Lion King, Wicked, The Phantom of the Opera, Billy Elliot, Thriller Live, Les Miserables and Mamma Mia! London Theatre Direct connects directly to many London theatre box offices, providing customers with a full range of ticket pricing and availability, in real-time.
“Although Theatreland is typically a little slower on the uptake of newer technologies, we have been pushing very hard over the past few years to set an example to the industry by experimenting with new technologies [like Bitcoin].”
The announcement further establishes Bitcoin as an emerging and popular payment method for e-commerce and brick-and-mortar businesses throughout the world. London Theatre Direct is proud to take their small part in promoting the adoption of bitcoin and offering London theatregoers more options to pay for their tickets.
About London Theatre Direct
London Theatre Direct is a leading provider of theatre tickets. Established in 1999, londontheatredirect.com was one of the first websites to sell theatre tickets online in the UK. Fully bonded, official agents, London Theatre Direct Ltd is a full member of S.T.A.R. (The Society Of Ticket Agents And Retailers, recognised by the Society Of London Theatre, Metropolitan Police, Westminster Council and the UK Office Of Fair Trading).
Late Thursday evening when Gil Luria of Wedbush Securities and I announced on Twitter that Fortress Investment Group (NYSE: FIG) is probably the first public company to purchase and hold Bitcoin, there was an additional filing that same evening I made note to review. This filing with the Securities and Exchange Commission was the annual report (10K) for SVB Financial Group.
SVB Financial Group offers “diversified financial services through Silicon Valley Bank, SVB Analytics, SVB Capital, SVB Global and SVB Private Bank, SVB Financial Group {which} provides clients with commercial, investment, international and private banking services. The company also offers funds management, broker-dealer transactions and asset management…Headquartered in Santa Clara, Calif., SVB Financial Group (Nasdaq: SIVB) operates through 27 offices in the U.S. and international operations in China, India, Israel and the United Kingdom.” SVB has $23 Billion in assets and over 1,600 employees (and this video shows that it can be a fun place to work).
John Lee, VP SVB Accelerator Group was interviewed (YouTube) at the GigaOM Structure 2011 and said that they are working with 1,500 seed stage companies in the Bay area alone and the bank works with 10,000 clients across the country. According to a San Jose Mercury news article from 2011, SVB is a “behind-the-scenes player in the creation of more than 30,000 startups.”
Under the section “We face risks in connection with our strategic undertakings and new business initiatives,” SVB disclosed that:
“We are focused on our long-term growth and have undertaken various strategic activities and business initiatives, many of which involve activities that are new to us, or in some cases, experimental in nature….We are also expanding our payments capabilities to better serve our clients, including innovating new electronic payment processing solutions, developing new payments technologies, and exploring new evolving payments systems, such as virtual currencies known as ‘bitcoin.’”
I’m a bit perplexed by the way this is written. SVB is no stranger to Bitcoin and therefore should know that there aren’t various currencies known as bitcoin. Perhaps the filing should have read as follows? “..exploring new evolving payments systems, such as the virtual currency known as ‘Bitcoin.’
It has been well established that Bitcoin companies and entrepreneurs have difficulties obtaining bank accounts. However, SVB is one of the first U.S. Banks that has been willing to work with Bitcoin businesses…or is it?
SVB appears to have a history of interest in companies engaging in alternative currency issuance. A SVB Showcase YouTube video from October 2011 has an SVB Accelerator interview with Bob Bagga, CEO, BizXchange. BizX is a “Social Commerce platform that uses our private and complimentary [sic] currency, the BizX $ to support and grow commerce in B2B, B2C and C2C; svb.com.”
The bank does provide traditional forex services as detailed in its regulatory filing:
“… These products and services include foreign exchange services that allow commercial clients to manage their foreign currency needs and risks through the purchase and sale of currencies, swaps and hedges on the global inter-bank market.”
Moreover, In August 2011, SVB announced an Internet Payment System to help companies sell overseas by collecting “foreign payments of all major types or currencies.”
However, Bitcorati.com, “a global directory and rating system for the people and businesses involved in Bitcoin”, tried to open a bank account with SVB last October and was declined for the following reasons:
“We circled internally with our regulatory group and I’m afraid our concerns were correct. At this time SVB cannot initiate any new relationships or accounts for companies that receive BitCoin [sic] for any form of payment…”
I guess when Greg Becker, President and CEO of Silicon Valley Bank said (YouTube) that ”We work with the coolest companies of any bank globally,” doesn’t necessarily include companies involved with everyone’s favorite cryptocurrency, Bitcoin.
SVB’s caution isn’t without merit. If you carefully read SVB’s response to Bitcorati, they state that they will not initiate any new relationships or accounts and this implies that there are or were pre-existing relationships and indeed there are (and “were”).
In “Bitcoin Exchange Deal Repatriates Assets To U.S.CoinLab” Jon Matonis explained in Forbes how CoinLab announced that it would be taking over Mt. Gox’s U.S. and Canadian based trading accounts and that it would “not have been possible without a solid and willing financial institution in the United States {ie. Silicon Valley Bank}”. Teri Buhl of Bitcoin Magazine noted the goal was to move customers’ money from overseas to Silicon Valley Bank. It was set up as a revenue sharing arrangement between CoinLab and Mt. Gox and CoinLab would in part use Mt. Gox’s pre-existing infrastructure. CoinLab detailed for its first 100 alpha customers that they would be “Withdrawing by wire from SVB (details will be on your account page).”
Shortly thereafter the relationship between Mt. Gox and CoinLab collapsed and CoinLab filed a formal complaint in Federal Court against Mt. Gox seeking $75 million in damages.
Coinlab CEO Peter Vessenes wrote a personal statement regarding the lawsuit and hinted that things might not be kosher at Mt. Gox:
“…Bitcoiners have, on average, lost more money due to technology difficulties, frozen / lost banking relationships and shady characters like pirateat40 than due to any part of Bitcoin’s fundamental economics…”
It is possible that during the due diligence stage between these companies accounting irregularities at Mt. Gox were first discovered (not necessarily by CoinLab nor SVB). CoinLab said that “We’re working a plan with Gox that may end up allowing them to hold the ‘hot wallet’ coins and leave cool and cold storage in our secure environment. We’ll know more soon.” Although not mentioned specifically in the lawsuit, I am guessing (i.e. conjecture on my part) that Mt. Gox’s inherent inability to transfer Bitcoin in cold storage to CoinLab and a proper accounting of Bitcoin sunk the deal.
The lawsuit does mention that “{Mt. Gox} failed to timely reconcile revenue and customer trade imbalances…” and “…failed to timely deposit Liquidity Funds in the manner instructed by CoinLab” and “…”failed to deliver all passwords,Yubikeys, administrative logins and any other security information required so that CoinLab may assume operation of the Bitcoin exchange services for customers in the United States and Canada in case of a service interruption.”
Back to SVB…
To put SVB further into context for those unfamiliar with the bank, SVB Capitals Strategic Investors Fund V-A, LP Third Quarter 2012 Report to Limited Partners (PDF) explains that one of SVB Capital’s biggest deals include Facebook’s $16 Billion Initial Public Offering in May with Accel Partners which according to “Who Owns Facebook” owns 10% of the company. Looking further into the document we find fund commitments from “Andreessen Horowitz Fund III, LP” and the “Andreessen Horowitz Parallel Fund.”
In Marc Andreessen’s article for New York Times “Why Bitcoin Matters” received an editorial note that “Marc Andreessen’s venture capital firm, Andreessen Horowitz, has invested just under $50 million in Bitcoin-related start-ups. The firm is actively searching for more Bitcoin-based investment opportunities. He does not personally own more than a de minimis amount of Bitcoin.”
ACH or “Automated Clearing House” services for Coinbase appear (odd to see this term/disclaimer used) to be provided by SVB. And it was announced in December that Coinbase Raised $25 Million From Andreessen Horowitz.
For now it appears that one has to have access to high profile venture capital firms such as Andreessen Horowitz if they want to pitch their their Bitcoin business to SVB. Perhaps a quarterly filing by SVB this year may shed more light on their Bitcoin experimentation.
Last December, I noted in my blog a 10-Q filing by ITEX (OTCQB:ITEX), a bartering system/marketplace which facilitates cashless transactions, in which Itex warned in its quarterly report that “Bitcoin, Litecoin and Ripple may Cause it to Lose Revenue” and that “new focus on Virtual Currencies by regulators may have ‘spill over’ into Itex’s Business.” Last week ITEX went on to announce that it was the “First Trading Community to Accept Bitcoin.” If you can’t beat them, join them I guess. I’m not sure if this is also SVB’s mantra because the message was kind of cryptic.
We stand poised on the cusp of something altogether new. A huge percentage of the human race is either “unbanked” or “underbanked”, that is to say that maybe half of humanity either does not have a bank account of any sort and/or makes limited use of banking institutions or uses other non-bank institutions or informal financial services to conduct their financial affairs.
There are a variety of reasons for this. Many hundreds of millions of people live in rural and urban areas of developing or underdeveloped regions where there simply are no banks. They live in societies with poorly developed financial service sectors and there may be no banks in the towns and villages where they live. Or maybe there is a bank, but the bank may require documentation to establish an account that simply does not exist. In many areas of Asia, Africa and Latin America there simply is no door-to-door mail delivery. There is therefore nothing corresponding to a mailing address. Many streets and alleys do not even have names. Beyond that, there may not even be electrical service, no gas service and no municipal water or sewer service.
So when a commercial bank, for example, requires potential customers to bring in a paid utility bill with the resident’s name and address on it, or a pay check stub with their name on it, to establish a new account, for many millions of Africans, Asians and Latin Americans, that is a complete impossibility. Where they live there are no street names, the houses and shacks have no numbers, and there is no mail delivery, and perhaps no electricity or gas or water or sewers, either. Additionally, they may work on an informal, cash basis, in a day labor arrangement. So they simply cannot provide pay check stubs and utility bills. These simple realities of daily life constitute insurmountable barriers to entry into the formal economic system for a very large percentage of humanity.
It is not surprising, therefore, that research conducted by McKinsey & Company and The Financial Access Initiative has shown that fully 2.5 billion members of the adult population of this planet do not use banks or microfinance institutions for either savings or loans. Almost 2.2 billion of these individuals are in Africa, Asia, Latin America and the Middle East. That is half of the world’s adult population.
But this phenomenon of being “unbanked” or “underbanked” is hardly restricted to people in countries on the periphery of the so-called “developed” world. Even in the USA, 28.3%, or more than one in four households, are “unbanked” or “underbanked.” They either do not have bank accounts at all, or only partially use formal banking institutions to meet their financial needs. They avail themselves of other arrangements such as money transfer services, check cashing outlets, supermarket bill paying counters, prepaid debit cards, and the like.
These Unbanked Masses Are Ripe For Bitcoin-Based Financial Services
The abject, unabashed failure of the formal, commercial, central-bank-based financial services sector to serve fully half of humanity represents a tremendous opportunity for Bitcoin visionaries and entrepreneurs. It is not a question of taking market share from the commercial banks. It is a question merely of offering financial services – in some cases for the first time — to a vast, unserved and underserved segment of the global population that the commercial banks have not bothered to concern themselves with.
That represents a massive opening for Bitcoin, a decentralized, digital, global, rapid, crypto-currency that is well suited to operations out of the orbit of the commercial, central-bank-based financial services sector.
All of the pieces of the puzzle are already present on the global playing board to do this. It but remains for the Bitcoin community to assemble them in a slightly different way, and the effect on global finance could shift very powerfully and quickly to the advantage of the half of humanity who have been largely shut out of normal commerce and economic activity.
Bear with me for just one moment. It all has to do with the marriage of the burgeoning network of mobile communication devices (cell phones, tablets, etc.) and the Bitcoin network and technology.
In other words, the very regions where there are teeming millions of “unbanked” and “underbanked” adults, are the same regions where mobile phone use is all but universal.
Clearly, for Bitcoin as a decentralized, global, digital, crypto-currency, the vehicle to penetrate this vast market is via the hand-held mobile communication device – the mobile phone, cell phone, tablet, call it what you will. The culture in the underdeveloped and developing countries the world over has already resoundingly embraced cell phone technology. In less than two decades the humble cell phone has completely penetrated global society, from Bolivia to Namibia to Madagascar to Indonesia.
The challenge for Bitcoin developers is to bring basic Bitcoin functionality to the ordinary cell phone. Bitcoin applications need to be developed that are configured to use the USSD protocol and the SIM card. The global Bitcoin network is here and growing. Near universal adoption and use of mobile telephones is also here, east to west, north to south. The task is to marry the two and open up a vest, untapped market. If the USSD protocol and the SIM card stand in the way of making Bitcoin easily available to a couple of billion new users, then the best technical minds in the Bitcoin community need to resolve those issues, in consultation with the major cell phone companies. In the case of Latin America, that would include at least Claro (América Móvil) and Movistar (Telefónica). These are two of the largest cell telephone companies in the world. In Africa, the major cell phone providers are Vodafone, Telefónica, Airtel, Orange, Beeline, MTN Group, Etisalat and Qatar Telecom. In Asia there are many providers, but India’s Bharti Airtel seems the obvious potential initial Bitcoin collaborator, due to its size globally and its massive penetration of the Indian subcontinent, and also African, cellphone markets. Crack the Indian, Latin American and African cell phone markets and the world will lie open before Bitcoin. The key is to integrate cell telephone technology and the Bitcoin network. Once one of the major global cell phone companies, such as Airtel or Telefónica, buys into the Bitcoin concept it will radically alter local and international commerce.
M-Pesa Shows the Way
Beyond that, a unique, mobile-phone-based payment and financial services system in Africa has already shown the way for Bitcoin. The M-Pesa system in use in East Africa lets people use their cell phones to deposit, withdraw, send and receive money. There are no banks in the transaction. The mobile phone companies host the service. The money is stored in an account on the cell phone. It is a peer-to-peer payment service. There are 17 million users in Kenya alone, and 5 million in Tanzania. The service has even recently been introduced into Afghanistan.
This is the model for Bitcoin. The M-Pesa system (pesa means money in Swahili), has obvious implications for Bitcoin’s future. Indeed, I would say that if Bitcoin does not very rapidly go this route that it is destined to wither and die.
Bitcoin visionaries and entrepreneurs must move quickly and decisively, along the lines being sketched out here. Why not develop a Bit-Peso system for Latin America, Spain and the Philippines, for example? Seven Latin American countries and the Philippines currently use the “peso” as their national currency. Eleven other Latin American countries used the peso in the past, as did Spain. Two African countries also used the peso in the past. So the moniker, Bit-Peso, could have reflexive cultural resonance in Latin America, Spain and the Philippines, as M-Pesa does in the Swahili-speaking region of East Africa. For that matter, why not a Bit-Pesa for East Africa, a Bit-Franc for French Africa, a Bit-Dinar for the Middle East?
Bitcoin as we know it now is very “techie” and computer “geeky”. That has to change and fast, or it will not and cannot be used by the great masses of humanity. Applications must be developed that are very secure, always, every time, but that are non-techie, non-geeky, and user friendly for the typical person in the developing world who can operate a cell phone, but knows absolutely nothing of computer programming, algorithms, hashes, the block chain, cold wallets, secondary authentication, etc.
The whole process must be made as streamlined and easy as taking a picture with a cell phone, or texting a message.
Or like using M-Pesa in Kenya and Tanzania. That’s the model. If the Bitcoin community can take the East African experience and modify it for global use, by marrying Bitcoin, mobile phone use and the commerce of everyday life at the face-to-face level, then it will have mass acceptance and sweep like a wave through Latin America, Africa and Asia.
Self-disclaimer: I live in South America, on a street and in a neighborhood where there is no daily, door-to-door mail delivery. I also have rarely used banks for more than ten years, among other reasons because I have little money; consequently I do not have any money in any bank, do not have a credit card and probably could not get a bank account or credit card either, for some of the same reasons I have set out above. I do not have a job in the formal economic sector, so I cannot supply a pay check stub. I also do not pay a water or electricity or gas bill, as I live in a small rented room. So I cannot provide a utility bill in my name either.
However, I do have a cheap, prepaid cell phone. And I do at this moment have a small fraction of one Bitcoin.
So I myself am very much a part of the unbanked and underbanked half of humanity that has a cell phone, and could potentially benefit from the very Bit-Peso scenario that I have developed in this article.
Businesses large and small continue to adopt Bitcoin as a trusted payment method, both in e-commerce and brick-and-mortar spaces. BitScan hopes to lead the continued global adoption and aims to help users learn about Bitcoin, make connections within the market and grow the Bitcoin community through a unique platform. Following the release of the company’s iOS application that combines Bitcoin knowledge with interactivity, BitScan announced it will move forward with the development of the BitScan app for Android. The company has since launched a crowd-funding campaign to assist in the development of the application, which in the end hopes to increase exposure to merchants and further launch Bitcoin into widespread adoption.
The new application will also include the world’s largest Bitcoin Directory, currently consisting of over 6,000 businesses throughout the world. Rob Wilson, CEO of BitScan stated, “we remain convinced that promotion of Bitcoin commerce remains the key to mainstream bitcoin adoption and we are pulling out all the stops to make this happen.”
BitScan made the announcement in a recent press release:
SYDNEY, AUSTRALIA — February 2014 — BitScan has launched a crowd-fund campaign to help finance an Android version of their Bitcoin Directory App, which includes the largest categorized and mapped directory of Bitcoin businesses on the planet, now contains over 6,000 businesses covering more than 130 countries. Five days after launch on Max Keiser’s new crowd-funding platform, StartJOIN.com, pledges hit $6,000, exactly one third of their $20,000 target.
Just five days from launch, pledges have already hit $6,000, underlining community interest in a project aimed at promoting commerce throughout the Bitcoin ecosystem.
In parallel with this project, which is scheduled for completion early in Q2 2014, the BitScan team are forging ahead with optimization of their iOS App and website (http://bitscan.com) to support efficiency, speed and scalability. An ambitious product development schedule aims to deliver a series of enhancements for both consumers and businesses throughout the year.
A fundamental component of BitScan’s strategy is making their rapidly growing database available to third party developers, for integration in their own products. BitScan aims to make this possible via customized API access, in order to provide wallet developers, news and consumer sites with the possibility of integrating directory data within their own offerings.
In partnership with BitPay, another component of their strategy involves the development of Trust IP, which can be deployed to boost consumer confidence in online Bitcoin commerce, with businesses and peer-to-peer.
The Sydney-based team believe a key to mainstream bitcoin adoption lies in the promotion of bitcoin commerce. BitScan’s apps and website are the first step as they strive to make a positive difference throughout and beyond the Bitcoin community.
Anyone wishing to help them in this quest can view their crowd-funding campaign at www.startjoin.com/bitscan.
Another brand new product hot off the shelf works with Google Glass and allows consumers to pay with Bitcoin by simply nodding twice. This technology is called EAZE, and is supported by software that matches the name. Paying with Bitcoin just got easier.
Imagine sitting in your favorite restaurant and instead of being presented with a check, you are presented with a QR-Code to complete your transaction, without interrupting your conversation. Simply say “make a payment” and EAZE recognizes the command, scans the code via Google Glass and pays directly from your Bitcoin wallet. EAZE combines the simplicity of mobile payments with futuristic technology, and provides a streamlined approach to completing Bitcoin transactions at the point-of-sale.
Although many have yet to get their hands on Google Glass; the price point alone makes some of the most technologically inclined run for the hills. However, when paired with EAZE, Google Glass users are given yet another reason to don this wearable technology. Initially launched at the “Wearable Wednesday” event in Barcelona, EAZE answers the question “what if you could nod to pay for anything?”
In a recent press release the company explained, “the service demonstrates how frictionless payments work when the right technologies are combined.”
How EAZE Works
EAZE combines Bitcoin and Google Glass with a Bitcoin enabled wallet stored directly on the device. A user simply states, “OK Glass, make a payment” and Google Glass scans the QR code of any Bitcoin enabled Point Of Sales (POS) application. The transaction details appear on the display of the wearable tech and the user completes the transaction by nodding twice to confirm the payment.
For merchants, EAZE provides a POS application for accepting Bitcoin payments. The application follows the same philosophy of frictionless payments. To receive payments with EAZE, the merchant downloads the mobile application (available for iOS and Android) and adds a logo. An account is created automatically and the merchant is ready to accept Bitcoin in minutes.
The combination of these services when paired with the Bitcoin protocol will allow for greater interactivity between the merchant and consumer. In fact, after a payment is successful, the user can decide to “follow” the merchant. EAZE enhances the relationship between businesses and consumers, and very well may forge the path for future frictionless payment platforms. However, much like any new Bitcoin payment method there is always a question of payment security. What makes EAZE secure?
Security and Usability
Due to the nature of frictionless payments, there must be a way to keep funds secure that is integrated into the software. Much like many other Bitcoin storage methods, all Bitcoin deposited in the EAZE wallet are stored in a deterministic wallet that is unlocked locally with a passphrase. According to EAZE, “the wallet exists only in the memory of the user’s Glass, so the funds are never accessible via the server.” This technique gives the user full control and possession of their digital currency.
In addition to wallet security, “Nod to Pay” spending limits can also be set, similar to daily transaction limits set by banks or any normal wallet holding offline cash. Any amount that exceeds the “Nod to Pay” limit requires additional security, in the form of a PIN code, to confirm the payment.
A Frictionless Future?
Five years ago, contact free payments were just being introduced, with many using technologies integrated into credit or debit cards and other digital payment platforms. Bitcoin and other digital currencies, however, changed the way we think about making payments both online and in-person.
“Payments in the future are a combination of software, wearables and gestures. Technology now enables us to create completely new ways to pay. We no longer need debit or credit cards to authenticate. Instead, wearables like bracelets, rings and Google Glass can identify us. Authorizing a payment can also be done with simple gestures,” EAZE co-founder Raimo van der Klein stated.
EAZE can open the door for many other frictionless payment systems, by pairing wearable technology with mobile payments. For Bitcoin, transactions via wearable-tech like Google Glass enable businesses to complete transactions with ease. I believe we have only seen the beginning, with companies like EAZE, Nymi and many other companies working to provide consumers with additional ways to make secure payments with Bitcoin.
This article is a review of the current FinCEN administrative rulings as they apply to the use of virtual currencies in the United States. FinCEN first started contemplating virtual currencies in March 2013 when they released FIN-2013-G001. Their original ruling did not consider users of virtual currencies to be dealers in foreign exchange, which was a positive outcome because being a dealer in foreign exchange brings with it significant compliance requirements. There was, however, one paragraph in FIN-2013-G001 that was both unexpected and problematic. In section c., FIN-2013-G001 read:
“A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.”[1]
A plain reading of this language could only lead one to conclude that a miner who creates virtual currency and sells it to another person is acting as a money transmitter. Fortunately, this problem seems to have been resolved by the recent “Atlantic City Bitcoin Ruling”, which has now been formally published by FinCEN as FIN-2014-R001. This new ruling supersedes the earlier one:
“To the extent that a user mines Bitcoin and uses the Bitcoin solely for the user’s own purposes and not for the benefit of another, the user is not an MSB under FinCEN’s regulations, because these activities involve neither “acceptance” nor “transmission” of the convertible virtual currency and are not the transmission of funds within the meaning of the Rule. This is the case whether … the user is purchasing goods or services for the user’s own use, paying debts previously incurred in the ordinary course of business, or (in the case of a corporate user) making distributions to shareholders.”[2]
The above paragraph is significant. It says that, so long as a user is “using Bitcoin” (i.e., selling it) for their own purposes, then they are not engaged in money transmission and are not considered to be a money transmitter (and do not need to register as an MSB under FinCEN’s regulations.) The paragraph even allows that a general partner who is mining on behalf of a limited partnership can make partnership distributions (whether in Bitcoin or in dollars) without being engaged in money transmission. There is, however, still a gray area here: it is not clear whether or not an agent who is mining Bitcoin for another user becomes a money transmitter by making a distribution to that user. The answer probably depends on the legal structure of their relationship. We hope that FinCEN addresses this question next because it affects many existing business models in our industry.
The Atlantic City Bitcoin Ruling was formally published by FinCEN on January 30th, 2014, along with another ruling, FIN-2014-R002[3]. The first ruling dealt with miners. The second applies the same sort of logic to traders. These rulings not only describe the conditions in which miners and traders might become money transmitters, they also apply themselves more broadly to all virtual currency users:
“How a user obtains a virtual currency … is not material to the legal characterization [of the user] under the BSA … What is material to the conclusion that a person is not an MSB is [the question of] what the person uses the convertible virtual currency for, and for whose benefit.”[4]
This is a positive result for the Bitcoin industry. Although we still have an incomplete picture of the regulatory landscape, we do know two things: 1) So long as a person is buying or selling Bitcoin for their own benefit, they are not acting as a money transmitter, and 2) FinCEN is working hard to identify and address potential issues in our industry, and they will give you guidance if you ask for it. We encourage anybody who has questions about their own situation to contact FinCEN directly.
In the last installment of this series, we talked about what “smart contracts” (or, perhaps more accurately, “self-enforcing contracts”) are, and discussed in detail the two main mechanisms through which these contracts can have “force”: smart property and “factum” currencies. We also discussed the limits of smart contracts, and how a smart contract-enabled legal system might use a combination of human judgement and automatic execution to achieve the best possible outcomes. But what is the point of these contracts? Why automate? Why is it better to have our relationships regulated and controlled by algorithms rather than humans? These are the tough questions that this article, and the next, intends to tackle.
A Tale of Two Industries
The first, and most obvious, benefit of using internet-driven technology to automate anything is the exact same that we have seen the internet, and Bitcoin, already provide in the spheres of communications and commerce: it increases efficiency and reduces barriers to entry. One very good example of this effect providing meaningful benefits in the traditional world is the publishing industry. In the 1970s, if you wanted to write a book, there was a large number of opaque, centralized intermediaries that you would need to go through before your book would get to a consumer. First, you would need a publishing company, which would also handle editing and marketing for you and provide a quality control function to the consumer. Second, the book would need to be distributed, and then finally it would be sold at each individual bookstore. Each part of the chain would take a large cut; at the end, you would be lucky to get more than ten percent of the revenue from each copy as a royalty. Notice the use of the term “royalty”, implying that you the author of the book are simply just another extraneous part of the chain that deserves a few percent as a cut rather than, well, the single most important person without whom the book would not even exist in the first place. Now, the situation is greatly improved. We now have distinct printing companies, marketing companies and bookstores, with a clear and defined role for each one and plenty of competition in each industry – and if you’re okay with keeping it purely digital, you can just publish on Kindle and get 70%.
Now, let’s consider a very similar example, but with a completely different industry: consumer protection, or more specifically escrow. Escrow is a very important function in commerce, and especially commerce online; when you buy a product from a small online store or from a merchant on Ebay, you are participating in a transaction where neither side has a substantial reputation, and so when you send the money by default there is no way to be sure that you will actually get anything to show for it. Escrow provides the solution: instead of sending the money to the merchant directly, you first send the money to an escrow agent, and the escrow agent then waits for you to confirm that you received the item. If you confirm, then the escrow agent sends the money along, and if the merchant confirms that they can’t send the item then the escrow agent gives you your money back. If there’s a dispute, an adjudication process begins, and the escrow agent decides which side has the better case.
The way it’s implemented today, however, escrow is handled by centralized entities, and is thrown in together with a large number of other functions. On the online marketplace Ebay, for example, Ebay serves the role of providing a server for the seller to host their product page on, a search and price comparison function for products, and a rating system for buyers and sellers. Ebay also owns Paypal, which actually moves the money from the seller to the buyer and serves as the escrow agent. Essentially, this is exactly the same situation that book publishing was in in the 1970s, although in fairness to Ebay sellers do get quite a bit more than 10% of their money. So how can we make an ideal marketplace with cryptocurrencies and smart contracts? If we wanted to be extreme about it, we could make the marketplace decentralized, using a Diaspora-like model to allow a seller to host their products on a specialized site, on their own server or on a Decentralized Dropbox implementation, use a Namecoin-like system for sellers to store their identities and keep a web of trust on the blockchain. However, what we’re looking at now is a more moderate and simple goal: separating out the function of the escrow agent from the payment system. Fortunately, Bitcoin offers a solution: multisignature transactions.
Introducing Multisig
Multisignature transactions allow a user to send funds to an address with three private keys, such that you need two of those keys to unlock the funds (multisigs can also be 1-of-3, 6-of-9, or anything else, but in practice 2-of-3 is the most useful). The way to apply this to escrow is simple: create a 2-of-3 escrow between the buyer, the seller and the escrow agent, have the buyer send funds into it and when a transaction is complete the buyer and the seller sign a transaction to complete the escrow. If there is a dispute, the escrow agent picks which side has the more convincing case, and signs a transaction with them to send them the funds. On a technological level, this is slightly complicated, but fortunately Bitrated has come up with a site that makes the process quite easy for the average user.
Of course, in its current form, Bitrated is not perfect, and we do not see that much Bitcoin commerce using it. The interface is arguably not as easy as it could be, especially since most people are not used to the idea of storing specific per-transaction links for a few weeks, and it would be much more powerful if it was integrated into a fully-fledged merchant package. One design might be a KryptoKit-like web app, showing each user a list of “open” buys and sells and providing a “finalize”, “accept”, “cancel” and “dispute” button for each one; users would then be able to interact with the multisig system just as if it was a standard payment processor, but then get a notification to finalize or dispute their purchases after a few weeks.
But if Bitrated does get its interface right and starts to see mass adoption, what will that accomplish? Once again, the answer is reduced barriers to entry. Currently, getting into the consumer escrow and arbitration business is hard. In order to be an escrow service, you essentially need to build an entire platform and an ecosystem, so that consumers and merchants operate through you. You also can’t just be the one escrowing the money – you also need to be the one transferring the money in the first place. Ebay needs to have, and control, Paypal, in order for half of its consumer protection to work. With Bitrated, this all changes. Anyone can become an escrow agent and arbitrator, and an Ebay-like marketplace (perhaps CryptoThrift or the upcoming Egora) can have a rating system for arbitrators as well as buyers and sellers. Alternatively, the system could handle arbitration in the background similarly to how Uber handles taxi drivers: anyone could become an arbitrator after a vetting process, and the system would automatically reward arbitrators with good ratings and fire those with bad ratings. Fees would drop, likely substantially below even the 2.9% charged by Paypal alone.
Smart Contracts
Smart contracts in general take this same basic idea, and push it much further. Instead of relying on a platform like Bitfinex to hedge one’s Bitcoin holdings or speculate in either direction at high leverage, one can use a blockchain-based financial derivatives contract with a decentralized order book, leaving no central party to take any fees. The ongoing cost of maintaining an exchange, complete with operational security, server management, DDoS protection, marketing and legal expenses, could be replaced with a one-time effort to write the contract, likely in less than 100 lines of code, and another one-time effort to make a pretty interface. From that point on, the entire system would be free except for network fees. File storage platforms like Dropbox could be similarly replaced; although, since hard disk space costs money, the system would not be free, it would likely be substantially cheaper than it is today. It would also help equalize the market by making it easy to participate on the supply side: anyone with a big hard drive, or even a small hard drive with some extra space, can simply install the app and start earning money renting out their unused space.
Instead of relying on legal contracts using expensive (and often, especially in international circumstances and poor countries, ineffective) court systems, or even moderately expensive private arbitration services, business relationships can be governed by smart contracts where those parts of the contract that do need human interpretation can be segregated into many specialized parts. There might be judges specializing in determining whether or not a product shipped (ideally, this would be the postal system itself), judges specializing in determining whether web application designs meet specifications, judges specializing in adjudicating certain classes of property insurance claims with a $0.75 fee by examining satellite images, and there would be contract writers skilled in intelligently integrating each one. Specialization has its advantages, and is the reason why society moved beyond running after bears with stone clubs and picking berries, but one of its weaknesses has always been the fact that it requires intermediaries to manage and function, including intermediaries specifically to manage the relationship between the intermediaries. Smart contracts can remove the latter category almost completely, allowing for an even greater degree of specialization, along with lower barriers to entry within each now shrunken category.
However, this increase in efficiency is only one part of the puzzle. The other part, and perhaps the more important one, has to do with a topic that many cryptocurrency advocates hold dear: reducing trust. We will cover that in the next installment of this series.
MtGox, the Bitcoin exchange, is in the news again, this time for collapsing. One leaked report maintains that MtGox may only have 2,000 Bitcoins in reserve over against 744,408 Btc in liabilities – which indicates a reserve of less than 1%. With new revelations coming out daily this paragraph will be out of date by the time this article hits the press. Whatever the final details turn out to be, MtGox melted down, and the digital currency community needs to ask why this happened, and how can we prevent this from happening again.
MtGox originally claimed that their troubles stemmed from a long-term exploit of the malleability bug which tricked exchange providers into spending bitcoins to the attacker’s account. However, the loss of 99.7% of their reserves cannot be attributed to the malleability bug. It is clear that the failure of MtGox is a failure of governance.
MtGox is not alone. Forty-five percent of Bitcoin exchanges to date have failed, in most cases with their customers’ money. The digital currency industry’s track record on fiduciary responsibility is abysmal.
Some people on the sidelines have been jumping up and down calling for government regulation of Bitcoin. However, government regulation is not the solution.
The digital currency community should be self-regulating. This is best achieved by using good governance.
In this article we will show how the Five Parties Model of governance can be applied to Bitcoin exchanges as a way to give better quality oversight than any regulator can impose. Then we will analyze the failure of MtGox and how it could have been prevented by using the Five Parties Model.
Trust Shall Not Live by Tech Alone
Bitcoin is an attempt to solve the problem of governance of a centralised issuer of currency through technology. By using a common protocol to manage a public blockchain, we can make it impossible to issue more Bitcoins than the pre-determined limit.
As MtGox has shown, the issuance problem is not the only trust problem for the digital currency community.
In order to provide useful services, certain businesses must hold the users’ Bitcoins and cash in escrow. These businesses, such as exchanges, brokerages, online wallets, retail payment aggregators, etc. are at risk from insider theft, external hacking and loss through currency volatility risk and poor accounting practices.
How can a user trust a business to protect his or her value held in escrow? Clearly the users of MtGox trusted an entity that was not trustworthy.
This is not a new problem for finance. It is called the “agency problem” in reference to the fact that an agent acts for the user as a trusted intermediary. Financial institutions have been dealing with the issue of trusted intermediaries for millennia.
This field is broadly called “governance” and has many well known methods for achieving accountability and reliability for fiduciary institutions.
The question then is how to bring those practices into a digital accounting and payment system.
To address this weakness of customer escrowed funds, back in the late 1990’s we developed a governance technique for digital currency that we called the “Five Parties Model of Governance.” (This model was built into the digital currency platform that we designed for exchange, called “Ricardo”.)
The five parties model shares the responsibility and roles for protection of value amongst five distinct parties involved in the transactions. Although originally designed to protect an entire digital currency, this technique should be broadly applied to businesses that hold value in escrow for their customers.
The Five Parties Model (5PM)
Every business that holds customer funds in escrow and allows them to trade internally, such as MtGox, is effectively a digital currency issuer.
For a single issuer of digital currency, the Five Parties Model looks like this (Figure 1).
Figure 1. Five Parties Model of Governance
1. Issuer
The Issuer is the institution guaranteeing the contract with the User. This is the person or entity ultimately responsible for the assets and whether the governance succeeds or fails.
Every Bitcoin exchange (ie. MtGox), online wallet, and payment service aggregator (ie. BitPay) who escrows customer funds and represents them as an account is acting as a digital value Issuer. The bigger the institution, the greater the need for a strong governance contract with the users.
2. Trustee
Each holder of value has a signatory who controls creation or deletion of assets on the books – which should mirror the deposit or withdrawal of assets from the reserve asset pool.
This position has an alter ego – a different signatory on the other side, who controls deposit and withdrawal from the asset pool (reserve accounts).
In the Five Parties Model we assign the signatory role to a Trustee, such as an outside law firm or accountant, who is not an employee or shareholder of the Issuer.
The Trustee should operate under two rules:
a. The Trustee may only disburse assets with a transaction receipt from the mirror account of the one he controls.
Ie. if he controls the internal account for Bitcoin, then he can only create new internal value on presentation of a deposit receipt of equal value of Bitcoin for the reserve asset account (ie. the cold wallet).
b. The Trustee can only spend or disburse value to the Manager account. This prevents the Trustee from creating new value and spending to an account that he or an accomplice controls. For a Trustee on the asset reserve account, he can only spend withdrawals to the Manager’s account.
3. Manager
In the Five Parties Model the Manager is the person or entity, usually the trading desk of the Issuer, who asks the Trustee to perform the big controlled operations: create or destroy digital assets, or deposit or withdraw physical ones, in order to reflect the overall pattern of trading activities.
The Manager typically works on a daily trading basis using float accounts (hot wallets).
In an example business day, the trading desk may get 50 BTC deposits and 45 BTC withdrawals, leading to a net position of +5 BTC.
As trading balances build up or draw down, the Manager asks the Trustee to authorise the conversion of daily trading assets against the long-term reserves backing the internal value on the exchange books.
For the above example, if the exchange has net of +5 BTC deposits at the end of the day, the Manager should transfer 5 BTC from the hot wallet trading account to the cold wallet reserve account. Then he places a request to create 5 BTC new value on the internal books, and gives the Trustee a copy of the deposit receipt to the cold storage account.
After verifying the receipt is valid, the Trustee then uses his signing key to create the new value on the internal books, and then spends that value to the Manager’s internal float account. In this way the Manager converted 5 actual Bitcoins in his hot wallet into 5 internal Bitcoins on his float account.
That is how value should be moved in and out of a Bitcoin exchange in a controlled and firewalled fashion without putting the reserve funds at risk in a “hot wallet”.
Manager Bails in 5 BTC to the Cold Wallet
4. Operator / Escrow / Vault
Most Bitcoin Exchanges to date have created their own software and operate their own servers. (This is a big part of the reason that 45% of Bitcoin exchanges have failed – 70% of the failures are due to security breaches.)
Another disadvantage of rolling your own Bitcoin exchange software is that someone inside the company may have enough information to alter the software to conduct illicit transactions and then cover their tracks by deleting the logs.
In the Five Parties Model, it is preferable to outsource the software and server maintenance to a third party that specializes in this service. In the Bitcoin world, Bex.io is an example of this model. They have created a standardized Bitcoin exchange software, and lease that software out to local exchanges, while controlling the operation of the software itself. (Disclosure: the authors’ company, Dinero Limited, also provides and operates this type of software.)
If the role of Operator cannot be outsourced, then we put in place controls to make sure that the IT department does not have access to the signing keys of the Trustee and the Manager. Preferably these parties should not work in close contact with each other, or even work in the same location. The goal is to prevent collusion between the Trustee, the Manager and the department operating the servers.
For the Bitcoin reserve assets in cold storage, the Bitcoin Network is the Operator for the accounting and ledger system. There is already an excellent separation of roles in place there.
5. The Fifth Party – The Public as Auditor
The final and most important element of the Five Parties Model is the role of the Public as auditor.
Typically, the role of auditor is to examine the books to validate that the other parties are indeed doing their job. As is covered elsewhere (Audit), paid auditors have a long-term conflict of interest, which has been at the root of several notable disasters in the last decade – the failure of Enron, the wholesale bankruptcy of banking in 2007 financial crisis, the collapse of AIG, none of which auditors rang the bell for.
Auditors, as well as being conflicted, are also expensive. If governments come in and regulate Bitcoin they will require exchanges to pay for quarterly or annual external audits, which will dramatically increase costs without much benefit.
We should be able to find a more effective and less costly alternative.
Let me introduce YOU, the user, also know as “The Public.”
You, the Public, do not have a conflict of interest, in that it is your value at risk, and you have a strong interest in seeing that the other four parties are doing their jobs properly.
Yet, how can the public audit anything when audit almost by definition means seeing that which cannot be seen?
The answer is to make that which was previously unseen, seen. Make the net balances of the internal books and the reserve assets visible to the public. (We are not suggesting that customer accounts be exposed.) The public only needs to see the total net liabilities of the internal accounts, to compare them to the assets in the reserve accounts.
Some examples of digital currencies that have supported public audit include:
e-gold published a real time balance sheet of their digital issuance.
GoldMoney publishes monthly reports and regular audits.
Ricardo publishes the balances of the Trustee and Manager accounts.
Most Bitcoin exchanges already have public API’s used for automated trading. It should be trivial to add a query to their API that allows the public to ascertain the net balance on the internal books in real time.
The addresses of the Bitcoin cold storage accounts should also be made public. This allows the public to compare the asset reserve to the internal book value that has been issued. If the internal book balance is higher than the asset reserve, there has been a breach of contract.
The Five Parties Model Applied to Bitcoin Exchange
The Five Parties Model is just and exactly that – a model. This means there are variations, and a business must modify it to suit. For example, many businesses in the space have not one but two bases of value to control: an underlying asset and a digital issuance. Bitcoin exchanges fall into this category.
When an Issuer is backing the digital currency with a reserve asset, both of these assets need to be protected. To do this, we utilise two instances of the Five Parties Model in a mirrored pair. In each, the Issuer and the Public act as parties on both sides, whereas the Trustee, the Operator and the Manager may be duplicated (or not). Figure 2 shows an application of the Five Parties Model to a Bitcoin Exchange.
Figure 2. 5 Party Model for Bitcoin Exchange
An exchange supporting many currency pairs requires a somewhat more complicated regime. For every one of their assets – BTC, Altcoins, USD, EUR, JPY, etc, they must delegate operators, trustees and managers.
However, this model can still be managed for multiple currency types with only two trustees – one for the internal book value, and one for the external reserve assets.
Where MtGox Went Wrong
Now that we have explained the Five Parties Model and why it is important, let’s look at where MtGox failed.
MtGox as the Issuer of Internal Book Value
In the present case, MtGox was the contractual party that guaranteed to deliver an exchange of value, and in the mean time keep escrowed funds and/or BTC secure.
As can be seen from the following screen capture (Figure 3) taken from the Internet Archive, MtGox did in fact have a contract with the users to fully reserve their internal Bitcoin and currency accounts:
Figure 3. MtGox Custodial Contract
As an Issuer MtGox failed to implement internal controls to ensure that their contract conditions were honored at all times.
Furthermore, recent revelations (by a former MtGox insider who is now a competitor) allege that MtGox management may have knowingly operated the exchange on a fractional reserve basis since a major Bitcoin theft in 2011. If that proves to be true, then sadly, the management may have compounded the initial crime committed against them by secretly operating in breach of contract instead of simply reporting the theft and filing for bankruptcy. That followed by rise in the value of Bitcoin since 2011 has multiplied the impact of the original theft by one-hundred fold.
MtGox Failed to Separate the Roles
MtGox Failed to Separate Roles to Keep The Wrong Hands Out of the Cookie Jar
MtGox appears to have had the same trading desk or Manager controlling both the creation of value on the internal books and the release of assets in the reserve accounts.
By merging two roles that should have been separated — Manager and Trustee — MtGox allowed the Manager to transfer out the reserve assets without first destroying an equivalent amount of internal value on their books.
If MtGox had been following the Five Parties Model from the beginning, it would have been impossible for a security breach or malleability attack to have stolen any more than the Manager’s hot wallet balance. The customers’ funds would not have been jeopardized and the discrepancy would have become immediately apparent.
The failure of MtGox to separate the asset reserve from the Manager’s trading accounts precipitated an epic disaster.
MtGox Failed to Arrange for Audit
MtGox did not make their internal Bitcoin balances public, and did not have a quarterly third party audit in place, either. Consequently they operated as the largest Bitcoin exchange for three years with no one checking their books. That is like driving while blindfolded.
Ideally, MtGox would have displayed a balance sheet with references to cold wallets on one side, and their internal Bitcoin/Altcoin balances on the other side. The former is verifiable via the blockchain, while the latter could be made available by the operator via the API, and periodically audited by a third party to ensure the code providing the balance query was accurate.
MtGox Failed Because Nobody Was Watching Them
The Public Failed to Demand an Audit from MtGox
With the information above, you the Public as individuals or as media or other observers could have verified that things were as they should be, and if not, sound the alarm! That’s what Twitter and media sites such as CoinDesk and Bitcoin Magazine are for.
As MtGox did not have a sufficient governance model in place, the public was startled to learn that more than $300 million worth of Bitcoin managed to disappear.
However, we the account holders may ultimately blame our own failure to insist on good governance for any losses we suffered from the failure of MtGox.
How To Prevent MtGox From Happening Again
If the digital currency community does not self-regulate, we will find ourselves placed under government regulations. (Which may well happen anyway.) Government regulations drive up operation costs, but ultimately do not provide additional safety or security. Consider how government regulation utterly failed to prevent the 2007 banking crisis.
Instead of regulation, the digital currency community should demand and apply the Five Parties Model of governance.
Public transparency is consistent with the ideals of Bitcoin’s public blockchain, and can be expected to greatly improve the stability and reliability of the digital currency community.
Applying the Five Parties Model to Bitcoin exchanges need not be expensive. All it takes is for any exchange to appoint two trustees to control the reserve assets and the internal book value, limit the accounts the Trustees can transfer value to, and publish an API allowing public query of the total balance of their internal books.
We have websites such as blockchain.info and bitcoincharts.com that can easily support realtime charts using the information from the APIs of participating Bitcoin exchanges. Instead of merely providing price data, these websites can play an integral part of the governance of the Bitcoin community by collecting and displaying data concerning the reserve assets and total liabilities of exchanges and escrow services.
The media also play a very important part of the governance equation. Publications that cover the digital currency sector like Bitcoin Magazine, DGC Magazine, and CoinDesk should be asking hard questions of new and old exchanges about their governance procedures.
The Bitcoin Foundation and other industry associations would be well advised to encourage the development of an industry standard for governance of exchanges and escrow services using the Five Parties Model.
You, the public, should demand it.
To voice your support for the Five Parties Model, please use the hashtag #5PModel.
Update – As this article was going to press, BitQuick became the first Bitcoin exchange to move towards implementing the Five Parties Model by making its internal balance and Bitcoin reserve addresses public through their API. (Perhaps that’s why they are called Bit QUICK.)
Ian Grigg and Ken Griffith are the co-founders at Dinero Limited, which provides a secure multi-instrument platform for digital currency exchange. Since 1995 we have built real-time trading exchanges for precious metals, securities and digital currencies. Dinero’s trading platform is a complete solution ideal for hosting crypto-currency exchanges.
Recently in December 2013, the Indian Central Bank (Reserve Bank of India, RBI) decided to not regulate, and stated clearly that they lacked expert knowledge on the subject at that time. So they cautioned people not to trade in Bitcoin or any other similar crypto-currency. A few days after, one exchange and a Bitcoin information (and dust holder) site closed down, BuySellBitCo.in and rbitco.in, respectively. These actions were undertaken by the RBI’s own Enforcement Department (ED), which conducted the search and closure operations on two properties. These incidents occurred immediately after the following RBI announcement.
“Regulation comes only when people are doing certain business and we come to understand that something wrong is happening. First of all we don’t understand this subject.” ~ KC Chakrabarty, RBI deputy governor
This heavy-handed approach came with only the bank’s statement that crypto-currency was to be free within India, unregulated, but free.
RBI-ED sealed the home of Nilam Doctor during the raid conducted on 26th December 2013
“The RBI has no plans to come up with a regulatory framework for Bitcoins, the virtual currency, which has risen sharply in value in the past few months, a top official said.”~ The Times of India
You may guess that depends on one’s given definition of ‘free’. With the world’s second largest population at 1.237 billion, nearly the majority of citizens in India are amongst the unbanked, crypto-currency could do very well to get a proper foothold within the Indian sub-continent. An excellent piece on the regulatory framework within India and how it relates to Bitcoin and crypto-currency can be found here.
Summarizing that crypto-currency, under current regulation and legal framework, cannot be regulated, though with new regulation it may yet come under the umbrella of the political and banking powers. The RBI-ED then requested information on what these businesses actually do, the same businesses that they had just forced to close down. One of the affected businesses (rbitco.in), a website that explained the basics of Bitcoin and allowed registered customers to deposit ‘dust’ Bitcoin that customers gained via visiting various ‘free Bitcoin’ websites and promotions. The site allowed people to withdraw their dust once their account acquired a total of 0.5 or more. We can reveal that one of the individuals who had their house raided and closed (Nilam Doctor) ran this particular website, and after the property seizures the ED forwarded these questions.
The official location of your company in India and the details of the company
The details of your clients and their KYC
The details of the sale and purchase of the Bitcoin.
The details of your employees in India.
In summary, the site neither sold nor purchased any Bitcoin, and it was run by a single person (Nilam), and KYC was registered emails (seeing as customers only deposited dust and then withdrew their own dust once it accumulated to the required amount). Could it be drawn from these questions that the RBI-ED in fact knew nothing about the investigation and closures they were enacting? Who was pulling the strings if a law enforcement department can be sent off with no investigation or any pre-knowledge of what they are doing?
The Bitcoin Alliance India (BAI) and Bitcoin community members discussed the issue and released a press release with regards to the RBI and RBI-ED approaches towards crypto-currency and the legitimacy of a free market. Nishith Desai of Nishith Desai Associates explains the illegality of Bitcoins within India post RBI-ED invasion, in that Bitcoin (in India) is not illegal, yet the governmental authorities have the responsibility to warn national residents of the dangers inherent within the Bitcoin economy.
He has been an outspoken pro-active Bitcoin supporter and advisory expert, and one of the individuals accosted has informed us that to date, the BAI are now waiting for the conclusion of an RBI central meeting with regards towards Bitcoin and their ‘illegality’ and function within India. This meeting was to have occurred two weeks ago; the BAI and related Bitcoin experts and community participants are awaiting the RBI’s conclusion to this meeting.
RBI was also issued a letter by Venugopal for assistance deciding about bitcoin’s fate, but the BAI have been waiting for nearly a month for a response. Naavi.org (Vijayashankar Na) also published some articles on bitcoin during the RBI-ED inquiries. In personal correspondence on the ongoing situation within India, Nilam Doctor informed us that they recently opened his sealed property in India, for the purposes of searching for bitcoin related money laundering documents and similar incriminating materials.
Needless to say, they found nothing but decided to take 2x 240 MB HDD’s (last used in 1998), after only taking 50 days to decide to finally open the property. These incidents point to the fact that regardless of RBI’s only communication policies, lack of knowledge and experience within Bitcoin and the related space, the central bank of India used its law enforcement department to close businesses without any prior knowledge of the business activities, nor any expert knowledge of what Bitcoin entails. To help promote the accessibility and future of Bitcoin within India, Nilam Doctor is raising funds to help support Bitcoiners within India and to help educate the relevant authorities and governmental bodies within India, to explain the virtues and positives that can be gained from Bitcoin adoption. Key features to address during the visit to India:
To form Bitcoin Foundation (India) as a non-profit organization in India.
Hold meeting with senior government offices in major cities.
Hold meet-ups with pro-bitcoiners in Bangalore, Mumbai, New Delhi, Pune, Hyderabad, Jaipur, Ahmedabad, Calcutta, Nagpur.
Create awareness to the benefits for general public to use virtual currencies.
During the tour to India, he will publish weekly reports of the development here on Bitcoin Magazine.
In the most recent article from the Sunday Guardian, Nilam Doctor has been portrayed as the Master of Bitcoin (in India) by the ED, clearly showing a strong lack of understanding of the concept behind decentralization and what Bitcoin really is.
If you wish to contribute to the Bitcoin movement within India then please feel free to donate: (1BfindEetm8qpwJH2M7Ht7rgmLztwpX83P). When 40 BTC is raised Nilam will tour India, visiting the relevant authorities and establishments on behalf of Bitcoiners as a whole, and especially those within India. He has informed us that he will keep us updated on all progress. Nilam can be contacted directly via (nilamdoc AT gmail.com). Nilam is a Lifetime member of the Bitcoin Foundation, one of the Founders & Directors of the Bitcoin Foundation India (chapter) and a Bitcoin Exchange developer.
I understand and appreciate where you are coming from with your recent letter about Bitcoin, and I agree about the fundamental issues you address regarding the financial security of our country and the protection of hard-working Americans. As a US Marine Corps veteran of the Iraq war and a small business owner, these are values I share. Before I really understood Bitcoin, I had the same concerns that it was a get-rich-quick scheme for speculators and a currency only suited for nefarious individuals.
But then I learned about the true brilliance underneath Bitcoin – the Blockchain – and this new understanding changed my opinion. I urge you to consider the gravity of this innovation, which in my opinion is on par with the internet itself, and my hope is that instead of prohibition, you will champion an environment conducive to the incredible potential prosperity it makes possible.
Let me address your specific concerns and then I’ll share why the Blockchain itself really changed my mind.
Concern #1: Bitcoin is a haven for scams and black market sales and helps criminals to hide from law enforcement.
Let’s first agree that despite laws and regulations, there will always be some people who engage in malicious activity. Since that is the case, the key question is how Bitcoin compares to other currencies, and how it intersects with criminal behavior.
Yes, Bitcoin enables frictionless transfer of money over the internet and the transactions are irreversible. But they are not anonymous. The blockchain is in fact a publicly visible ledger, in which all transactions are completely visible to everyone. Transactions are pseudonymous, meaning that the sender and receiver are labeled with an address that can be used to connect them to their identity. Before these concepts were widely understood (and it became public knowledge that the NSA has access to all of the information coming in and out of our computers) it appeared as though Bitcoin was a great tool for illicit activities. But now, law enforcement agencies have suggested that Bitcoin could actually be beneficial to their investigations – by subpoenaing ISP records to demonstrate ownership of a Bitcoin wallet and combining that information with the records in the public blockchain, law enforcement can actually provide evidence of criminal activity – evidence that the blockchain itself will never allow to be destroyed. What happened with the Silk Road is an excellent example of the transparency of the system supporting efficient action from law enforcement and it has since become understood that Bitcoin is actually a very poor vehicle for illicit activity.
Let’s look at the numbers. Before they were shut down by authorities, the Silk Road and other illicit drug markets combined handled about $50M in annual sales, which seems like a big number. But for context, it only accounts for .01% of the international drug trade annually (based on an estimated annual worldwide drug trade of around $435B). And for a little more context, the Bitcoin network handles about $10B in annualized transaction volume, which means only .5% of Bitcoin transactions went through these black market exchanges. So it turns out that the amount of illicit activity conducted in Bitcoin is really quite small, no matter how it’s measured.
I shared your concern about the potential for hackers and scammers to steal Bitcoins from average folks like myself. But then I learned about the two aspects that make the Bitcoin protocol more secure than anything we have seen before: #1) It is maintained by a massive decentralized network of computers in which no single computer can decide it wants to alter or break the rules, and if it tried it’s work effort would simply be rejected by the rest of the network. As long as at least 50% of of those participating are doing so without bad intentions, all goes smoothly. But even if a bad actor comes along and spends hundreds of millions of dollars in hardware to control more than half of the network, their power would be limited to reversing a transaction within 10 minutes of it being initiated. #2) It uses a “push” system whereas most traditional financial transactions use a “pull” method. In traditional transactions I hand over my personal and banking information and trust that the business I am transacting with will only take the amount of money we agreed to and will keep my private information safe. This method has proven again and again to be profoundly vulnerable to hackers; just recently hackers stole the personal information of 70 million Target customers. Bitcoin’s “push” system means that I, as the consumer, am able to send the money for the transaction to the business directly without revealing any of my personal information and I have complete control over the amount that is sent.
Concern #2: Bitcoin is highly unstable, disruptive to the economy, and is being banned by other countries.
Describing Bitcoin’s exchange price as unstable is a fair characterization, but there are several factors to consider for a more broad understanding. First, like most currencies, it’s price has been growing more stable as it’s market cap has increased and, according to the Washington Post, it is “highly likely” that Bitcoin’s price will stabilize over time. And for a little more context, Bitcoin’s price is in fact less unstable than many other national currencies with annual inflation rates of 12% (Egypt), 54% (Argentina) or even 300% (Venezuela). Second, viewed as an investment, Bitcoin was a big winner in the past year, increasing in value by at least a factor of ten. Third, Bitcoin holds the promise of a new kind of economy, one that offers much more stability than our current system. While there will be some rockiness in the road to getting there, it’s potential is far more stable than the system we have now which has required our central bank inflate our money supply by more than $80,000,000,000 per month for years to support the continuing operation of our largest banks. Finally, despite it’s price fluctuations, Bitcoin has proven to be incredibly resilient. Even with all of the market moving news recently – the possible theft or loss of around 850,000 Bitcoins and the collapse of the once largest exchange – the price has recovered within a few days, climbing above $550 already. This is just the most recent example of many that illustrate the incredible resilience of the Bitcoin protocol itself and the longterm bullishness on the part of its supporters and users.
Your concern that the deflationary nature of Bitcoin’s value will encourage hoarding also makes sense, especially since some of the largest proponents in Bitcoin have admitted to hoarding their holdings. However, MIT has just released a report that dispels these fears in which they assert that the vast majority of new Bitcoins are spent (circulated into the economy) within 24 hours.
And as far as Bitcoin being disruptive to our economy, I enthusiastically say – yes please! Our manufacturing base has been almost completely off-shored and our actual unemployment rate is staggeringly high. If you ask me, our economy needs some disrupting, and Bitcoin is just the ticket to bring about the positive change we so desperately need.
Bitcoin is highly beneficial to legitimate businesses. Business owners appreciate the financial advantages of Bitcoin – frictionless transactions that are safe, fast and good for the bottom line. Bitcoin transactions are virtually free compared to the two to four percent charged for an average credit or debit card transaction, which amounts to huge savings for businesses. It also reduces costs for consumers, as observed by former Treasury Secretary Larry Summers who recently said, “It seems bizarre that at this late date, one has to pay as much as one does to use a debit card or to get cash from an ATM or to transfer money to one’s child living abroad.” He went on to say, “Very serious economists thought that the Internet was going to be no more important than the fax machine, so I’m not willing to dismiss Bitcoin,” and called it a “very, very important development.”
I honestly don’t really understand why you are looking to China and other countries for their position on Bitcoin. China also bans Twitter, YouTube and Facebook, all very significant tools for the sharing of information and valuable parts of the American economy. I’m grateful to live in a country that values innovation and freedom and I hope that our policies will continue to reflect these values. I think the larger concern in this respect is that as Bitcoin is banned in other countries, businesses will leave those countries, looking for a place that embraces innovation. Countries that appreciate and embrace the value of the blockchain are going to be the home to billions of dollars in new economic activity. But don’t take my word for it – consider the wisdom of 20-year Wall Street veteran Bruce Fenton who says that countries that ban or over-regulate Bitcoin will suffer “fewer startups. A drain of top talent. Jobs and opportunities pushed overseas.” Or the inventor of Netscape, the first web browser, Marc Andreesen who said, “the amount of hardware and innovation that is put behind it is going to be gigantic.” In other words, Bitcoin isn’t just an economic boon, it’s a job creator and we don’t want to miss out on the prosperity it will create by banning or over-regulating it in it’s early days.
That something is unregulated isn’t, in and of itself, evidence that it needs to be regulated. Bitcoin is revolutionary exactly because of it’s transparent and open nature, and, for the first time enables a market to be authentically regulated directly by consumers themselves.
The Blockchain is what it’s really all about.
Bitcoin was just the first – a proof of concept – of a growing and dynamic market of blockchains designed to take advantage of the shared computational resources of people around the planet to encourage social improvement and positive change in a variety of ways. What has really blown my mind about Bitcoin isn’t the currency itself, it’s the technology it introduced. The blockchain can be applied to any system of transactions and it’s structure of incentivized, distributed computing can have far reaching benefits. Here are some of my favorite examples:
PrimeCoin is being used to find new prime numbers. SolarCoin incentivizes the adoption of alternative energy. CureCoin is distributing the work of protein folding to help cancer researchers find a cure. Permacredits support the building of permaculture developments, backed by real commodities like housing, agriculture and business.
My company is in the design and manufacturing business – and I have been very unhappy with the two options currently available to me to make our products; we could either manufacture overseas where questionable labor practices, unregulated toxic materials, and big quality control issues dominate or we could be essentially priced-out of the marketplace by choosing to manufacture domestically and responsibly. We are currently developing a blockchain called Makercoin – it’s purpose is to encourage collaborative development of goods and to decentralize, distribute & localize manufacturing. It’s end goal is to capture the creativity and innovation of the brightest minds in design and bring manufacturing back into our local communities, rather than simply where the cheapest and most exploitable labor is concentrated.
Marc Andreesen is convinced that the technology behind Bitcoin is as significant as the web, saying, “Bitcoin, or cryptocurrency, the general concept is the first thing I’ve described ‘like the Internet’ since the Internet. So I’ve been waiting 20 years to be able to say, “Ahaaa this is like the Internet,” and this is the first one that I’ve seen.”
My hope in writing this letter is that you will reconsider your position, and welcome the next technological revolution by advocating for policy that supports an environment of innovation and prosperity for all.
We operate in a particular financial paradigm: a centralised order with extraordinary power concentrated at the top.
However, Bitcoin has created what was once unimaginable: a working, resilient and voluntary financial system with power distributed evenly according to contribution.
It may or may not be possible to reconcile the legacy financial order with this new system. The jury’s still out. Even without reconciliation one would assume that the majority would flock to the new system.
In flattening the financial structure you offer a greater value proposition to the majority. Assuming, of course, the majority can see that value proposition. But it is not always obvious. It would be if people understood that their central bank stole from them.
At the top of the existing structure is the central bank. They do indeed steal from you. They steal from you in disgusting quantities and every day. The theft is insidious and indirect. So, it is not obvious. But the theft is still very real.
The theft is not particularly complicated. Although it is dressed in confusing language: ‘quantitative easing’, ‘operation twist’, and ‘bailout’. Realizing how the theft works is important.
When the methods of the thief (central bank) are understood, the value proposition for the Bitcoin system becomes much more obvious.
Culturally and collectively we seem to instinctively understand that ‘printing money’ is bad. Arbitrarily increasing the supply of currency is incredibly detrimental to an economy. In essence this is what your central bank does. But why is it detrimental?
Money is not wealth. Goods and services are wealth. Money is how you represent and transfer that wealth. Printing money does not increase wealth (the quantity of available goods and services). Printing money simply divides the existing wealth into a greater number of pieces.
This is because the dollar you hold does not represent your share of the available goods and services. Rather, it only represents your share of the total money supply. That is the key.
Life is Like Monopoly
Paul Mckeever’s Monopoly game analogy offers a useful illustration. Take four players in a monopoly game. Each player, including the banker, has $100. The total money supply is therefore: $400. Each player has a ¼ share of the money supply.
The banker suddenly issues himself an extra $400. The total money supply is now $800.
The banker has $500 (this is now 5/8ths of the total money supply). Each of the 3 other players is still left only with their $100 of savings. This now only represents 1/8th of the total money supply.
Each of the other players has effectively had 1/2 of their money stolen. This was done when the banker increased the money supply and gave the new money to himself. He has unjustly enriched himself at your direct expense.
Each of the other 3 players money has had 1/8th of value absorbed directly into the banker’s newly issued money, moving him to 5/8ths of the money supply.
The effect would be exactly the same if the banker had instead kept his $100, not introduced any new money into the system, reached over and taken dollars from each player. Of course, that theft would be too obvious. You’d slap him.
Notice that the total wealth (available properties) in the Monopoly game never increases. The only thing that increases is the banker’s capacity to purchase that wealth (properties) over the other players.
The act of arbitrarily increasing the amount of money in circulation simply transfers the capacity to purchase the existing wealth from those who hold money (workers and savers), to those who create additional money (bankers). The banker’s new money absorbs that stolen money.
It’s a neat trick and a very interesting form of thievery.
Of course, it is a zero sum game. The central bank gains directly at your expense, whereas real wealth increases benefit everyone. But they can only ever occur from productivity, creating more goods and services of higher value at a lower cost.
How does Bitcoin Solve This?
Quite simply, no one can arbitrarily increase the supply of Bitcoins and steal from you in this way. The central bank’s power to increase the supply of money and give it to themselves and their friends is gone.
The money creation process instead mimics the mining of a natural resource like Gold. Entrepreneurs must efficiently organise land, labour and capital to create the tools needed to dig Bitcoins out of the digital crust. It is an expensive and risky exercise.
The Bitcoins take time, effort, resources and sacrifice to dig up from the virtual ground. So it is true that over the next 100+ years those who mine Bitcoin will be creating new money. However, and, most importantly, it is not out of thin air – at zero cost.
The newly created Bitcoins will absorb value from the existing Bitcoins in circulation. This is true. But they will do this completely predictably over time and at a decreasing rate, minimising the negative effects on those who hold Bitcoins.
Most importantly however, the people who want to dig the Bitcoins out of the virtual crust must first spend Bitcoins and take on risk in order to do this. This money creation is not arbitrary. The central bank takes on no risk and increases the supply of money at no cost.
And of course, eventually, one day in 2140, the creation of new Bitcoins will stop and that is all there can ever be, mathematically. Can we say the same of the US dollar?
Bitcoin is often understood to be both dangerous and an unreliable store of value. In the worst logical leap it is claimed that Bitcoin is as worthless as centrally issued fiat paper. This accusation is more outrageous and egregious when one understands the particular aspects of how central banks steal your money.
On Thursday, March 6, Bitcoiners from across the United States and around the world will gather in Austin, Texas for the first Texas Bitcoin Conference. Attendees will have a stellar line-up of speakers to look forward to with ample time to network and take part in over 30 workshops and tutorials.
The Texas Bitcoin Conference Team issued the following press release:
Mt. Gox and the Future of Bitcoin Demystified
Texas Bitcoin Conference
Premier Two-Day Event
March 5th and 6th 2014
Features over 30 workshops and tutorials for consumer friendly Bitcoin adoption, a $1 Million Hackathon for advancing the development of Distributed Autonomous Applications (DAA), A diverse list of distinguished speakers. The conference will be making history in the arts with the world’s first Bitcoin-exclusive concert featuring Grammy-nominated Carolyn Malachi. Bitcoin will be used as a force for good at this event with all concert proceeds supporting Bitcoin accepting charities!
AUSTIN, DATE — The Texas Bitcoin Conference www.texasbitcoinconference.com is rapidly approaching. The event will be held March 5th and 6th at the Technology and Conference Center at the Circuit of the Americas Formula 1 complex (9201 Circuit of the Americas Blvd., Austin, TX. 78617).
In light of the recent Mt. Gox debacle, the Texas Bitcoin Conference has added a “Mt. Gox Explained” panel discussion on March 5th. The recent events surrounding Mt. Gox underscore the need for honest, transparent and auditable exchanges and Bitcoin endeavors.
The Texas Bitcoin Association looks forward to educating merchants, consumers and the curious public about Bitcoin adoption. Networking is a priority for the organization, with space and program time set aside for inventors, entrepreneurs, engineers and all attending to connect.
The Bitcoin 2.0 Hackathon: Building Next Generation Decentralized Applications & Protocols will take place both days. Teams will compete for more than $1 million in prizes and contracts in an event organized by the Mastercoin Foundation, Open-Transactions (Monetas), Ethereum, BitAngels, Ripple and others.
The Texas Bitcoin Conference will be making music history with the first ever BitCoinCert! www.bitcoincert.org The concert features Grammy-nominated Carolyn Malichi, the first known recording artist to accept Bitcoin payments for her music along with local favorites such as Eric Tessmer and Kalu James. The concert takes place Thursday, March 6th at 8:30 p.m. Volunteers are ready to help concertgoers new to Bitcoin quickly get empowered to purchase tickets with Crypto-currency. The suggested donation price is $25USD in Bitcoin.
Proceeds from the concert will support local and national service organizations. From a local perspective, the concert will support Without Regrets www.withoutregrets.org and Austin’s own Capital Area Food Bank. The Capital Area Food Bank is a Federal Reserve of food pantries and food banks across Texas.
Three organizations powered solely by Bitcoin will also be featured beneficiaries, including Sean’s Outpost homeless sanctuary in Florida, www.seansoutpost.com Bitcoin not Bombs www.bitcoinnotbombs.com and Fr33aid www.fr33aid.com Sean’s Outpost founder Jason King is running an ultra-marathon across the country that began in Miami on Jan. 26. He is expected to make an appearance at the Texas Bitcoin Conference on March 6.
Bitcoin as technology, Bitcoin as an ecomonic force, Bitcoin as a Force for Good. All aspects of this exciting community will be explored during the two day event.
For more information and ticket pricing, please visit the Texas Bitcoin Conference website, www.texasbitcoinconference.com
Last week BitPay launched a support platform for the Bitcoin Payment Protocol, working to make Bitcoin payments easier than ever for merchants and users. The payment protocol eliminates much of the human error in completing a bitcoin payment, while providing a streamlined approach to the transaction process.
A user can simply click on the payment link or scan the QR-code and offers two payment choices, either ‘pay’ or ‘don’t pay,’ which means that there is no need to copy the address and amount into their wallet. BitPay’s Payment Protocol Support provides multiple solutions that reduce human error and make it easy for merchants to start accepting Bitcoin with BitPay.
Payment Protocol Support will include Native Address Refund Support, Secure, Signed Payment Requests, User Friendly QR Codes (BIP-73), and Direct Payment Communication; all aimed at making payments to BitPay merchants easier.
Secure, Signed Payment Requests
The payment protocol also offers confidence to users that they are sending their payment to the intended recipient, which is made possible by optional SSL signatures (X.509 signatures) on payment requests. Because BitPay signs all payment requests, when using a wallet supported by the payment protocol (Bitcoin-QT and Android Bitcoin Wallet) the user will notice that BitPay is requesting payment for the transaction.
By establishing the party who is requesting payment, this helps ensure continued security of all bitcoin transactions simply because the user knows exactly who they are doing business with.
Native Address Refund Support
Through the Payment Protocol the wallet supplies a refund address in addition to the payment, eliminating the potential of error in refund situations. Native Address Refund Support is a streamlined approach to refunds that works on the block chain, with any wallet software and doesn’t require the buyer to have a BitPay account. This ensures the accuracy of every bitcoin transaction and increases reliability between the buyer and the merchant.
User Friendly QR Codes (BIP-73)
BitPay has also improved the usability of QR Codes for Bitcoin payments through the use of BIP-73. This user-friendly QR Code utilizes BIP-73 to reduce the information required for payment requests and reduce the density of each code. According to a recent article, less dense QR Codes are easier to use in low-light or from long distances. These lower density codes are normal HTTP URLs, offering an opportunity to provide additional information and instructions to users who don’t already have a wallet installed on their device.
With BitPay, users and merchants alike can view both the backwards compatible, older QR Code as well as the newer payment protocol QR Code. Each invoice allows the user to toggle between the two codes by clicking or tapping directly on the QR Code. User-friendly QR Codes can help spread knowledge of Bitcoin by being able to provide additional information to users who scan each code. BitPay’s support of BIP-73 will help create streamlined invoicing for merchants, making payments even more universal and easy to transact.
Direct Payment Communication
Another exciting aspect of the payment protocol is the elimination of the use of the mesh network to communicate a payment from sender to recipient. The Bitcoin mesh network serves two main purposes – communicating payments from sender to recipient and communicating payments from originators to miners. The payment protocol directly communicates payments from sender to recipient, which allows the mesh network to continually communicate transactions between originators and miners.
This means that the network can broadcast and ignore transactions without effecting interaction between the sender and recipient. According to a BitPay spokesperson, “Direct Payment Communication allows for the emergence of a true market in transaction fees.” The payment protocol helps improve Bitcoin’s scalability by utilizing the mesh network to focus on those transactions that are profitable for miners, reducing the load on the mesh network.
BitPay’s Payment Protocol Support provides merchants and users with a streamlined approach to completing Bitcoin payments. These solutions will allow the Bitcoin community to continue its growth and rapid adoption, while providing a reliable platform that gives payment protocol support – making payments to merchants easier than before.
CHARLOTTE, NC — PassportParking, Inc. announced a new service that allows customers to pay for parking with Bitcoin through its Mobile Pay service. Partnering with BitPay, a payment processor for digital currencies, PassportParking is the first company in the world to facilitate the acceptance of Bitcoin for metered parking spaces and off-street lots.
PassportParking, Inc. delivers fully integrated cloud-based parking solutions using the latest technology and equipment to streamline the parking process. The company’s decision to accept bitcoin benefits parking operators with near-zero merchant processing fees, which increases revenues without creating additional cost to parking customers. Paying with Bitcoin allows privacy-conscious customers to make secure and reliable payments, without having to share personal banking or credit card information.
“We make it easy for businesses like the Passport Mobile Pay to accept bitcoin as a form of payment,” said Stephanie Wargo, Vice President of Marketing for BitPay.
PassportParking’s Mobile Pay service allows customers to pay for parking via mobile device, either with mobile app or by phone. Passport has partnered with BitPay to provide a seamless payment experience for its customers, providing a payment solution wherein customers using the mobile app will have the option of paying with Bitcoin.
BitPay’s Bitcoin Payment Gateway API is the most advanced and reliable bitcoin-processing platform for e-commerce and brick-and-mortar merchants. In addition to eliminating chargebacks and lowering processing fees, BitPay also allows merchants like PassportParking to settle each transaction in USD and receive next-day payments directly into their bank account. This greatly decreases the merchant risk in regards to price volatility.
According to Brad Powers, Senior Developer at PassportParking and Project Lead for Passport’s Bitcoin integration, “Accepting bitcoin is just the latest example about how Passport uses cutting-edge technology to improve how customers can pay for parking.”
The company combines cloud-based parking solutions with their Mobile Pay platform, providing a web-based console that allows for in-depth data analysis, real time reporting and rate management. For the customer, Mobile Pay enables fast and easy payment directly from any type of mobile phone, with cutting-edge technology that gives the customer the ability to start a parking session through app, SMS or phone call.
Passport will initially launch this service with a prominent parking operator in its hometown of Charlotte, NC. Park Charlotte, which operates parking lots in the Charlotte area, has announced they will begin using PassportParking’s Bitcoin service in 2014. Providing parking facilities the ability to cut out the middleman and accept payment directly from customers is a win-win for companies and their customers.
“Bitcoin is superior for online payments and today many traditional brick and mortar payments are moving online – you pay for your taxi using Square and for your parking using PassportParking,” said Michael Gronager, COO of Payward. “We have always used coins for parking so using bitcoin is the natural successor.”
About PassportParking
PassportParking, Inc (Passport) – headquartered in Charlotte, North Carolina – is the industry’s leading provider of integrated cloud-based parking solutions. The company provides the most advanced technology and equipment in an enterprise suite that allows parking providers and owners to manage parking and enforcement operations more effectively and efficiently. Passport is backed by a highly respected group of investors, including Grotech Ventures and Relevance Capital. For more information, please visit www.passportparking.com.
About BitPay
BitPay is a Payment Service Provider (PSP) specializing in eCommerce, B2B, and enterprise solutions for virtual currencies. Visit https://bitpay.com.
Are you working on a Bitcoin project? The latest open-source Bitcoin project, Bitcore has been launched to make it easier than ever to develop apps that interact with the real Bitcoin network. Bitcore is a complete, native interface to the Bitcoin network, providing a pure and powerful core for your Bitcoin project.
Designed by BitPay, Bitcore has been launched in order to encourage developers to build software that directly interfaces with the Bitcoin network. As a powerful peer-to-peer network, Bitcoin is the next generation of financial technology; and because of the decentralized nature of the network, developers must be resilient and reliable, which makes open-source projects pivotal to forward progress. According to bitcore.io, “Bitcore unchains developers from fallible, centralized API’s, and provides the tools to interact with the real Bitcoin network.”
In the eyes of developers contemplating new Bitcoin projects, utilizing proprietary or centralized APIs hosted by closed software makes innovation very difficult. In contrast, Bitcore’s open-source model will drive continued development and implementation of Bitcoin applications and services.
Bitcore is an open-source JavaScript library that has the capability of doing anything imaginable with the Bitcoin protocol; and is designed to run server-side on node.js or client side within a web browser. Bitcore is able to interact with a trusted Bitcoin node, such as a bitcoind instance. Bitcore was created from an internal fork of Stefan Thomas’ bitcoinjs project, which many other Bitcoin companies and projects have used. In order to ensure the sufficient out-of-the-box capability and to attract developers to begin using Bitcore, it was decided to make the fork open-source.
The launch of Bitcore was supported by an initial project called Insight, which expressed the platform’s usability in real Bitcoin projects. Insight is a simple block chain explorer and is an example of the benefits and open-source technology behind Bitcore.
Bitcore can be installed from npm with class-like idioms available via Classtool. Examples of the extensive uses of Bitcore can be found at bitcore.io and on GitHub. There are several projects currently underway including Bitcoin address validation, block and transaction monitoring, live block chain exploration, creating and sending a transaction through P2P, parsing a script, consuming bitcoind RPC – the list is expanding daily as more developers get involved.
According to bitcore.io, “BitPay’s Bitcore is still under heavy development and is not yet ready for “drop-in” production use.” However, the nature of open-source makes it possible for anyone, whether developer or not, to submit security issues along with bug fixes, ideas for improvement and code optimization.
Bitcore will help drive the creativity and continued development of Bitcoin and its community of innovative individuals. By interacting with the real Bitcoin network, developers will be able to actively create Bitcoin projects that are unique to their requirements, and share them with the Bitcore community. Bitcore takes a collaborative approach to developing Bitcoin projects and ideas, and is the first platform that has the ability to interact with the real Bitcoin network.
The Bitcoin Alliance of Canada, the oldest and largest Bitcoin advocacy organization in the country founded by Anthony Di Iorio in April 2013, has announced a host of new updates relating to the Bitcoin Expo, an upcoming event that will take place in Toronto from April 11 to 13. Although there already have been two smaller Bitcoin-related gatherings in Canada, with the Bitcoin Summit in Toronto last October and Coinfest in Vancouver in February, the Bitcoin Expo will be the first major event to have a large marketing effort and attract attendees and speakers from Canada, the United States, Europe and Asia. The event has been in the works for several months, and was officially announced in November 2013; now, the Bitcoin Alliance has released a new website for the Expo, including the full speaker list, sponsorship packages and tickets on sale.
The Expo will take place in the Metro Toronto Convention Centre, the largest conference and meeting center in the country. The conference area will include at least four major rooms, including two speaking rooms each capable of seating 500 people, a smaller speaking room and a media room, and there will also be smaller rooms for events like fireside chats. The exact schedule has not yet been announced, but it is publicly known that the main event with presentations will take place on the Saturday and Sunday from April 12 to 13, with an optional gala dinner on Friday for whose who are willing to pay the extra $100 for a higher-level ticket. There will also be a free “Learn More About Bitcoin” event with 200 seats available on Saturday morning, as well as a hackathon dedicated to cryptocurrency technologies. The cost of the tickets is among the lowest for any Bitcoin event in the past year, with basic tickets at $200 (reducible to $180 if you take the simple step of becoming a free member of the Bitcoin Alliance of Canada) compared to $300 for the Bitcoin Foundation’s official 2013 conference in San Jose, €350 for their upcoming 2014 event in Amsterdam, $200 to $250 for Miami and $500 for the Inside Bitcoins conference in New York. The Expo will also be non-profit, relying heavily on volunteers to set up the event and with all proceeds going directly to the Bitcoin Alliance of Canada.
The speaker list now contains well over 40 speakers from a variety of walks of Bitcoin life; Bitcoin business owners and venture capitalists, members of the Canadian and US libertarian communities, non-profits, community organizers, a number of different “cryptocurrency 2.0” projects (and other more humble altcoins), Bitcoin media outlets and developers are all represented. Some of the speakers include:
Anthony Di Iorio, founder of the Toronto Bitcoin meetup, the Bitcoin coworking space and community center Bitcoin Decentral, Kryptokit and the Bitcoin Alliance of Canada. Coming from a long career in geothermal drilling technology and later real estate, Anthony first joined the Bitcoin community in late 2012, and immediately proceeded to found the first Toronto Bitcoin meetup in November 2012, making Toronto the third city in the country to have a meetup after Vancouver and Montreal. He is now employed in several Bitcoin projects full-time, including KryptoKit, Bitcoin Decentral, Ethereum and the Bitcoin Alliance.
Andreas Antonopoulos, a well-known Bitcoin technology expert and public speaker at Bitcoin events. Andreas is also a regular participant in the podcast Let’s Talk Bitcoin, and has also recently taken up a position as the chief technology officer of blockchain.info.
Charles Hoskinson, a Colorado-based mathematician and cryptographer who studied analytic number theory and worked on the Goldbach conjecture in graduate school before moving on to cryptography and later Bitcoin. Charles is most well known as the founder of the Bitcoin Education Project and creator of “Bitcoin, or How I Learned to Stop Worrying and Love Crypto”, a Udemy-based online course providing an introduction to Bitcoin and its internal workings.
Cody Wilson, a Texan crypto-anarchist and founder and director of Defense Distributed, the organization that produced the first 3D printed gun. Cody has since become increasingly interested in Bitcoin, and is also a founding member of the Dark Wallet project.
Joseph David, the founder of the Calgary-based exchange CAVirtex, the oldest still running Canadian Bitcoin exchange and the first to start trading Litecoin. CAVirtex is also developing a platform for merchant services and is increasingly moving towards becoming a large player in the Canadian Bitcoin merchant ecosystem.
Jason King, founder of Sean’s Outpost, a homeless shelter feeding hundreds of people in Pensacola, Florida. Sean’s Outpost originally launched in 2012, but started accepting Bitcoin donations in March 2013 when the price of a Bitcoin first shot above $50. Jason made a post on Reddit asking anyone to donate a bitcoin and feed 40 homeless people at a cost of $1.25 per person. Four days later, Sean’s Outpost had raised over $600, and Sean’s Outpost has since become a regular presence in the Bitcoin community. More recently, Jason has also launched Satoshi Forest, a nine-acre “sanctuary for the homeless” in Pensacola, and he is now running across America to raise awareness for homelessness and Bitcoin.
Jonathan Mohan, the founder of BitcoinNYC, a professional association of Bitcoin users in New York, and the founder of the New York Bitcoin meetup, which has now become one of the largest in the country.
*Charlie Lee is the creator of Litecoin, the second largest cryptocurrency and one of the oldest that is still around today. Litecoin is most well-known for its use of the Scrypt mining algorithm, requiring a large amount of memory to compute in order to make it more difficult to produce specialized hardware for it. Charlie also works for Coinbase, one of the most popular ways to buy Bitcoin in the United States.
Ron Gross is a co-founder of the Israeli Bitcoin community, one of the most concentrated Bitcoin communities in the world with several thousand members in its Facebook group out of a total population of 500,000 in Tel Aviv and 8 million in Israel. He is now also the executive director of the Mastercoin Foundation, and is a founding member of the Global Bitcoin Alliance.
Tickets are available for sale on the Bitcoin Expo web site, and sponsorship packages ranging from $5000 to $35000 have also been posted. The Bitcoin community in Canada has been growing rapidly this past year, with burgeoning local communities in Toronto, Montreal and Vancouver, each with a large meetup group, a dedicated community center and a Bitcoin ATM; the Bitcoin Expo is shaping up to be the grand opening of the Canadian Bitcoin community to the world at large. Looking forward to seeing you there!
Today, February 22, was the inauguration of the first Spanish bitcoin ATM in Diagonal Mar, a shopping center situated in one of the main avenues of Barcelona. With its installation comes 100 more ATMs over the next three months in the rest of Spain – a clear sign that interest in bitcoin, in this country, is settled.
This ATM, designed and operated by the Spanish companies Paymaq and Bbank respectively, starts the bitcoin fever that in the next three months will cover all the Spanish provinces with this service.
As we can see in other countries such as Canada, to buy or sell bitcoin in this machine it is necessary to identify in the system with your national ID card (an easy process that you can do with an integrated webcam).
Paymaq isn’t a unique company producing Bitcoin ATMs in Spain; Btcpoint is also selling attractive and well-designed machines. In a country where distrust, and even hatred, to banks is a constant, the adoption of this easy-to-use technology could have a good adoption.
Other ATMs are coming in the next few weeks from Catalonia, a country with a tradition of self-management and citizen innovation, inside the “Cooperativa Integral Catalana”, a comprehensive cooperative, with around 2,000 members and more followers, where projects such as DarkWallet are being developed.
The vision of CIC is to offer an alternative and independent-of-banking system and build a cooperative and stronger economic system across from the States. Purchased at Lamassu, the 5 CIC ATMs will bring service with Bitcoin, Litecoin and Freicoin with DarkWallet implementation.
In this first semester there will be CIC ATMs providing service in different “change offices” and one online marketplace around all the catalan country to make the possibility of commerce away from banks in the real economy.
Bitcoin inspires individuals around the world and certainly can spark creativity. On Thursday, March 6, 20Mission will host the first ever Bitcoin Inspired Art Show entitled, “The Time is Now”. As Bitcoin truly prompts individuals to rethink finances and the future of our financial system, now this innovative technology has also inspired artists. Bitcoin Magazine was pleased to learn of this event.
“The Time is Now” planning team issued the following press release:
‘The Time is Now’ will be the first Bitcoin inspired art show
Experience the Revolutionary spirit of Digital Currencies Through Art
San Francisco, California (February 25, 2014) – 20Mission is pleased to present The Time is Now, a Digital Currency inspired art exhibition. Please join us on Thursday March 6, from 7-10 p.m., to meet the artists and for the exhibition opening in which pieces of art will transport us to the future to re-invent our current financial system
To RSVP, please visit BitcoinArtShow.Eventbrite.com
20Mission (20Mission.com) is a co-living and co-working space in the trendy Mission District of San Francisco where engineers, designers, artists and entrepreneurs live, work and play.
Jered Kenna is 20Mission’s founder. Jered speaks regularly about Bitcoin, virtual currency, and the future of money and has been featured in major media outlets around the world.
With the rise of Bitcoin and other potential cryptocurrencies that represent mobile money without borders, it may seem like this is a completely new idea. While the technologies being used may be new, the idea of a World Currency has been around for awhile. Discussion of this at the IMF has gone on for years. An example would be this 2009 IMF blog article titled “Reserve Currencies in the Post-Crisis International Monetary System”. The article traces the history of the US dollar as a world reserve currency back to the 1944 Bretton Woods Conference. It then proceeds to discuss potential competitors to the US dollar. It briefly mentions the Euro and the Renminbi, but quickly dismisses them. It then moves on to a discussion of possibly using the IMF’s Special Drawing Rights (SDR’s) as a world reserve currency. However, the article notes that has drawbacks too. It then moves on to the more interesting concept of a new kind of global currency. Here is a quote from the article.
“An even more ambitious solution would be to move to a truly global currency, along the lines of Keynes’s “bancor”, that would circulate alongside countries’ own currencies and would offer a store of value truly disconnected from economic conditions and policies in any country. To achieve this, one would need to set up a global monetary institution that would issue the global currency depending on global economic conditions, and that could act as a global lender of last resort. It would need to have an impeccable (“AAAA”) balance sheet, and governance arrangements that engender widespread credibility and acceptability.”
If we stopped reading at the end of the bolded italics, we might conclude that sounds like Bitcoin or other similar cryptocurrencies. If we continue reading though, we see it is different. The global currency described here would need to set up a “global monetary institution that would issue the global currency”. This would be more like the GSD that Klickex is working on that we discussed in an earlier article in Bitcoin Magazine.
There have been other articles in the past that talk about a global currency. But an article that appeared in a January 1988 issue of Economist Magazine is one I find truly incredible. If you think how different the world was in 1988, the precise predictions made in this article are quite amazing. The idea of a new “World Currency” of any kind was not in the mainstream of public thought.
I have posted the full article here for anyone wanting to read it in its entirety. But let’s take a look at a few interesting quotes from the article and add some comments here and there (comments in bold type). Here is the opening paragraph. You might try inserting the SDR or the Klickex GSD where you see “phoenix”.
“THIRTY years from now (i.e. 2018), Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favored by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century.”
At this point we could be talking about Bitcoin or any new cryptocurrency out there today. Let’s continue as the article talks about what could lead to this “New World Currency”.
“. . . not long after the next currency agreement is signed it will go the same way as the last one. It will collapse. Governments are far from ready to subordinate their domestic objectives to the goal of international stability. Several more big exchange-rate upsets, a few more stock market crashes and probably a slump or two will be needed before politicians are willing to face squarely up to that choice. This points to a muddled sequence of emergency followed by a patch-up followed by emergency, stretching out far beyond 2018 – except for two things. As time passes, the damage caused by currency instability is gradually going to mount; and the very trends that will make it mount are making the utopia of monetary union feasible.”
Pretty good forecast I would say. We have seen a “muddled sequence of emergency, followed by a patch-up, followed by emergency” play out before our eyes.
Next is a statement that will get the attention of the Bitcoin user. Remember, this was written in January 1988.
“As telecommunications technology continues to advance, these transactions will be cheaper and faster still.”
Here we might still be talking about Bitcoin. But then the article turns towards something different. Something more like the SDR mentioned above (or even the Klickex GSD we wrote about in the earlier article here).
“The phoenix zone would impose tight constraints on national governments. There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF.
This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case. Even in a world of more-or-less floating exchange rates, individual governments have seen their policy independence checked by an unfriendly outside world.”
Now we see that this new World Currency would come from a new Central Bank that would mean a loss of sovereignty for individual governments. Not like Bitcoin. The article continues:
“Preparing the way for the phoenix will mean fewer pretended agreements on policy and more real ones. It will mean allowing and then actively promoting the private-sector use of an international money alongside existing national monies. That would let people vote with their wallets for the eventual move to full currency union. The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.”
Bitcoin users reading this article might see a lot that looks like Bitcoin in “the Phoenix.” However, the article actually talks about something more like the SDR. Maybe even something like the GSD (Global Stability Dollar) unveiled last year by Klickex. The difference being, the last two would be regulated by the banking system as the Economist article was clearly anticipating. Regardless, this 1988 article was obviously ahead of its time. It shows that a new kind of world currency is not a new topic of conversation. And the mention of 2018 looks eerily realistic as we watch things unfold today.
Many of the concepts that we promote over in Ethereum land may seem incredibly futuristic, and perhaps even frightening, at times. We talk about so-called “smart contracts” that execute themselves without any need, or any opportunity, for human intervention or involvement, people forming Skynet-like “decentralized autonomous organizations” that live entirely on the cloud and yet control powerful financial resources and can incentivize people to do very real things in the physical world, decentralized “math-based law”, and a seemingly utopian quest to create some kind of fully trust-free society. To the uninformed user, and especially to those who have not even heard of plain old Bitcoin, it can be hard to see how these kinds of things are possible, and if they are why they can possibly be desirable. The purpose of this series will be to dissect these ideas in detail, and show exactly what we mean by each one, discussing its properties, advantages and limitations.
The first installment of the series will talk about so-called “smart contracts”. Smart contracts are an idea that has been around for several decades, but was given its current name and first substantially brought to the (cryptography-inclined) public’s attention by Nick Szabo in 2005. In essence, the definition of a smart contract is simple: a smart contract is a contract that enforces itself. That is to say, whereas a regular contract is a piece of paper (or more recently PDF document) containing text which implicitly asks for a judge to order a party to send money (or other property) to another party under certain conditions, a smart contract is a computer program that can be run on hardware which automatically executes those conditions. Nick Szabo uses the example of a vending machine:
A canonical real-life example, which we might consider to be the primitive ancestor of smart contracts, is the humble vending machine. Within a limited amount of potential loss (the amount in the till should be less than the cost of breaching the mechanism), the machine takes in coins, and via a simple mechanism, which makes a freshman computer science problem in design with finite automata, dispense change and product according to the displayed price. The vending machine is a contract with bearer: anybody with coins can participate in an exchange with the vendor. The lockbox and other security mechanisms protect the stored coins and contents from attackers, sufficiently to allow profitable deployment of vending machines in a wide variety of areas.
Smart contracts are the application of this concept to, well, lots of things. We can have smart financial contracts that automatically shuffle money around based on certain formulas and conditions, smart domain name sale orders that give the domain to whoever first sends in $200, perhaps even smart insurance contracts that control bank accounts and automatically pay out based on some trusted source (or combination of sources) supplying data about real-world events.
Smart Property
At this point, however, one obvious question arises: how are these contracts going to be enforced? Just like traditional contracts, which are not worth the paper they’re written on unless there’s an actual judge backed by legal power enforcing them, smart contracts needs to be “plugged in” to some system in order to actually have power to do anything. The most obvious, and oldest, solution is hardware, an idea that also goes by the name “smart property”. Nick Szabo’s vending machine is the canonical example here. Inside the vending machine, there is a sort of proto-smart-contract, containing a set of computer code that looks something like this:
if button_pressed == "Coca Cola" and money_inserted >= 1.75:
release("Coca Cola")
return_change(money_inserted - 1.75)
else if button_pressed == "Aquafina Water" and money_inserted >= 1.25:
release("Aquafina Water")
return_change(money_inserted - 1.25)
else if ...
The contract has four “hooks” into the outside world: the button_pressed and money_inserted variables as input, and the release and return_change commands as output. All four of these depend on hardware, although we focus on the last three because human input is generally considered to be a trivial problem. If the contract was running on an Android phone from 2007, it would be useless; the Android phone has no way of knowing how much money was inserted into a slot, and certainly cannot release Coca Cola bottles or return change. On a vending machine, on the other hand, the contract carries some “force”, backed by the vending machine’s internal Coca Cola holdings and its physical security preventing people from just taking the Coca Cola without following the rules of the contract.
Another, more futuristic, application of smart property is rental cars: imagine a world where everyone has their own private key on a smartphone, and there is a car such that when you pay $100 to a certain address the car automatically starts responding commands signed by your private key for a day. The same principle can also be applied to houses. If that sounds far-fetched, keep in mind that office buildings are largely smart property already: access is controlled by access cards, and the question of which (if any) doors each card is valid for is determined by a piece of code linked to a database. And if the company has an HR system that automatically processes employment contracts and activates new employees access cards, then that employment contract is, to a slight extent, a smart contract.
Smart Money and Factum Society
However, physical property is very limited in what it can do. Physical property has a limited amount of security, so you cannot practically do anything interesting with more than a few tens of thousands of dollars with a smart-property setup. And ultimately, the most interesting contracts involve transferring money. But how can we actually make that work? Right now, we basically can’t. We can, theoretically, give contracts the login details to our bank accounts, and then have the contract send money under some conditions, but the problem is that this kind of contract is not really “self-enforcing”. The party making the contract can always simply turn the contract off just before payment is due, or drain their bank account, or even simply change the password to the account. Ultimately, no matter how the contract is integrated into the system, someone has the ability to shut it off.
How can we solve the problem? Ultimately, the answer is one that is radical in the context of our wider society, but already very much old news in the world of Bitcoin: we need a new kind of money. So far, the evolution of money has followed three stages: commodity money, commodity-backed money and fiat money. Commodity money is simple: it’s money that is valuable because it is also simultaneously a commodity that has some “intrinsic” use value. Silver and gold are perfect examples, and in more traditional societies we also have tea, salt (etymology note: this is where the word “salary” comes from), seashells and the like. Next came commodity-backed money – banks issuing certificates that are valuable because they are redeemable for gold. Finally, we have fiat money. The “fiat” in “fiat money” is just like in “fiat lux“, except instead of God saying “let there be light” it’s the federal government saying “let there be money”. The money has value largely because the government issuing it accepts that money, and only that money, as payment for taxes and fees, alongside several other legal privileges.
With Bitcoin, however, we have a new kind of money: factum money. The difference between fiat money and factum money is this: whereas fiat money is put into existence, and maintained, by a government (or, theoretically, some other kind of agency) producing it, factum money just is. Factum money is simply a balance sheet, with a few rules on how that balance sheet can be updated, and that money is valid among that set of users which decides to accept it. Bitcoin is the first example, but there are more. For example, one can have an alternative rule, which states that only bitcoins coming out of a certain “genesis transaction”, count as part of the balance sheet; this is called “colored coins”, and is also a kind of factum money (unless those colored coins are fiat or commodity-backed).
The main promise of factum money, in fact, is precisely the fact that it meshes so well with smart contracts. The main problem with smart contracts is enforcement: if a contract says to send $200 to Bob if X happens, and X does happen, how do we ensure that $200 actually gets sent to Bob. The solution with factum money is incredibly elegant: the definition of the money, or more precisely the definition of the current balance sheet, is the result of executing all of the contracts. Thus, if X does happen, then everyone will agree that Bob has the extra $200, and if X does not happen then everyone will agree that Bob has whatever Bob had before.
This is actually a much more revolutionary development than you might think at first; with factum money, we have created a way for contracts, and perhaps even law in general, to work, and be effective, without relying on any kind of mechanism whatsoever to enforce it. Want a $100 fine for littering? Then define a currency so that you have 100 units less if you litter, and convince people to accept it. Now, that particular example is very far-fetched, and likely impractical without a few major caveats which we will discuss below, but it shows the general principle, and there are many more moderate examples of this kind of principle that definitely can be put to work.
Just How Smart Are Smart Contracts?
Smart contracts are obviously very effective for any kind of financial applications, or more generally any kind of swaps between two different factum assets. One example is a domain name sale; a domain, like google.com, is a factum asset, since it’s backed by a database on a server that only carries any weight because we accept it, and money can obviously be factum as well. Right now, selling a domain is a complicated process that often requires specialized services; in the future, you may be able to package up a sale offer into a smart contract and put it on the blockchain, and if anyone takes it both sides of the trade will happen automatically – no possibility of fraud involved. Going back to the world of currencies, decentralized exchange is another example, and we can also do financial contracts such as hedging and leverage trading.
However, there are places where smart contracts are not so good. Consider, for example, the case of an employment contract: A agrees to do a certain task for B in exchange for payment of X units of currency C. The payment part is easy to smart-contract-ify. However, there is a part that is not so easy: verifying that the work actually took place. If the work is in the physical world, this is pretty much impossible, since blockchains don’t have any way of accessing the physical world. Even if it’s a website, there is still the question of assessing quality, and although computer programs can use machine learning algorithms to judge such characteristics quite effectively in certain cases, it is incredibly hard to do so in a public contract without opening the door for employees “gaming the system”. Sometimes, a society ruled by algorithms is just not quite good enough.
Fortunately, there is a moderate solution that can capture the best of both worlds: judges. A judge in a regular court has essentially unlimited power to do what they want, and the process of judging does not have a particularly good interface; people need to file a suit, wait a significant length of time for a trial, and the judge eventually makes a decision which is enforced by the legal system – itself not a paragon of lightning-quick efficiency. Private arbitration often manages to be cheaper and faster than courts, but even there the problems are still the same. Judges in a factum world, on the other hand, are very much different. A smart contract for employment might look like this:
if says(B,"A did the job") or says(J,"A did the job"):
send(200, A)
else if says(A,"A did not do the job") or says(J,"A did not do the job"):
send(200, B)
says is a signature verification algorithm; says(P,T) basically checks if someone had submitted a message with text T and a digital signature that verifies using P’s public key. So how does this contract work? First, the employer would send 200 currency units into the contract, where they would sit in escrow. In most cases, the employer and employee are honest, so either A quits and releases the funds back to B by signing a message saying “A did not do the job” or A does the job, B verifies that A did the job, and the contract releases the funds to A. However, if A does the job, and B disagrees, then it’s up to judge J to say that either A did the job or A did not do the job.
Note that J’s power is very carefully delineated; all that J has the right to do is say that either A did the job or A did not do the job. A more sophisticated contract might also give J the right to grant judgements within the range between the two extremes. J does not have the right to say that A actually deserves 600 currency units, or that by the way the entire relationship is illegal and J should get the 200 units, or anything else outside of the clearly defined boundaries. And J’s power is enforced by factum – the contract contains J’s public key, and thus the funds automatically go to A or B based on the boundaries. The contract can even require messages from 2 out of 3 judges, or it can have separate judges judge separate aspects of the work and have the contract automatically assign B’s work a quality score based on those ratings. Any contract can simply plug in any judge in exactly the way that they want, whether to judge the truth or falsehood of a specific fact, provide a measurement of some variable, or be one of the parties facilitating the arrangement.
How will this be better than the current system? In short, what this introduces is “judges as a service”. Now, in order to become a “judge” you need to get hired at a private arbitration firm or a government court or start your own. In a cryptographically enabled factum law system, being a judge simply requires having a public key and a computer with internet access. As counterintuitive as it sounds, not all judges need to be well-versed in law. Some judges can specialize in, for example, determining whether or not a product was shipped correctly (ideally, the postal system would do this). Other judges can verify the completion of employment contracts. Others would appraise damages for insurance contracts. It would be up to the contract writer to plug in judges of each type in the appropriate places in the contract, and the part of the contract that can be defined purely in computer code will be.
And that’s all there is to it.
The next part of this series will talk about the concept of trust, and what cryptographers and Bitcoin advocates really mean when they talk about building a “trust-free” society.
Bitcoin has experienced a flurry of attention recently in the media and in the political arena. Even cynical financial journalists and analysts have been drawn into the debate. Learn about financial markets and Bitcoin.
Since its inception in 2009 by the then anonymous developer Satoshi Nakamoto, this online based currency trading system has confused and excited the technology industry, because no one can seem to agree whether the concept of a digital currency that is not attached to government is a force for good or a harbinger of evil.
One thing that experts can all agree on is that when implemented properly, Bitcoin’s potential is limitless.
The supporters and developers of Bitcoin have been its fiercest advocates since its creation.
They love it because it allows users to exchange currency for goods or services online (and in real life with certain applications) without having to use a third party like a credit card company or PayPal. This eliminates service fees associated with such companies. By not affiliating with any country’s government or economy it can potentially avoid becoming dragged down when that economy suffers, which is also a desirable trait for many users.
Bitcoin’s detractors are concerned about its legitimacy. Since purchases with virtual Bitcoins are untraceable, it has become a preferred form of payment for illicit drug transactions. There is also a US court case pending that alleges Bitcoin was used as payment for contract killings.
Gavin Andresen, the chief scientist at the Bitcoin Foundation, was interviewed by NPR about the illicit implications of Bitcoin. When asked about the drug allegations he stated, ‘That’s really disturbing. That really bothers me. For me as a tech geek, my first thought is, all right, how can we stop this? How can we fix it? This is a case where maybe it can’t be fixed with technology.’
There is the other concern that while Bitcoin may not be subject to any one economy’s inflation, that currency trading within the Bitcoin system can be arbitrarily inflated. Fiatleak.com has reported daily price swings of Bitcoin as high as 80%. A paper based currency experiences price swings as well, but they are usually on or around the 1% mark.
This means that on any given day of currency trading your Bitcoins could be worth hundreds of times more than you paid for them, or virtually nothing. This volatility is not a great indicator of Bitcoin’s staying power in the digital economy.
Ultimately, we might have to wait until the world’s governments and indeed regulators decide how to handle Bitcoin – until then there are no guarantees that it will still be around in 10 years.
Competing cryptocurrencies have been in the news lately. This VICE Motherboard roundup is a good list of some of bitcoin’s most promising challengers. But it makes a comparison which reveals a view often expressed but is probably misguided about the nature of cryptocurrency competition. “Is there room for more than one sheriff in town?” writer Alec Liu asks. “In the case of Facebook, competitors with similar functionality never made it, regardless of apparently advantageous tweaks to the original formula.”
The comparison makes sense at first. Most people use only one kind of money, and Facebook has no obvious remaining competitors, besides the much-less-used and very different Twitter, Instagram and Snapchat. But here’s why a better analogy for the battle between bitcoin and altcoins might be Netflix and Hulu.
Competition is pretty powerful. People don’t take risks with their time, money and reputation, with the possibility of losing all and failing publicly, if they’re secure in their domination of a market. The possibility of getting trounced is what motivates people to try to generate value in new ways. Competition, then, spurs the kinds of risks necessary to innovate. Innovation is the only way to create new wealth. Resources are finite. Innovation is infinite. The wealth created through innovation leads to longer lives, greater levels of prosperity and more free time, allowing people to learn about themselves and the world around them.
But, competition is also costly. Many powerful firms have been crippled or taken under by their inability to compete with upstarts. IBM, Xerox, Circuit City, all once-powerful tech behemoths, have all been taken out or scaled back considerably since their heydays.
Competition is also costly for consumers. Consider VHS versus Betamax. Or Nintendo versus Sega. Or the iPhone versus Android. Or Mac versus PC. What they all have in common is this: Most people will use only one. It’s simply too expensive, relative to the benefits, to use both competitors. Few people want to buy, and learn to use, two different systems.
But one thing that technological innovation does is move people away from expensive hardware. According to the Chicago Tribune, when the VCR was introduced in 1975, the average cost for one was between $1,000 and $1,400. In 1975 Sears was selling their cheapest (black and white) television for $500 in today’s dollars. Their best color TV would set you back about $2,600.
Today your laptop, which does much more, but will also play movies from the internet, likely costs less than Sears’ crappiest black-and-white television, even with a Netflix subscription included.
Netflix and Hulu are the VHS and Betamax of today, competing for watching-stuff-at-home customer dollars. But one huge difference is that low investment costs mean that they can both compete with each other for a long time. Betamax and VHS knew that one of them would need to become standard, because few people were going to buy both kinds of players. Legend is that when the porn industry took up VHS, its fate as the default video format was sealed.
Not so with Netflix and Hulu. Investment cost, and therefore the cost to switch, is minimal. In fact, both services are so cheap and their services different enough that many, many people pay for both. Or, they do what I do and pay for Netflix and share with their sisters, who pay for Hulu Plus and share with them. Hulu Plus and Netflix are still very much competing. Most people do not pay for both. When Netflix found success in creating an original series, House of Cards, which begot another incredibly successful series, Orange Is The New Black, Hulu also got in on the game, creating several lower-budget original series which non-subscribers can watch for free.
People are still talking about competition between bitcoin and altcoins such as Dogecoin or NXT like they are VHS and Betamax. But they are much more like Netflix and Hulu. Netflix and Hulu have opened up a new world of original content creation without middlemen and have helped normalize the internet as a source for television and movie watching. Similarly bitcoin and altcoins are opening up new worlds of payment options without middlemen and normalizing the internet as a source for banking services.
In addition, crypto is following this competitive innovation model; only instead of both branching into original content shows, Florincoin is the first cryptocoin to introduce messages in transactions, and bitcoin will be introducing this feature as well.
Yet in some ways, even the Hulu/Netflix analogy is inapt. In several dimensions, cryptocurrencies transcend competition. After all, all moderately successful ones are based on open source code. All attempts at cryptocurrency based on closed-source code (I only know of one) have failed miserably. Active altcoin development with open-source coding means a diverse set of developers fix problems, and this problem-solving ends up helping all cryptocurrencies run smoothly.
In addition, unlike traditional competitors, crypto developers actually work together for each other’s mutual benefit. For instance, Litecoin and Bitcoin developers joined forces to create a large bounty for the person who found a fix for a bug affecting both currencies, and the fix was found. Another great example of mature cross-community communication can be see in JR willet’s post on the Mastercoin Blog, where he asks Vitalik (lead developer of Ethereum) for advice. Vitalik has written two features for Mastercoin.
It is because currencies have been so dreadfully difficult to exchange that we have previously taken for granted the need for one dominant currency, just as there was a need for one dominant video format. But exchanging cryptocurrencies is actually even easier than switching from Netflix to Hulu.
No one can look at the carcasses of once-successful companies, or their VHS (or DVD) cabinet and deny the destruction aspect of creative destruction. And the thought of people competing brings to mind the opposite of cooperation. Backstabbing and wanting people to fail are horrible things to contemplate. Yet cryptocurrencies are harnessing the creative aspects of creative destruction, namely innovation and its natural result, prosperity, while discarding some of the nastier aspects.
It would be surprising, and actually a little sad, for one cryptocurrency to dominate. Whereas Netflix and Hulu are constantly innovating, there were basically no changes to the VHS format until the DVD arrived and made it obsolete. Similarly, fiat money hasn’t seen any innovation in the last hundred years. The greatest benefit and promise of bitcoin the currency is the potential to innovate our currencies. Competition enables and incentivizes innovation. Long live bitcoin. Long live altcoins. Long live competition, and the prosperity it creates.
Today, the BitGive Foundation announced its newest project of a fundraising campaign for The Water Project. How incredible that one can send BTC to help provide fresh water to those truly in need!
The BitGive Foundation issues the following press release:
BITGIVE FOUNDATION – FUNDRAISING CAMPAIGN FOR THE WATER PROJECT
Charitable giving in Bitcoin.
(Sacramento, CA – February 24, 2014) – The BitGive Foundation is partnering with The Water Project to promote charitable giving through a fundraising campaign to bring clean, safe water to a community in Africa.
The BitGive Foundation has kick-started the campaign with a 2 Bitcoin donation ($1,248 USD equivalent) towards the $10,000 goal. You can check out the campaign and its progress, and donate by visiting the BitGive Fundraising Campaign.
The Water Project Inc. is a 501(c)(3) non-profit organization unlocking human potential by providing sustainable water projects to communities in sub-Saharan Africa who suffer needlessly from a lack of access to clean water and proper sanitation.
The Water Project recently began accepting Bitcoin donations and especially accommodated a crowd-sourcing campaign in Bitcoin for the BitGive Foundation’s effort. The Water Project’s President, Peter Chasse, is also a fan of crytocurrencies and recently released this blog Welcome Cryptos to encourage crytocurrency donors to give to The Water Project.
The BitGive Foundation is pleased to be working with such a worthy organization and to support their new acceptance of Bitcoins with a $10,000 fundraising campaign. This is the young Foundation’s second major fundraising effort. They also raised $4,850 worth of Bitcoins for Save the Children’s Typhoon Haiyan Children’s Relief Fund last November.
Madeline Finch, Board Member and Secretary of the Foundation says, “We are very pleased to be working with The Water Project and happy to kick-start the campaign with 2 Bitcoins. We are a fairly new organization, and The Water Project is perfectly aligned with our mission.”
To share their vision and continue to educate audiences about Bitcoin, Connie Gallippi, Founder and Executive Director of BitGive, recently presented on a ‘Future of Giving’ panel at the Startup & Tech Mixer in San Francisco with thousands of attendees, and she has also presented at several Bitcoin conferences and events in the US and South America. She and Madeline also serve as leading women in the Bitcoin community, which is known for being light on female representation.
The BitGive Foundation, launched last year, is a charitable giving organization leveraging the power of the Bitcoin community to improve public health and the environment world-wide. BitGive received several early significant donations from Bitcoin mining companies KnCMiner and Butterfly Labs, as well as in-kind donations and services from Perkins Coie, LLP and BitPay, Inc., who also processes Bitcoin donations to charities at no cost.
The Foundation will soon be launching a Founding Donors Campaign to raise capacity-building funds to sustain the organization and support its mission. The Foundation has a multi-million dollar long-term goal for global giving and is confident that the Bitcoin community will support that bold vision.
Few topics inspire as much passion as the Second Amendment to the U.S. Constitution. The natural right of a citizen to keep and bear arms is both political and contentious.
Despite judicial clarification gun control will remain a sensitive issue as ‘pro-gun’ lobbyists continue to engage ideologically with ‘gun-control’ lobbyists.
The ambiguity around definitions within the amendment and the original intention of the framers does not help. Although, given the divisive nature of the topic, crystal clear clarification probably wouldn’t help.
In this spirit of ‘pro-gun’ constitutional conservatism we now have ‘Guncoin’. If Bitcoin is a libertarian wet dream then we really should have seen Guncoin coming. Perhaps some did.
The freedom movement itself, in a U.S. context, focuses on Constitutional principles. The Constitution is a concise document. But two areas it most certainly covers are money and guns. Control of both are essential protections from the tyranny of state.
Conceptually Guncoin weds two of the freedom movement’s most popular tools: guns and cryptocurrency. So, on the face of it, the existence of Guncoin makes sense.
Guncoin claims to exist out of a real public need. In the United States it is very difficult to find conventional payment processors willing to serve online firearm dealers. When a third party payment processor is willing to process a transaction it involves an incredibly high fee.
Guncoin therefore promises to increase competition in online firearms distribution. This will be achieved by providing a payment option that removes the need for any third parties.
Of course, Bitcoin or any existing alt-coin could fulfill this function. But Bitcoin does not make any obvious political statement. By contrast, Guncoin is brazen in its embrace of political and ideological principles.
Technologically Guncoin (GUN) is a Litecoin clone, utilising Scrypt algorithm. GPU miners currently mining Litecoin, Dogecoin and other Scrypt coins can effortlessly switch to Guncoin with their existing equipment.
An upper limit of five hundred million coins will ever be mined. It should be noted that there is a ten percent pre-mine. The stated intention of the developers is to set aside this amount as rewards to contributors.
Guncoin promises to remove the friction in purchasing firearms and related products online. The intention is to have transactions initiated and confirmed the same day. Eventually the developers hope to see Guncoin accepted by all firearms related businesses.
The core development team consists of a Project Manager, Web and Graphics Designer, two Developers and an Advertising Specialist, all of whom claim to be experienced with buying and selling firearms via online auctions such as gunbroker.com.
In the eyes of a Bitcoin core developer Gavin Andresen, alt-coins are a distraction and harmful to the overall ecosystem. They act to effectively increase the overall money supply and co-opt development talent that could be contributing to Bitcoin’s core code.
Nevertheless, this proliferation of alt-coins is exactly what we’re seeing, all over the internet. Coins are emerging that fit specific and niche community needs and occupy certain spaces online. For example Dogecoin is evolving into a tipping coin for news forums like Reddit.
Perhaps Guncoin can evolve to fulfil certain needs in its own target community. Once born its evolution will take its own path, largely out of the control of its core developers. This is healthy.
The intention of Guncoin’s developers now is to cater to the gun enthusiasts of America, then beyond.
To achieve this goal Guncoin developers are now running a crowd funding campaign with the immediate goal of raising a minimum $130,000. The funds will be used to build an extremely strong web infrastructure and community backing for Guncoin together with a heavy marketing strategy for the public release.
Longer term the core developers hope to foster and inspire a community that will go on and present retailers with options for accepting Guncoin directly.
Guncoin will be officially released to the public on May 1st of this year, regardless of how well the funding campaign does. The fundraising campaign will last for the next 40+ days.
There is already a lot of controversy about Guncoin and it has only been advertised for a few days.
In addition to trusting the digital currency exchange one might also consider the government that makes or changes the laws in the country in which the exchange operates. Governments have coordinated together and created laws commonly referred to as “Know Your Customer” or KYC. However, the citizens are left without protection and many have had their money and digital currency stolen. These series of articles are aimed to give the reader more knowledge, tips and tricks to arm themselves. These we call the KYE rules or “Know Your Exchange”.
Part one of the series looked at two of the most popular exchanges that have been popular to the western world. Part two expanded on the research tools and tips for the reader to do their own research in effort to find the exchanges for which they are most comfortable. The reader must weigh several factors to make the best possible decisions for trusting the exchanges. Several new exchanges have recently opened in the Asian part of the world. There are several unique qualities that make Asian cultures somewhat different than western cultures. Chinese citizens are more likely to be gamblers. This creates price speculation swings that may not have anything to do with the fundamentals or the potential for the currency itself. This article references three Chinese exchanges for illustration of discussion. This is not a review of the exchanges themselves.
BTC-China
BTC-China CEO, Bobby Lee
In the autumn of 2013 the BTC-China exchange soared past Mt. Gox and became, albeit temporarily, the biggest digital currency exchange in the world measured in reported volume trading. Chinese investors swarmed to the exchange with new money when BTC-China announced they were eliminating trading fees. The ensuing price of bitcoin rose from under $200 to over $1,400 USD on the exchange in less than 10 weeks. This also raised the price fivefold throughout the world during the same time period. Then it all came to a crash on December 5 when the Chinese central bank sent a memo to their banking system with instructions that they were not allowed to conduct official business with digital currencies. The price of bitcoin crashed by $400 in the ensuing days.
Bobby went to work carefully studying the wording and meaning of the memo to find a solution that would keep his exchange open for business. He came up with a clever idea to sell vouchers through an eBay-like system in China that gave the customer a voucher code that they could then redeem on the exchange. It was important to note that China could have just simply banned the exchanges but chose not to. This was interpreted as a move to keep banks out of bitcoin speculation and circumvent China’s control over their official currency. Many people inside the country have been finding creative ways to get their money out of China and into a foreign currencies they deem safer.
BTC-China eventually followed the lead set by another Chinese digital currency exchange; Huobi. The CEO of that exchange, Leon Li, first allowed depositors to send money to his personal bank account which he then flowed into the exchange on their behalf. With the success of Huobi, BTC-China quietly followed this new approach at the beginning of February.
HuoBi
The word HuoBi means “Fire Currency” in Mandarin Chinese. It shot out of relative obscurity with its continued no-fee trading structure and is listed as one of the top exchanges by reported volume thanks in part to Leon Li, whose personal bank account funded the exchange. No outside banks issued money directly to the exchange.
As far as the reported numbers of volume issued from Huobi, there is concern that all might not be what it seems. Another Chinese exchange, OKCoin, was accused of misreporting their trading volume when an exchange arbiter discovered the volume on OKCoin remained steady with its previous reporting even though the central bank’s ruling had stung the trading volume on the other Chinese exchanges. After inquiries were made to the exchange the numbers quietly and suddenly dropped to an expected level.
Many in the bitcoin community continue to openly wonder if HuoBi’s numbers are to be believed. Others question whether internal computers are issuing buy\sell orders with high frequency trading computers without closing the transactions. Although there are many rumors, they are hard to prove. The Chinese government has issued warning statements about exchanges and does not regulate digital currencies; so exchanges are free to report whatever numbers they like.
The numbers representing the exchange volume are reported from the company itself. There is little transparency and an exchange has incentive to fudge the numbers to get the attention of new customers. One can’t verify these trades on the block chain as they’re all done internally with only net buys or sales that exceed the inventory of the exchange needing to be purchased or sold in the open market to cover the aggregate.
This is not to say that this type of activity is happening at HuoBi. Because several questions have been raised on forum boards about the possibly of this happening, it becomes a good illustration for speculation. With the high volume numbers coming out of these exchanges, these questions repeatedly come up but tend to focus more on Chinese exchanges.
BTER, located in China, is relatively new.
English and Chinese languages are supported on the website. It can, unlike other Chinese exchanges, accept Chinese Yuan directly. The most notable difference for this exchange is the use of several alternative (alt) coins. Compared to US based Cryptsy, the trades were quicker without the lag time common on Cryptsy.
Trying to get good reliable information has proven difficult for this exchange. It was first brought up in the forums last April. This writer opened an account in January and has only slight difficulties. Its authentication procedures were tricky to navigate. Its support system relies on Skype messaging. E-mails were answered, but because of the time difference, sometimes it was 8 – 12 hours later. It may be a one-person support “team”. Navigating the site and making trades was fast and reliable with enough volume that trades ran smoothly. Actually withdrawing the funds was much more tricky than it had to be and was likely buggy. They require a “funds” password that is different than your login password. An email is then sent for your verification. It required the use of a captcha and TOTP Google authentication. A message box appeared when you put in your account name, fund password, TOPT, and Captcha – which then incorrectly indicated that a password change had been requested.
It indicated several times that one of the fields was input incorrectly although after the fifth attempt and careful review each keystroke by a second person onhand, three more attempts were needed. It eventually allowed the funds to be transferred off-site to another bitcoin wallet. This writer interpreted that the exchange really, really doesn’t want you to withdraw the funds. The forum chatter didn’t bring up any serious concerns other than the difficulty withdrawing funds.The litecoin withdraw took many hours to fulfill when after finally giving up – it appeared in an off-site wallet the following day.
This article is not intended to be an all-inclusive review of exchanges. The firsthand experience is only used because there currently is very little information available to form a consensus opinion.
Asian Exchanges – a perspective.
Bitcoin exchanges in communist or totalitarian governments have their own challenges. Capital controls meant to keep money from leaving the country are often necessary as currencies often get inflated to unrealistic artificial levels which get unbalanced against other currencies. In a free market, they would find equilibrium when exchanged freely with foreign currencies as opening a window will equalize the temperature inside a house to the outside temperatures. For citizens who have to buy goods or services outside the country or to maintain buying value, foreign currency is often preferred. Bitcoin has become another path some citizens view as possible escape mechanism for currency to leave the country. Others methods involve ‘fake invoicing’ from foreign purchases, and the purchase and use of gambling tokens which are accepted across borders in reciprocal arrangements between casinos.The financial borders of these countries are usually sealed up by governments for fear of losing control of their manipulated currency value, only when contrasted against other world currencies become exposed.
These countries can do very little against digital currency mining and find an easier time controlling the exchanges. It may be wise to remember that they can change the rules at any time. Trustworthy exchanges are at the mercy of the government’s jurisdiction in which they reside. Historically speaking, centrally planned economies used by totalitarian governments have a poor record of maintaining economic stability and the value of money eventually becomes unrealistic to the point where the country becomes desperate to control it. Attempts at artificial manipulations fighting against the natural law of supply and demand inevitably create bubbles and black markets. The average lifespan of fiat currency is about 27 years. and as a result , when those currencies begin to self-destruct, governments tend to grab all the funds they can find, including personal savings and retirements. We can witness their financial ship sinking most recently in Argentina, Poland, Portugal, Venezuela, and North Korea. These are just a few of the more recently examples, but history is littered with similar stories. Generally it’s not a matter of “if” but “when”.
As long as some powerful countries support and foster bitcoin, perhaps it has a chance to erode the effects of corruption from various less reputable countries. Perhaps bitcoin can end capital controls and break down the money barriers that governments use in efforts to keep their own currency propped up from within. Bitcoin might have an acidic effect for removing cancerous corruption from the inside out. If citizens demand transparency through the block-chain, honest money may turn out to be the only money governments can’t appropriate at will in an effort to plug the sinking ship they’ve created through corruption and oligarchy.
History has proven that every communist country’s economy eventually fails or transforms itself into a quasi capitalist economy (the China experiment). Could it be possible that the end of communism does not come from war, but from the power of digital currencies? With much talk about governments trying to block digital currencies- perhaps ironically it’s in their best interest to protect and foster its growth and acceptance. Once set in motion, non communist countries can simply watch as the currency transforms those governments into accountability in ways tanks and bombs never could. Is it conceivable that nation states will themselves become the largest miners of digital currencies vying for control or protection of the blockchain? Charlie Lee, the inventor of litecoin and Coinbase, made a quiet plug for that idea during the New York hearing of the Division of Financial Services a few weeks ago.
It might be a battle at the flashpoints between old currency and new. Those flashpoints might be at the currency exchange level. It’s important for the reader to watch for this beforehand, and realize that with just a quick memo from the central bank the exchanges could effectively be banned outright; with little or no warning. In these areas it might be even wiser to make due diligence to not only know your exchange, but understand the politics of the country where it resides and ask yourself if you trust the government enough to let the exchange therein hold your money. The block chain itself is a glass house and as such it might make some very powerful officials nervous. The mighty spotlight of accountability governments shine on us might become unbearably uncomfortable when reflected back onto them. At this point we might rise up and go beyond “Know Your Exchange” – but elevate our knowledge and power that comes with the ability to “Know Your Government”.
SAN FRANCISCO, CA — February 21, 2014 — BitPay, a provider of business solutions for virtual currencies announced its participation as a premier sponsor at the LAUNCH Hackathon 2014 in San Francisco, CA. The event begins on Friday, February 21, 2014 at the San Francisco Design Center.
LAUNCH Hackathon is a global effort being held in conjunction with The Startup Weekend and Up Global, with attendees competing for over $2 million in investment and many other prizes. Over 1,000 developers will be competing in the 48-hour Hackathon, which aims at encouraging additional development of open-source tools that will benefit the Bitcoin and digital currency communities.
As a premier sponsor, BitPay is offering an additional financial benefit for developers who utilize BitPay’s Bitcoin Payment Gateway API or the new open-source library, Bitcore. The company recently announced Bitcore, an open-source Bitcoin project aimed to make it easier for developers to interact with the real Bitcoin network. The interface is completely native to the Bitcoin network and provides the required core functions needed to develop new bitcoin applications. Bitcore enables the continued innovation of the Bitcoin community as a whole and diminishes the barrier to entry for individuals who are new to bitcoin.
“BitPay developed and released Bitcore to encourage new projects in the space, and we are upping the ante for developers in the bitcoin space,” said BitPay Developer, Eric Martindale.. “Our goal is to create an opportunity for developers to implement powerful financial integrations with their bitcoin applications.”
Winners of last year’s Hackathon were Wizzywig.io, a complete website platform that provides users with a code-free environment to create personalized web pages; and Ramen.is, a software funding platform for startups. The judges for this years LAUNCH Hackathon will include Om Malik of GigaOm, Jeff Sandquist of Twitter, and Zal Bilimoria of Andreessen Horowitz.
The LAUNCH Hackathon will bring over 1,000 innovative developers and businesses together and through BitPay’s sponsorship, will give individuals the opportunity to be rewarded handsomely for their efforts within the Bitcoin community.
About BitPay
BitPay is a Payment Service Provider (PSP) specializing in eCommerce, B2B, and enterprise-grade bitcoin payment solutions for online and in-person. Visit https://bitpay.com.
About LAUNCH Hackathon
LAUNCH Hackathon is a competition taking place over 48-hours and is designed for teams of developers. Teams compete to create innovative software for the chance at over $2 million in investment and prizes. Visit http://hackathon.launch.co/
The Mankoff Company sent out the following press releases on both the NYC and London Conferences:
New York:
Cryptocurrencies: Opportunities, Challenges and Profitability in the Migration from Main Street to Wall Street
A Discussion for Institutions, Traders, Hedge Funds and Others in the Financial Technology Markets
March 12th, 2014, New York City
Every day there is an article or comment on cryptocurrencies – whether it is Bitcoin or one of the other currencies currently being traded globally. According to a recent article, “The internet-based protocol behind bitcoin has the power to disrupt and transform the FinTech industry, and the cryptocurrency’s recent endorsements from well-respected investors provide a critical first step toward legitimacy.” These panel discussions address the movement of trade of cryptocurrencies from Main Street to Wall Street. But how do you gain on these opportunities? Is it just a bubble, another speculative commodity or something more? What regulation will be instituted and how will that affect trading?
In these informative panel discussions, and partnering with the Mastercoin Protocol, we hear from experienced professionals in the industry on these issues and more. Held after trading hours so as not to take time off the desk, these discussions are immediately followed by a networking reception to continue the discussion and exchange of ideas. Join us on Wednesday, March 12th and learn why 2000+ of your industry colleague have attended Mankoff Company events.
Panels include:
Panel I: Regulation and Regulatory Impact
· Latest initiatives by regulatory bodies
· Anti-Money Laundering (AML)/ ABL (“Anti-Bitcoin Laundering”) and know-your-customer rules
· Storage issues/security/anti-hacking
· Will it become a legitimate currency? Will it interface with banking systems? And will it be taxed?
Panelists Include:
Nicholas Colas, Chief Market Strategist, Convergex
Donald J. Mosher, Partner, Schulte Roth & Zabel
David K. A. Mordecai, PhD, Courant Institute of Mathematical Sciences & Stern School of Business, New York University
Panel II. Steps to Becoming a Cryptocurrency Trader
· What is the potential of the crypto market?
· Evaluating the volatility: How it differs from traditional arbitrage and understanding how to handle it
· Is it another asset class? An ECN? A commodity like gold?
· Trading on exchanges
· Identifying current and future opportunities
· Clearing and settlement issues; Counterparty risk
Panelists Include:
Emmanuel Abiodun, CEO & Founder, Cloudhashing.com
Robert Cho, Vice President, SecondMarket Trading, SecondMarket, Inc.
Divya Thakur, Founder, BTX Trader
Panel III. Investment in Cryptocurrencies and bitcoin companies
· What makes it a good or bad investment?
· Investing in bitcoin companies: What makes them valuable?
· What are the technologies available? Being developed? And how will they be advance the move from the retail to institutional trader?
Panelists Include:
Emmanuel Abiodun, CEO & Founder, Cloudhashing.com
Representative, Bessemer Venture Capital
David Kinitsky, Senior Director, SecondMarket; General Manager, Bitcoin Investment Trust
Networking Reception: Following the conclusion of the Roundtable Panel Sessions join us for a Networking Cocktail Reception to further discuss the most top of mind issues of those involved in the financial markets.
Cryptocurrencies: Opportunities, Challenges and Profitability in the Migration from Main Street to the City
A Discussion for Institutions, Traders, Hedge Funds and Others in the Financial Technology Markets
3 April, 2014, London
Every day there is an article or comment on cryptocurrencies – whether it is Bitcoin or one of the other currencies currently being traded globally. According to a recent article, “The internet-based protocol behind bitcoin has the power to disrupt and transform the FinTech industry, and the cryptocurrency’s recent endorsements from well-respected investors provide a critical first step toward legitimacy.” These panel discussions address the movement of trade of cryptocurrencies from Main Street to the City. But how do you gain on these opportunities? Is it just a bubble, another speculative commodity or something more? What regulation will be instituted and how will that affect trading?
In these informative panel discussions, and partnering with the Mastercoin Protocol, we hear from experienced professionals in the industry on these issues and more. Held after trading hours so as not to take time off the desk, these discussions are immediately followed by a networking reception to continue the discussion and exchange of ideas. Join us on Thursday, 3rd April and learn why 2000+ of your industry colleague have attended Mankoff Company events.
Panels include:
Panel I: Regulation and Regulatory Impact
· Latest initiatives by regulatory bodies
· Anti-Money Laundering (AML)/ ABL (“Anti-Bitcoin Laundering”) and know-your-customer rules
· Storage issues/security/anti-hacking
· Will it become a legitimate currency? Will it interface with banking systems? And will it be taxed?
Panelists TBA
Panel II. Steps to Becoming a Cryptocurrency Trader
· What is the potential of the crypto market?
· Evaluating the volatility: How it differs from traditional arbitrage and understanding how to handle it
· Is it another asset class? An ECN? A commodity like gold?
· Trading on exchanges
· Identifying current and future opportunities
· Clearing and settlement issues; Counterparty risk
Panelists Include:
Emmanuel Abiodun, CEO & Founder, Cloudhashing.com
Karim Taleb, Managing Partner, Robust Methods
Panel III. Investment in Cryptocurrencies and bitcoin companies
· What makes it a good or bad investment?
· Investing in bitcoin companies: What makes them valuable?
· What are the technologies available? Being developed? And how will they be advance the move from the retail to institutional trader?
Panelists Include:
Emmanuel Abiodun, CEO & Founder, Cloudhashing.com
Basem I. Salfitim, Partner, Hummingbird Ventures
Networking Reception: Following the conclusion of the Roundtable Panel Sessions join us for a Networking Cocktail Reception to further discuss the most top of mind issues of those involved in the financial markets.
There can be no doubt that the Bitcoin ecosystem has been hit hard this past month. Canadian financial regulators, long held as the paragons of a light and wait-and-see approach to the Bitcoin economy, began to move towards a more active stance, and a particularly ominous passpge from the FINTRAC report even suggests that the agency can potentially “choke bitcoins oxygen (sic)” by denying Canadians access to the foreign exchange market. BMO, the last Bitcoin-friendly bank in Canada, shut down the account of Cointrader, a Vancouver-based Bitcoin exchange, soon after that, although fortunately Cointrader’s claim that this is part of a general shift to an anti-Bitcoin stance does not seem to be corroborated by reports from other Bitcoin businesses. On the other hand, somewhat less fortunately, the Russian government simply banned Bitcoin entirely.
Around the same time, Silk Road 2 was hacked, likely by its own owners, and $2.5 million worth of BTC was stolen and the marketplace shut down. An old but poorly understood property of the Bitcoin protocol, transaction malleability, led to several major Bitcoin exchanges shutting down for several days, as well as a major denial-of-service attack that caused the greatest disruption to the Bitcoin network since the blockchain fork last year in March. Finally, worst of all, MtGox, once by far the largest exchange in the Bitcoin economy, has disabled all withdrawals, and prices on the exchange have tumbled more than 85% amid fears that the exchange is insolvent. Among all this, it can be hard to see any bright future for Bitcoin whatsoever.
However, among the setbacks, we have seen a surprisingly large amount of positive news for the Bitcoin economy, much of which has been tragically unnoticed over the past few weeks. Among the important items are:
1. The January 31 CNY deadline came and went, and Bitcoin in China is stronger than ever. When the Chinese government made its first regulatory push against Bitcoin, moving to forbid banks from directly offering Bitcoin services, the government gave the banks a deadline of Jan 31 to stop working with Bitcoin. Many people interpreted this deadline as a date for when a further push against Bitcoin would be forthcoming, perhaps further banning Bitcoin trade or Bitcoin exchange. However, the deadline passed and… nothing happened. No crackdown whatsoever. Instead, when the deadline hit, BTCChina actually resumed accepting cash deposits, and soon after that China once again took first place as the country with the largest number of BitcoinQt downloads.
2. The porn industry is seizing upon Bitcoin like wildfire. Porn.com became the first major porn site to accept Bitcoin in December, and in mid-January the site announced that Bitcoin was responsible for 25% of its earnings. A week after that, porn.com was joined by Naughty America, and now very recently in February the list grew to include I Know That Girl (all links safe-for-work), a site owned by the same company that runs Pornhub. It seems like it’s actually porn, not gambling, that’s becoming the first industry to embrace Bitcoin in the mainstream.
3. Bitcoin exchange reopens in Thailand. When the Thai central bank announced that essentially any Bitcoin activity was illegal last July, many people were already skeptical, pointing out that the Thai central bank had no authority to ban Bitcoin by itself. Now, however, the main Thai Bitcoin exchange reopened its operations upon receiving another letter from the bank stating that Bitcoin exchange does not fall under foreign currency exchange regulations. The status of Bitcoin exchange is still contentious, as the Thai central bank now argues that Bitcoin exchange might be illegal because, if combined with foreign Bitcoin exchanges, it makes it too easy to bypass foreign exchange restrictions and convert Thai baht into other national currencies, but nevertheless substantial progress has been made.
4. Balanced Payments is moving to support Bitcoin. Balanced Payments, a popular credit card payment processor, has announced a partnership with Coinbase which will allow online marketplaces using their platform to easily also receive Bitcoin payments. Currently, the integration is in a private alpha mode, with Bitcoin payments only available for CrowdTilt and Gittip, but it will soon expand to other businesses as well.
5. California just clarified that Bitcoin is legal. Recently, Bitcoin users noticed a section of California law saying that “no corporation, flexible purpose corporation, association, or individual shall not issue or put in circulation, as money, anything but the lawful money of the United States”, and became concerned that this might apply to Bitcoin. So what did the Bitcoin community do? Well, they pointed the issue out to the state legislature, and soon enough a bill came along to clarify that Bitcoin was, in fact, perfectly legally okay. And, guess what: one week later the bill was unanimously passed.
6. The Winklevoss SEC filing is moving forward smoothly. The Winklevoss twins, famous for their role in Facebook, announced last July that they would start a Bitcoin investment fund, which institutional investors could use to invest in Bitcoin as part of their portfolios. Up until this point, the process has actually been moving forward quite nicely; yesterday the Winklevoss twins made their major filing with the Securities and Exchange commission. The approval process is still expected to take several months, and perhaps longer, but this is only to be expected; normally, starting a new exchange-traded fund takes years.
Eventually, MtGox will either declare bankruptcy or reopen deposits, and the particular shadow that currently hangs over our community can begin to withdraw. When that happens, the sky will clear, and we’ll see that the number of Bitcoin transactions is still rising, the search volume on Google Trends is no longer dropping and has been stable for about a month, the number of Coinbase wallets is approaching 1 million and companies taking advantage of tools such as multisignature transactions to help alleviate the problems with consumer protection and security that Bitcoin still has are just around the corner. Welcome to an exciting 2014.
Bitcoin Magazine is proud to announce its sponsorship of the WIMA Monaco Conference set to take place from April 22 through 24 at the Grimaldi Forum in Monaco. The conference is set to feature discussions on Big Data analytics and even conclude with a Bitcoin Master Class. Please use the registration code DC14 for a 20% discount to this exciting conference!
WIMA Monaco has the goal of “Connecting the physical and digital worlds for interactive customer management”. WIMA Monaco prides itself in “Keeping ahead of the game, WIMA continues to bring you unique insights of how the market is moving forward for different verticals through an informative conference agenda, innovative exhibits and various animations throughout the event.”
Specifically, the Bitcoin Master Class will feature Pierre Noizat, COO & Co-Founder of Paymium, and Nicolas Cary, CEO of Blockchain.info where attendees will receive a crash course and overview of Bitcoin from a technical and business perspective. Attendees will learn of the applications of Bitcoin, potential risks and additionally have an in depth time of Q&A.
WIMA Monaco’s Executive Director, Joanna Merchie, put out the following statement on the upcoming conference:
Dear Colleagues,
Moving with the market, WIMA MONACO has evolved in its concept. Still continuing to offer the best of NFC, but also bringing to the forefront complementary proximity based (QR, Bluetooth…) and cloud solutions, which may be used in parallel or as stand-alone end-to-end solutions to leverage a seamless user experience. This enhanced and evolved new concept for WIMA, offers a wider variety of tools for marketers to consider, when implementing new innovative and engaging mobile customer services connecting the physical and digital worlds.
Keeping ahead of the game, WIMA continues to bring you unique insights of how the market is moving forward for different verticals through an informative conference agenda, innovative exhibits and various animations throughout the event.
Big Data analytics is also a hot topic in relation to proximity solutions which bring a wealth of information about consumer buying habits, product consumption rate and the effectiveness of marketing campaigns.
For all payment innovators and investors don’t miss our Bitcoin Masterclass, a comprehensive overview of all you need to know to get started in the Bitcoin industry from a technical perspective, then moving on to a business overview presenting applications and use cases. Exciting and disruptive!
If we could sum up in one word what WIMA is about this would be networking. Time and time again both industry leaders and start-ups appreciate the quality of our event and find it the optimal environment for networking with potential partners and customers and we make sure we put plenty of opportunities your way to make the most of networking during breaks, our online networking tool and our new “Speed Networking Session”!
The Principality of Monaco will also play host to the next Celtic-Plus Event and Proposers Day which will be co-located with WIMA from 23 – 24 April. The exhibition area open to attendees from both events, will highlight synergies and offer new insights and opportunities for networking around Celtic-Plus research projects and the ready for market solutions and use cases presented at WIMA.
On behalf of the WIMA Team, we look forward to welcoming you, whether a newcomer or a regular WIMA attendee to the beautiful setting of Monaco from 22 – 24 April for the WIMA MONACO Proximity Experience!
The Bitcoin Center is New York City’s premiere Bitcoin and digital currency hub. Located in the heart of lower Manhattan’s Financial District, only 100 feet from the NYSE, the center acts as the region’s premier physical Bitcoin institution.
Dedicated to promoting awareness of Bitcoin and cryptocurrency, it seeks specifically to advance education and innovation in the financial tech space. It has done so since it was founded last year by leading entrepreneurs, policy makers, and thought leaders.
In the spirit of this ethos the center is partnering with BitDevs NYC to host its first hackathon this Saturday, February 22, 2014 from noon to 10:00 pm Eastern. For the uninitiated, a hackathon is an event where coders meet to program together over a short period. It is a collaborative and competitive environment driven towards specific development goals.
How exciting that such disruptive innovation and development should occur only metres from the doors of the New York Stock Exchange, right under the noses of these guardians of the legacy financial order.
The 21st century is here and New York’s Bitcoin Center exists to embrace innovation. They have made this clear with their words and actions. Partners BitDevs are a NYC group tailored towards software and hardware developers interested in the Bitcoin protocol, cryptocurrencies, open source, fintech and cryptography. They hold meetups once a week, alternating between formal and social gatherings.
The focus of the hackathon will be a vulnerable Bitcoin web wallet. Hackers will be asked to put their information security and Bitcoin knowledge to the test as they try to find the vulnerability in an online Bitcoin wallet designed by a BitDevs NYC member.
Players and spectators will contribute funds to this wallet ($5). The winner will be the player who successfully penetrates the server, accesses the working wallet account, and sends the Bitcoin therein to another address. This is a winner-takes-all event.
There are three specific objectives: to have fun, learn about information security as it pertains to Bitcoin, and to capture the coin.
Hackathons are the perfect way to attract smart and passionate people to work on Bitcoin problems and develop solutions. Of course, attracting talented developers is the key to any successful hackathon. Given the Center’s key location and international standing, it will not be a problem attracting experts from the sector and broader Bitcoin community. The more diverse the collection of people, the more creative the solutions.
After the New York Department of Financial Services (NYDFS) hearing, a spectre of regulation looms over the city. There is no better time to return to Bitcoins grassroots, hackers solving problems and collaborating to change the world. New York may soon become among the first jurisdictions to write comprehensive regulations for Bitcoin and virtual currency. Regardless, as long as institutions like the NY Center exist, doing positive work, Bitcoin will survive and thrive.
Please RSVP to the event on the BitDevs event page. If you don’t have a Meetup account please email [email protected] with ‘Hackathon RSVP’ in the subject line and your name in the body of the email.
All too often, companies and individuals, especially those who are tech-savvy, get caught up in the ones and zeros, continually evaluating performance based on statistical analysis, instead of simply engaging the customer. How do you tell where and to whom your brand is reaching? Bitcoin payment processor, BitPay, has figured out that the numbers can only tell you so much. Instead, the company held a contest aimed at their merchants across the globe.
The contest, which was aptly named after BitPay’s mascot, was called “Where in the World is Curly?” From December 2013 through January 2014, the company’s nearly 20,000 merchants were given the opportunity to show their creativity. A miniature Curly was sent to to each merchant and participants were instructed to submit photos of Curly representative to where they do business and what they do. The contest spanned the edges of the earth and represented how BitPay helps their merchants accept Bitcoin.
Winners of the contest were announced last week and were truly representative of the worldwide reach of Bitcoin and the BitPay brand. There were three finalists selected with a grand prize of one BTC. Each of the selected images came from all reaches of the world, and depicted every climate. The BitPay mascot was photographed by South Pacific Real Estate in front of a Fiji skyscape, having outdoor fun with a child in England by ByTerminr Limited, and in frigid mountain weather in Slovakia, which was submitted by GoldSilver.sk.
Curly in Fiji, photo by South Pacific Real Estate
BitPay VP of Marketing Stephanie Wargo stated in a recent press release, “We received immensely creative entries from all ages and from all types of merchants. Curly is a great representation of the company and the service we provide our merchants each day.”
It is through contests such as this that Bitcoin will continue to grow, not just in business, but in individual adoption. Put simply, widespread adoption is dependent on how something as new and innovative as Bitcoin is brought to the common consumer. From a marketing perspective, contests like “Where in the World is Curly?” bring Bitcoin into the public eye in a manner that is engaging and customer facing.
How do contests help?
Create buzz for products
Word-of-mouth marketing is extremely powerful and consumers seek product recommendations from social outlets more than ever before. How a brand takes advantage of the abundance of information is important. For the Bitcoin community, companies can use contests and the like to increase how their innovations are perceived by businesses and consumers.
Encourage additional website traffic
No matter how technologically advanced or innovative a product, a customer will not know it exists if there is no action taken. Contests give people strong motivation to visit a company’s website, and because Bitcoin is driven by e-commerce, this traffic is of utmost importance to the success of digital currency. Many consumers are apt to spend more time on a site where engagement is present, and in turn, are likely to access their Bitcoin wallet and place an order.
Strengthen relationship between company and consumer
Contests strengthen the company-to-consumer relationship by informing them about the company’s products in a fun and engaging way and by giving customers a benefit for interacting with the company. For BitPay, the photo contest helped create additional brand awareness while expressing how Bitcoin can positively affect businesses. “Where in the World is Curly?” created excitement throughout the Bitcoin community, and further established the relationship between the company and its current and future merchants.
Surely, contests are not for everyone, but in certain cases they can be used to positively impact new technology or innovations. For Bitcoin, contests can help drive consumer and business adoption, create additional customer engagement, and increase knowledge of digital currencies throughout the world.
There’s been a video making the rounds lately called “True Wealth” that targets older investors with doom and gloom misrepresentations of the cryptocurrency bitcoin. The video is from the notoriously fear mongering group Stansberry Research who released a similar one a few years ago warning of impending economic collapse. It is important to address the claims in these videos as they are targeting an older demographic that is already hesitant towards getting involved in bitcoin and, thanks to the video, for all the wrong reasons. Not only are fallacies used repeatedly throughout the video, but the advice is terrible from an investing standpoint.
First of all, the format is unlike regular videos you would see on other sites; you are not allowed to skip past the hyperbole and get to the point. This is by careful design because the video is very long and uses emotionally manipulative techniques to draw the viewer in while concealing supposedly useful information about investing in a mysterious “secret” currency that the super wealthy have invested in for centuries. The narrator name drops such families as the Rothschilds and Morgans to add to the allure of this investment, but it is all couched in an appeal to authority and bandwagon fallacy. The video compares Bitcoin to stocks of poorly launched companies that have failed in the past and repeats the argument that those first to market usually fail. If you can sit through it, which I begrudgingly did weeks ago after it was sent to my boss, you finally find out this “secret” currency that promises untold wealth is *spoiler alert* numismatic collectible coins.
My perspective on this issue is uniquely influenced by my position as an office manager at Roberts & Roberts Brokerage, a precious metals brokerage in Pensacola that takes bitcoin. We advise people to invest in physical bullion and the president, Tim Frey, frequently advises against investing in numismatic coins for a few reasons.
Numismatic coins are sometimes rare or common date coins that have been graded and placed in a nice looking case. They sell for high premiums over the melt value of gold, but require constant attention to the market that few people are able to expend especially those looking to simply invest in gold as a hedge against inflation. In a transcript the Stansberry video was based on, they refer to numismatic coins as “rare,” and while this is true of some coins, many of them are very common. The distinction takes a lot of time spent on research, and more common coins are often sold for a retail value far above their wholesale value; truly rare coins are the exception.
So, we see the old bait and switch in the video and transcript where they discuss truly rare coins then segue into trying to sell numismatic coins that aren’t as rare as one may think. You can view how many common date numismatic coins have been graded on the website of PCGS.
Stansberry Research is trying to get you to invest in coins whose values have dropped as much 89% of their premium above melt. Melt value is the value of the precious metal in an object based on the spot price, which is the price per troy ounce on the commodity market.
The value of numismatics has dropped dramatically over the past decade and differ from bullion in that they have much higher premiums and also slightly less gold. It wouldn’t be fair to only attack the way Stansberry is dispensing this information, so let’s crunch some numbers.
One example of declining numismatics is the $5 MS64 Liberty, a gold coin that sold in 2005 for a whopping 1236.52% over the melt value of $101.76. By 2013, the premium was 143.42% over a melt value of $402.60. Another example is the $5 MS64 Indian that reached a peak of 2872.77% over a melt value of $101.76 then plummeted to 18.48% over $402.60. When the spot value of gold increases, premiums for these coins fall and so far they have yet to recover. But don’t take my word for it; you can view the data here.
The video bashes bitcoin, but just in the last year we’ve seen an increase of 5000% and even more since bitcoin came on the scene in 2008. While volatility is always a concern, numismatics simply don’t hold up to bitcoin as a store of value as premiums have dropped considerably and are showing no sign of recovery whereas the protocol functions of the Bitcoin network offer innovations we can look forward to aside from its value as a currency.
Another case for bitcoin is that they are actually rare as opposed to many of the coins being called numismatic. There are only 21 million that can ever be created and some have already been lost. If you combine the limited quantity with the increasing amount of work needed to mine bitcoin, you have a currency/protocol that is set to increase in value over time as they become more rare and demand increases. In the five years since bitcoin has been around, interest has only grown, and with the advent of new businesses accepting it and new apps being launched it is expected to continue.
There are a few other problems with the video, as well. The coin collecting business is quite literally dying out. Collecting truly rare coins is a hobby that is very time consuming and decreasing among younger generations. At one time coin collectors outnumbered numismatic coins, but the numbers have been gradually declining and we now see more coins than collectors.
We see this all the time at the brokerage; a family inherits a bunch of numismatic coins and sells them off immediately or an older collector brings them in—they are often surprised at how much their value has declined because they haven’t done the meticulous research required. Many people get sold overpriced numismatic coins that are actually looking for bullion, which has lower premiums and is more reflective of the actual market price of gold.
Younger generations have little interest in coin collecting as a hobby and the only people stuck with these numismatics are much older collectors. The large coin collecting house Heritage even refuses to buy most of these coins because they have so many already and more coins are being graded and added to the mix that aren’t actually rare dates. More coins and fewer collectors creates a market that is drying up due to decreased demand.
Numismatics are a relic of an older time where information could be bought for the right price, but we’ve grown accustomed to free information in the age of the internet—you can read the source code for Bitcoin and Satoshi’s white paper. It’s out there and transparent for everyone to see, without having to use gimmicks and manipulation to sell you on it. While it’s my personal belief that Bitcoin is a groundbreaking innovation to get involved in, I urge everyone to do their own research.
Young people would rather have an investment that is versatile, if they have any money to invest whatsoever, and bitcoin fills this position far better than numismatics. You are not investing in just a currency, but an idea as well. Bitcoin as a network has value whether or not the currency remains at a high dollar price. We are witnessing the beginning of a new way to foment contracts between parties and send other information with the rise of cryptographic innovations.
Another feature of bitcoin that is appealing to Millennials is the divisible nature of bitcoin. You can buy as much as you can afford at the time rather than paying nearly $1,400 for a numismatic coin with a dubious future and rocky recent past. The coin collecting industry has been trying hard to encourage investment in these coins, but if you do the research, it is because they have an overabundance of them that they can sell for a very high markup above wholesale to people who are less experienced in coin collecting. If you must buy numismatics, find a place that sells them for wholesale.
You have to use fear and deception to sell numismatics and that may be why Stansberry Research produced this misleading video; as with all things, follow the money. The company is selling you fear and for a low, low subscription price you can find out all of their investment “secrets”. Sound suspicious? If you have to pay money for sacred information, perhaps you should evaluate what the source stands to gain.
By selling you overpriced numismatics; Stansberry could make a small fortune—even more if you are scared into their subscription scheme. If the tone and content of the video wasn’t enough to turn people away, Stansberry is also no stranger to controversy; in 2007 the founder Porter Stansberry was found guilty of fraud and ordered to pay $1.5 million in penalties. He has also been involved in other questionable schemes. As my suspicions confirmed, the company seems to be using the same tactics that have historically caused past clients to lose massive amounts of money.
For all the wailing about bitcoin being a Ponzi scheme, it has historically been those privy to classified information that have run them to rip people off. This mentality is nothing new in the coin collecting and even precious metals industry; even the U.S. Mint sells coins for far above their face value because of the special label “collectible”, but I guarantee you that if you tried to sell them to a dealer for the same price you’d be laughed out of the office. The same is true unfortunately for numismatics, and the target audience for Stansberry’s video are older generations, some of which could be easily fooled by the seemingly high production value of the video and its histrionic promises.
Bitcoin is for everyone and easily accessible even for those averse to technology. So the next time you see this video circulating, you can reassure them that bitcoin isn’t the threat Stansberry makes it out to be—at least not in the way they think of it.
In light of recent events, the Bitcoin Foundation will be holding an election for the vacant industry seat on the Board of Directors.
Please feel free to see the blog post the Foundation put out today:
Election for Vacant Industry Seat
The Bitcoin Foundation is holding an election for a vacant industry seat on its Board of Directors.
Here’s the overview:
Nomination Deadline: April 7, 2014
To nominate, you must be an industry member of the Bitcoin Foundation. Become a member here.
For this election, only Industry Members can nominate and vote for the Industry seat. See more specifics below in the “Details” section.
Email Greg Egan [email protected] to have your nomination added to the list. Each member can only nominate once; it is okay to nominate yourself.
All nominees will be required to fill out, sign, and mail in a physical form declaring their willingness to run for a seat and serve on the board if elected. The form will be provided upon acceptance of nomination.
Membership Sign Up Deadline for New Enrollment of Industry Members: March 31, 2014
If you are not already an industry member of the Bitcoin Foundation, you must become a member by March 31, 2014, to vote in this election. Details on becoming a member can be found here.
Voting Begins: Week of April 21, 2014
Details on how to vote will be sent to all members by email in advance of the first vote.
If we have a large pool of nominees, multiple voting rounds may be necessary.
Details:
What seat are we voting for?
The purpose of this election is to fill a vacant industry seat on the Board of Directors. Only Industry Members can nominate and vote for the Industry seat.
Who is on the current Board of Directors?
The new board members elected will join the current board:
Vacant (Industry seat)
Micky Malka, Founder of Ribbit Capital (Industry Seat)
Mark Karpeles, CEO of Mt. Gox (Industry seat)
Gavin Andresen, Chief Scientist (Individual Seat)
Jon Matonis, Executive Director (Individual Seat)
Elizabeth Ploshay, Manager of Communications of Bitcoin Magazine (Individual Seat)
Peter Vessenes, CEO of Coinlab (Founders Seat)
You can see details and background on the current board here.
Do I have to be a member to nominate, vote, and run for election?
In order to be eligible to vote in this election, you must be a current industry member of the Bitcoin Foundation, which requires full name, valid email address, and valid mailing address. Only Bitcoin Foundation industry members may nominate someone for this election. However, in order to provide for the widest range of capable candidates, nominees are not initially required to be industry members, but are expected to become industry members of the Foundation upon election.
How will the nominees campaign for the election?
We have set up a special section of our members-only forum where nominees can post their own threads to describe their platform and interact with our members.
What will the responsibilities be for an elected board member?
The Board of Directors for the Bitcoin Foundation is responsible for providing leadership and conducting business on behalf of the organization. As such, here is a brief outline of what will be expected of a board member:
Review and abide by the by laws. The bylaws are the basis for the organizational structure of the Foundation, and all board members must be well versed in their details and impacts on Foundation business.
Attend all board meetings. Board members are expected to attend all board meetings. Currently, our regular meetings occur once per month via video conference and are scheduled to accommodate a wide range of time zones of the participants. Interim meetings may also be required from time to time.
Occasional travel may be required. Board members may at times be required to travel on behalf of the Foundation. Approved travel costs will be paid by the Foundation.
Perform officer roles as assigned. Board members can be assigned officer roles in addition to basic board obligations, and are responsible for all tasks related to those roles as outlined in the bylaws.
Act in the best interest of the Foundation and its members. As the public faces of the Foundation, board members should conduct themselves responsibly in addition to actively seeking to further the goals of the Foundation.
If you are an industry member or know of an industry member who would be interested in serving on the Board of Directors, we are happy to discuss further with you what the expectations and responsibilities of being a member of the board entails.
Best regards,
Elizabeth T. Ploshay
Secretary and Member, Bitcoin Foundation Board of Directors
Mediabistro is set to host the second NYC Inside Bitcoins Conference from April 7-8 at the Javits Convention Center. This year, the conference will take place over two days and feature over 45 prominent presenters who will shed light on what is to come in the Bitcoin space. Featured presenters include Jeremy Allaire, Founder and CEO of Circle, Nicolas Cary, CEO of Blockchain.info, and Barry Silbert, founder & CEO of SecondMarket and creator of the Bitcoin Investment Trust.
One of the highlights of the conference will be a partnership with the Bitcoin Center NYC to have a special Bitcoins Trading Café with a “Satoshi Square” setup for individuals buy and sell Bitcoins throughout the conference in a peer to peer manner.
Mediabistro issued the following press release on April’s upcoming conference:
Explore the Future of Virtual Currencies at Inside Bitcoins NYC – Get 15% OFF
After thousands gathered at Mediabistro’s Inside Bitcoins Conference in Las Vegas, they’ve decided to return to New York City on April 7-8 at the Javits Convention Center. Thought leaders and industry experts will examine the growth of virtual currencies, investment strategies, and much more at this exciting event.
Whether you’re a venture capitalist, lawyer, technologist, entrepreneur, regulator, cryptographer, or public policy expert, their agenda offers the latest intelligence for everyone and anyone interested in learning more about Bitcoin. The conference will take a glimpse into Bitcoin’s future with sessions such as Best Practices for Using and Securing Bitcoins, Moving Bitcoin Forward: Bringing Trust, Legitimacy and Transparency to the Market, Creating and Funding the Next 100 Great Bitcoin Companies, and Wall Street’s View of Fair Value for Bitcoin.
NEW to the event is the addition of a special space called the Bitcoins Trading Café. A comfortable café setting in the middle of the bustling trade show floor, this space will allow attendees to meet, buy, and sell Bitcoins throughout the duration of the conference. In addition to trading, this space will allow Bitcoin enthusiasts to network, relax, and discuss the cryptocurrency.
Inside Bitcoins is one of the first events of its kind to give attendees the option to pay for their ticket with either dollars or Bitcoins.
Early bird prices for Inside Bitcoins expire tonight plus all Bitcoin Magazine readers will receive an extra 15% OFF full conference passes! Register here with code MAG15 to receive ultimate savings!
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