Dear Senator Manchin

cc: Secretary Lew, Chairwoman Yellen, Commissioner Curry, Acting Chairman Wetjen, Chairman Gruenberg, Chairwoman White

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.

Your Central Bank Steals Your Money. Here’s how.

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.

 

Join the action at http://bitcore.io

 

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.

Image by San Francisco based artist Dan Gribben

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.

Artists:

฿ Brett Hunter

฿ Thomas-Joseph Carrieri

฿ Dan Gribben

฿ Sean Vallor

฿ Kelly Ahrens

฿ Cassie Olitan

฿ Jeff Gomez

฿ Happy Dong

฿ Zachary Sweet

฿ JOE

฿ Sure

฿ Michael Covington

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.

###

Contact:

Connie Gallippi

1-916-625-6BIT

info@bitgivefoundation.org

 

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.

If you are interested, please check out the Facebook page and the Fundraising Campaign for all of the information.

Foreign Government Risk.

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/

 

 

Bitcoin Magazine is proud to serve as a media sponsor for the Cryptocurrencies: Opportunities, Challenges and Profitability in the Migration from Main Street to Wall Street conferences in NYC and London. Both conferences are sponsored by the Mankoff Company which was established in 2009 as a marketing and event consultancy to highlight the financial community and trading technologies. This year the Mankoff Company is taking a closer look at Bitcoin and Cryptocurrencies.

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.

For more information and to register, please go to: http://www.themankoffcompany.com/CryptocurrenciesNYMarch2014

London:

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.

For more information and to register, please go to: http://www.themankoffcompany.com/CryptocurrenciesLondonApril2014

www.themankoffcompany.com

 

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!

Stay tuned for lots of exciting updates…

Best regards,

Joanna Merchie

Executive Director

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 bitdevsnyc@gmail.com with ‘Hackathon RSVP’ in the subject line and your name in the body of the email.

For a map of Bitcoin Center NYC, click here.

Find Bitcoin Center NYC on Facebook, LinkedIn, Meetup, and Twitter.

All guests of Bitcoin Center NYC are required to sign in. Media must RSVP with James V. Barcia using james@nycbitcoincenter.com.

If you are interested in sponsoring catering for the event, please contact Justin at bitdevsnyc@gmail.com.

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.

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 membership@bitcoinfoundation.org 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!

 

 St. Andrews is one of the United Kingdom’s oldest and most prestigious educational institutions. Its Carnegie Club is a student-run group, making distinctive contributions to the intellectual life of St. Andrews since 2010. The Club aims to provide an open platform for the discussion of important topics of current interest and concern.

Throughout the academic year The Carnegie Club of St Andrews holds dinner debates, lectures, panel discussions and networking events that allow attendees to make intellectual and personal connections to succeed with their academic and career ambitions.

In this spirit, the Carnegie Club will be hosting a Bitcoin panel consisting of business experts and representatives from bitcoinglobalinvestments.com, Rocket Internet, G2 Investment Group and New Entrepreneurs Foundation.

The panel promises to be an exciting one. The Carnegie Club of St. Andrews is renowned for providing a platform through which the leaders of today can debate contentious issues such as Bitcoin with the newer generation. In the process, panellists pass on their experience and wisdom to the leaders of tomorrow.

The focus of the panel will be Bitcoin and Entrepreneurship in the Digital Age. The panel of leading thinkers will speak on the impact of the Internet on business. Attendees will be able to join directly in the discussion with global leaders in the fields of tech entrepreneurism, cloud computing, and digital currencies such as Bitcoin.

The panel will touch on important issues, with Bitcoin and related technologies as the focus. Topics will include how to integrate networked technologies to meet and transform human needs, and how to be prepared and compete in this accelerating marketplace.

By inviting high-profile speakers, the event offers attendees an exceptional opportunity to participate actively in inter-generational knowledge sharing.

Javier Marti will be one of the guest speakers on the Panel and the leading Bitcoin expert in attendance.

Mr. Marti is a successful entrepreneur, author of the book “Mobile, domains and the future”, speaker and trainer that predicted the current economic global depression and the negative effects in the workforce of illegal immigration, robotics and automation in his 2004 article, “Your job will go too, but you can do something about it”.

Mr. Marti is also the founder of the first Bitcoin Meetup group for Bristol and the South West area of the UK, meeting regularly in Bristol, Avon. He has been featured in two documentaries and interviewed as an expert on different subjects on MSI radio and Gloucester Radio, and is regularly contacted by the written press for assistance on his areas of expertise.

Mr. Marti aims to provide a deeper understanding of the factors that affect the present and future value of Bitcoin, as well as the underlying sociological and economic changes that the western world can expect in the near future, and their effect on the digital currencies landscape.

Students considering themselves budding economists and entrepreneurs are encouraged to attend. By the time many graduate in 2016, the internet economy is expected to account for some $4.2 trillion in the G-20 nations.

The digital age is truly upon us and learning is necessary in this networked era of exploding entrepreneurism.

The event will take place on Tuesday the 18th of February 2014 at Parliament Hall, South Street, St. Andrews. It begins at 17:30, with doors opening at 17:00. Entry is £5 and tickets can be bought here: http://www.ticketsource.co.uk/event/51589

This is an incredibly exciting time to be alive. Before our eyes, we’re witnessing the evolution of a technology that’s simultaneously empowering, liberating, and disruptive. The decentralized blockchain is already beginning to shake the world; with each passing month, cryptocurrencies are gaining wider adoption as programmers and entrepreneurs create, innovate, and explore new possibilities.

Yet this is only the beginning. It’s not just the currency that’s evolving – it’s the platform. Bitcoin will soon be supplemented by tools and protocols such as Open Transactions, Ethereum, and Mastercoin that enable smart contracts, digital assets, and the creation of any financial instrument imaginable – from stock to options to bonds and beyond.

In light of these upcoming advances, let’s take a look at one area that stands to be utterly revolutionized as the next level of development takes hold.

DO YOU TRUST ME?

Imagine you’re a forward-thinking entrepreneur with a small, successful business. You’d like to expand your  startup, but lack the necessary funds. Rather than turn to a bank for a loan, you’d prefer to offer digital shares in your company.

If you try to do this today, you’ll run into two nasty obstacles.

• A lack of trust and transparency. The nascent Bitcoin investment market can be summed up in two words: Caveat Emptor. From currency miners to online casinos to nebulously-described Bitcoin funds, there’s no shortage of ways to invest your hard-earned BTC. Unfortunately, there are also endless tales of losing investments and outright scams. As an entrepreneur, it may be difficult to prove to skeptical investors that you are legitimate, with an actual revenue-generating business.

• The logistical limitations of the Bitcoin protocol. Bitcoin, on its own, doesn’t lend itself to the creation and trading of securities like stocks and options. Websites and services have stepped in to meet this need; however, this places the onus of trust on a third party. The ideal solution would have trust baked into the equation; neither the business nor its investors should have to worry whether a particular exchange or service is trustworthy. Much like Bitcoin itself, shares in a company ought to use a decentralized network to provide built-in trust.

The good news is that smart contracts and digital assets will soon provide an elegant solution to the second problem. But while the rise of “Bitcoin 2.0” offers a better way to issue and trade shares, investors will still be eager to manage risk; they’ll want to know which companies are legitimate and have a successful business model. In short, they’ll need more information.

BLACK BOX, GLASS BOX

Private companies operate in a black box. With no outside investors, they maintain full confidentiality over their financials; there’s no incentive to do otherwise. Today’s publicly traded companies provide a deeper level of insight, issuing quarterly reports on their performance. These backward-looking, after-the-fact results show investors where the company was, but not necessarily where it’s going. (In his recent piece on Triple Entry Accounting, Jason Tyra showed how that method could improve trust in financial statements.)

The advent of the decentralized public ledger has paved the way for a new approach to the disclosure of financial results – a system that can be used to build trust and credibility.

Real-Time Transparency (RTT) stems from the simple notion that information wants to be free. In this system, key financial results – such as incoming revenue – are monitored in real-time via specific public addresses enshrined in blockchain’s public ledger. RTT is the antithesis to the Black Box; it opens the windows and lets investors peer inside.

There are major incentives for companies to use this approach. The ability to instantaneously track key financial results would give investors more timely and accurate information on a company’s performance. Trust levels are increased, and the business owner stands a better chance of gaining investors. And as we’ll see, RTT also opens the door to novel ways of rewarding those investors.

REAL-TIME IN REAL LIFE

RTT provides a way to see how a company is performing at any given moment. It’s as simple as using the Blockchain to monitor certain key metrics. Let’s use one metric – incoming revenue – as an example. A business owner looking to attract investors could do the following:

• Designate one Bitcoin address as the destination for all incoming sales.

• Using the blockchain, this address would be easily tracked by investors. It could also be verified; investors could make a test purchase, for instance, and verify that those funds actually went from their address into the revenue address.

• Investors (and potential investors) would be empowered with timely and relevant information on which to make their decision. Is the company actually bringing in money? How many sales have been made over the past month? Do these figures approximate the projections made by the business?

Want to provide even deeper insight into your organization’s performance? Simply leverage the blockchain by confining all business expenses to BTC, rather than dollars. State, in advance, all your fixed expenses – from servers to salaries to utilities. Investors could then verify that the stated expenses are indeed being transferred to the service provider, who also maintains a public address. This would allow potential investors to more accurately vet the company; if they think the expenses are too high, they might steer clear.

RTT, however, does pose a few challenges of its own:

How do buyers maintain their privacy?

If a company’s revenue address is public, this naturally means that anyone would be able to see the source of incoming sales. This could present a problem in cases where buyers didn’t want their Bitcoin address linked to the company’s revenue address. Fortunately, tools such as the forthcoming Dark Wallet  will soon give buyers the privacy they crave. These tools could even be offered at the point-of-sale by the company itself.

How do businesses maintain strategic secrecy?

The interesting thing about RTT is that transparency isn’t binary; it can be offered on a sliding scale. Companies that don’t want to reveal any information to competitors might opt to reveal no financial results, knowing that this might limit their appeal to investors. Businesses looking to foster greater trust would have a stronger incentive to “open the kimono” and reveal revenue, fixed expenses, and other key financials via the blockchain.

MEET THE CONDITIONAL DIVIDEND

Most investors are familiar with the concept of a quarterly dividend, where a company rewards its investors with a pre-determined amount – say, 25 cents/share – as a way to share profits and incentivize ownership.

RTT opens the door to a tantalizing possibility: the creation of a conditional dividend, which is paid out if a certain revenue target is exceeded within a designated timeframe. Shareholders, for example, might be rewarded an extra 200 MBTC/share if incoming revenue passed 100 BTC for a particular month. This conditional dividend would be safely programmed into the dividend’s smart contract, and paid out immediately in the event the revenue target was exceeded. Rather than trust the company to report the revenue figure accurately, shareholders could monitor progress toward the dividend target in real-time.

Another benefit of RTT would be fewer nasty surprises for shareholders. Currently stocks can experience violent price swings when unexpected news, such as a weaker-than-expected earnings report, hits the market. Similarly, shares can gap higher and skyrocket if a company surprises to the upside. Price action would likely be smoother as these developments are factored in real time, rather than all at once via a quarterly earnings announcement.

SCRATCHING THE SURFACE

If you were an entrepreneur who owned a successful or promising business, what would be the best way to attract investors? As we’ve seen, it’s all about fostering trust. RTT offers an easy and effective way to do just that.

The applications of the transparent approach aren’t limited to businesses; they could be applied to non-profits, or even crowdsourcing efforts. Down the road, RTT may also be a natural fit with Decentralized Autonomous Corporations (DAC’s) – businesses that are pre-programmed with business models and mission statements.

A flourishing market for smart contracts and crypto-investments isn’t far behind. We can reasonably assume that within a year or two – or perhaps much sooner – there will be an easy and secure way to invest in companies. It’s safe to say that within that market, open and transparent organizations will stand a better chance of gaining investors’ funds and support.

The future is on its way, and you can see right through it.

 Photo via Rob Deutscher and licensed under Creative Commons CC-BY-2.0

About 30 people attended the first-ever Bitcoin meetup in Quito, Ecuador on Thursday, February 6th. The meetup was organized by Dutch alternative money promoter Paul Buitink (@paulbuitink), currently residing in Quito, and American IT entrepreneur Justin Leitgeb (@justinleitgeb), who made available the Quito office of his company, Stack Builders, who specialises in Ruby and Haskell software development. Argentinean Diego Gutierrez Zaldivar, who organized the Buenos Aires conference in December of last year and who coordinates Bitcoin initiatives in South America, also helped with organization.

Turnout was bigger than expected given that the meetup was only promoted in the Bitcoin Ecuador Facebook group and on meetup.com. In fact, three people flew in from Guayaquil to attend the event.

What was really exciting was the passion and the technical and theoretical knowledge the attendees demonstrated. It became clear once more that South America needs to modernize its money system.

Compared to people of countries like Venezuela and Argentina, the citizens of Ecuador may have felt blessed under the wings of the greenback. Nonetheless, the meetup made it clear that there are many Ecuadorians who feel passionately about modernizing the monetary system. Online commerce hardly takes place in Ecuador and, like in other Latin American countries, a lot of transactions are still cash based.

In the short term, the Bitcoin community plans to focus on basic infrastructure and community building. The Bitcoin meetup will continue to be hosted in Quito every month and there are plans to form groups in other large cities, including Guayaquil and Cuenca. Directly following the meeting, a forum was established at bitcoinecuador.info to efficiently exchange ideas and opinions. Monday, February 10th, the first so-called “Satoshi Square” has been organized to make in-person exchanges possible, which is still challenging in a country like Ecuador. On sites like localbitcoins.com and mercadolibre.com.ec, there is hardly liquidity.

In the medium-term, forum sessions and conferences will be organized to educate the academic world and enlighten politicians and officials. In the long-run, exchanges, merchant services and the like will have to be developed. Open source enthusiasts who were catalysts in the Ecuadorian government’s embracement of open standards have already expressed their interest in helping to foster crypto currency growth in the Andean nation.

Ecuador, a small country with slightly less than 16 million inhabitants, has been dollarized since 2000, against the will of many politicians and economists. Compared to the previous currency, the SUCRE, this move has brought relative stability – especially compared with other Latin countries. Still, cryptocurrencies could potentially cater for even more economic growth. By allowing cryptocurrencies to flourish in Ecuador and by not burdening them with too much regulation, Ecuador could well become a safe haven for the Bitcoin community to explore and build crypto solutions. As Ecuador doesn’t print its own currency, less resistance should be expected from the central bank of Ecuador. The government is said to be working on its own currency, and should they consider to throw cryptocurrencies in the mix, it could set Ecuador apart from other countries.

Furthermore, in 2009 the government implemented a regional compensation system with the members of the Allianza Bolivariana para las Américas (ALBA), that is Venezuela, Cuba, Antigua y Barbuda, Bolivia, Dominica, Nicaragua, San Vicente y las Granadinas and Uruguay. This system, called Sistema Unitario de Compensación Regional (SUCRE), intends to replace the dollar and ultimately behave like a currency. For the moment it’s used as a way to settle debts between exporting companies of the member states through the use of a central clearing bank that behaves similar to the European Central Bank (ECB) . While the reasoning behind the SUCRE system of trying to diversify away from the dollar for regional trade is clear, allowing people to use a globally accepted, politically neutral currency like the Bitcoin makes even more sense.

With the enthusiasm and skills of the current Ecuadorian Bitcoin community and the interesting economic and political conditions in the country, the crypto future for this small Andean country could be as beautiful as its old colonial center.

This article is intended as an introduction to the concepts of bitcoin that might be of interest to those people that are retired. The reader is expected to have only basic internet web browsing and email knowledge.  The questions and answers are given in “layman” terms.

What is Bitcoin ?

Bitcoin is a new kind of payment and currency system. It’s a new way to pay for things with using pre-paid credits. It’s different from credit cards because it’s not based on debt. It’s the next generation of transferring money that replaces past inventions of using checking accounts and credit cards. It allows you to pay with cash-like money over the internet, even when they are standing next to you. With this new invention, credits of value that are stored on a ledger shared and verified by everyone, everywhere, at once, all around the world. It’s the first verifiable accounting systems that doesn’t belong to any government, bank, or king. Therefore it’s the first accounting system that belongs to nobody, so it can be verified and trusted by everybody. It’s the first time in history this has been possible.

The term is bitcoin – but it’s not really a coin – it’s just a block of pieces of value now being called bits. The term of the currency called a ”bitcoin”, is just another name for one million bits: just like a dollar can be called one hundred pennies.  They have a lot of unique qualities that make them like no other currency that has come before.  One of the biggest benefits is that it acts like money and has value. To be valuable  it must remain scarce and desirable.  Bitcoin is also a money payment system maintained by a world wide community. One of the main rules of the system is that only a limited quantity can ever be created, and that law can never change. A limited supply with exploding demand makes it become valuable.

People and companies all over the world have started to accept bitcoin as an equal to cash or credit cards. Merchants are helped by companies who will convert the bitcoin payments right back to cash at the time of sale.  This is very good for the merchant because they don’t have to pay credit card fees or worry about getting stuck the bill because credit card fraud.

But what about the government…and banks?

The US government wants desperately to maintain the nation’s technology lead in creating new businesses that the world uses. Google, Facebook, and Apple are a few examples.  They are excited to see all the new businesses that are starting up and the hundreds of millions of dollars being invested.  This is new growth and jobs that the US needs.

Even the Federal Reserve Bank recently showed excitement about the new possibilities despite that fact that it can remove some of the functions that banks do.  Electronic payments and checks can be done by bitcoin automatically and almost free without a lot of banks getting in the way. One world-wide ledger that everybody can trust will handle that.  Than banks themselves will benefit because their old ways of sending money to each other hasn’t improved since the 70s. It still takes them up to five business days just to wire funds across the street. Bitcoin can transfer money all over the world in less than 10 minutes for almost free.   Understandably, some banks are nervous about change, but the need for banks won’t be going away; people will still need to get loans to start new businesses, buy cars and houses. Banks are going to have to adapt and find new ways of being useful.

Many other countries don’t understand bitcoin yet. Just like most people, some governments are a little afraid of technologies they don’t understand. A lot of countries are a little slower to catch on but tend to follow the USA’s lead when it comes to world-changing technologies. The US didn’t invent bitcoin (that we know of) but seems to be out in front of other governments right now in the race to the future.  Other countries seem to be slowly coming around. They have a duty to remind their citizens that there aren’t laws on the books yet for bitcoin technology because it never existed before.  Some have told their citizens watch out for bad businesses and criminals trying to trick people out of their bitcoin. They remind their population that bitcoin isn’t legal tender – just like all the currencies of every other country outside its borders. Just try to pay your parking fine using Mexican Pesos and you’ll see how that works.

What about bad guys – aren’t they using bitcoin?

Yes, they have. They were some of  the first to realize the benefits of  using bitcoin for transferring money.  They were one step ahead of the police and courts who didn’t know about it or understand it yet. It would be a few years before they would figure out how to stop crime with it. Some authorities around the world also continue to fear twitter and email because “bad people” can communicate.  As we have learned, not all police around the world are the good guys. These days, the police have been using it to stop thieves because bitcoin can leave a trail of breadcrumbs forever recorded on the ledger.

The US government said bitcoin hasn’t been used much for crime at all compared to regular cash because not everybody accepts bitcoin yet. Bad guys still need cash to  pay for bribes, and guns and other bad guy stuff. But big online bitcoin exchanges have gone down and taken a lot of customer’s money with them. Governments don’t have laws on the books yet to make sure big exchanges are insured and audited like regular money exchanges.  Partners in crime will likely be afraid that the money trail that might lead back to them as well. Some of the authorities have said they would rather the crooks use bitcoin because it’s easier to follow than cash.  The US officials don’t believe terrorist will be much interested.

Somebody told me it’s a scam. Is it a ponzi scheme or something?

No. Ponzi schemes wouldn’t be considered legitimate by the Federal Reserve Bank, governments around the world, or big investment companies spending hundreds of millions getting new companies formed.  The bitcoin system isn’t owned by anybody yest everybody in the world can use it. There is no “pyramid” because there is not center or middle – it is decentralized. If one studies closely, they would likely find that the only people saying that today are the same people who understand it the least. Nobody should be promising that you’ll make money with bitcoin. It is very new and that can become valuable, but it can also be risky. If this technology really is changing the paradigm of the world, it might be fair to ask…wouldn’t that to be expected?

Like any investment in a new technology or company, the people that invest early are better off than those who invest late. Just ask early Google investors, or Microsoft and Apple, or railroad companies.  That’s the nature of investing. As things become more popular, more people want to use them which creates more interest and it builds on itself. Just like the telephone wasn’t worth much when only five people in the world used it. But now how much are cellphone companies worth? We see this happen all the time with new technologies that change the world. Only this time it’s the nature and abilities of money itself that is changing.

Where do you buy bitcoin?

You can buy bitcoins from several companies on the internet. Some of them will even connect right to your regular banking account so you can trade back and forth between bitcoin and dollars whenever you want in the United States. The two easiest places right now are coinbase.com and circle.com. They will allow you to connect your bank right to their banking system to transfer dollars to bitcoins and back when you want.

They will also store it and protect it there so you don’t have to worry about people trying to steal it from you. Many companies have gone out of business and the people lost their money that trusted them. Coinbase.com has proven to be very respectable. Circle.com is brand new but is backed by very important people with good track records and reputations.

Things to know first:

The price of bitcoin goes up and down by huge amounts that make it unpredictable right now. This is common for new world-changing technologies at first. But when you take a step back and look at the price over a year’s time at every point, it has always gone up. That doesn’t mean it always will, but there are reasons to believe it will. People are learning new ways to use them and it’s creating more excitement. Sometimes the excitement gets ahead of itself and when calmer heads prevail the price adjusts downwards very quickly as people see a price drop and panic. A lot of people are still skittish about new technology but trust is growing and the price swings are getting smaller. Now big Wall Street companies are starting to invest, the huge price swings may calm down.

It’s also a good idea for seniors to leave bitcoin with these bank-like companies (Currently coinbase.com and circle.com) because they are the kind that are audited and insured. This verifies they are protecting your bitcoin and still have it in their possession and can send it back to you, or convert it back into regular dollars if you want. They protect it by storing most of it disconnected from any networks and use several secure storage locations around the world with security guards. There are also other good honest companies for more technical people. And there have been a lot of companies that have gone out of business or have been raided by thieves. For now, coinbase.com has proven to be excellent and easy. Circle.com may also be good to look into as they open for business

I Don’t plan on spending bitcoins. Why would I want any?

The technology has a way to go to become friendly and easy enough for many people that haven’t grown up using new technology all their lives. Some of the retirement population might consider buying a little as a small investment. They should be reminded that it’s still considered risky investment still because the technology is still very young. It’s possible that there could be something that breaks that nobody has thought of yet. But a lot of people have realized that if it continues to work, it could be extremely valuable over time. The price has gone up thousands of percent. If seniors think about putting a little money into bitcoin, it should be money they wouldn’t lose sleep over if the price went to zero. You can buy as little as $5.00 so there’s no need to make a big investment.

Some people consider it an investment in the future of a new kind of money system. They believe that putting a little money aside here is a bet on the prediction that the rest of the world will eventually catch on to this new invention. It has dozens of benefits over older kinds of money that have been around for centuries that couldn’t have existed until this time and place inf the world. People living on fixed incomes see that the price of what they need is going up faster and each dollar they own buys less. Owning a little bitcoin might help protect some of the value of their money. If the price and value continue to increase as many experts predict, some people may considering buying a little as an insurance policy for their money.

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Sources:

https://bitcoin.org/en/development

http://www.bloomberg.com/news/2014-05-29/u-s-economy-shrank-early-this-year-for-first-time-since-2011.html

http://www.coindesk.com/federal-reserve-bitcoin-potential-boon-global-commerce/

http://www.americanbanker.com/magazine/124_02/why-bitcoin-matters-for-bankers-1065590-1.html

http://en.wikipedia.org/wiki/Legality_of_Bitcoins_by_country

http://www.coindesk.com/argentine-central-bank-issues-warning-burgeoning-bitcoin-ecosystem/

http://www.nytimes.com/2014/02/27/opinion/27iht-edlebedev27.html?_r=1

http://www.usatoday.com/story/news/nation/2013/10/21/fbi-cracks-silk-road/2984921/

http://www.bloomberg.com/news/2014-03-18/treasury-s-cohen-says-regulation-helps-virtual-currencies.html

http://www.nhregister.com/general-news/20140319/us-officials-dont-expect-terrorists-to-embrace-bitcoin-heres-why

https://coinbase.com/

https://www.circle.com/

http://www.investopedia.com/articles/investing/052014/why-bitcoins-value-so-volatile.asp

http://fortune.com/2014/04/02/secondmarket-ceo-barry-silbert-banks-cant-ignore-bitcoin-anymore/

http://support.coinbase.com/customer/portal/articles/628970-how-does-coinbase-handle-security-

http://www.marketwatch.com/story/my-risky-retirement-bet-in-bitcoins-2014-05-27

http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/

http://bitcoinmagazine.com/12846/you-say-bitcoin-has-no-intrinsic-value-twenty-two-reasons-to-think-again/

 

The Bay Area’s leading poverty-fighting organization recently accepted its first Bitcoin donation. Bart and Brad Stephens of Stephens Investment Management donated 20 bitcoins to Tipping Point Community on February 6.

“Bitcoin is a disruptive innovation in the field of financial technology,” Bart Stephens said. “Tipping Point is an innovator and a disruptive force in philanthropy. We have supported Tipping Point since its inception and we are excited by this pioneering gift. Both Tipping Point and Bitcoin share a bright future, bringing benefits to consumers and families in need alike.”

Tipping Point Community helps donors find, fund and partner with the Bay Area’s most effective organizations serving individuals and families. Because Tipping Point’s board underwrites all operating and fundraising expenses, 100% of every dollar donated goes directly toward the fight against poverty. Since 2005, Tipping Point has raised more than $60 million and has reached nearly 250,000 people in need.

“Tipping Point and our donors are always seeking new ways to improve our community,” said Daniel Lurie, CEO and Founder of Tipping Point. “Bitcoin is still in its early days, but we are excited at the prospect of it as an additional resource in the fight against poverty.”

Stephens Investment Management is a boutique investment firm managing a family of financial products including hedge funds, sector-focused venture funds, an income fund, a real estate fund, a fund-of-funds, and private company direct investments.

If you would like to donate to Tipping Point and join the fight against poverty in the Bay Area, please contact Sophie Jaggi at sjaggi@tippingpoint.org.

Paying in Bitcoin already offers tons of advantages over credit cards. It’s by-default more secure, and on the internet at least, faster and easier. However, paying with bitcoin IRL has until now been pretty clunky, generally involving scanning multiple QR codes, signing and approving. All that may change, however, with the introduction of technology aimed at simplifying paying with Bitcoin at the point of sale. BIPS has made this possible by using the Samsung Galaxy Gear Watch.

The Samsung Galaxy Gear is an Android-based smartwatch that with a few tweaks is able to run just about any Play Store app, including Mycelium Bitcoin Wallet. With it, users can buy items in a store or share a dinner bill with a friend in Bitcoin with a tap of their watches. Perhaps most interestingly, it allows users to keep their private keys on a native hardware wallet, off and away from online wallets.

The most challenging aspects of accepting Bitcoin for brick-and-mortar retail businesses are clunkiness and differentiating each customer from the previous customers.

The watch is connected to the internet via Bluetooth phone tether. It is the first wearable Bitcoin wallet, taking what has previously been the realm of fitness and applying it to payments. Users can scan QR codes, make secure payments and even use Chirp to send payments via sound waves.

One aspect that is great for customers, but maybe not as great for merchants, is the fact that BIPS does not actually collect any customer information, only merchant information.

“The more information we collect the more prone we are to attacks and risking people’s personal data being leaked,” said Kris Henriksen, a media representative for BIPS. “Hence we have chosen not to collect merchants’ customer data as it is irrelevant to our services. And as such we do not need to replace the customer data credit cards provide.”

However, merchants find the customer data that credit card purchases provide extremely valuable. To make up for this deficit, whose value is undoubtedly overshadowed by the increased security of Bitcoin payments, merchants can take further advantage of customer loyalty programs.

Innovations in point of sale will make taking and offering Bitcoin as payment safer, easier and more efficient. Having more choices in how to pay is undoubtedly better, though it’s yet to be determined how long credit cards will remain the default mode of payment.

What happens when you approach business from a place of excitement and opportunity instead of fear and doubt?

You make more money, of course.

Over 140 Canadian businesses now accept bitcoin as a method of payment. And why would they not? The process is inexpensive, quick and exciting.

Being bitcoin-friendly is a win-win: it offers businesses access to a previously untapped market of eager consumers who excitedly arrive, purchase and pay with their bitcoin; consumers who also act as promotional agents for the forward thinking establishments. Consumers win by increasing their purchasing power to a larger number of bitcoin-friendly businesses. What is most exciting is knowing that we are beginning to use bitcoin to purchase products in real time, through traditional businesses, not just through e-commerce shops.

Over 50,000 businesses worldwide currently accept bitcoin, and this number is due to increase quickly as business owners expand their understanding of the myriad benefits this currency provides.

One such business in Quebec, Canada, sings bitcoin’s praises and sees the currency as the way of the future. Alain owns Montreal Poutine, a family restaurant by day and post-bar snack-stop by night. He decided to start accepting bitcoin as a method of payment just one week ago, after one of his waitresses urged him to look into it.

“I saw the speculative side of it, and I saw that this would reach ‘target customers’ who want to spend their money and don’t know where to go or how to do it,” Alain explains.  He sees bitcoin as simply another way to accept payment.  “In the world of business, if someone wants to give you money, you take it!”

Alain saw the benefits of bitcoin immediately: “When you have a customer eating and the guy next to him is jumping up and down over bitcoin, you know you’ve done something good.”

Alain uses the popular merchant service BitPay to accept payment from his customers. The process is incredibly simple.

“We have a big sign out front that tells people we accept bitcoin. When the customer is ready to pay, we bring over a laminated paper with our QR code on it. They scan it with their phone, type in the price of our poutine, send it to us and I get an e-mail wherever I am saying I have received a new payment in bitcoin.”

Unlike other payment methods like Visa, Debit, MasterCard and the notorious American Express, fees on accepting bitcoin are cheap: “one of the cheapest forms of accepting payment, besides cash,” says Alain. “I think the fee is 1%. It’s incredible.”

It’s also instantaneous and irreversible, eliminating the possibility of chargebacks. Some businesses, like Australia-based Millennius, report declines in online fraud and increased purchase amounts when dealing with bitcoin as a method of payment.

Like many other bitcoin supporters, Alain sees the technology being implemented on a mass scale within 6 months to a year: “Six months ago when I asked my bank manager what Canadian bank would be the first to accept bitcoin, she laughed at me. But she didn’t laugh this time. Now she’s actually thinking about it… Maybe TD?”

Montreal Poutine has already completed 8 transactions with bitcoin and is looking for a way to implement an interactive machine into their business processes. For now, the laminated QR code does just fine: “Either way, it’s really good for me.”

It’s inevitable. More businesses will use bitcoin when they understand and experience the benefits of this incredible innovation. The bitcoin community has a unique position to educate and empower business owners in this exciting transition. Once the features, benefits and process of bitcoin are understood, they will adopt it.  There is already talk in the Bitcoin Twittersphere about collaborating and creating pamphlets for business owners that explain and highlight the benefits of bitcoin.  This should be pursued and executed; it’s our opportunity to change the world one business at a time.

For now, I look forward to discovering and reporting on more bitcoin-friendly businesses… and buying a delicious poutine with a few clicks on my phone.

The future is here.  Businesses, get on board!

*Canadian Bitcoin Business Directory.

“The bitcoin is a mania like tulip bulbs in the 1600s and Beanie Babies in the 1990s.” – Wall Street Journal

“Bitcoins are the tulips of modern times.” – Financial Times

“Central Banker On Bitcoin, At Least With Tulipmania You Got a Tulip At The End.” – Forbes

Both saw a dramatic rise in price, and critics say that bitcoin necessitates a collapse similar to the one tulips suffered in the 17th century. There are two huge problems with the comparison, though. Bitcoin has almost nothing in common with the tulip and tulip mania had more to do with disruptions in the trading climate than actual tulips.

Previously, Bitcoin Magazine released a detailed piece attempting to explain why tulip mania doesn’t apply to bitcoin, but it falls short in comparing tulips and bitcoins in relation to the properties of good money. It is true that tulip bulbs are not a good money, but they did not try to be a money; they were a commodity. Unfortunately, in order to understand how the tulip bubble developed, a brief history lesson is necessary.

The tulip was first imported to the Netherlands in 1593 and quickly grew in popularity as the most beautiful flower that could withstand the harsh climate. The Netherlands was entering a Golden Age, where the country quickly grew wealthy due to productive trade with the East Indies. The fortunes of merchants grew, resulting in more disposable income and more demand for luxury goods. The bubonic plague, which saw a resurgence in the early 1600s, may have also been a factor, with plague hitting Spain, England, Italy, and, later, the Netherlands. The threat of a repeat of the 14th century Black Death and the ongoing Thirty Years’ War may have contributed to reduced risk aversion.

Another interesting factor was the Tulip-breaking virus, which was not common, but very important. The virus caused individual petals to split into multiple colors, a beautiful effect which drove the prices of infected “Admiral” tulips upward. The virus was also responsible for limiting the flower’s reproductive capacity. Considering that regular tulips already take 7-12 years to grow (and the tulip bubble only lasted about 4 years), Admiral tulips were scarce and had a slowly responding supply.

Though these factors suggest a tulip bubble, it doesn’t quite explain the extreme price of $30,000 for a tulip. Shouldn’t investors have realized how fragile and useless a tulip is once they had it in their hands? The answer is that they did not have the tulips in their hands. Much of tulip mania took place in taverns across the Netherlands, where speculators met to trade the first ever futures contracts. As a result, more people could get involved in tulip speculation because it did not require the handling and maintenance of any plants. Many speculators never even held physical tulips and it is arguable as to whether or not the price of physical tulips kept pace with the price of tulips contracts.

The tulip price had its first hiccup in November 1636, which caused a scare among Dutch elites invested in tulips. Remember, tulip trading was not mainstream, but it was popular among some royalty. The Dutch authorities responded by converting all futures contracts into options contracts, protecting buyers from terms they agreed to and greatly reducing the cost of speculation. Previously if you overestimated the future price of a tulip (in a futures contract), you still had to buy the tulip at that price. With the new legislation, you were on the hook for only a fraction of the contract price (around 3%). All of a sudden, it was much easier to profit from speculation and less profitable to grow the flowers. It was this step that spurred furious trading activity and price movement, peaking at 20 times the November 1636 level only 3 months later.

I mentioned that these futures and options contracts were the first of their kind. Short sales, however, were not yet invented. The result was upward price pressure in the derivatives market without the possibility of short sales to temper it.

This all peaked in February 1637 when, with the price at its peak, no buyers showed up to a tulip auction in Haarlem. There was no more demand for tulips, only for profitable tulip contracts made too easy to profit from by government decree. Within days, the price plummeted across the Netherlands and we had our first financial bubble in history.

So what does this have to do with Bitcoin?

Nothing at all.

The tulip bubble saw wild price runups, like Bitcoin, but little else is comparable. Bitcoin has almost no derivatives market, with ICBIT and Predictious being the only two exchanges I’m aware of to offer derivatives trading. In fact, some economists blame bitcoin’s volatility on the lack of derivatives trading, since it is difficult to bet against bitcoin.

There is one shared characteristic of tulips and bitcoins, though. Both have unresponsive supply. Tulips take years to grow and that played a role in the tulip bubble. As demand skyrocketed, supply couldn’t keep pace, exacerbating the price explosion. Bitcoin’s supply is entirely fixed, which has likely played a similar role in bitcoin’s three bubbles, raising the price to higher than expected heights and dramatic plummets. Unlike tulips, bitcoin has reached its current price without any derivatives market and the introduction of one is likely to dampen price volatility.

Basically, wild derivatives speculation caused the tulip bubble and bitcoin doesn’t have a derivatives market. If you’re looking to compare something to tulips, I think I may have found something: The global derivatives market is at least 10 times the world GDP.

 

For those looking to fulfill their Bitcoin fix next week, Bitcoin Center NYC has it covered. Kicking off the week on Monday, February 17th, Bitcoin Center NYC will hold a special trading event, with special guest and Bitcoin evangelist, Jeffrey Tucker. Following the event on Monday evening, Bitcoin Center NYC will host a debate between Andrew Schiff of Euro Pacific Capital and Jeffrey Tucker, which takes place on Tuesday – just 100 feet from the NYSE.

Bitcoin Center NYC is the city’s only brick-and-mortar institution dedicated to further the adoption of Bitcoin and cryptocurrency alternatives. In the heart of New York City’s financial district, Bitcoin Center is the premier Bitcoin and digital currency center focused on educating and building the Bitcoin community.

The event on Monday will consist of the ringing of the trading bell to launch the World’s Largest Direct Sellers-to-Buyers Trading Pit, also known as the Nakamoto of All Satoshi Square Meetings. Jeffrey Tucker will find himself in the middle of the action and excitement within Bitcoin Center NYC, taking part in live trading of Bitcoin and other cryptocurrencies.

The following night, Tucker and Schiff will debate the merits of Bitcoin, a discussion that will bring new light to digital currency, and educate even the most experienced Bitcoiner. A question and answer (Q&A) session will follow the debate.

This week’s events at Bitcoin Center NYC will give a glimpse into the exciting world of digital currency, further establishing Bitcoin as a growing payment method in the financial space. Whether you are experienced with digital currency or are just getting started, the events at Bitcoin Center NYC have something for everyone. If you are in the area and interested in Bitcoin, you won’t want to miss this.

Below is the full schedule of next week’s events.

Monday, February 17, 2014

5:45 p.m. to 6:15 p.m.

Jeffrey Tucker – Special Guest, Rings Trading Bell

Bitcoin Center NYC

40 Broad Street

New York, NY 10004

6:15 p.m. to 10:00 p.m.

World’s Largest Direct Sellers-to-Buyers Trading Pit aka

‘Nakamoto of All Satoshi Square Meetings’

Bitcoin Center NYC

 

Tuesday, February 18, 2014

 7:00 p.m.

Andrew Schiff & Jeffrey Tucker – Debate, Q&A

Bitcoin Center NYC

40 Broad Street

New York, NY 10004

 

All guests of Bitcoin Center NYC are required to sign in.

For more information and upcoming events, please visit bitcoincenternyc.com

 

Have you been thinking about a cold storage solution for your Bitcoin? Don’t worry, Verso is here to help. The Swiss-based company has recently released one of the newest and advanced cold storage applications to date. Designed for the Bitcoin community, Verso has created Verso Card, a physical cold storage wallet with military grade security; in addition to the Verso Wallet, the company’s mobile application that accesses the funds on the Verso Card.

Verso Cards are credit card-sized wallets for Bitcoin, which allow you to carry your digital currency wherever you go with utmost security. The front of the card reveals the address of your card, encoded in the form of a QR code. This allows people to send you Bitcoin with any wallet software. The back of Verso Card holds a strongly encrypted version of your private key, one that can only be opened with your password.

Even further, the card itself is a thing of beauty. There is no question that Verso put the effort into creating one of the best looking cold storage solutions in the Bitcoin community, not to mention one of the most secure. Whether you are a Bitcoin novice or expert, Verso Card is extremely usable and familiar. Put Verso in your wallet, under your bed, or anywhere you like – you are in control of your money.

Verso Wallet is a pivotal partner to Verso Card. It is a cross-platform mobile Bitcoin wallet, available on iOS, Android, and soon Windows Phone. Don’t smash your iPhone yet, Verso gives you everything you need. The wallet application provides needed management features of your Verso Card, from checking your balance, latest transactions, preferred currency, sharing your address and send Bitcoin. Scan the back of Verso Card, enter your password and you’re in your wallet.

For Verso, security has been a large focus. This is why each private key and password is protected by a military-grade AEG-256 algorithm. “The private key is only known by the user and is under no circumstance communicated to any server. It is generated on the client side at the time of purchase using multiple sources of entropy, and is immediately encrypted with the user password using military-grade security,” the company stated in a recent press release.

Hacking is virtually impossible with Verso. In order to have access to your wallet, a thief would have to know your password and actually possess your Verso Card. Because your password is created at time of purchase, there is no server that is storing your important personal information, which is similar to other Bitcoin wallets.

The company currently is shipping its Verso Silver card and will soon release Verso Gold. The difference between each card revolves around additional security. Verso Gold is equipped with a second layer of authentication, in order to help prevent at attempted brute-force attack. In addition to security, Verso Gold also provides loss protection. As a Gold card holder, Verso stores fragments of your wallet in multiple Swiss bank accounts, so you can recover a digital copy of your Verso Gold in case of loss.

Verso delivers a Bitcoin wallet and storage solution that not only looks amazing, but is extremely easy to use. Each card costs 24.44 mBTC (.02444 BTC or $16 USD), a low cost for keeping your Bitcoin secure. The overall function of each product will attract Bitcoin users of any level, and also help drive mainstream adoption of Bitcoin. Verso is your new everyday Bitcoin wallet that puts Bitcoin in your hands.

 

For more information, visit  https://versocards.com/

 

 

Money2020 has caught the Bitcoin bug. This week, this leading global event team announced ‘(Bit)coin World at Money 2020’ to feature the increased focus and awareness of Bitcoin as a distributed payment protocol and cryptocurrency. Money2020 aims to bring together thousands of attendees from more than 2,000 companies and 50 countries to dialogue about the intersection of payments, mobile, retail, marketing services, data and technology, and financial services. With a goal of covering how consumers and businesses manage, spend and borrow money, Money2020 will dedicate an entire segment to Bitcoin, the leading cryptocurrency and up and coming disruptive technology that is completely changing the way we view payments and cross border financial interactions. During the past two conferences, Bitcoin has had a presence with past speakers such as Tony Gallippi, Co-Founder and CEO of BitPay, Inc. This coming November, Money2020 will take their involvement with Bitcoin to the next level. Bitcoin Magazine is privileged to serve as a media partner for November’s upcoming Money2020 conference in Las Vegas, NV.

Money2020 issued the following announcement:

Money2020 Introduces ‘(Bit)coinWorld at Money2020’

Increased Focus on Distributed Payment Protocols and Crypto-Currencies to Help Catalyze Mainstream Adoption

New York, NY, February 10, 2014–Money2020, the leading global event for disruptive innovations in all aspects of how consumers and businesses manage, spend and borrow money, today announced the launch of ‘(Bit)coinWorld at Money2020’, dramatically increasing the coverage and inclusion of distributed payment protocols and crypto-currencies at this year’s Money2020, to be held November 2-6 at the Aria in Las Vegas.

With more than 5,000 attendees–including over 500 CEOs–from more than 2,000 companies and 50 countries expected this year, Money2020 has quickly become the largest and most important event for innovation at the intersection of Payments, Financial Services, Retail, Mobile, Marketing Services, Data and Technology.

“We represent the broadest ecosystem of innovation in money and bring together otherwise disparate and siloed segments, including companies as wide ranging as banks, processors, retailers, payment networks, mobile operators, e-commerce and m-commerce enablers, Internet companies, data companies, marketing services providers, industry and equity analysts, venture capitalists, hedge funds, start-ups, trade groups, regulators, media and much more,” said Simran R. Aggarwal, co-founder and president of Money2020. “This allows us to serve as a catalyst for the development and growth of the ecosystem. By adding (Bit)coinWorld as a key element of this year’s Money2020, we’re expanding our coverage of technology that we believe has real disruptive potential.”

(Bit)coinWorld at Money2020 is a platform where leaders in distributed payment protocols and crypto-currencies and leaders responsible for driving commerce innovation can interact, learn and forge critical partnerships. To help accomplish this goal, Money2020 is:

1. Creating a dedicated agenda track to include extensive coverage of distributed payment protocols and crypto-currencies, featuring the pioneers and leaders in the industry,

2. Increasing exhibitor and sponsor presence, showcasing the latest organizations and innovations, and

3. Introducing targeted networking events designed to connect critical stakeholders and industry participants.

“Money2020 is at the heart of today’s most important dialogue in payments and financial services. At our 2013 event, we started to see mainstream interest in bitcoin and other crypto-currencies and we believe that, in 2014, this will evolve into broader and more meaningful dialogue and partnerships, ” said Aggarwal. “We’re thrilled with the support we have from all of the key stakeholders in bringing this unique program together.”

“To realize its full and transformational potential, Bitcoin–and the companies that are making it a reality–must work effectively with merchants, regulators and other established institutions,” said Tony Gallippi, chief executive officer of BitPay. “As the premier payments event, Money2020 is well positioned to make that happen and we’re excited help by bringing our expertise and leadership to (Bit)coinWorld.”

“We believe that bitcoin is nearing a tipping point for broad consumer adoption and recognition worldwide,” said Fred Ehrsam, co-founder of Coinbase. “As the largest and fastest growing bitcoin wallet service in the U.S., we’re thrilled to be a part of (Bit)coinWorld at Money2020 as these discussions are vital to the acceptance and evolution of crypto-currencies.”

“Bitcoin represents a disruptive, distributed and global paradigm shift, with substantial human and financial capital now moving into Bitcoin,” said Nicolas Cary, chief executive officer of Blockchain.info. “It will require responsible stewardship, thought-leadership and partnership to move Bitcoin into the mainstream and Blockchain.info is proud to partner with Money2020 for (Bit)coinWorld to help accomplish that.”

“Over time, I believe Bitcoin will become widely regarded as one of the most important inventions ever, and (Bit)coinWorld at Money2020 will be a great place for everyone to learn more about it and its broad, global implications,” said Roger Ver, a highly regarded early Bitcoin angel investor and evangelist.

“As the fastest and lowest-cost settlement networks in the world, distributed payment protocols, like Ripple and Bitcoin, represent an expansive business opportunity for established banks and payments companies, and the opportunity for the world of value to be woven together just like our information web,” said Chris Larsen, co-founder and chief executive officer of Ripple Labs, creators of the Ripple protocol. “Amidst this economic paradigm shift, Money2020 is a fantastic venue for a meeting of the minds between the worlds of cryptocurrency and financial institutions to advance the movement. I’m looking forward to (Bit)coinWorld.”

Additional details about (Bit)coinWorld will be announced in the coming weeks and months, including speakers, sessions and special onsite experiences to take place during Money2020, November 2-6, at the Aria in Las Vegas.

About Money2020

As the leading and largest global event covering commerce at the intersection of payments, financial services, mobile, retail, marketing services, data and technology, Money2020 brings together the broad, worldwide community of innovators that is profoundly changing how consumers and businesses manage, spend and borrow money. 2014’s Money2020 (including (Bit)coinWorld at Money2020) will be held on November 2-6, at the Aria in Las Vegas and is on track for 5,000+ attendees, including 500+ CEOs, from more than 2,000 companies and 50 countries.

Contact:

Rob Wells

Money2020

(704) 674-7147

rob@money2020.com

 

Bitcoins’  – Know Your Exchange. A

KYE  Guide Part One

 

This is the first part of the three-part investigative series that will take a closer look at those digital currency exchanges that sometimes operate as if it were the Wild Wild West. Currently, there is little to no oversight or regulation for the exchanges. As such, it is up to the bitcoin community to research and know something about the exchanges before we trust them with thousands of dollars. It seems that very few actually do as we read about so many “basement” exchanges closing down and taking the customers’ wallets with them. There is no recourse for this situation and recent statements from several governments lately make this abundantly clear. In short, you are on your own. These series of articles will hopefully shine a bright light on those places that often time go dark. This list attempts to make no judgments, it is information only. It is up to you to interpret this information as the reader sees fit.

 

We have laws and regulations that require banking services and exchanges to make some effort to Know Your Customer. This is commonly referred to as “KYC” with the intent to safeguard against would-be money launders, terrorist and the sort. However, how much do we know about them?  Do you trust your thousands of dollars’ worth of bitcoins to a web address that you know only by its front page website that looks convincingly trustworthy because it has pretty graphics and official sounding financial words?

 

Very few, it seems, have taken the additional effort and time to see for themselves deeper than the web page and actions of the bitcoin herd. Many people just assume that if everybody else is doing it, they might as well too. This series selects the top exchanges by volume to dig deeper and get some facts the traders ought to consider. With this information, we can do more to help ourselves as we are on our own. It’s time we create our very own “Know Your Exchange” (KYE) guidelines.

Mt.Gox. “Magic the Gathering On-line exchange”

Mt.Gox – The embattled and possibly now dead, exchange located near Tokyo Japan, originally was created in early 2010 to allow on-line exchange for collectables used for the fantasy trading card game “Magic the Gathering”. It quickly ceased this business plan and experimented with the new bitcoin concept. In March of 2011 the company was sold to Mark Karpeles and his company Tibanne Co. Ltd.

 

The exchange only accepts bank-wire transfers from the US. It abides by the KYC laws but was often cited at being weeks behind in approving requests for an account due to being understaffed for the amount of requests received. This caused a delay in purchasing bitcoins for up to a month or more.

 

The experience of bitcoin investors here could be interpreted as the warning shot to provide a learning experience for others to follow and highlights the importance of this article. Reports indicate that the exchange is refusing to transfer money or bitcoin via wallets outside of its exchange for what it calls “Technical Reasons”. The front page on their website includes a news feed that is a laundry list of excuses for the problems and press it has received throughout the year.

From:  http://www.tokyo-cci.or.jp/english/ibo/2353440.htm

Using Google Maps –  at the address highlighted in yellow we can find the office building for the company here:

 

Mt.Gox Building Entrance

Whatever the current state of Mt.Gox today, the trading platform has been credited for helping bitcoin reach the status and price levels of today. It was a better trading platform than those before it. One could argue that it was a small fish suddenly finding itself in a big pool. Warning signs have been in the press for its viability and solvency since last summer. Many insiders to the bitcoin community spoke often about the dangers. In July 2013, Roger Ver, the nicknamed “Bitcoin Jesus” millionaire and early bitcoin promoter, posted a video on YouTube vouching for the solvency of Mt.Gox having personally visited the exchange.

 

Mt.Gox was the largest bitcoin exchange by volume until recently and the price quotes used by the press and many calculations were based on the bitcoin price found there. But many argue that the higher price found on this exchange was due to the fact that bitcoins were bought or moved there, but because of banking regulations and legal reasons bitcoin could not be converted to cash and sent to regular banking channels. The only way out was to move bitcoins through the bitcoin wallet system.

 

Many people attempted to arbitrage the price difference between Mt. Gox and the other exchanges selling bitcoin cheaper. This involves buying bitcoin on other exchanges for a cheaper price and then transferring the bitcoin to Mt. Gox to resell at a higher price profiting from the difference. Unfortunately when the bitcoin was moved to Mt. Gox, they found that once it sold, they could not move their converted dollars through banking system back home as Mt. Gox was cut off from regular banking transfers for many countries. The unlucky customers were forced to pay the same higher prices to repurchase the bitcoin to move it back out through the bitcoin network instead. Although it seems many didn’t immediately understood that this was even an option. This created a bubble as it was effectively a “dead end street” and a large amount of people new to bitcoin found themselves “stuck” at the end of the road with many continually buying at increasing bid amounts to make a financial u-turn. Price differences between Gox and the others topped $100.00 per bitcoin.

BITSTAMP

Another one of the popular bitcoin exchanges is BITSTAMP. https://www.bitstamp.net/

The address is listed in the UK.  It is owned by the parent company UK PLC which shares the same address. It was announced in August of 2011.

The front page of UK PLC shows the expensive looking high rise end of London.  One might think of the image of BITSTAMP being a huge company in the high-end financial district of the London Elites.

UK PLC Website

With the assistance of Google Maps, we find the true address location of the address here:

BITSTAMP seems to have weathered to bitcoin exchange controversies better than others and seems to be arguably the de-facto trusted leader of bitcoin exchanges as of today. The price quotes from this exchange are now widely used and referenced by other bitcoin companies including US-based Coinbase.com. They still require bank –wire transfers from the US and abide by KYC laws.

 

An informative website with additional facts about BITSTAMP is found here.

Bitcoin exchanges – in perspective.

 

It’s important for the reader to remember that the marketplace for bitcoin is young and largely immature. Bitcoin investments are considered very risky by the established risk analyzers. Those who invest in bitcoin understand this, and perhaps having these unregulated and immature exchanges are just part of that accepted equation. The exchanges profiled here were not set up by established financial experts. These are essential tech companies that did not dismiss the currency out of hand as the financial establishment has done. It is prudent, perhaps, to withhold judgment as history will yet decide if these innovating pioneers were the dawn of something grand and wonderful… or a footnote. As a disruptive force bitcoin simply could not have been born or allowed to live by the banking establishment. Logically, it had to come from the technically minded to understand its basic foundation.

 

Having a marketplace to distribute the currency is crucial for its development. For all the negative aspects that have been reported, it might be wise to respect the visionary pioneers who have gotten it this far. They had to maneuver tricky business factors and the lack of respect for the currency that brought with it embarrassing stereotypes to overcome. This is not unprecedented in the technology world. Bill Gates, Steve Jobs and many others had to start out in garages or houses. They had humble beginnings, but they still had to project an image that was perhaps greater than their actual achievements and stature at that time. It perhaps requires these traits to be taken seriously enough to be given a chance.

 

Perhaps it was inevitable that the financial world ignored it and then laughed at it. Today, as the proverb suggests, some are fighting it. However, in the land of the technical pioneering spirit – the US has not issued governmental warnings to stay away. This is not true of several governments – that seem intent on fighting it. The leaders in the high-tech sector responsible for much of the giant successes of the last two decades have begun to take the lead again. They are dragging along their big financial backers whom they’ve made wealthy. Those backers would naturally be resistant to a disruptive technology. Hedge fund managers are the contrarians of the banking crowd are increasingly taking bitcoin seriously. They will likely be the trailblazers for the financial world eventually forcing the stodgy status-quo bankers to keep up,.

 

New money entering into the ecosystem will demand regular regulated exchanges in the US. and with it, like it or not, established banking systems. These were often referred to as the “enemy” of bitcoin – but ironically might be its savior bringing the currency from its infancy to its toddler stage. Internet idealists desperately wanted to keep the internet free from advertising and big money. This is also true for bitcoin idealists. New wondrous technology will likely not be exclusionary of bankers any more than it would be to drug dealers or governments. For now however, we have these small and relatively immature exchanges pioneering the way. Rebellious and anti-establishment, they have filled a vital role that could not have come from within the establishment. Unfortunately most may not last long when the big money rushes in and co-opts them. Some may well survive on the peripherals, for the portion of the population often ignored, disaffected, and under represented – which ironically may very well may describe their current customer base.

 

Finding and regulating all of the exchanges may be trickier than it seems – as will be discussed further in the next part of this series. For now, find the one exchange you can trust and celebrate them with your business while you still can.

Watch for part two in this series soon.

Part two of a three part series. Governments have “Know Your Customer” laws a.k.a. KYC. Should Bitcoiners create “Know Your Exchange” rules as well?

 

Many governments have issued strong-arm caution statements that strongly discourage their citizens from using digital currencies and reinforcing the point that the government does not recognize the currency as legal payment. There have been hacks, robberies, and exchanges closing up shop taking their investors’ funds with them. When this happens, the victims often will go to the police but find they don’t find the same protections that would be afforded them if a regulated bank had tried the same thing. As frustrated customers of Mt. Gox recently discovered, they have little recourse when they found weeks or months go by and unresponsive customer service. It’s clear that we are on our own.

 

Most governments, however, didn’t actually ban the currency despite what the mainstream news headlines might have you believe. They did send advisories that any money you lose will not be their responsibility, which one might be considered refreshing in the nanny-state many feel that governments have become. Many bitcoiners might likely prefer the government stay out money affairs since they’ve demonstrated discouraging ineptitude with our financial affairs this far. There is no FDIC for bitcoins to insure your deposits. It will take a different mindset in protecting your money. Nobody is going to do it for you. Disturbing news from Routers indicating that EU officials are considering confiscation of personal savings accounts to make themselves whole after mismanaging their money the first time through taxes. Understandably – their citizens have begun making arrangements to protect their wealth including conversion to hard-to-reach digital currency – except then it’s a matter of “pick your poison”. Hackers on the left, government on your right and interconnecting it all are the exchanges.

 

In Part One of the series we discussed the exchanges of Mt. Gox and BITSTAMP. In Part 2, we continue this effort and provide profile for BTC-E, and Cryptsy. How will you know if they are worthy to trust with your money?

BTC-e

https://btc-e.com/

 

BTC-e might be described as an enigma. Even its exact location is somewhat of a mystery. The managing company is registered in Cyprus but lists Bulgaria as its location. It appears to avoid too much government regulation and as such, the exact location is undisclosed. BTC-e is one of the primary benefactors in gaining customers leaving Mt.Gox who swelled the customer base as Mt. Gox shrank. Accounts are secured with two-factor authentication for all withdraws and has not reported being a victim of a hacking attack. The company may represent an emerging model for internet business that can be everywhere and nowhere at once. This makes it difficult to apply laws from regulators and governments for institutions that have no borders and can be defined in multiple jurisdictions.

btc-e.com front website.

There is much confusion in the press lately about the exchange’s “war” with the Russian government. The Russian central bank boldly issued a statement which reiterates the existing laws that recognize only the ruble as the official currency. It did not make new laws or rulings but did create some “Fear, Uncertainty, Doubt” by labeling transactions as potentially suspicious. And it made clear that businesses using the currency are breaking existing laws.

 

The defiant BTC-e issued a statement in response that they are discontinuing support for the Russian Ruble on their exchange. They advised that they would continue to work through alternative third party issuers like OKPAY. BTC-e is one of the largest exchanges to also trade with alternative digital coins such as litecoin. This writer found no reports of security issues.

 

BTC-e Legendary troll box

If one were to take you on an adventure trip around the world of “Bitcoinland” no visit would be complete without a stop at BTC-e’s front page chat window, commonly called the “Trollbox”.  Perhaps there is no better place to better understand the “Crypto-Culture” than to hang around this area for a few days. Here you can watch warring bitcoiners try to psych each other into buying and selling various currencies to their own advantage. It turns into a hotbed of hot-off-the-press news and old fashioned crypto culture jokes.

 

Cryptsy

https://www.cryptsy.com/

Cryptsy is one of the few exchanges based in the US. It is owned by Project Investors, Inc. which is located in Florida. They have 60 various alternative currencies but current complex legal regulatory restrictions do not allow them to trade in government backed currencies. They have indicated plans are in the works to allow for this in the future. Currently you must fund the exchange with bitcoin or alternative currencies rather than government fiat currency. The exchange requires two-factor authentication for login.

Photo from Cryptsy’s website.

Cryptsy is run by “Big Vern”

 

Cryptsy is a smaller operation and sometimes exhibits computer lagginess as the infrastructure occasionally struggles to keep up with surging demand. This writer found the interface is simple and intuitive and discovered no evidence of security concerns. If having a large selection of alternative currencies is important, consider looking into Cryptsy.

The exchanges listed here differ than those profiled in part one of this series in the fact they they will also allow trade in alternative (Alt-coins). For many who feel like they’ve missed the boat on bitcoin while it was still cheap in years past, they often hope that lightning strikes twice. They hope that the new currency they’ve targeted will bring them fortune. The makers of these coins also need an exchange to get them distributed.’ The confluence has created competition and campaigns to get their own coins featured and available for sell. Exchanges have become a lucrative business. Various “write-in” campaigns have developed by various groups to petition the exchanges to include their own versions of the currency.

 

With the flood of new entrances vying for the spotlight, the exchange services are becoming increasingly important and profitable. It might be wise to select multiple exchanges for trading your currency of choice. Many security experts still advise to keep your money off the exchanges once the trade is complete. Services such as bockchain.info are seen as much safer places to store your wealth until you wish to exchange it again. It might be important to note that although various countries have issued warnings against using digital currencies and related exchange services –  the US government has not.

 

KYE tools.

There are several on-line tools available to research the various exchanges. Google Maps can help identify the building listed at their address. Crypto currency websites such as cointalk.org and the bitcoin subreddit groups can provide valuable information if you can weed fact from fiction. There are various scam checking websites such as scamadviser.com that rely on the vigilent public working together to keep safe. Another tool can to see a company’s Facebook page. The comments and complaints left for the company can be enlightening. As wallets are kept private, reputation systems will be more important than ever and might be an important emerging market opportunity. There are also dedicated websites that specialize in reviewing and listing these exchanges such as “Planet.btc”. Beware that things move very quickly in world of digital currencies and reputations can change on a dime so it takes diligence to verify that the information found on these sites is still accurate and recent. In the end, nothing replaces good old fashion detective work. As was proven by Mt.Gox, just because everybody else is doing it, doesn’t necessarily mean it’s the best or safest.

Due diligence is advised when you research the various exchanges. By one count, over 70 digital currency exchanges currently exist but with increased popularity this figure will surely rise. Financial risk analyzers still regard digital alternative currency investment as inherently risky as would be expected for a five year old unbacked currency. Gavin Andresen from the Bitcoin Foundation still recommends that one should consider only investing what one is comfortable losing. This article purposely did not list “Coinbase.com” or “Bitpay.com” as exchanges. The only exchange they conduct is from US Fiat currency from your regular banking system to bitcoin and back. You cannot exchange one digital currency for another and withdraws are sent back to your regular bank rather than stored as US Dollars on the exchange. Direct deposits to and from the regular banks take three days or longer because it must travel on the rails of the regular banking system which will seem like snail mail once you’ve gotten used to the bitcoin protocol. Panic selling and repurchasing once you’ve realized your haste, makes it even worse as you watch your mistake play out in slow motion. By many accounts these two money service companies are currently among the two most trusted in the world.

 

In general, most digital currency exchanges were started by technical people rather than experienced financial trading companies. Small startup companies naturally would have a difficult time presenting a business plan to the established banking system to get funding to open a digital currency exchange as these are new to history, Growing pains are naturally to be expected. This article series should not be interpreted as condemnation or recommendation for any exchange but is intended to provide illustration to inexperienced newcomers to digital currencies in an effort for them to “Know Your Exchange”.

In the final part of this series we will cover the newer entries into the exchange markets which have exploded in popularity.

Disclosure: This author has an account with the exchanges profiled in this article.

Authorities in Miami recently arrested two men in what may be the first instance of citizens being charged under state law for engaging in “too-large” bitcoin transactions. The two were contacted by undercover officers who were looking to exchange $30,000 dollars each for bitcoin, an amount which violates the state’s money laundering laws. According to Miami-Dade State Attorney Katherine Fernandez Rundle, undercover police officers conducted the stings looking for “individuals engaged in high volume Bitcoin activity.”

It’s difficult to imagine a world in which undercover officers targeting people engaged in voluntary exchanges is a good use of law enforcement resources. Earlier this year, police in Florida found over 100 untested rape kits, some of which have been sitting in storage, untouched, since 2005. The state has 11 of the 100 most violent cities in America.

Florida’s anti-money laundering law makes exchanges above $10,000 illegal without offering information to the government. The state also forbids frequent unlicensed transactions of more than $300 but less than $20,000 in any 12-month period.

The prosecutor’s office justified using resources to seek out bitcoin users by claiming that“Bitcoins are often seen as a perfect means of laundering dirty money or for buying and selling illegal goods, such as drugs or stolen credit card information.” Indeed, the state claims one undercover agent told one of the arrested men, nicknamed Michelhack, that he wanted to use the Bitcoin to purchase stolen credit cards online.

But as Katherine Mangu-Ward has noted for Slate, bitcoin is far from an ideal, or even particularly popular, method for laundering money.

Money laundering is the process of throwing needles into a haystack. The idea is to lose dirty cash in a jumble of legitimate transactions. About $8 billion worth of transactions were conducted in bitcoin from October 2012 to October 2013. During 2012, Bank of America processes $244.4 trillion in wire transfers and PayPal processed $145 billion. The bitcoin haystack just isn’t big enough or messy enough to be a useful place to launder money right now. A better option: cash-heavy businesses, such as casinos or—yes—laundromats.

“High level international cybercriminals have not by-and-large gravitated to the peer-to-peer cryptocurrency, such as bitcoin,” Secret Service Special Agent Edward Lowery said. “Instead, they prefer “centralized digital currency” that is based somewhere with looser regulations and lazier enforcement.

Jon Matonis has called money laundering the thoughtcrime of finance. Buying into the idea that citizens owe the state of Florida an explanation for voluntarily selling bitcoin for dollars means, in practice, that everyone owes it to the government to get involved in enforcing other laws.

Perhaps the trade would be worth it if money laundering laws helped the state prosecute violent criminals. But that’s not the case. Most laundered money is used in crimes whose violence stems from their being illegal, such as gambling and the drug trade.

At no point should the citizens of Florida owe it to the government to divulge information on voluntary transactions. That the law is written this way is totally inappropriate. Money laundering laws violate privacy, are extremely expensive to comply with, are incredibly ineffective as a means to thwart other crimes. But that Florida authorities are actually seeking out peaceful bitcoin sellers to ensnare for failing to give up information is especially galling. Florida officials are wrong in their assessment of bitcoin, and they’re wrong to apply badly-written laws in an effort to quash it. Charges against these two men should be dropped immediately, and the laws rewritten to reflect useful priorities for law enforcement.

Namecoin is a Bitcoin derivative that allows you to register names and data into a public blockchain. It bypasses going through central agencies that can take down your websites by removing the DNS entry.

Namecoin isn’t one of these dozens of “me too!” cryptocurrencies popping up each day. In fact, Namecoin is barely even used as a currency, althought have very high value for a non-bitcoin cryptocurrency. That’s not its reason for existence. It exists to register domain names that can be used around the world without relying on government-controlled entities who can delete anything at a whim.

Viral Electron Chaos Laboratories (which includes one of the developers of Namecoin) have already released a working beta of FreeSpeechMe, a plug-in that allows easy viewing of Dot-Bit (.bit) sites without any tech experience. They’ve also written tutorials on their site for using the plug-in, registering Dot-Bit domains (which currently cost about ten cents U.S. each), and tutorials for webmasters to set up Dot-Bit versions of the Dot-Com or other TLD sites.

The plug-in is free, and is currently available for Windows and GNU/Linux, with additional versions planned for Mac and Android. The source code is also on the FreeSpeechMe website, so anyone may examine it and even create derivations as they wish.

Dot-bit (.bit) are domains registered into a decentralized and public Namecoin blockchain. This is the opposite of all the other centralized top-level domains like Dot-Com, Dot-Net, Dot-ES, Dot-UK, Dot-DE, etc. Those are all controlled by authorities and are frequently censored by governments around the world without any Due Process and with no recourse for the domain owner.

FreeSpeechMe can change the game and the rules of the Internet the way we’ve come to accept them.

For an Internet user, typing bitcoinmagazine.com or bitcoinmagazine.bit into a browser will bring you to the same website, as they probably go there from a link, bookmark, or auto-fill anyway. There is, however, a critical difference between the two urls; the first one can suffer censorship of governments and corporations, the second one cannot.

Here are the advantages of Dot-bit and the FreeSpeechMe plug-in:

• When you register a Dot-bit domain, everyone in the world with FreeSpeechMe can see the website in 3 hours, in contrast to traditional and centralized systems that can take up to 72 hours.

• The system is decentralized, so that people have more protection from censorship. Dot-Bit domains can’t be removed from an authority contacting ICANN or other central systems.

• If a web host takes a website down (with a demand from some central authority), the website owner can move the files to another server (even in another nation) and be viewable worldwide in 40 minutes.

• TOR compatible, now will be easy to remember a domain in the Tor network!

• The person registering the domain has name privacy without paying more. (This requires the domain owner being careful. Otherwise authorities could use traffic analysis and action analysis to find the owner. But it can be done.).

• Easy to install (much easier than DNS setting configuration. And FreeSpeechMe does NOT change your DNS settings)

• More secure; avoids DNS Hijacking and other attacks.

• Dot-Bit registrations are much less expensive than other top-level domains.

With this crowdfunding campaign, the FreeSpeechMe team is looking to raise $50k (US), in cash, Bitcoin, or Namecoin. Reaching this goal will allow more Dot-bit use beyond Firefox, improvements on integration with Tor Browser and other anonymous networks, implementing new-generation Transport Layer Security, solutions for current issues, and many other improvements. It will also be used to help promote widespread adoption of FreeSpeechMe and Dot-Bit, which are critical to this system keeping the Internet out of the wrong hands.

This fundraising goal is still open. If they receive more funds they will continue improving new interesting features for Namecoin and FreeSpeechMe as:

• Update the Namecoin code (currently based on Bitcoin 0.3.x)

• Improve scalability (Resolve domains without need of download and processing blockchain)

• Automatic renewal of domains

• Cold-storage (porting armory)

• Optimize speed (Although now Dot-it is much faster than other top-level domains)

• Better blockchain anonymity (e.g. implementing Zerocoin)

• Blockchain privacy (using encryption for obscure domain-owners data)

• Improve better implementation of NameID; decentralized single sing-on system based on Namecoin.

• SSH client integration

If you can’t wait and you want to register Dot-Bit domains or configure your website you can learn how at www.freespeechme.org, where they are also asking for donations in Bitcoin and Namecoin.

Would you live in a completely sustainable skyscraper?

Colony Earth is an Eco Development company that runs on permaculture, renewable resources, Bitcoin and other cryptocurrencies. With a mission to create a development that is a living example of healthy balanced living and education, in an environment that is focused on technology, Colony Earth is changing the way we think about everyday life.

Founder Xavier Hawk started Colony Earth after realizing the need to provide a safe, healthy and balanced lifestyle for every individual. Based on his experience living in eco-villages, sustainable communities, and his passion for cryptocurrency, Colony Earth became the first Bitcoin eco development in the world. This spring, the first eco-village will open in North Carolina, with a plan to build similar permacultures around the world, including Colony Earth skyscrapers – entirely with Bitcoin and other cryptocurrencies.

We spoke to Xavier Hawk to find out more about this project and what the future holds for Colony Earth.

Adam Hofman: How did you get started with Bitcoin?

Xavier Hawk: I bought my first Bitcoin at an early stage from what became a trusted friend on localbitcoins.com. He taught me a lot and I’m grateful to him still.

AH: Where did the idea for Colony Earth come from?

XH: I “semi” retired at 30 from consulting and moved to the mountains of North Carolina with my wife and kids; on a nice organic farm where we began homesteading. I have a truck that runs on veggie oil and have been heavily involved with the permaculture movement, youth empowerment, and sustainable living from a very young age. I have lived in and experienced various eco-villages and Intentional Communities throughout my travels and wanted to maintain a safe, healthy, and balanced lifestyle for my kids.

Turns out homesteading is a LOT of work – I travel, work, and have a family. I needed to figure out a way to have this healthy lifestyle while still taking care of business. I looked at all sorts of ways to do this and Colony Earth was born out of that struggle for balance.

AH: What are the benefits Colony Earth provides?

XH: There is always something to do – gardens to tend to, animals to care for, etc. Lots of people don’t have experience living this way. However, they want the healthy food, water, and security that comes from this way of living. Colony Earth makes it easy, safe, and affordable to have all this with no skill required.

You always have the benefits of modern 21st Century tech while actually benefiting the earth, and is also a great way for people to learn. Whenever you want to plug in and do some garden therapy, the farm manager and other staff can include you. It is not required, but it is rewarding.

We are not a commune or kabutz. Imagine a golf course community with a clubhouse and activities, but instead of golf we have trails, ponds, offices, biodynamic gardens, clean water, and cultural activities. Imagine this in a skyscraper with power, food, water, waste management and commerce all handled and generated on site.

It’s like resort style living but it actually benefits the earth and its inhabitants. We make living in balance with the earth easy, affordable, and profitable not only for investors but also the residents and the earth itself.

AH: What has been the biggest challenge?

XH: Most intentional communities fail because of poor business models and lack of proper economic systems. I spent five years testing different business models for this concept. In that time I developed “Business Permaculture,” a model that guarantees sustained profit and huge upside potentials for investors, residents, and the earth alike.

AH: What has been the most rewarding aspect of starting Colony Earth?

XH: I am meeting many like-minded and passionate people who are all saying the same thing, “when are you opening?” I have found that Colony Earth is something people from every walk of life and economic bracket want. They want security, healthy food, clean water, and an uplifting place to live. It’s a global phenomenon full of people I am inspired by, and I feel very honored to be providing these solutions.

AH: Where is Colony Earth going next?

XH: I have some very visionary long-term plans for Colony Earth – taking the phrase “to the moon!” to a whole new level. We are working to open the doors of our first neighborhood near Asheville, NC this spring. Colony Earth is in talks with various investors and advisors to make sure we launch properly with a special permaculture based coin that will be redeemable for food, goods, and services at any Colony Earth Eco-Development and other eco-villages in our network around the world. It’s very exciting.

AH: What role does Bitcoin play in your business?

XH: Our homes and rentals actually belong to the neighborhood and people pay for membership to have access. These memberships and other costs are paid in digital currency, primarily Bitcoin and Litecoin. We pay our staff in Bitcoin, and any work hours our members contribute are also paid in Bitcoin. Finally, any profits the neighborhood produces in retreats, rentals, conferences, and agriculture get shared in digital currency. Our goal is to create a seamless, off grid, high-tech neighborhood based on permaculture principles, making it easy to learn about and use permaculture and crypto currencies. Colony Earth is an organization encouraging mass adoption by providing forward-thinking housing solutions aimed toward the future.

AH: Are there any Colonies being built right now?

XH: Our first colony is being built near Asheville, North Carolina. It will be where my core team lives, works, and plays while developing other locations. Colony Earth already has interest from mining companies in Africa that want to create a high standard of living community for their workers. We have been contacted by plenty of organizations who all want this for their area. I envision rapid adoption once our first location is opened this spring.

AH: Do you have any advice for companies getting started with Bitcoin?

XH: Stay plugged in, pay attention, and hold on tight. Everything is shifting and changing so quickly, you need to make sure your position works and can adapt to the changing environment, regardless of platform.

 

Visit http://colonyearth.com/

 

This morning, I awoke to an individual on Twitter letting me know, in no uncertain terms, that bitcoin and social issues were unrelated. Since literally everything is related to everything else in some way, I’ll assume what he meant is that bitcoin and social issues are particularly far apart in terms of overlap.

This is of course absurd. While “social issues” is a term which needs to be defined prior to further discussion, the “social issues” that particularly interest me are issues of poverty, class, mobility, equality of opportunity and access to resources.

Access to banking and credit

Credit is one of humankind’s most important innovations. The introduction and mainstreaming of lending at a profit is directly responsible for untold wealth creation and innovation. However, currently, access to credit is anything but evenly distributed.

Bitcoin addresses this inequity in two ways. First, it offers banking to millions who otherwise are not able to access traditional banking services. In America alone, up to a third of the population is unbanked or underbanked. Regulations and risk combine to ensure that offering services to certain segments of the population is unprofitable. Bitcoin vastly decreases the cost and risk of extending those services to people with low-incomes and poor credit scores.

Second, the Bitcoin protocol offers the promise of Smart Contracts. By creating and enforcing contracts through the blockchain instead of the state, people who currently don’t have access to credit will be able to enjoy vehicles, places to live, and other necessities, allowing entrance into the middle class.

Remittances and fighting oppressive regimes

The ability to transfer money globally is a very powerful tool in the fight against poverty. Currently, the process is extremely slow and expensive. Bitcoin offers instant, nearly-free overseas remittances.

In addition, bitcoin offers an escape hatch to people trapped under oppressive regimes. For example, the price of bitcoin spiked when people began moving their money from bank accounts to bitcoin in Cyprus after the government announced plans to seize cash from the country’s bank accounts.

Charity

The subreddit /r/Bitcoin makes up the vast majority of funding for Florida’s most effective and innovative homeless shelter, Sean’s Outpost, whose operating budget is almost entirely made up of bitcoin donations by reddit users. In addition, the BitGive Foundation exists to harness bitcoin’s tremendous power to innovate the way we tackle charitable giving.

Bitcoin is no panacea. A term like social issues is clearly meant to encompass a huge swath of legitimate concerns, some of which are more closely related to bitcoin than others. However, the idea that bitcoin and cryptocurrency is somehow unrelated to the social would have to rest upon the contention that concerns like access to credit, global poverty and oppressive regimes are not social issues. On the contrary, there is nothing more social than a voluntarily transaction. And giving more people worldwide access to mutually beneficial exchange is one of the most important social issues a system could take on.

I am part of the generation often called the Baby Boomers. We are heading into our retirement years now in large numbers. Baby Boomers for the most part are not familiar with concepts like Bitcoin and cryptocurrencies. They have heard these terms, but it all sounds kind of “crypto” to them.

While there are exceptions for sure, the new technologies driving Bitcoin and other new proposed currencies are more appealing to younger generations. They were raised in the smartphone era, so using a Bitcoin seems more natural to them. It is clear that the movement towards Bitcoin and other digital currencies has a strong appeal to a libertarian mindset. There is a growing concern about centralization of power and a desire to seek “decentralized” solutions to problems.

All this seems to lead to an inevitable culture clash between the old guard financial establishment and this new and growing movement away from the existing financial power structure.

We are still in the early stages of this evolving movement. Most people still don’t think of Bitcoin when doing their financial planning. Baby Boomers have grown up with stocks, bonds, mutual funds, annuities and other establishment-approved savings instruments. If they have concerns about the current financial system, they are comfortable with holding some tangible assets like gold, silver, diamonds, or even artwork for the well-heeled. This is how they diversify “outside the system”.  This means there is a tendency for most people to dismiss the idea of Bitcoin or other cryptocurrencies as a passing fad. Something that is popular today, but won’t last.

That may be a mistake if you dig beyond the surface and take a look at the battles going on in the cryptocurrency arena. Baby Boomers may not understand much about cryptocurrencies, but they do understand war. They have seen plenty of wars in their lifetime, and they know that wars are not fought over things that don’t matter. And recent news events suggest we may have some cryptocurrency wars going on right now.

Bitcoin is the biggest and most well-known cryptocurrency. It has become the symbol of the movement to challenge the paradigm of the old guard financial system. Apparently, the old guard financial system has noticed, and it appears they are not excited about a system that exists outside their sphere of control.

While they have not moved to prevent Bitcoin from operating by challenging its legality, it seems like in the last few weeks they are ramping up an effort to marginalize it in the eyes of the public. To keep it in its place so to speak. If you follow the news you notice that all this seems to have started after some comments made by Jamie Dimon (JP Morgan) and Treasury Secretary Jack Lew to CNBC. Secretary Lew was quoted as saying he and Jamie Dimon “share incredulity” over Bitcoin. Dimon was quoted as saying that when governments start regulating Bitcoin “that will probably be the end of them.”

Those sound like fighting words to me. They sound like someone who thinks Bitcoin is just a passing fad and won’t last. But wait a minute. If that is true why would JP Morgan be so interested in filing a patent for a cryptocurrency of their own? This article in The Telegraph describes how JP Morgan filed a patent for “an electronic currency with many similarities to Bitcoin”. They even provide a direct link to the patent filing itself.  Interesting.

I wonder whatever happened to that patent? According to M-CAM (a sight that reviews the status of patent applications), it has been rejected. In their review linked above they state,

“However, Mr. Patel might well have rejected the claims because of the ‘On Sale Bar’ rule under 35 U.S.C. Section 102(b), meaning that if the invention has been on sale for over a year then the invention is no longer patentable. Under the ‘On Sale Bar’ rule, the application could be invalid because it closely mirrors Bitcoin with features such as making free and anonymous electronic payments, and Bitcoin has been in circulation since 2009.”

The patent may have been rejected because “it closely mirrors Bitcoin”. If that is the case, JP Morgan couldn’t be happy about that. It might even lead them to put out a not very complimentary public report, as noted here in Entreprenuer.  It quotes the report as calling Bitcoin “incredibly illiquid” and “extremely volatile”.  But it doesn’t stop there. They add this quote

“At the risk of sounding like a Luddite, Bitcoin looks like an innovation worth limiting exposure to,” Normand says in the report. “As a medium of exchange, unit of account and store of value, it is vastly inferior to fiat currencies.”

Vastly inferior to fiat currencies? Those sound like fighting words once again.

I guess they mean unless it is a cryptocurrency that is establishment approved. After all, JP Morgan filed a patent to have one, right?  They must think it has some potential future.

Lately,  the news is filled with stories about denial of service attacks on Bitcoin  exchanges. Someone out there seems to view this as a war.

What does all this tell us? It tells us that Bitcoin (and the concept of cryptocurrencies) must matter more than many of us old Baby Boomers would realize. People don’t fight wars over things that don’t matter.

Someone obviously thinks there is a future for cryptocurrencies worth fighting for.

Note: this article is adapted from an article on my blog related to monetary system change.

A Bill (act to amend Section 107 of the Corporations Code, relating to business associations) introduced by California State Assembly member and Chairman on Banking and Finance Roger Dickenson on January 15th “AB-129 Lawful money: alternative currency” (PDF) as Amended January 23, 2014 specifies that “current law which bans the issuance or circulation of anything but lawful money of the United States does not prohibit the issuance and use of alternative currency.”

Reading between the lines, right now within the state lines of California it appears that the world’s favorite cryptocurrency does not conform with state law (i.e. its illegal!).  

The most recent action on the amendment indicates that it was sent to the Senate Banking and Finance on February 6th shortly after it unanimously passed assembly on January 29th with 75 votes YES,  0 votes NO and 5 voted present/not voting.

The Bill Analysis  explains that:

“This bill makes clarifying changes to current law to ensure that various forms of alternative currency such as digital currency, points, coupons, or other objects of monetary value do not violate the law when those methods are used for the purchase of goods and services or the transmission of payments.”

and further explains how current state law (to be changed) is more restrictive than federal law:

“…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.”

The bill also hints that other established alternate currencies known as “Community Currencies”  such as Bay Bucks of San Francisco are currently in violation of state laws that have not been enforced.  Selective enforcement of the law (i.e. reigning in on Bitcoin but not Community Currencies) would be arbitrary and capricious. The bill also appears recognize Bitcoin as a freedom of speech issue as the analysis explains that Community Currencies have “…become a form of political protest as some communities that use such currency do so in protest of United States monetary policies, or large financial institutions.”

However, the bill specifically does not make Bitcoin legal tender by “..prohibit{ing} a person from being required to accept alternative currency.”

In the middle of last year California made headlines when it’s Department of Financial Institutions sent a bizarre cease and desist order addressed to the BitCoin [sic] Foundation for conducting money transmission in the state. Later in the year, the California Legislature passed a bill to reform the California Money Transmission Act.  Roger Dickenson was also the chairman of Banking of Finance when this amendment was passed and stated that the bill would “remove barriers to market entry to start-up payment technology companies.”

California’s “AB-129 Lawful money: alternative currency”, passed assembly the same day that  New York Department of Financial Services (NYDFS)  held public hearings on virtual currencies.

New York, the financial capital of the world (PDF) and California, the technology capital of the world appear to going head to head with one another for regulatory clarity around cryptocurrencies.  With New York home to both Silicon Alley and Wall Street, California needs to foster a sensible regulatory landscape to keep Bitcoin startups in California.

Bitcoin exchanges in California and New York both made headlines in the past week with San Francisco-based Kraken (ie.Payward) announcing (Twitter) that it was unaffected by the Distributed Denial-of-Service attack / transaction malleability issues affecting other Bitcoin exchanges, and New York City based SecondMarket recently announced a pilot exchange for “qualified bitcoin market players.”

P.S. Note to California: You have a couple of typographical errors in your bill analysis that should be corrected:  

1) It’s Bitcoin Miners not Bitcoin “Minors”

2) In regards to Bitcoin being pseudonymous (which you correctly identified as not anonymous) you mention IP addresses being “recoded” [sic],  I think you meant “recorded” and Bitcoin users addresses certainly aren’t being recorded in the block chain but rather with the layered services that they are using.

The promise of Crypto part 2 of 2
David Mondrus, MBA, Columbia University & Michael Frank, Ph.D. MIT

Side Note:

In part 1 of 2 we discussed “payloads with paychecks”, an exciting concept that could be considered the beginning of an “Operating System” of Bitcoin. Vitalik Buterin,^[1] the creator of Ethereum, announced on his mailing list that the “testnet” is live. This is an incredible milestone in the history of computing, in my opinion. (Disclaimer: Vitalik is one of the founders of Bitcoin Magazine and still sits on the editorial board. He and I did not communicate prior to writing this article. All of my information comes from publicly available sources.)

 

Parallel processing time sales

Now, picture the global mining plant. US, Europe, Asia… Big mining installs, small rigs, video cards, kids with CPUs, small companies, all mining Bitcoin, Litecoin, Dogecoin, etc. … All of them in essence contributing CPU/GPU/RAM/Disk to the global hash plant.

Using Ethereum, or something similar, we can, and likely very soon will, create a parallel processing network using the resources of the global hash plant, and reimbursing the miners for their labor. There is a HUGE need for this kind of a parallel processing “cloud” based computing. This is REAL work, with REAL world significance. Work that requires a LOT of computing power, one for which there isn’t a “ready market,” but work that is nonetheless critically important to us as a species. The global, distributed, parallel processing network that is “mining” is a ready-made system for this application.

The Stanford “Folding @home” project, http://folding.stanford.edu/, which could lead us to a new cure for cancer, needs parallel processing. So does the Berkley “Seti @home” project, http://setiathome.berkeley.edu/ . There is an entire universe of parallel processing work that is not filled. The Berkley BOINC^[2] list, https://boinc.berkeley.edu/projects.php , shows 40+ parallel processing projects needing power.

The scope of their work is staggering. From astrophysics to cryptography to environmental research, the applications are truly incredible for human advancement. In the fields of science, parallel computing power is an expensive, scarce resource. For particle research, advanced theoretical physics, fluid dynamics, stock market prediction, neural network and artificial intelligence research, in social science research, in materials development, in space design, in all of these things parallel computing is expensive, hard to get, and absolutely CRITICAL.

The global hashing network can be adapted, using standard incentives and motivations, to provide, as a consequence of their “hashing,” research into these fields. And this is not a small amount of power. The BTC hash plant already represents a computing plant that performs 8 times as many binary operations per second as the top 500 supercomputers combined. That is an incredible amount of computing power that is currently “only” used to “mine” coins. There is so much more that these machines can do.

Interestingly, a lovely by-product of this approach is that it reduces a serious and valid environmental concern over the global hash plant. Bitcoin uses a lot of electricity, and no matter your thoughts on Global Warming, or Anthropogenic Climate Change, introducing a large and rapidly increasing electrical demand on our current electrical infrastructure is not something to be taken lightly.

So, while we cannot and should not stop the propagation of Crypto for environmental concerns, the fact that we can, as a byproduct of hashing, advance humanity through the availability of cheap parallel processing, justifies the environmental impact. The gains we, as humanity, can make from the availability of this massive, public, parallel processing system outweigh concerns about the environment in my opinion.

 

Humanity’s first distributed data vault.

What do you do in a world where the NSA can tap any undersea cable? Where Facebook and Google know more about us than our mothers? Where Britain has 1 camera for every 14 people?^[3]

In a world where everything is recorded and stored privacy truly is dead.

But, perhaps, that is not as scary of a thought as it might at first appear. It’s all a matter of power and transparency.^[4]

 

We as a society have an incredible amount of power. Do you remember the case of Kiera Wilmot?^[5] The Florida school girl who was arrested for a failed chemistry experiment? Initially the state wanted to try her as an adult and she was expelled from high school. But once word of her plight spread on the internet and people started making phone calls, the charges were dropped and she received a much lighter punishment more in line with her actions. The situation ended with a 10 day suspension, and a temporary transfer to another school^[6]. I call that an “Internet win”. THAT is our power.

But that power only works if people know, only if the word spreads, only if there is transparency. Only then can an injustice be corrected. And people can be fickle for sure. But I’ve noticed that if 1) the data is available, 2) people review it and 3) there is truly an injustice, people will act. So it is transparency and communication that are important. And in a world where they watch us, perhaps we should watch them too.

As both the Atlantic^[7] and Reason^[8] have argued, “Watched cops are polite cops”. When the police wear a camera and all of their interactions are recorded, the cops become nicer. As Reason reports “a 12-month study by Cambridge University researchers revealed that when the city of Rialto, California, required its cops to wear cameras, the number of complaints filed against officers fell by 88 percent and the use of force by officers dropped by almost 60 percent. “

As wearable computing spreads and our clothes become “internet connected,” personal cameras and real time streaming devices will allow all of us to stream every moment of our daily existence to the cloud. While some may find this unsettling and scary, their children, or perhaps THEIR children won’t even notice. They will place our concerns in the ancient history department next to the rotary phone and the tape deck.

While this might sound fantastic, the work on this has already begun.

We believe that once the adoption of “payloads with paychecks” has stabilized, the system will evolve into a distributed, planet-wide storage and processing network – in other words, a distributed OS. You will be able to store your data and run your code in the “cloud” very similarly to what you can do now with Amazon or Google, except the data and the processing will be fully distributed through the hash net, encrypted, redundant and constantly moving. The systems running the data won’t know what they’re running, and no-one will know where the data IS at any one time until you access your data. After all, if even YOU don’t know where you data is how can “they”? Whoever “they” are to you.

In a separate, technical white paper^[9], we describe the first steps towards a secure, worldwide Operating system with our new concept NDCoin, a cryptocoin framework supporting Nondeterministic Distributed Computation.  Invoking tools such as homomorphic^[10] encryption^[11], zero-knowledge proof verification^[12], and succinct computational integrity and privacy (SCIP)^[13], we have laid the conceptual groundwork for a distributed, encrypted, organic high-performance computing system and data vault that obfuscates and encrypts users’ mission-critical data and active algorithms with minimal cost. Since the data is in many places at once it is robust, and since the location of that data is uncertain until identity is verified attack vectors are limited. That is not to say that this is a panacea. There are still many attack vectors from biometric spoofing to social engineering to brute force, but we believe this is a step in the right direction. We will publish the implementation details of this project in the near future and will be very happy to collaborate far and wide.

 

In a world where the government can watch what you do, the best defense might be to always watch what the government does too.

 

 

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Bitcoin Magazine is please to announce Mediabistro’s fourth Inside Bitcoins Conference to take place in New York City on April 7-8. The Conference is set to take place at the Javits Convention Center in the heart of Manhattan. Last July, Mediabistro launched their first Inside Bitcoins Conference at the New Yorker Hotel. Mediabistro issued the following press release to highlight April’s upcoming conference:

Mediabistro Announces Inside Bitcoins Conference and Expo at Javits Convention Center in New York City April 7-8, 2014

Mediabistro Inc. announced that its worldwide Inside Bitcoins conference and expo will be at the Javits Convention Center in New York City on April 7-8, 2014. Inside Bitcoins recently took place in Las Vegas on December 10-11, 2013 and will also run in Berlin, Germany on February 12-13, 2014.

“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, Founder and CEO of Circle, as a keynoter.  In addition we expect over 40 organizations to exhibit and over 2,000 attendees.”

Notable speakers for the upcoming conference include Josh Rossi, Founder of Satoshi Square, Jonathan Mohan, Founder of BitcoinNYC, John Collins, Professional Staff, Senate Homeland Security and Governmental Affairs Committee, and more. View full list of featured speakers.

Bitcoin Magazine will serve as a media partner with Inside Bitcoins to provide discounted rates for Bitcoin Magazine readers. Get 15% OFF full conference passes with code MAG15. Register Now!

About Mediabistro Inc.

Mediabistro Inc. (Nasdaq: MBIS) is a leading Internet media company that provides services for social media, traditional media, and creative professionals, as well as for innovators in the 3D printing and mobile app industries. Service offerings include an online job board, news and analysis, trade shows and events, online and in-person courses, and research products.

All current Mediabistro Inc. press releases can be found online at:

http://corporate.mediabistro.com/corporate/press.html

For information on Mediabistro Inc., contact:

Natalie Bonacasa  

press@mediabistro.com

212-547-7870

MtGox, a Bitcoin exchange that used to have over 90% market share in the industry and still remains one of the top three Bitcoin exchanges today, announced on Friday that they would be halting BTC withdrawals as a result of unspecified internal technical issues, and promised that they would have an update by Monday. The Bitcoin price dropped 10% partly as a result of the news, and conspiracy theories abounded about what was going on inside. One Bitcoin user travelled from Australia to hold a protest in front of the MtGox offices, and even had a conversation with MtGox CEO Mark Karpeles – a conversation the details of which he published in his post on Reddit. Today, MtGox announced that the exchange would not be re-opening withdrawals, and released a long press release explaining their reasons why.

The news is only the latest in a nearly year-long series of shocks to hit the once seemingly unassailable exchange. In April, MtGox was forced to shut down for over a day after the platform’s software was unable to handle the large volume of trades after the Bitcoin price crashed from over $200 to about $60. In May, MtGox was sued by Coinlab, lost their Dwolla account and had over $3 million of their funds seized by FinCEN. In June, the exchange suspended USD withdrawals for two weeks as a result of banking issues in Japan, and that was when the exchange began to get into trouble. Withdrawals were resumed two weeks later, but it became very difficult for users to get their money out with some withdrawals taking weeks or even months. The Bitcoin price on MtGox began to be consistently 10% higher than on Bitstamp after that point – not because a Bitcoin on MtGox is worth more, but because a dollar on MtGox was worth less, and some people even became concerned that not every dollar deposited by the exchange had any backing at all.

The above status quo would last for the next seven months, and at the end of January the Bitcoin price on MtGox went up to 25% higher than the price on Bitstamp – or rather, the value of a dollar on MtGox was worth 20% less than a dollar in the banking system. In the last five days, however, there was a radical shift: the price on MtGox switched to being 5% lower than Bitstamp. The reason is not that MtGox fixed its withdrawal issues; dollars on MtGox are still worth 20% less than dollars on BitStamp. Rather, now that BTC and USD are both unwithdrawable from the exchange, BTC on MtGox are also worth 20% less. This is not a mere conjecture; it is actual fact, as shown by a Bitcointalk thread with people offering their MtGox BTC for real BTC at a 25% discount.

So what is the problem with MtGox today? Essentially, the root of the problem lies in a concept called “transaction malleability”. In order to understand the root of the problem, we must first understand two key concepts. First of all, Bitcoin is transaction output-based, not account-based. For example, if A sends transaction X transferring 10 BTC to B, and then B makes a transaction Y sending those same 10 BTC to C, transaction Y would cite the output of transaction X as the source of its funds. The way that Y “cites” X is by including the “transaction ID” of X. The TXID of a transaction is based on the hash of the transaction; that is, as soon as one constructs a transaction, one can calculate what its index will be by applying a mathematical function to it, and different transactions will end up having different TXIDs.

Second, because of a flawed implementation in the way Bitcoin verifies transaction signatures, there is a way to take a transaction and add leading zeroes to the values in the transaction, changing the representation without changing the meaning, to produce a different transaction, with a different TXID, that has the same effect. Note that this is not double-spending; the new transaction will have the same outputs and the same inputs as the old transaction, and the only material difference between the two is the TXID. Also, importantly, unlike double-spending you do not need to be the creator of the original transaction to have the second transaction; potentially anyone’s transaction can be spoofed.

The bug that MtGox faced is as follows. First, user A requests a withdrawal from MtGox, and waits for MtGox to send the transaction, say T1 with TXID H1. Then, A adds a leading zero to T1 to make the equivalent, but different, transaction T2 with TXID H2. A then quickly pushes T2 to as many mining pools as possible, hoping that T2 would get included. Meanwhile, MtGox is watching the blockchain to see if a transaction with TXID H1 gets included; of course, no such transaction ever does because T2 gets in instead. Then, MtGox ends up mistakenly thinking that the withdrawal never got through, and sends the bitcoins again to the withdrawer.

From the press release, it might easily be thought that the bug is a new and unexpected vulnerability in Bitcoin, and the price dropped by roughly 20% as a result of the news. However, the price has since regained nearly all of the drop, and for good reason: the bug is not a fatal new Bitcoin bug at all. This counterintuitive property of Bitcoin transactions has been known since 2011, and most Bitcoin wallets already deal with it by watching for any transaction spending the outputs of certain previous transactions, rather than watching for a transaction with a specific ID. MtGox, with its custom Bitcoin implementation, does not. The problem is thus entirely a result of programming failures on MtGox’s part.

For MtGox, things are not looking good. While the price on Bitstamp is now back up to $680 after the drop from $700 to $530, the price on MtGox has only recovered to $612, an entire 10% below the price on Bitstamp, a marked change from the 10% above Bitstamp that the exchange had been maintaining for the seven months before. Will MtGox be able to pull its feet back together after this incident and reclaim its glory as one of the core institutions of the Bitcoin economy? We’ll just have to wait and see to find out.

 

EBITDA? Micropayments? Bitcoin? What?

EBITDA [i] is simply the Earnings that a company has Before Interest, Taxes, Depreciation, Amortization. It is in essence a true representation of a company’s earnings power. How much money did the company make if we only include the products of the company and not any extraneous factors?

The SEC doesn’t recognize EBITDA as an official metric, so in this case we’ll use “net income” as a substitute. So, in Amazon’s case for the 3 months ending 2013/12/31 net income was $510 million on Gross Sales of $25,587 million. If we assume that they pay the industry standard 2% of their sales for merchant services, or in other words, the ability to actually take credit cards, then a 100% conversion of Amazon’s sales to BTC will save them, $25,587*.02=$511 Million. That is money that goes directly to the bottom line. [ii]

In other words: If Amazon fully converted to Bitcoin they would DOUBLE their profits. I wonder what that would do to the stock price …

 

Micropayments[iii] are simply small payments. Currently it isn’t profitable to have micropayments. The merchant processors charge not just a % fee, but also a transaction fee, which in some cases might run up to $1 or more PER transaction. But Bitcoin doesn’t have that problem. Sending very small amounts of money, while sometimes slow, is essentially, free.

This opens up an HUGE amount of business models that were until now unprofitable. As Max Keiser tweeted about a month ago: “Netfllix is thinking about going BTC.”[iv] This is because it’s unprofitable for Netflix to sell you a movie for a $1. It costs them more than that to process the transaction. But in BTC? EASY. And Netflix is just one example of where micropayments make sense. How about weekly news articles? Can you say “Chicago Sun-Times?”[v]

So for all of those who worry about Bitcoin adoption, or who wonder if my future visions of the utility of Bitcoin are a far away dream I show you REAL utility. TODAY. NOW.

 

Disclosure: the author of this article is involved with the Ethereum project.

There have been a number of very interesting developments in cryptography in the past few years. Satoshi’s blockchain notwithstanding, perhaps the first major breakthrough after blinding and zero-knowledge proofs is fully homomorphic encryption, a technology which allows you to upload your data onto a server in an encrypted form so that the server can then perform calculations on it and send you back the results all without having any idea what the data. In 2013, we saw the beginnings of succinct computational integrity and privacy (SCIP), a toolkit pioneered by Eli ben Sasson in Israel that lets you cryptographically prove that you carried out some computation and got a certain output. On the more mundane side, we now have sponge functions, an innovation that substantially simplifies the previous mess of hash functions, stream ciphers and pseudorandom number generators into a beautiful, single construction. Most recently of all, however, there has been another major development in the cryptographic scene, and one whose applications are potentially very far-reaching both in the cryptocurrency space and for software as a whole: obfuscation.

The idea behind obfuscation is an old one, and cryptographers have been trying to crack the problem for years. The problem behind obfuscation is this: is it possible to somehow encrypt a program to produce another program that does the same thing, but which is completely opaque so there is no way to understand what is going on inside? The most obvious use case is proprietary software – if you have a program that incorporates advanced algorithms, and want to let users use the program on specific inputs without being able to reverse-engineer the algorithm, the only way to do such a thing is to obfuscate the code. Proprietary software is for obvious reasons unpopular among the tech community, so the idea has not seen a lot of enthusiasm, a problem compounded by the fact that each and every time a company would try to put an obfuscation scheme into practice it would quickly get broken. Five years ago, researchers put what might perhaps seem to be a final nail in the coffin: a mathematical proof, using arguments vaguely similar to those used to show the impossibility of the halting problem, that a general purpose obfuscator that converts any program into a “black box” is impossible.

At the same time, however, the cryptography community began to follow a different path. Understanding that the “black box” ideal of perfect obfuscation will never be achieved, researchers set out to instead aim for a weaker target: indistinguishability obfuscation. The definition of an indistinguishability obfuscator is this: given two programs A and B that compute the same function, if an effective indistinguishability obfuscator O computes two new programs X=O(A) and Y=O(B), given X and Y there is no (computationally feasible) way to determine which of X and Y came from A and which came from B. In theory, this is the best that anyone can do; if there is a better obfuscator, P, then if you put A and P(A) through the indistinguishability obfuscator O, there would be no way to tell between O(A) and O(P(A)), meaning that the extra step of adding P could not hide any information about the inner workings of the program that O does not. Creating such an obfuscator is the problem which many cryptographers have occupied themselves with for the last five years. And in 2013, UCLA cryptographer Amit Sahai, homomorphic encryption pioneer Craig Gentry and several other researchers figured out how to do it.

Does the indistinguishability obfuscator actually hide private data inside the program? To see what the answer is, consider the following. Suppose your secret password is bobalot_13048, and the SHA256 of the password starts with 00b9bbe6345de82f. Now, construct two programs. A just outputs 00b9bbe6345de82f, whereas B actually stores bobalot_13048 inside, and when you run it it computes SHA256(bobalot_13048) and returns the first 16 hex digits of the output. According to the indistinguishability property, O(A) and O(B) are indistinguishable. If there was some way to extract bobalot_13048 from B, it would therefore be possible to extract bobalot_13048 from A, which essentially implies that you can break SHA256 (or by extension any hash function for that matter). By standard assumptions, this is impossible, so therefore the obfuscator must also make it impossible to uncover bobalot_13048 from B. Thus, we can be pretty sure that Sahai’s obfuscator does actually obfuscate.

So What’s The Point?

In many ways, code obfuscation is one of the holy grails of cryptography. To understand why, consider just how easily nearly every other primitive can be implemented with it. Want public key encryption? Take any symmetric-key encryption scheme, and construct a decryptor with your secret key built in. Obfuscate it, and publish that on the web. You now have a public key. Want a signature scheme? Public key encryption provides that for you as an easy corollary. Want fully homomorphic encryption? Construct a program which takes two numbers as an input, decrypts them, adds the results, and encrypts it, and obfuscate the program. Do the same for multiplication, send both programs to the server, and the server will swap in your adder and multiplier into its code and perform your computation.

However, aside from that, obfuscation is powerful in another key way, and one which has profound consequences particularly in the field of cryptocurrencies and decentralized autonomous organizations: publicly running contracts can now contain private data. On top of second-generation blockchains like Ethereum, it will be possible to run so-called “autonomous agents” (or, when the agents primarily serve as a voting system between human actors, “decentralized autonomous organizations”) whose code gets executed entirely on the blockchain, and which have the power to maintain a currency balance and send transactions inside the Ethereum system. For example, one might have a contract for a non-profit organization that contains a currency balance, with a rule that the funds can be withdrawn or spent if 67% of the organization’s members agree on the amount and destination to send.

Unlike Bitcoin’s vaguely similar multisig functionality, the rules can be extremely flexible, for example allowing a maximum of 1% per day to be withdrawn with only 33% consent, or making the organization a for-profit company whose shares are tradable and whose shareholders automatically receive dividends. Up until now it has been thought that such contracts are fundamentally limited – they can only have an effect inside the Ethereum network, and perhaps other systems which deliberately set themselves up to listen to the Ethereum network. With obfuscation, however, there are new possibilities.

Consider the simplest case: an obfuscated Ethereum contract can contain a private key to an address inside the Bitcoin network, and use that private key to sign Bitcoin transactions when the contract’s conditions are met. Thus, as long as the Ethereum blockchain exists, one can effectively use Ethereum as a sort of controller for money that exists inside of Bitcoin. From there, however, things only get more interesting. Suppose now that you want a decentralized organization to have control of a bank account. With an obfuscated contract, you can have the contract hold the login details to the website of a bank account, and have the contract carry out an entire HTTPS session with the bank, logging in and then authorizing certain transfers. You would need some user to act as an intermediary sending packets between the bank and the contract, but this would be a completely trust-free role, like an internet service provider, and anyone could trivially do it and even receive a reward for the task. Autonomous agents can now also have social networking accounts, accounts to virtual private servers to carry out more heavy-duty computations than what can be done on a blockchain, and pretty much anything that a normal human or proprietary server can.

Looking Forward

Thus, we can see that in the next few years decentralized autonomous organizations are potentially going to become much more powerful than they are today. But what are the consequences going to be? In the developed world, the hope is that there will be a massive reduction in the cost of setting up a new business, organization or partnership, and a tool for creating organizations that are much more difficult to corrupt. Much of the time, organizations are bound by rules which are really little more than gentlemen’s agreements in practice, and once some of the organization’s members gain a certain measure of power they gain the ability to twist every interpretation in their favor.

Up until now, the only partial solution was codifying certain rules into contracts and laws – a solution which has its strengths, but which also has its weaknesses, as laws are numerous and very complicated to navigate without the help of a (often very expensive) professional. With DAOs, there is now also another alternative: making an organization whose organizational bylaws are 100% crystal clear, embedded in mathematical code. Of course, there are many things with definitions that are simply too fuzzy to be mathematically defined; in those cases, we will still need some arbitrators, but their role will be reduced to a limited commodity-like function circumscribed by the contract, rather than having potentially full control over everything.

In the developing world, however, things will be much more drastic. The developed world has access to a legal system that is at times semi-corrupt, but whose main problems are otherwise simply that it’s too biased toward lawyers and too outdated, bureaucratic and inefficient. The developing world, on the other hand, is plagues by legal systems that are fully corrupt at best, and actively conspiring to pillage their subjects at worst. There, nearly all businesses are gentleman’s agreements, and opportunities for people to betray each other exist at every step. The mathematically encoded organizational bylaws that DAOs can have are not just an alternative; they may potentially be the first legal system that people have that is actually there to help them. Arbitrators can build up their reputations online, as can organizations themselves. Ultimately, perhaps on-blockchain voting, like that being pioneered by BitCongress, may even form a basis for new experimental governments. If Africa can leapfrog straight from word of mouth communications to mobile phones, why not go from tribal legal systems with the interference of local governments straight to DAOs?

Many will of course be concerned that having uncontrollable entities moving money around is dangerous, as there are considerable possibilities for criminal activity with these kinds of powers. To that, however, one can make two simple rebuttals. First, although these decentralized autonomous organizations will be impossible to shut down, they will certainly be very easy to monitor and track every step of the way. It will be possible to detect when one of these entities makes a transaction, it will be easy to see what its balance and relationships are, and it will be possible to glean a lot of information about its organizational structure if voting is done on the blockchain. Much like Bitcoin, DAOs are likely far too transparent to be practical for much of the underworld; as FINCEN director Jennifer Shasky Calvery has recently said, “cash is probably still the best medium for laundering money”. Second, ultimately DAOs cannot do anything normal organizations cannot do; all they are is a set of voting rules for a group of humans or other human-controlled agents to manage ownership of digital assets. Even if a DAO cannot be shut down, its members certainly can be just as if they were running a plain old normal organization offline.

Whatever the dominant applications of this new technology turn out to be, one thing is looking more and more certain: cryptography and distributed consensus are about to make the world a whole lot more interesting.

If you want to experience Bitcoin unlike any other, take a step into the newly formed Bitcoin Center NYC. A block from the New York Stock Exchange, Bitcoin Center creates a lively approach to buying and selling Bitcoin in an area that has since been silent with the excitement of live trading. Each Monday, the floor comes alive with the sound of traders exchanging Bitcoin and other digital currencies.

Infamously named “Satoshi Square,” which originally held trading at Union Square, Bitcoin Center NYC is the new headquarters for trading for the frigid winter months. The event this past week had 100 in attendance, filled with boisterous trading in millibits and thousandths of a Bitcoin. However, the event doesn’t just trade Bitcoin. Individuals also trade Dogecoin, the altcoin that currently has the third largest trade volume of all cryptocurrencies. “The intensity is palpable,” said a Bitcoin Center trader.

Bitcoin Center NYC is the only place in the city where Bitcoin can be traded for cash in a live environment. Pushing through a crowd to get the best price is not uncommon. If you are lucky enough to obtain your piece of crypto-cash, you will also enjoy the live exchange after trading ends. Buyers exchange public keys to transfer funds between digital wallets, a process that is efficient and easy.

Aside from trading, Bitcoin Center NYC is a prime location for the avid Bitcoiner as well as users new to the growing cryptocurrency market. In fact, a majority of those in attendance are often individuals new to Bitcoin, just seeking additional knowledge and experience. Live trading is only a minor aspect of the future of the Bitcoin ecosystem. Bitcoin Center NYC’s real value lies in giving people a place to congregate, share ideas and get excited about the Bitcoin community in New York City.

Bitcoin was created as a peer-to-peer payment system and because of this, the in-person payment is another way to get your hands on Bitcoin. In every corner of the world there are events much like those held at Bitcoin Center NYC. This approach to trading has created a seamless way to put Bitcoin in your virtual wallet within minutes.

Bitcoin communities like the one in New York City and others around the world have helped drive Bitcoin’s meteoric rise “to the moon.” With increasing transaction volumes and more individual involvement, Bitcoin will achieve continued long-term growth. Bitcoin Center NYC is setting the standard for the Bitcoin community – a place where people can learn, share and trade. Although cryptocurrencies are still very young, it is thanks to events like those held every Monday in New York City.

Just off of Broad Street, a block from the NYSE houses one of the best places to begin your obsession with Bitcoin. Happy trading!

This post was released for Issue 17 of Bitcoin Magazine as part of a series of articles about puzzles and games that started with Issue 12.

Here I present a few challenges for bitcoin hoarders, about keeping bitcoins in separate wallets according to some restrictions. Have fun solving them!

Suppose that I have 10 bitcoins and I want to store them in 2 separate wallets (A and B) without splitting coins (that is, not using fractional units). Keeping a wallet empty is allowed. It’s easy to figure out that there are 11 ways of doing so: (0,10), (1,9), (2,8), (3,7), (4,6), (5,5), (6,4), (7,3), (8,2), (9,1) and (10,0).

Figure 1: Example of legal distribution

 Challenge 1: Now suppose that I have 1,000 bitcoins¹. How many ways of distributing them among the two wallets are there?

 Now suppose that, for security reasons, I don’t want to keep more than 800 bitcoins in a single wallet.

Figure 2: Example of legal distribution.

Figure 3: Example of illegal distribution (there are more than 800 bitcoins in the right wallet).

 Challenge 2: How many ways of distributing those 1,000 bitcoins are there now?

Now suppose we add a 3rd wallet and I have no capacity restrictions. Remember that keeping some wallets empty is legal.

Challenge 3: How many ways of distributing those 1,000 bitcoins among the 3 wallets are there?

Figure 4: Example of a legal distribution for 3 wallets and 1,000 bitcoins.

Let’s add a capacity restriction of 800 bitcoins per wallet once again.

Challenge 4: How many ways of distributing those 1,000 bitcoins among the 3 wallets are there now?

Now for those that have cheated by using a computer to solve the previous challenges…

Challenge 5: How many ways of distributing 21 million bitcoins among 3 wallets with a maximum allowed capacity of 10 million each are there?

And now for those that have solved all the challenges so far, suppose that wallet A has a maximum allowed capacity of 5 million bitcoins, wallet B has a maximum allowed capacity of 10 bitcoins and wallet C has a maximum allowed capacity of 15 million bitcoins.

Challenge 6:  How many ways of distributing those 21 million bitcoins among the 3 wallets are there now?

And finally, let’s add a fourth wallet and remove the capacity restrictions.

Challenge 7:  How many ways of distributing those 21 million bitcoins among the 4 wallets are there now?

Please post your answers in my forum:

http://nestorgames.freeforums.org/bitcoin-magazine-puzzles-f16.html

… and I will reward the best post with a copy of one of my games. I’m looking forward to discussing your findings. Thank you for reading and for your donations!

 

You might also enjoy my previous posts:

– Bitcoinstellations

– Rise of the machines

– Creativity as problem solving

– The Bitcoin Maze

– The Bitcoin Harvest

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1. Unfortunately I don’t!

 

 

I do not know about you, but often times, I find it difficult to select the best Bitcoin pricing index. Just recently I learned of Coinprice.us, created by Rich Morgan, software developer at BitPay and longtime Bitcoin fan. Rich chose to create a more reliable pricing average and pull from BitStamp, BTC-E, CampBx and BitFinex. With a goal of creating a clearer pricing site, even the white background of Coinprice.us allows the bolded black prices and average to stand out.

Prior to learning about Coinprice.us, I used to be a fan of Bitcoin Wisdom. Still a valid pricing index, Bitcoin Wisdom just doesn’t have as clear of a display of pricing for those who want a quick average. An additional benefit of Coinprice.us is its clear mobile interface with a still clear listing of pricing and the average. Still including an average pricing chart like Bitcoin Wisdom, Coinprice.us places greater emphasis on the average price.

For those of us who tend to get distracted looking at chart after chart, Coinprice.us is a solution to provide that 30-second break from work for a price check but alleviates the temptation for continual analysis of chart after chart. Additionally, with such a solid mobile interface, one can easily check out the price of Bitcoin while walking from one appointment to another. The pricing index you choose to use is up to you, but I enjoy a quick glance at an average price of BTC rather than feeling inundated in charts.

So, why am I so excited about Coinprice.us? This site is an example of two Bitcoiners seeing an apparent need in the Bitcoin community and taking action to improve the quality of user experience. There is tremendous value in individuals getting involved to better the Bitcoin user experience and set Bitcoin up for further mass adoption. If we need to get grandparents involved in Bitcoin, why not have a CLEAR and larger font average price! Bitcoin Wisdom and other pricing indexes which delve more in depth are certainly great for those who like analyzing chart by chart, but Coinprice.us provides not only an average price but also a desirable user interface.

Feel free to check out Coinprice.us. Also, if you would like to display a different arrangement of exchange pricing, why not create a site? The more pricing sites, the better opportunity to loop in a wider Bitcoin user base.

 

The Promise of Crypto
Part 1 of 2

“Bitcoin and crypto currencies in general represent a fundamental shift in human society that will rival the shift made by the internet.”

 

Wow, that sounds like so much nonsense… I know because when I say that to people they get that little snicker in their mouth. Bitcoin? Change the world? You’re nuts. It’s just money. And not even that really. It’s a pyramid scheme…

And yet within minutes of talking, a realization comes to them and their eyes get wide. “Really? Wow!”

So what really is the promise of Bitcoin ? How will it change the world?

 

Bitcoin is money

“Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country.^[1][2][3] The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment.^[4][5] Any kind of object or secure verifiable record that fulfills these functions can be considered money.”

Bitcoin as a protocol has three distinct components: the ledger itself, the crypto around the ledger guaranteeing the veracity of the ledger, and the reward system for the miners to run the crypto.

The reward component of Bitcoin fits the criteria of money. The system gives 25BTC to anyone who manages to “mine” a coin. You can then trade, keep or sell your coins, and many other people are willing to trade FIAT currencies like the US Dollar or the Yuan for your BTC. (I would be willing as well)

But why? Why would you give up your trusted and safe US Dollar for something that you can’t even buy groceries with? Well, I call it the bacon answer. Do you like Bacon? I like Bacon. I like MORE bacon.

Bitcoin=MORE Bacon.

Nicolas Kirpatrick posted this great image a few weeks back. As you can see the price of Bacon as denominated in Bitcoin has declined over the last 3 years, while denominated in USD it has gone up. This is because Bitcoin is a controlled supply currency. There can only ever be 21 million bitcoins and while we’ve only discovered 12 million of them, the remaining nine million will be discovered over the next 126 years. The Bitcoin foundation predicts that the last coin will be “mined” around 2140.

That means that as governments print more and more fiat prices will follow the bacon mode above, and I like MORE bacon. 😉

Bitcoin as a Trusted Transaction Ledger.

Notice from above “or secure verifiable record that fulfills these functions can be considered money”. And what is Bitcoin? A Trusted (or secure) publically distributed (verifiable) transaction ledger (record)”. So in that way also Bitcoin is money. And in that way, it is also much more.

How did writing and counting start? “Writing numbers for the purpose of record keeping began long before the writing of language” “The earliest known writing for record keeping evolved from a system of counting using small clay tokens. The earliest tokens now known are those from two sites in the Zagros region of Iran: Tepe Asiab and Ganj-i-Dareh Tepe. ^[6]”

Counting was needed for the trade of goods. Writing was invented to describe the goods. Traditional archeology holds that writing started in Sumeria around 3200 BC (as well as Mesoamerica) but recording inventory, or accounting was already in widespread use and evolving as far back as 4000bc.

Counting is a survival skill in our world. Without counting you do not know how much food you have, or how quickly you’ll use it, important information in the cold dark of winter. Without this information you might die.

The counting aspect of Bitcoin, the TRUSTED ledger, is the true innovation of Satoshi Nakamoto. It changes everything. As I mentioned in my previous article, “In mining, we trust”, everything is a ledger. Stock market results, deed management, elections, accounting, they are all ledgers. Ledgers that currently can all be “fudged”. Granted some manipulations are harder than others to pull off undetected, but as the scandals of the last six years have shown, no ledger that is NOT independently verifiable can really be “TRUSTED”.

And aside from financial ledgers, elections are also ledgers, are they not? Think about the 2000 US General election for example. George Bush vs Al Gore, Palm Beach county, Florida. Senior citizens counting votes manually, holding tickets to the light to see if they’ve been punched. “Hanging Chad” entered our vocabulary then. What a horrible night that was for our democracy no matter which side you supported. A clean and fair election is the least we should be able to expect from our government.

Imagine voting via “Vote Coin”. You go to the DMV and register. They take your biometrics, and put it encrypted on file with the key being quite literally “you”. Maybe with a device similar to this.  http://www.bionym.com/ . When you go to vote, YOU open your one time election wallet and send each of the coins to the candidates you select. The tally continues in real time, open and publicly visible and no-one can tell which specific vote was yours since your wallet ID is also encrypted. This certainly doesn’t solve every problem, but it does solve the 2000 election debacle, and that’s pretty good.

Now think about how many ledgers you use every day. At the gas pump, at the checkout counter, at work, at home, shopping, driving, etc .. Hundreds. Thousands. Every day. But does it make sense for my morning cup of coffee to be on the same transaction ledger as my deed? Or as your lunch in Beijing? Of course not. The current Bitcoin block chain is 13Gb. It is already unmanageable for many, especially for those in the developing world. Sync times for new wallets are measured in hours in the US and in days in the third world, an unacceptable rate for mass market adoption. 13Gb, and we are only at .017% of global adoption? Scary!

Another concern with Bitcoin is the 10 minute transaction settlement time. The system is designed to solve each block (or to verify each transaction) in the last 10 min. If you’re selling things across the internet that take a few hours to ship, a 10 minute window to see that the payment is good is fine. However, if you are selling electronics or brand name goods or jewelry in a retail environment, a 10 minute window is far too long. Customers won’t hang around waiting for the settlement. So you risk giving away expensive merchandise and not getting paid. Bitcoin is great, but it’s not perfect and doesn’t fit every solution. So that implies many currencies, many “bitcoins”, each with different properties. Each coin would be made for its transaction style. Stock market trading needs sub second reconciliation speed; they would pay for a sub second settlement window. Deed management isn’t as fast, but would need offline cold storage, etc … There would be geography differences, language differences. You would even have your own transaction ledger to keep track of everything you’ve spent and to reconcile it with the bank. All quick, automated, without significant auditing, because it is already TRUSTED.

 

We can see the beginning of this in the burgeoning Alt market with over 260 coins currently in existence and more being introduced daily, and the somewhat embarrassing success of DOGE coin. (Disclosure: I own DOGE coin and actively mine it at times). By the way, the success of DOGE will surely be scrutinized in the near future. I can see the Ph.D. thesis now: “The propagation of money memes in a social network”.

How much time will we save in doing our taxes? In auditing our institutions? In double checking the books? Not only that, but if you can see all activity, and if everyone can, then our trust in those institutions increases and our ability to direct our institutions increases as well.

 

“Payloads with Paychecks”.

Bitcoin, and other alt coins, within them, have the ability to carry a “payload”. Any data, encrypted or plain text can be stored within the block chain. So that means that I can wrap a “payload” with a “paycheck”. Being able to attach instructions or code to money means that I can pay “machines” to work.

Every automated transaction between different owners and many transactions between same owners is a potential market. Wanna buy a movie from Amazon? Here ya go. (Coincidentally Netflix announced that they are working on an “on demand purchasing mechanism” for Bitcoin. This is not yet “Payloads with Paychecks”, but it does make the point). How about software wrapped in money? Run this and get paid?

Think about the implications of that. Large corporations spend millions every year accounting for their IT work. How much of that processor did we use for the HR job? How much for accounting? How do we allocate the costs? If I can wrap a payload with a paycheck, you don’t need to ask. You know.

I can envision an entire industry based on systems payload management, systems payment integration, priority queues, etc … Wanna change that light to green? Send an instruction with the payment. System will accept payment, check instruction, check safety and other instructions, turn light green. Want to account for depreciation of software? Build a micro payment into each instruction. Want to sell cloud services? Publish a schedule of commands, and their costs. Then accept payloads … with paychecks. Want to hire systems or people to do piece work? Yep, payloads with paychecks. Entire odesk/ebay type websites where jobs are offered, processed and reconciled using “payloads with paychecks”. Imagine, no receivables, no “float”, no interest. Just simple payment for work. Simple.

As a matter of fact, Ethereum is the first tentative implementation of “payloads with paychecks”. It should hopefully become an enablement language that allows anyone to create a “payloads with paychecks” application. Contracts, deeds, trusts, can all be made more efficient with Crypto and Ethereum.

Remember, none of it works without TRUST, and TRUST requires mining, and all of the mining equipment available is currently being used. The supply chains are full, and new plants take years to come online.

And no, this is still not the full promise of Bitcoin and Crypto. These functions, while revolutionary in of themselves, pale to the final concept of what Crypto can do for humanity. But that will have to wait for part 2.

 

If you are in the San Francisco area, there is an event that you won’t want to miss. The Startup and Tech Mixer is taking place at the W Hotel and begins today, Friday, February 7th. Whether you are attending to learn, connect, create new possibilities for yourself, or simply to have fun, Startup and Tech Mixer has something for everyone.

The event will feature leading innovators in the tech space, and guest speakers from leading Bitcoin companies like BitPay and BitGive. Topics will range from “The Future of Giving” to “To Bitcoin or Not to Bitcoin,” along with many others related to providing guidance to startup companies and recent innovations in technology.

This year’s Startup and Tech Mixer will be sponsored by BitPay, W San Francisco, BPM and GoBold.Ly.

A little about Startup and Tech Mixer: We want to provide a meaningful experience for the Startup & Technology community by cultivating powerful opportunities to connect, learn, share, and inspire others outside of what is expected. The goal is to create socially-inspired spaces that are designed to unite people and foster authentic connections. We aim to achieve real connections by challenging how participants interact with each other and the world around them, and to create an environment of trust, curiosity, love, growth – and most importantly, fun.

Whether you are an avid Bitcoiner or are just looking to get started, this event will provide insight into the fastest growing digital currency. Attendance is limited, so arrive early!

For information, event schedule and to attend the event, visit startuptechmixer.com

 

LocalBitcoins is the largest Bitcoin marketplace, decentralized and worldwide; the company operates in over 4,500 cities and 150 countries. Founded in Finland, the business operates with a few employees but functions large and provides users with a two-factor authentication system, and SSL encryption for the digital wallet.

Recently, the company launched a coupon redemption service; Bitcoins can be used to purchase coupons which could then be used by others. This is a tangible platform for commodification within the cryptocurrency market.

Users are able to check authentication of coupons using QR codes, or the address. Identity theft becomes less of a concern and verification is generally done on the spot. The coupons are an innovative approach at effectively increasing the quick and easy exchange of Bitcoin currency.

LocalBitcoins doesn’t take responsibility of the exchange rate fluctuations, but tries to make sure that the exchange rate is relatively risk-free for the seller. Currently the selling rate is maximum of bitstamp 24h high, and localbitcoins.com selling average. Localbitcoins claims the latter tends to be of higher of the two. Moreover, Kangas has plans to research what would be the best rate for users.

Jeremias Kangas, CEO of LocalBitcoins.com answered a few questions Bitcoinmagazine.com had for him – take a look!

In order to create coupons, issuers must apply for approval – what is the criteria for this process? The coupons are [an] experimental feature, that is why the issuing is limited to [a] limited group. Applications are approved on a per-account basis, there are no specific requirements.

 Since redemption requires a Localbitcoins.com account, how does it work if you are not a user? When a coupon is redeemed, the user can create an account to which the Bitcoins are automatically credited, OR they can type the username of an existing account. In the latter case, Bitcoins can be redeemed without the user having to log in at all.

 How are the coupons visually presented? We have a template for the coupon, but also CSV export for the coupons is possible, so that traders can create their own design.

Is there a way of printing batches of coupons, for example: a hundred coupons of $1 USD each? It is very easy to create big batches. There is possibility to print as many coupons at any nomination. Currently, the feature prints 3 coupon per page via template.

The countdown to March 1 has begun for basketball fans everywhere. This is not March Madness in the usual sense, but instead is a huge day for Bitcoin. We are a few short weeks from witnessing an NBA first: the Sacramento Kings accepting Bitcoin.

The announcement made just weeks ago will mark the first professional sports team to accept Bitcoin. Beginning March 1, the Sacramento Kings will accept Bitcoin for online ticket and merchandise payments, as well as in the arena itself. The plan to accept Bitcoin is in support of the organization’s goal to create a new sporting experience. In a recent interview with ESPN, Kings owner Vivek Ranadive stated, “When I sold the NBA on keeping the team in Sacramento, my pitch included using the sports franchise as a social network to push the technology envelope. This is an example of that.”

Accepting Bitcoin supports the team owner’s business philosophy called “NBA 3.0,” which focuses on investments in technology, globalization and deep community partnerships. In addition to Bitcoin, the team is also experimenting with Google Glass and many other advancements based on the fan experience. The acceptance of Bitcoin brings the team one step closer to allowing fans to keep their wallets at home, which will eventually be a ticketless and cashless arena environment.

Each Bitcoin purchase will be processed through BitPay, a leading payment processor for virtual currencies. The partnership will enable the team to streamline the transaction process for event-goers, and will also enable the team to settle their funds in USD with zero chargebacks and low transaction fees. Unlike credit cards, which charge a percentage of the total sale, BitPay will charge a flat-rate transaction fee and enable the team to net more money on each transaction.

Bitcoin will truly alter the fan experience by creating a fast and easy way for fans to make online and in-person payments without having to reach for their credit card or cash. “We are able to implement a technology that allows our fans to make Kings-related purchases without physically reaching into their wallets. A major tenet of the NBA 3.0 philosophy is about utilizing technology for the betterment of the fan experience, and this is yet another step in that process,” Ranadive said in a recent press release.

The Sacramento Kings will soon begin accepting Bitcoin in their Kings Team Store, using a simple checkout process, forging the path for Bitcoin in the wide world of sports. The adoption of the digital currency has expanded to hotels, bars and restaurants, casinos, and now sports within a few short months. While Bitcoin is still in its infancy, a growing number of merchants are experimenting and noticing the benefits of the fastest growing payment method. In fact, Richard Sherman of the world champion Seattle Seahawks recently announced he would be accepting Bitcoin on his online store, saying “I hear it’s the currency of the future.”

The Sacramento Kings currently reside in the 19th largest market in the NBA, on the edge of Silicon Valley, an area filled with tech-savvy companies and leading innovators. “The city is plugged into a tech mind set to which Bitcoin appeals,” said Ranadive. For the team, Bitcoin supports their technology-focused philosophy and will prove to enhance the fan experience. Fans can leave their wallet at home, enter the gate with an electronic ticket and complete purchases by simply scanning their Bitcoin wallet – creating an effortless experience. Through partnership with BitPay, the Kings will be able to save on processing fees and eliminate chargebacks, while providing an easy payment solution for fans.

Bitcoin has a bright future in the live sports market, but will have to prove itself first. In less than a month, a new type of March Madness will be upon us, with the Sacramento Kings paving the way. When will your favorite team accept Bitcoin?

Calling itself the “first exclusive bitcoin portal,” CoinPool.com features a directory of businesses who accept bitcoin, sorted into over 100 categories and a marketplace where users can purchase items with bitcoin.

Bitpay.com currently offers a bitcoin business directory, which boasts a search function and categories. Listings come with just one photo, a short blurb and a link to the merchant’s website. Bitcoinyellowpages.com is another good resource. But the functionality is a bit counterintuitive. Clicking on a category takes a user to a map view instead of a listing. Bitcorati’s directory functions the same way.

CoinPool.com reportedly offers product/service catalogs and photos right inside the comprehensive listings, along with a ratings and reviews section. Another promising feature is a listing of classified ads for items which can be purchased with bitcoin.

Users will also have access to an online event calendar for comprehensive details about upcoming cryptocurrency events/conferences/expos. Listing businesses, creating classified ads and adding events to the calendar will all be free.

The information section will offer instructional videos on bitcoin, as well as forums.

On Wednesday February 5^th Apple inc. launched a fresh skirmish against Bitcoin. Blockchain’s wallet was removed from the App store.

This is the latest in an ongoing war waged by the Apple Corporation against Bitcoin users. Blockchain’s wallet was, for quite some time, all that remained. Leading innovators Coinbase, Gliph, and CoinJar were booted some time ago.

Apple Inc. benefited from an unprecedent corporate revival in the late nineties. The company found new direction, positioning themselves as the “crazy ones”, the “misfits”, “rebels” and “troublemakers”. A new corporate culture developed.

Apple would show “no respect for the status quo.” They would disrupt anywhere that had become stagnate. They did this very well. Those who failed to adapt, died.

But one should always beware, when fighting monsters, to not yourself become a monster.

Apple is right to fear Blockchain.

In June of 2012 Apple filed its patent application for ‘iMoney‘: a virtual currency and digital wallet technology.

Apple clearly has designs on both the space Bitcoin occupies and the services that Blockchain provide.

Blockchain are amongst the oldest and most respected innovators: pioneers in the ecosystem. Their application had been on the App Store for 2 years, accumulating more than 120,000 downloads. There were no customer complaints, and there existed a broad user base. I was personally among them.

At its currency level Bitcoin poses a direct threat to Apple’s ambitions. A rapidly growing and hugely innovative Blockchain were necessarily vulnerable.

Bitcoin will shake-up currency, sure. But, more importantly, Bitcoin will shift paradigms.

Apple no doubt fears Bitcoin.

Apple stands for control. All offerings are centralized. Its model is based on proprietary ownership of any disruption and all of its components. But you can’t own, control or acquire Bitcoin.

At its deepest level Bitcoin promises to do away with all traditional forms of centralized development and organisation: completely reshaping our ideas of control.

Bitcoin’s core technology acts to, as Cody Wilson notes, “question all previous frameworks”. Apple fears it will not be able to answer.

Bitcoin is therefore, both a philosophical and ideological enemy and an existential threat. Bitcoin as an open source software project, decentralized and operating autonomously, is creating inordinate amounts of value without any point of control.

Apple Inc., more than any other, knows what disruption does to stagnant beasts. Their reaction was predictable and it’s to be pitied. Nothing else should be expected of a Goliath.

Still, Apple does have a choice. They could choose to stand with honour: proving themselves still nimble. They could fight both Blockchain and Bitcoin with innovation. They could proudly attempt to show the superiority of their methods, leading by example.

It’s always the innocents who suffer

Blockchain and Bitcoin will both continue and grow.

In the meantime it is Apple’s customers who will suffer. The same customers Apple is supposed to serve. A truly useful currency and payment system has been taken from them for, as they put it, “unknow reason”.

Blockchain will still bring Bitcoin to the unbanked and underbanked. It will continue to offer access to international financial services with your smartphone.

Millions will still be empowered. Family members will still send money home to support their communities. And charities will still fundraise, aiding those in need.

As of Wednesday, none of this will be done on any iOS device.

It is a shame.

Apple would do well to quickly fill the void with something truly amazing. But is a centralized Apple capable of creating something of greater value than Bitcoin? If a Central Bank can’t do it, why would we expect Apple can?

Maybe Apple will prove us wrong. Perhaps they can disrupt money and completely reshape it in their image. Time always tells.

But if they’re showing this level of hostility already, what will they do with control of your “iMoney”?

Imagine walking into your favorite coffee shop, electronics store or restaurant, and paying for everything you need with the flick of your wrist. Today, Nymi (NIM-mi) makes this possible and more importantly, allows Bitcoin users to store their Bitcoin in a native biometric wallet.

Bionym’s Nymi wearable armband uses your unique ECG (electrocardiogram) biometric signature to securely identify you to various services and devices. The Toronto-based startup will also provide Nymi users with an easy to use and secure Bitcoin wallet. This is the first wearable Bitcoin wallet, and will enable consumers to make secure payments using the most secure digital payment method, without having to use your phone, tablet or computer.

In a recent Techcrunch interview, Bionym President Andrew D’Souza stated, “What Nymi brings to the table is a way to keep the private key securely stored independent of any computer, and tied to your unique ECG biometric signature. This makes it not only secure, but also more convenient than existing Bitcoin wallet solutions.”

Wearable technology has been around for years and has been widely used for tracking fitness activity. Companies like Samsung just recently dove into wearable tech and rumor has it that Apple currently has another in development. However, Nymi is the first technology that has merged the ability to make payments with wearable tech. Bionym’s innovation has many implications for both consumers and businesses, especially those in the Bitcoin community.

What Nymi Means for Businesses

An aspect of Bitcoin that has been challenging for brick-and-mortar businesses has been the payment process itself. Nymi provides an effortless and streamlined Bitcoin transaction process that will be customer facing, while enabling even greater transaction efficiency. The act of buying your favorite drink at Starbucks with Bitcoin can be a reality with Bionym’s new product.

Still, a challenge remains for many brick-and-mortar businesses looking to accept Bitcoin. How do you integrate Bitcoin into an existing POS? The answer has been given by many companies who provide payment integration, but very few actually integrate directly into every point-of-sale platform. For Bionym’s Nymi, this could mean that their native wallet may just be a way to secure and store Bitcoin in a unique and wearable way. However, with the rapid growth and adoption of Bitcoin, major retailers are searching for ways to get ahead and Nymi will soon capitalize on its innovation.

What Nymi Means for Consumers

Consumers are always looking for new and secure ways to pay for what they need. We have seen firsthand the cost of fraud with the recent data breach at Target stores nationwide, which accounted to over $1 billion in fraudulent purchases. It is obvious that the security of our money and our payment methods is more important than ever.

Nymi is tied directly to an individual’s ECG biometric signature, which means that if it is lost, nobody can access your funds. The technology within Nymi works much like Bitcoin, as both are backed by security that is built into the code. When you complete a transaction using Bitcoin, each user agrees to the amount and the transaction is verified multiple times. This happens nearly instantaneously and because each user agrees upon the transaction, there is no security risk, unlike other payment methods. Nymi brings this technology into the wearable tech space.

This new wearable tech will drastically increase the adoption of Bitcoin, both in business and by consumers. Not only will individuals be able to store their funds on a device that is directly tied to their biometrics, but they will also be able to effortlessly pay for goods and services. It makes perfect sense for Bionym to integrate a Bitcoin wallet into the Nymi. For Bitcoin, Nymi will bring new light to the already fastest growing mobile payment method. It will drive individual adoption and sales for businesses who already accept Bitcoin. For businesses who do not accept Bitcoin – it’s not too late.

Jamie Dimon opened his mouth in Davos about bitcoin and nonsense came out. “It’s a terrible store of value,” Dimon told CNBC’s Andrew Ross Sorkin. “It could be replicated over and over.”

“It doesn’t have the standing of a government,” added Dimon. “And honestly, a lot of it — what I’ve read from you guys — a lot of it is being used for illicit purposes.”

Evidently Dimon hasn’t heard only 21 million bitcoin can be produced and it gets harder and harder to create new bitcoin, with only a few produced each hour. We can’t say the same for the Federal Reserve and its partners in money creation, the commercial banks.

The lack of government standing means there would be no bitcoin bailout for JP Morgan should the need arise. No wonder wonder Dimon hates it. As far as being used for illicit purposes, that’s rich coming from a guy whose bank was just fined two billion dollars for not alerting the authorities to the activities of one of their customers, Bernie Madoff.

These days, Dimon is viewed as the smartest banker in any room he enters. In 1716 France John Law was that guy. Way more interesting than Dimon, Law was James Bond-like — a suave, debonair, womanizing gambler who (like Dimon) always seemed to come out on top. Law had plenty of friends in high places and worked the party circuit throughout Europe, as Dimon works Davos today.

However, Law had a skeleton in his closet in the form of Edward Wilson, whom he killed in a duel for which details remain sketchy. (Did the two men duel over Elizabeth Villiers, “the king’s boss-eyed, unattractive mistress,” or a certain Mrs. Lawrence, or money Wilson had received from a homosexual lover?)  Dimon’s skeletons are all in the open as JPMorgan pays various fines for the bank’s running afoul of the regulators.

This collision of Dimon, Law, and bitcoin was created by Joel Dietz with his piece in the November Bitcoin magazine entitled, “Why John Law Gambles with Bitcoins.” Dietz, 300 years after the fact, presents a thought experiment with the question, “What would [Law] say about Bitcoin and other digital currencies.”

While Dietz gets many of the juicy anecdotes about the Scotsman correct, he starts spinning the Law legacy from his opening sentence, “Today, John Law is often hailed as one of the greatest financial innovators of all time.”

I’m not sure who Dietz thinks has been hailing Law for greatness. Charles Rist, in his book History of Money and Credit: From John Law to the Present Day, wrote of Law’s theories,

Law’s writings . . . already contain all the ideas which constitute the equipment of currency cranks—fluctuations in the value of the precious metals as an obstacle to their use as a standard . . . the ease with which they can be replaced by paper money, money defined simply as an instrument of circulation (its function of serving as a store of value being ignored), and the conclusion drawn from this definition that any object can be used for such an instrument, the hoarding of money as an offence on the part of the citizens, the right of the government to take legal action against such an offence, and to take charge of the money reserves of individuals as they do of the main roads, the costliness of the precious metals compared  with the cheapness of paper money.

Only Keynesians have a soft spot in their hearts for Law.  Law biographer and Mississippi Bubble expert Antoin Murphy said it best. “Keynes can be termed as post-Lawian!”

Followers of the Fed and Keynesian policies will find this John Law quote familiar.

An abundance of money which would lower the interest rate to 2% would, in reducing the financing costs of the debts and public offices etc. relieve the King. It would lighten the burden of the indebted noble landowners. This latter group would be enriched because agricultural goods would be sold at higher prices. It would enrich traders who would then be able to borrow at a lower interest rate and give employment to the people.

In Choice in Currency F.A. Hayek linked Law and Keynes.

LORD KEYNES has always appeared to me as a new John Law. Like Law, Keynes was a financial genius who made some real contributions to the theory of money…But Keynes could never free himself from the popular false belief that, as Law expressed it, “as the additional money will give work to the people who were idled and enabled those already working to earn more, the output will increase and industry will proper.”

Joe Salerno weighs in on Law’s legacy in his book Money: Sound and Unsound.

as the founder and head of what, in effect, was one of the first national central banks in history, the Banque Generale (later, the Banque Royale) of France, Law almost singlehandedly destroyed the French monetary system in the course of four short years (1716-1720). As a monetary theorist, Law has been called the “ancestor of the idea of a managed currency” by no less an authority on economic doctrine than Joseph Schumpeter.

Diest gives the impression that Law started what would become the Mississippi Company to raise money to settle the Louisiana Purchase and bring “back the great riches of the new world.

While the company’s sole asset was government-granted trading rights with this new territory, the use of funds raised through stock sales was to refinance France’s burdensome debt.

While Law’s system relieved the government’s debt service, the resulting inflation, in the words of economic historian Earl Hamilton, “was a catastrophe to the labouring class.” Overall, prices more than doubled for the working class and the prices of some food items (like bread) soared 300 to 400 percent.

These facts fly in the face of Dietz’s comment, “Law’s primary flaw was that he was too successful.”

Dietz takes a big leap when he writes, “It should be clear that Law would see digital money as the future.” The value of bitcoin and successful cryptocurrencies is in their limited number. Dimon may think bitcoin can be reproduced ad infinitum but Satochi put a lid on bitcoin issuance for a reason. His creation of the best known cybercurrency was a direct response to the mismanagement of money by central banks that endlessly create money. The result being distractive booms, busts and inflation.

Law was the sole person who decided how much money Banque Generale would create. He did not want to be hemmed in by limits to his money issuance. He believed his system was saving France, its government, and creating prosperity. While its possible Law learned something from the debacle he created, assuming he’d embrace the strictures of Satochi’s structure is far-fetched.

Dietz is more likely to be right that Law “would almost certainly be running the circuit talking to central bankers.” Law believed as central bankers believe today, that economies can be managed if the right smart people are in charge, what Jim Grant calls the PHD standard. But competing crypto-currencies are the antithesis of central planning in money.

“Cryptocurrency is the future,” Dietz concludes. “It just calls for a bit of vision and boldness to pull it off on the scale needed. It needs another John Law.”  What Dietz dreams of is Law sliding into the shoes of Janet Yellen or Mario Draghi and turning all government paper and coin into government digits.

However, cryptocurrency is the future for the exact opposite reason. The vision needed is not Law’s but Hayek’s, who wrote, “It seems to me that if we could prevent governments from meddling with money, we would do more good than any government has done in this regard.  And private enterprise would probably have done better than the best they have ever done.”

Technology and private enterprise have arrived just in time to compete with government in the monetary arena. The last thing needed is a currency crank with friends in government to derail the prosperity private money can bring.

 

Bitcoins continue to keep supervisory authorities, businesses and users as well as speculators busy. On 19 December 2013 the German Federal Financial Supervisory Authority (BaFin) published its input to the vivid discussion on how Bitcoins are presently regulated in Germany. BaFin puts some points in concrete terms (especially trading with Bitcoins) and confirms some preceding views of the German Ministry of Finance and BaFin itself described in our prior article dated 27 November 2013 (only available in German).

Latest Developments

The interest in and – consequently – the demand for Bitcoins remains at a high level. Since November 2013 the market price for Bitcoins rose about almost 70 % and – according to the trading platform Mt. Gox – is hovering around the threshold of 1,000 USD (= ca. 650 EUR). The German trading platform Bitcoin.de lists similar increases. This is indeed astonishing, when considering the interim ambivalent developments:

• ŸCentral Banks of France and Germany and the European Banking Authority issued warnings, according to which everyone who trades with Bitcoins risks the total loss of invested funds

• ŸChina has forbidden banks to transact in Bitcoins, which led to a temporary price drop at the world’s largest Chinese trade platform BTCChina (daily amount of transactions: EUR 60 million)

• ŸEbay UK, Overstock.com (a major US online retailer) and Zynga, a big online gaming company, announced that they plan to accept payments in Bitcoins

• ŸWorldwide growth of offline shops that accept Bitcoins as a payment method – currently 2,300, more than 800 in Europe

• ŸLaunch of Bitcoin ATMs in Canada, Hong Kong, Finland, Slovakia and Switzerland; on the other hand ban of such ATMs in Taiwan

This environment in mind, BaFin conducted a supervisory and legal evaluation, taking into account also the risks inherent with the trading of Bitcoins, which resulted in a so called “expert article” in December 2013 (“Bitcoins: Aufsichtliche Bewertung und Risiken für Nutzer”, Bitcoins: Supervisory evaluation and risks for users of 19 December 2013 – “expert article”).

BaFin enhances legal certainty regarding Bitcoins

In this expert article BaFin explicitly points out – as already stated by the German Ministry of Finance – that Bitcoins are so called units of account (Rechnungseinheiten) and thus financial instruments in the meaning of the German Banking Act (Kreditwesengesetz). These units of account (Rechnungseinheiten) are substitute currencies, which “are used as means of payment in multilateral clearing circles on the basis of an agreement under private law”. BaFin avoids using the misleading term “private money”, which came up in an answer by the German Ministry of Finance to an enquiry by a member of the German Federal Parliament in August 2013. In a nutshell BaFin clarifies:

Bitcoins are neither currency or legal tender nor e-money in the meaning of the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz).

Furthermore, BaFin affirms its point of view, set out in a Guidance Notice on the Payment Services Supervision Act of December 2011 and described in our article of 27 November 2013 that the mere generation and the use of Bitcoins as a “substitute currency”, i. e. payment and “mining” are not regulated activities and, therefore, do not trigger any license requirement.

However, if purchasing or selling of Bitcoins for others is provided on a commercial scale, a license under the German Banking Act (Kreditwesengesetz) is required. According to BaFin, the same conditions apply for so called mining pools. In these mining pools computers of many “miners” work together to generate Bitcoins by solving the increasingly complex mathematical tasks (complexity rises parallel to the total amount of Bitcoins).

Trading with Bitcoins requires BaFin licence

According to BaFin, as a rule, commercial trading of Bitcoins is regulated. In particular, the following four regulated activities under the German Banking Act (Kreditwesengesetz) must be considered. In every individual case the business model must be examined in order to determine the applicable regulation.

1 Principal Broking Services (Finanzkommissionsgeschäfte)

Anyone who purchases and sells Bitcoins commercially in his own name for the account of others conducts principal broking services (Finanzkommissionsgeschäfte) and has to obtain a licence by BaFin. Trading platforms for Bitcoins especially render such services, if they meet the following criteria:

1. ŸOperator of the trading platform must follow instructions of participants regarding the amount of Bitcoins traded and the price until the execution of an order

2. Participants do not know the identity of their trading partners and the platform acts in its own name, i.e. not as a proxy for the participants

3. ŸEconomic implications of transactions (only) affect the participants

4. ŸTrading platform is obligated to both transfer Bitcoins and give account to participants

2 Multilateral Trading Systems (MTFs)

Secondly, according to BaFin, the regulation of Multilateral Trading Systems (MTFs) can be applicable to Bitcoin trading platforms.

MTFs bring together a large number of persons’ interests in the purchase and sale of financial instruments (such as Bitcoins) within the system according to set rules in a way that leads to a purchase agreement for these financial instruments. As a general rule, Bitcoin trading platforms can fall under this definition and therefore need a BaFin-license as a financial services institution. This is the case if providers offer Bitcoins on the trading platforms and lay down a specific price. If this price is met or exceeded by another participant, the trade comes into effect automatically.

However, there is a tricky issue that BaFin ignored in its expert article:

In Germany MTFs are regulated under the German Banking Act (Kreditwesengesetz) and the German Securities Trading Act (Wertpapierhandelsgesetz). The German Banking Act (Kreditwesengesetz) stipulates a license requirement for the operator of a MTF. The German Securities Trading Act (Wertpapierhandelsgesetz) contains compliance requirements for the operation of the MTF. In particular, providers of MTFs must ensure that retail investors are excluded from the platform. The requirement to exclude retail investors would make Bitcoin-MTF impossible as their services are – typically – directed at the public, including in particular retail investors.

However, we think that there are good arguments the Securities Trading Act (Wertpapierhandelsgesetz) is not applicable to Bitcoin-MTF. This is due to a deviation between the definition of a financial instrument in the Banking Act (Kreditwesengesetz) and in the Securities Trading Act (Wertpapierhandelsgesetz). While the definition in the Banking Act (Kreditwesengesetz) explicitly includes units of account (Rechnungseinheiten) they are not included in the definition of the Securities Trading Act (Wertpapierhandelsgesetz).

As a result, Bitcoin trading platforms structured as a MTF would only require a license as a financial services institution under the Banking Act (Kreditwesengesetz) but would not have to exclude retail investors.

Still, BaFin has not commented on this subject yet and did not mention it in its recent statement. However, we believe that it is evident that the application of the requirements of the Securities Trading Act (Wertpapierhandelsgesetz) to Bitcoin-MTF would equal a statutory prohibition of such structures.

3 Investment and Contract Broking (Anlage- und Abschlussvermittlung)

BaFin considers that the sole publication of lists of Bitcoin traders – whether online or offline – constitutes investment and contract broking (Anlage- und Abschlussvermittlung) that requires a license under the Banking Act (Kreditwesengesetz) or under the German Trade, Commerce and Industry Regulation Act (Gewerbeordnung) – which is a relatively straightforward matter. This extensive interpretation of “broking” will certainly provoke criticism as the simple publication of lists could also be qualified as a non-regulated activity.

4 Proprietary Trading (Eigenhandel)

Finally, providing purchase and sale of Bitcoins as a service for others is proprietary trading (Eigenhandel) and therefore a financial service. According to BaFin, especially Bitcoin exchange offices meet these requirements.

As a bottom line, it can be concluded that BaFin uses its statement to inform the Bitcoin-industry that it considers the commercial trading of Bitcoins to be a regulated activity. Only the kind of regulation and the requirements in detail depend on the individual structure of the trading platform.

BaFin warns users of Bitcoins

Furthermore, BaFin follows the present trend of European supervisory authorities to warn about the risks when dealing with Bitcoins.

Firstly, BaFin points out that Bitcoins could get lost or stolen, when a malfunction of the user’s computer occurs or hackers attack. However, the same risks threaten legal tenders, e-money or any other objects of value, whether physical or digital.

According to BaFin, it is likely that low transaction costs – one reason for the increasing popularity of Bitcoins – will rise, because the generation of Bitcoins through computers is going to become more and more complex. BaFin assumes that costs will align with the common banking costs, due to the growing demand for heavier hardware and electricity. Here, BaFin addresses an important issue. As a fact, transactions in Bitcoins may slow down because of increased transaction costs. Some users – especially speculators – might get deterred and prices for Bitcoins could cool down and become steady. As a result, Bitcoins would become more mature. They could evolve from a gambling tool to a “real” alternative currency. As a conclusion, the risks emphasized by BaFin can turn out into a big chance for Bitcoins.

On the other hand, BaFin warns that Bitcoins could be subject to extreme fluctuations in the price. This could attract speculators and holders of high amounts of Bitcoins to gamble and imply high losses for normal Bitcoin users. Although such development cannot be excluded for us, the aforementioned scenario is much more realistic.

Conclusion

BaFin further clarifies the regulatory situation of Bitcoins in Germany and gives the Bitcoin-industry a warning that the commercial trading of Bitcoins is regulated in Germany – one way or the other.

Although BaFin considers Bitcoins as a risky financial investment and warns users to deal with them, the fact that BaFin decided to publish an expert article at all underlines the growing importance of Bitcoins. Bitcoins are now of such relevance that BaFin can no longer ignore them.

Still, one main question remains – if BaFin will follow our approach and except Bitcoin-MTF from the requirement to exclude retail investors.

Therefore, one thing is certain: Bitcoins will continue to be subject to discussions of legislators and supervisory authorities around the world – we will keep you posted.

Whether or not you are in the market for a new car, a growing amount of dealerships are allowing customers to pay using Bitcoin. In late 2013, many stories were told of the first Tesla bought using the rapidly growing digital currency, which helped forge the path for many more sales to come.

Since then, we have seen many high-end automobile purchases with Bitcoin as the method of payment. To add to the continuing trend, Land Rover of Redwood City, California announced last week that the world’s first Land Rover was sold using Bitcoin.

Land Rover of Redwood City has been a proud member of the Qvale Automotive Group since 2000 and the family sold its first car in 1947. Since then, the family now owns a chain of luxury dealerships throughout California and Florida.

According to the Redwood City dealership, they were approached by a prominent Silicon Valley Venture Capitalist wanting to purchase a new vehicle with Bitcoin. At the time, the team in the San Francisco metro area had very little knowledge of Bitcoin or its useful benefits. The company partnered with BitPay, a payment processor, to help facilitate and complete the transaction. “Although the concept of Bitcoin is hard to grasp, the process as put forth by BitPay is quite simple,” said Doug Doyle, General Sales Manager with Land Rover of Redwood City.

The adoption of Bitcoin into the brick-and-mortar space has helped many companies, namely car dealerships, gain a foothold on their competition. These businesses now can reach the ever-expanding Bitcoin community, and provide them with another way to spend Bitcoin.

Doug Doyle stated in a recent press release, “we realized we need to be ready to accept change in this constantly broadening virtual community, so we agreed to our first Bitcoin sale.” The California dealership understands the innovation and simplicity of Bitcoin and what the financial implications for their business could be – lower transaction fees, zero chargebacks and low risk of fraud. These benefits could make a meaningful difference in every business.

Will you be able to buy your next car with Bitcoin? Odds are yes. Simply because, many dealerships have began accepting Bitcoin due to an inquiry from a prospective buyer. In every story related to the same topic, it is apparent that all we have to do is ask. For dealerships, Bitcoin can and will change the way business is done. “Just send an invoice and the money shows up in your account. Simple and seamless, just as they [BitPay] said,” stated Doug Doyle.

Not every car purchase with Bitcoin will be a Land Rover. Instead, we will witness other major dealerships jumping to accept Bitcoin for all cars, new and used. Companies like BitPay provide Land Rover of Redwood City with the ability to seamlessly complete transactions with substantially lower payment processing fees than those of credit cards or money transfers, with the opportunity of flat-rate pricing.

For consumers looking to spend Bitcoin, this could bring savings to you, because the dealership could lower the sticker price due to its savings on transaction costs. The age of buying your next car with Bitcoin is just getting started. Thanks to early adopters like Land Rover of Redwood City, who are paving the way for what is to come.

When a venerated institution such as The Wall Street Journal dedicates a new section to covering bitcoin, you know an idea has hit the mainstream. Announced today, BitBeat: Your Daily Bitcoin Round-Up will aggregate news stories related to bitcoin and other cryptocurrencies the WSJ thinks its readers will find important.

We are launching a new feature here at MoneyBeat: BitBeat, a daily round-up of bitcoin news, notes, and thoughts. The crypto-currency had a hectic 2013, and the new year is already shaping up as a manic one as well. So far, there has been a high-profile hearing on bitcoin’s future, and a high-profile arrest of a bitcoin apostle, and while the price has been stable so far, another wild rally, or brutal sell-off, could come at any moment. We’ll do our best to keep you up to date on all the happenings as bitcoin goes through what many expect to be an important year.

The first piece of news? Bitcoin’s latest price, obtained via CoinDesk.

Veteran reporter Paul Vigna is bringing 16 years of experience covering the financial world to the page, and hopes to update it daily. He describes it as a place for “stuff we don’t have time to turn into stories we can make quick reference to.”

So far all the stories are from the newspaper itself or CoinDesk. Readers can send tips to paul.vigna@wsj.com.

“I started writing about [bitcoin] in the spring,” Vigna said. “I just got interested in it so we started doing it. With the volume of things people send me, it just struck me over the head that we should do a roundup.”

The Wall Street Journal joins Forbes in having a dedicated page for bitcoin coverage. Interestingly, despite featuring literally thousands of topics, the New York Times topic pages do not include bitcoin or cryptocurrency.

“The fact that I’m writing about it shows that I think it’s an important development,” Vigna said. “I don’t know where it’s going to go. As a writer I think it’s a really interesting development, an interesting story. I think this is going to be a pretty interesting year for it. So that’s why we’re doing this.”

The Bitcoin buzz is pervasive and a lot of people are trying to understand this whole new concept of some kind of money that exists somewhere out there in cyberspace. Bitcoin advocates like to point out the advantages of a unit of exchange that potentially reduces transaction fees for users. But more importantly, Bitcoin operates OUTSIDE the existing establishment financial system. That is a main attraction for more and more people as countries all over the world create more and more of their fiat currencies in an effort to stave off a massive deflation event. The expansion of fiat currency has been seen as essential to saving the existing financial system from possible collapse. But the price paid is increasing loss of confidence and trust in currencies.

So let’s look at this from the point of view of a global banker whose job is to maintain stability and confidence in the existing world monetary system (say the IMF for example). Things have not gone too well in recent years. People are looking around for alternatives. Bitcoin surfaces as a very popular one. The technology is new and not as easily regulated under the existing financial banking system.

What do we do about this? Maybe instead of trying to wipe out Bitcoin and other digital competitors, we decide it would be great to have a cryptocurrency of our own  Perhaps we could find an up-and-coming financial tech startup to beta test one for us. They might try out this idea quietly in a less high profile part of the world to see how it might work. And, if we are going to ask people to trust our digital currency, why not just make it an “asset backed currency”, fully approved and backed by our existing global financial banking system.

That will never happen, you say. Not so fast my friend! Now Klickex enters the picture.

Recently, after doing research for my blog site on potential future monetary system change, I posted this little item: An IMF Approved Digital Currency?

It’s about a company based in New Zealand (Klickex) that up till now has just been a peer-to-peer digital money transfer specialist. They have a technology that allows people in the South Pacific to transfer money at far lower costs than using traditional money transfer services. They have been a big help to unbanked people who need to send money to relatives or others and had to pay very high fees for small transfer amounts.

But that’s not all Klickex has been up to. Last November they did a news release about a new “asset backed cryptocurrency 2.0”. Along with that was a very interesting 7 minute video where they presented this new idea at FinovateAsia 2013. http://www.finovate.com/asia13vid/klickex.html

Ok, that’s nice, but there are a lot of startups. What makes Klickex different?

Maybe this. Klickex seems to have caught the attention of some interesting players in the existing global banking system. Earlier in 2013 they were awarded the prize for top startup at the Innotribe Challenge. Guess who sponsors that award. It’s SWIFT. A key partner in the existing global banking system.

Klickex CEO Robert Bell had this to say to Bank Innovation, “SWIFT loved that we want to set up a new global central bank to eliminate global FX risks and costs… and have already done it in the Pacific with United Nations Capital Development Program funding.”  http://bankinnovation.net/2013/09/klickex-named-top-startup-at-swifts-innotribe-challenge/

Excuse me. Did I see that correctly? SWIFT loves their idea to set up a new global central bank? They have already done it in the Pacific with UN funding? Interesting.

A little more research turned up the fact that the World Bank has said some nice things about Klickex related to their existing money transfer technology. It is used with Digicel Mobile Money in the South Pacific. It seems their ability to reach out to the unbanked and lower fees for them has gained approval at some high profile global institutions.

In November 2013, they inform us in the video above they have been testing this “asset backed currency” for awhile now. And they apparently have the attention of some friends in high places like SWIFT, the IMF and the UN.

Their investor profile at Finovate2013 lists the following key investors: SWIFT, EU, AusAID, United Nations Capital Development Program (UNCDP/PFIP), HM NZ Treasury, Private Investors, Friends and Family & Management.

They also mention these key partnerships: SWIFT & The United Nations Capital Development Program.

So let’s recap. Here we have a small financial tech startup running a seemingly routine business model. It helps poorer unbanked people have improved ability to transfer money with low fees.

They have a new product though. It’s an asset backed cryptocurrency. It is working on regulatory approval with some very high profile global institutions to function INSIDE the existing banking system. They say the approval process for their currency takes from 6-60 weeks in various nations.

Some contact I had with Klickex convinces me that they are a company to keep an eye on for the future. Bitcoin users may find this worth following to see what unfolds. But if their GSD (Global Stability Dollar) really becomes a “global digital reserve currency” that is asset backed and establishment approved, I suspect we all will want to keep an eye on it.

Disclaimer: I am an active participant in the Ethereum project and part of the organization along with Vitalik Buterin and Mihai Alisie.

If you aren’t yet hip to Ethereum, let me tell you just how excited I am for this project! I’ve never believed in the social value of altcoins, but Ethereum is something special, just like Bitcoin was special compared to eCash. In essence, Ethereum takes the blockchain/consensus technology and wraps a new system around it, such that Bitcoin is just a currency. And what is currency but some digital asset? Except digital assets can represent something more than a specific sequence of bits–they can represent an idea. What if that idea is a legal contract? If the network participants agree on the contract status via blockchain consensus, it’s easy to see how one could extend this idea to work for a multitude of needs including escrow, voting, betting, futures contracts, or really any mathematical expression described by a Turing-complete machine language. And it will all automatically run in “the cloud”. Welcome to the new world of Distributed apps–or Dapps.

Combined with BitTorrent-like swarm technology this can give birth to a system whereby storage resources are compensated with what I’ll call “Internetcoin”. Whatever the digital asset is, the fundamental technology to auto-exchange it through a Ripple-like network to Bitcoin or any preferred local currency makes the world of infinite niche altcoins a reality. The net effect is that static server resources can easily be distributed amongst peers who are economically incentivized to participate. Interestingly, in P2P networks, the content moves faster and grows stronger with demand instead of straining under load. Finally, we can all have our fill of no-downtime celeb newsutainment while also working to turn the issue of Net Neutrality into a moot point.
Continue reading “Ethereum, Dapps, and the rise of a new Internet”

Last week TechCrunch delved into bitcoin’s image problem. Having followed bitcoin for the past year or so, I expected a substantive critique of bitcoin’s legitimate branding… let’s call them opportunities. Instead I got a poorly researched bit of toothless invective. Here are the piece’s biggest errors.

Take the Winklevii, white knights in the bitcoin army, who are asking for little to no regulation of the bitcoin markets, a prospect that will further drive away “respectable” users.

Oh, if only. In reality, Business Insider reports that last week at the New York hearing on regulating bitcoin, the Winklevoss twins said they were gratified the Department was discussing ways to help legitimize Bitcoin commerce. And that their Bitcoin ETF is awaiting regulatory approval from the SEC.

As it stands now, bitcoin is used to buy drugs and maybe stuff from Overstock.

Actually, people who research things before they say them have found that illegal narcotics make up about half a percent of bitcoin transactions.

Finally, bitcoin users are seen as misogynistic and sexist. While this post by Arianna Simpson is not indicative of the entire culture, it is a cautionary tale for those who may want to take part in a meet-up or seminar. Furthermore, new users trying to ask questions in forums or IRC chat rooms are bombarded with invective, and posts like this one casting a negative light on BTC receive countless defensive replies. If bitcoin users don’t want to be seen as sexist, insular nerds, then the change begins from within.

How someone who wrangled a TechCrunch byline could be so unfamiliar with the tech community at large to think that what Simpson experienced is any way unusual for a tech meetup of any kind absolutely baffles me. Our author is either inexplicably ignorant about the problems which plague the tech sector in general, or is being disingenuous in an effort to make bitcoin look especially bad.

There is no impetus for the average user to dump money into an unregulated system that appears as volatile as the currency of some banana republic run by a capricious dictator.

How about a 4,000% increase in price or an escape hatch for people living under oppressive regimes?

And perhaps the biggest whopper of them all:

I understand the value of the system as a .zip file for wealth.

Well, no, you clearly don’t. This is where the legitimate branding opportunities come in. Bitcoin is probably going to help the wealthy the most and first. That’s just how things work. However, that doesn’t mean bitcoin doesn’t eventually offer the most promise to the poor. Here’s how.

1. Smart Property

Smart Property, built on the Bitcoin protocol or protocols based on it, has the potential to open up worlds of credit and contract previously unavailable to people who are low-income, homeless and otherwise not currently deemed “credit-worthy.”

See: http://ethereum.org/

2. Money remittance assistance

Remittances are a huge deal for people in developing nations. And bitcoin makes them cheaper and easier than ever before.

See: http://bitpesa.co/

3. Innovative charity

How odd that our author would say, “Forums like /r/bitcoin on Reddit are endlessly effusive, crowing that this cafe is accepting bitcoin and this dentist is filling cavities for bitcoin,” and yet totally miss the most exciting thing on /r/Bitcoin. The subreddit makes up the vast majority of funding for Florida’s most effective and innovative homeless shelter, whose operating budget is almost entirely made up of the cryptocurrency, obtained via donations from reddit users.

See: http://seansoutpost.com/

See: http://bitgivefoundation.org/

 

 

 

Cleaning up Mark Williams’ Bitcoin FUD From New York DFS

Let’s get the facts straight.

At the New York hearings Division of Financial Service conference on Virtual Currencies held this last week we heard from a wide variety of characters who are in, worked with, or have taken  a critical view of the currency in the media. The general agreement seems to reflect that the hearings were useful and positive. Most agreed that the task of bringing balance of a thoughtful approach to the subject matter will help untangle the complexities of digital currency. Both business and government seemed eager create a framework of some legal regulation to assist its continued growth. Other states may use this outcome as a template for their own respective jurisdictions.

Mark Williams, a professor in risk analysis from Boston University, was inexplicitly the only speaker left off the announced agenda from the Department’s website’s list. His portion of the hearing was on day 2, session three. He’s recently taken it upon himself to be a vocal skeptic of the currency and has seemingly gone out of his way to draw attention to his anti-cause. It is unclear what his motivations might be or what group might be financing his actions with his attempt to spread FUD around the issues of digital currencies. This article will separate accusations and innuendo from actual and provable facts and let the reader decide for themselves if his opinion has merit. You can see his performance in part three of the second day of hearings recorded here.

The network effect:

Before we can accurately analyze his arguments, it’s important that the reader understand an important factor that is causing the dynamic of growth and volatility of bitcoin requires the  understanding of the principles of the established and repeated examples of the network effect.

Put simply, the value of certain products and services become much more valuable with more people that use that same product or service. It creates a positive feedback loop. If only two people in the world owned a phone, how valuable would the phone system be? But if you could talk to 100 people on the phone, the value rises. If you can reach anybody in the country at any point in time, what new abilities do you have that the phone can give you? How much more valuable is to you then? The same is true for email, Facebook, Twitter, and so on.

 

The explosion in adoption rates was breathtakingly fast. At some point the change reaches critical mass and an irreversible paradigm shift happens. Things never go back to the way they were before. Eventually it reaches a saturation point and the uptake slows. This is commonly known the “S” curve. It starts out volatile as market disruption changes are usually met with skepticism – we don’t give up our old paradigms easily. Disruptive technologies solve problems in new ways that weren’t possible before. Read more about networks effects here.

Mr. Williams remarked that there was no change in fundamentals that could account for a price surge from $13 to over $1200 in a year represented an unbelievable 9,000% rise. Yet we can compare the adoption rates of the technologies using  charts that follow. They compare the network effect of the growth of the internet in the 1990 to 1996 to the rise in bitcoin price.

Websites on Internet

 

Bitcoin addesses used, reported from Blockchain.info

 Mr. Williams said that 9,000% increase is not something you typically see in a commodity. One might wonder why he chose to compare commodities to the network effect of a new internet technology. Some would argue that this is a classic example of comparing apples to oranges. Only later does he define bitcoin as a payment system. So he calls it a commodity when he referred to it’s meteoric rise in price, but then a payment network when describing the dangers in possibilities of crime. He changes his description and attributes of bitcoin to morph into the boogeyman of his current argument from moment to moment.  This article will treat bitcoin as just a unit of data reserved for a place in the public shared ledger database, of which in theory we could have over one quadrillion addressable units as of this writing. Mr. Williams’ inconsistent classification of bitcon ends up being logically inconsistent to own arguments.

 In the most basic of economic lessons, we are taught that price is simply an equilibrium point of the law of supply and demand. Put most simply, if more people demand a certain item that is owned by somebody else, they must offer enough in trade that the people that own it deem the amount paid. Each participant feels that they received the better of the trade. So to each party, the trade is equitable. This mechanism is called “price discovery” and it’s a vital function for any product. It is worth precisely what people will pay for it. Sometimes we find out quickly, sometimes not. Speculators play an important role to find what the market will be willing to pay, and what items hold value including expectation of future value.

Mr. Williams claimed without giving reason that the price must be artificial reduction in supply – or artificial increase in demand. If nobody is buying under duress and is free to purchase or not, how can the price of anything be considered artificial? Price can be traced to the value people place in it. The value people give is subjective. For example, a glass of water can have significant value and price very differently under different context. In the middle of a river, a glass of water is priced and valued much differently that a glass of water in the middle of the desert after a day without. The glass of water is priced in terms of its usefulness and value. Which of these examples is paying the “artificial” price? They are paying the price they agree for the value they give it. There is no such thing as an artificial price in a free market. A currency free from government interference may be valued differently depending on the country and economic circumstances.

The reader might remember that bitcoin is not a US currency; it is used world-wide. Does Mr. Williams speak for all 193 countries? Does he posit that he understands the value each population places on a currency? Does his opinion reflect the true opinions of the 75% of the world that remain unbanked? Does he really believe he’s qualified to make such a grand stand statement? Some might say the very central banks he defends as the “true” experts in global economics haven’t made satisfactory effort to three-fourths of the world, including 1/3 of US citizens that must resort to world of payday loans and predatory lending. If Mr. Williams has spoken to representatives from the poorer classes that can’t get credit, or have the correct identification, a stable job, or any other blemish that might disqualify them from having a checking account or credit card, perhaps it would be important to know. One might argue that he is unqualified to make judgement for what is best for all people of the earth if his only experience is working with the one establishment that has continuously  proven to ignore and disqualify most of the world.  

He referred to early bitcoin adopters and creators as the “computer geeks” who know nothing about global economics. Yet the very white paper establishing bitcoin was in the midst of global banking failures which were the direct reason given for its creation. Does the reader suspect that a person being skilled in economics or computer skills are mutually exclusive to each other? Is there no conceivable way there might be a person skilled in both areas that perhaps takes a more free-market position rather than the current day trend of banking centralization?   

 He speaks of bitcoin concentration of ownership but how does he know? It is established that the world does not know who owns bitcoins. The only record is stored on the block chain public for all to see. Units are organized into wallet ID numbers that are not associated with any known person unless they’ve let it be known. By way of example, the unfortunate person in the UK who found he accidentally lost his hard drive containing the bitcoin wallet password now sits underneath the earth in a landfill. He has probably lost access to his coins for good. Does he still own them? Is he ready to sell them any time? Is he a hoarder? Mr. Williams doesn’t seem to consider that coins can and do still appear on the ledger that are in reality lost forever inside digital wallets long lost and forgotten.  In the first two years of bitcoin’s existence these coins were practically worthless and used mostly as a proof of concept. It was not unusual to purposely discard them regularly. These deletions weren’t accidents. Stories of entire hard drives being erased with full knowledge the coins would be lost forever are common. At the time it appeared that it was not worth the hassle of backing them up and there were no guarantees of the future value. Yet Mr. Williams has indicated this may be a conspiracy theory does not allow for the de-facto inventory loss. He’s indicated in his published papers that this all might be a vast conspiracy of techno cyber punks ready to cash in.

He said that bitcoin is being over hyped in in a hyper-bubble. But this seems to ignore that fact that bitcoin is not a company. In his own words, how can a payment network \ commodity have an advertising budget or marketing campaign?  There are many people excited about the possibilities it has but nobody argues that the price isn’t volatile at this still early stage. Even those who help maintain the open source code regularly advise inquirers to only invest money into bitcoin that they can afford to lose. Although as time goes on, it is likely harder to do without a twinkle in their eye. Mr. Williams predicted in December that the price would be in the single digits by June. Yet the news and momentum since he made his prediction has proven just the opposite. Major retailers like Overstock.com and TigerDirect have joined some fifty thousands  of other companies accepting bitcoin. Bitcoin ATMs sell out with long lines of customers clamoring for access.

 

An entirely new ecosystem is developing and thriving in the space Mr. Williams predicted decay. Two examples: Google exploring integrating bitcoin into their systems. And Ebay: http://www.cnbc.com/id/101356642 and rumors of many other big names in the pipeline. His prediction on December 17  began with the  price of $700. If we chart a linear drop from that point compared to June 3 – We can follow the actual price movement from week to week. According the actual performance thus far, the trend is not his friend. The linear drop equates to a 30% drop in price charted every two weeks: Actual price labeled is Mt. Gox quoted price.

His comments about a Ponzi scheme were inaccurate and can be compared with the actual definition explained by wikipedia. I encourage you to validate for yourselves why most other noteworthy economists quit making this claim a long time ago. This may be interpreted as professionally ignorant at best. FUD is designed to confuse so his real agenda remains hidden.

 

 

Today, In Bitcoin We Trust, IBWT, announced that they have teamed up with OKPAY to allow customers to use wire transfers to deposit funds in either in either GBP, USD, EURO, or their latest addition, CAD. Individuals already set up with OKPAY will now be able to deposit to IBWT.

In Bitcoin We Trust issued the following press release:

IBWT INTRODUCES BANK WIRE TRANSFERS, USD, CAD, EURO, GBP

IBWT has teamed up with OKPAY to allow customers to deposit funds in either GBP, USD, EURO, or their latest addition, CAD. Over time they plan to integrate further denominations for international customers. If you have an OKPAY account, you can now deposit to IBWT.

Customers who have undergone verification with OKPAY will be able to conduct wire transfers to their OKPAY accounts, taking the standard 5-7 days to clear. Then they can send a deposit request via the IBWT platform and send the equal amount to deposit@ibwt.co.uk whilst logged into their OKPAY account. The IBWT team have stated that deposits and withdrawals via OKPAY will be processed within 24 hours, 7 days a week.

Recently they also added an alternative withdrawal system, processing hard currency direct into customers’ bank accounts. They have since stated they will be placing a limit on this which will increase gradually over time.

“Though we have a way for customers, internationally, from Canada, the US and all over Europe to trade via bank wire transfers, we still wish to keep and expand the alternative methods of deposits and withdrawals. We’re quite aware that there are many unbanked individuals, or without addresses, yet many people have mobile phones. We plan to introduce ATMs that will work via the IBWT platform and that customers will be able to buy crypto-currency from and then upload from their receipt to their mobile phone.”

“Customers are transferring funds to OKPAY and not directly to a crypto-currency Exchange, this way customers are more protected from over-zealous banks that have been troubling people wishing to trade in Bitcoin.”

When querying the usefulness of UK customers being able to deposit funds in GBP, Mr Dalais (Director of IBWT) pointed out that customers would be liable to pay a £4 OKPAY fee for depositing GBP via a bank wire transfer (slightly higher fees for withdrawals), yet compared to exchange rate fees it could be considerable savings for individuals and businesses who have been forced to constantly change GBP > USD or to Euro.

OKPAY service fees can be fully viewed here.

 

Simplicity is everything. That is what Oregon Scientific, leading provider of useful innovation designed to promote better health and living spaces, believes. Their smart living ideas embrace innovations that help individuals live smarter, providing leading brands of weather radios, clocks and electronics. Best of all – Oregon Scientific will soon accept Bitcoin.

The company was founded in Portland, Oregon in 1989 and since then has become the go-to source for all lifestyle improving technologies. The company is backed by 16 marketing and distribution offices with various manufacturing facilities around the world. The company invests heavily in research and development, building each product while maintaining five key standards: creativity, intelligence, harmonious design, user-friendly function and dependability.

The decision to accept the digital currency was sparked from CEO Dr. Raymond Chan’s progressive vision in addition to Bitcoin’s strong media presence. “Oregon Scientific is always looking for innovation and ways to connect with consumers,” stated Guillermo Ginesta, the company’s Digital Marketing and E-Commerce Assistant Manager. “The goal is to provide a real life alternative for people to actually use Bitcoin.”

The company initially planned to begin accepting Bitcoin on their e-commerce site in Q2 of 2014, but due to the positive customer response, Oregon Scientific has decided to move up the date to within five weeks. By partnering with BitPay, a Bitcoin payment processor, the company will soon be able to accept Bitcoin using BitPay’s Bitcoin Payment Gateway API. The excitement level at the customer level is very high and Oregon Scientific will likely see increased traffic and sales of their electronics designed for simplified living.

Dr. Raymond Chan, CEO stated in a recent press release, “The adoption of Bitcoin is actually an extension of our pledge. We are not only pioneering on our products, but also on the way we serve our customers. We’re always open to any forward-thinking ideas that can bring convenience to our customers. This pledge has enabled us to build lasting relationships with customers all over the world.”

Oregon Scientific provides a wide range of consumer technology including weather stations, digital and atomic clocks, sports electronics, bluetooth and mobile accessories, in addition to health and wellness products. Because Oregon Scientific provides technology to over 35 major countries, their adoption of Bitcoin will enable the company to accept payments from anywhere in the world, while saving on processing fees.

Much like what Bitcoin does for businesses, Oregon Scientific provides useful innovation through technology with a focus on taking the hassle out of everyday life, allowing the consumer to focus on what matters most.

As a BitPay merchant, Oregon Scientific will be accepting Bitcoin across all platforms of their e-commerce community, providing large electronics brands to America and throughout the world. “Bitcoin is a huge trend and we want to be ahead of the curve. Our ultimate goal is to provide a real life alternative for people to actually use Bitcoin, and people are very excited about when they can use it and how it will be done,” explains Ginesta.

Oregon Scientific will help bring Bitcoin to the common consumer and grow the entire Bitcoin community. The rollout will happen any day in the coming weeks. Set your alarm and watch the clock, and if you don’t have one – just visit Oregon Scientific.