Month: April 2015

XBT Provider AB announced today the authorization of Bitcoin Tracker One, the first bitcoin-based security available on a regulated exchange, Bloomberg reports.

Bitcoin Tracker One is an “Exchange Traded Note” (ETN) designed to provide investors with convenient access to the returns of the underlying asset, U.S. dollar (USD) per bitcoin, less investor fees. Bitcoin Tracker One is authorized by Sweden’s financial supervisory authority, and will be admitted to trading on Nasdaq Stockholm. The average dollar exchange rate of bitcoin from the most liquid exchanges provides the underlying reference price. The first day of trading is expected to be May 18th, 2015.

“We are proud to offer the world’s first “Bitcoin tracker” to be traded on a regulated exchange,” said Alexander Marsh, Chief Executive Officer of XBT Provider. “By enabling this easy and secure way to invest in Bitcoin we hope to have eliminated the boundaries that earlier prevented individuals and companies from being able to actively invest in what we believe to be the future of money.”

“These are exciting times for the Bitcoin ecosystem,” said Board member Staffan Helgesson. “Bitcoin Tracker One will be the world’s first financial instrument that provides consumers and institutions the possibility to invest in bitcoins without holding coins themselves.”

The Bitcoin Tracker One Prospectus, which has been approved by the Swedish FSA, currently is available only in Swedish. XTB Provider AB will hedge all sales of the bitcoin-traded note by buying an equal value in the bitcoin market. A spokesperson for Nasdaq confirmed to CoinDesk that XBT Provider had been approved as a certificate issuer and that its product was the first bitcoin-based item to be listed on the Swedish exchange.

Market maker Mangold Fondkommission, a Stockholm-based brokerage and investment bank, will assist XBT Provider with clearing services and acts as a liquidity provider for Bitcoin Tracker One.

The XBT Provider website states that the company is aiming to attract additional liquidity providers to the order book going forward to complement the natural flow of orders. The goal is offering a liquid market with a small spread, making the instrument attractive for all type of investors.

Bitcoin Tracker One is the latest addition to the growing number of bitcoin investment vehicles that aim to expand bitcoin investments beyond the volatile spot exchanges and attract traditional investors who prefer not to trade bitcoin as currency because they are scared by bitcoin’s wild price swings. Bitcoin Tracker One could become an interesting option for those traditional investors who are persuaded that the dollar exchange rate of bitcoin will rise in the mid- and long term, but prefer not to hold bitcoin directly.

Other similar bitcoin investment vehicles are Barry Silbert’s Bitcoin Investment Trust (BIT), which received formal approval for listing on the OTC Markets Group’s OTCQX exchange with the symbol GBTC, and the upcoming Winklevoss Bitcoin Trust ETF (Exchange Traded Fund), which will be available to investors on NASDAQ with the ticker COIN.

XBT Provider AB (publ) is a public limited liability company formed in Sweden and incorporated under Swedish law, with statutory seat in Stockholm. The XBT Provider website states that the company is backed and guaranteed by KnCGroup, a bitcoin mining hardware manufacturer and service provider that has been targeted by a recent class action lawsuit.

 

Photo by TS Eriksson / CC BY 3.0

Fidor Bank, the innovative German bank that is bringing Bitcoin and digital fintech to mainstream banking, is now operating in Great Britain.

Fidor Bank, one of the world’s most innovative banks disrupting the traditional banking sector, has been recognized by the World Economic Forum as a “Global Growth Company.”

Founded in Germany in 2009, Fidor Bank offers a new approach to financial services.

“Traditional banks do not reflect their customers’ needs in the digital age,” notes the Fidor Bank UK website. “Customer requirements are not being met by traditional banks because of lack of innovation, increasing the distance between banks and their customers.”

A key feature of Fidor Bank is its community site, where users and representatives of the bank discuss the financial services provided by the bank in an open forum. The Fidor Bank community has become one of the most active financial communities in Germany, where more than 250,000 users, bank employees and board members engage in discussions around the clock. Of course, Fidor Bank UK has also a Facebook page.

The Fidor Bank Community Product Reviews section offers a free overview of the advantages and disadvantages of a wide range of financial products. Product reviews are completely independent and consist solely of the views of community members, with feedback from the bank.

Fidor Bank Community members develop reputation and “karma” points, and can join interest groups. The most popular interest group is dedicated to cryptocurrencies. This is not surprising, because Fidor Bank is popular among Bitcoin users and considered as the most Bitcoin-friendly mainstream bank. In October, Fidor Bank partnered with bitcoin exchange Kraken to create the world’s first cryptocurrency bank.

In February, the bank announced a “Bitcoin Express” option for German customers to buy and sell bitcoin instantly on the bitcoin.de partner exchange. Holders of a “Fidor Smart Giro Account” can purchase bitcoin directly from their bank accounts and receive bitcoin immediately after the purchase. They can also sell bitcoin to another Smart Giro Account holder and have the money instantly credited to their accounts. The Smart Giro Account is a full bank account with all the standard features, including interest on credit balances and a low-cost credit card. The latter is, in practice, equivalent to a card that can be recharged with bitcoin.

Similar services might soon be made available to customers in the U.K. as well.

Commenting on the recent launch of Coinbase in the U.K., The Financial Times noted that Great Britain is on its way to becoming a global hub for bitcoin and digital currencies, with both the government and Bank of England having made recent moves designed to stimulate the development of digital fintech.

A recent U.K. Treasury document titled “Digital Currencies: Response to the Call for Information” shows that the government is interested in supporting and understanding blockchain-based digital fintech, and understands the potential benefits it could bring to society.

Only U.K. residents can open a Fidor Bank U.K. account. Some Reddit users have already done so, and reported their first experiences.

Coinbase announced the expansion of Coinbase services to the United Kingdom, including the ability to trade bitcoin on the Coinbase Exchange and to buy/sell bitcoin with British pounds (GBP) using the Coinbase Wallet, and the addition of BTC/GBP and BTC/EUR currency pairs on Coinbase Exchange for U.K. users.

Besides the United Kingdom, Coinbase services are also available to other European Union residents.

The move brings Coinbase into the competitive British market, which co-founder Fred Ehrsam argues is buoyed by the forward-looking attitude of U.K. regulators toward Bitcoin, as well as other financial technology innovations, The Guardian reports.

“The payments regulators and the Treasury are taking a very balanced view of bitcoin,” said Ehrsam. “They’re really taking their time to understand the core technology prior to regulating.”

“I’d definitely say that regulation is more favorable in the U.K. right now,” CEO Brian Armstrong told TechCrunch. “I have to give a lot of credit to U.K. regulators. They’ve actually been very forward-thinking about bitcoin.”

Armstrong hinted that the exchange might be the most revenue-rich part of the business in Great Britain for a while to come. Coinbase is divided into three pillars between a consumer wallet, a platform with APIs for developers and an exchange where investors can trade bitcoin against the major currencies.

The Guardian notes that Coinbase is one of a small group of companies attempting to “sanitize” bitcoin, ridding it of many of the negative connotations. In January, investors, including three of the world’s most respected financial institutions – The New York Stock Exchange, a subsidiary of USAA, and BBVA (NYSE:BBVA) Ventures – invested $75 million in Coinbase, bringing its total capital to $106 million.

“With this investment, we are tapping into a new asset class by teaming up with a leading platform that is bringing transparency, security and confidence to an important growth market,” said NYSE President Tom Farley. “We look forward to supporting Coinbase’s growth utilizing our global distribution capabilities and market expertise.”

The Coinbase exchange launched in January in the United States, and according to Ehrsam, “quickly rose to be the most liquid Bitcoin exchange in the U.S.”

The Financial Times notes that the Coinbase launch in Great Britain is a boost to plans to transform the U.K. into a global hub for bitcoin and digital currencies, with both the government and Bank of England having made recent moves designed to stimulate the development of digital fintech in the United Kingdom.

For European users, it’s good to have a solid alternative to Bistamp – not because Bistamp’s service is not satisfying, but because having more options to choose from is always good. A test revealed that opening and using a new Coinbase account is quick and easy for European Union residents in Great Britain.

After completing email verification, identity verification and phone verification (for two-factor authentication), new customers can start using their Coinbase wallet for bitcoin and euro, and buy or sell bitcoin using the integrated Coinbase exchange.

The Coinbase wallet can be funded with bitcoin deposits, or with euro deposits sent via Single Euro Payments Area (SEPA) transfer from any E.U. bank. According to Coinbase customer service, European users can withdraw funds from their Coinbase euro wallet to their SEPA bank account, with a delay of one or two business days.

At a first glance, the Coinbase European service seems solid and professional, with a simple and intuitive web interface, a community forum for common questions and answers, and responsive customer service. Coinbase also offers a secure vault for long-term bitcoin storage offline, and is fully insured against hacking, theft or loss of customer funds.

Bitcoin Shop, one of the first Bitcoin companies quoted on the U.S. stock market, announced that it has signed a Letter of Intent to merge with Israeli Bitcoin mining hardware manufacturer Spondoolies-Tech. The Letter of Intent follows last week’s announcement that Bitcoin Shop raised $2.3 million in a venture capital funding round.

Bitcoin Shop, quoted on the OTC Market with the ticker BTCS, is based in Arlington, Virginia. Besides operating an e-commerce store which accepts a variety of digital currencies and offering a multi-signature wallet with bank-grade security, the company is the lead investor in Bitcoin ATM manufacturer Coin Outlet, and runs bitcoin mining operations in a new 83,000-square-foot facility.

The new mining facility is expected to handle more than 10 megawatts of power and up to 40,000 TH/s (terrahash per second) of mining hardware for “transaction verification” operations. (That means bitcoin mining, but with a crisp business-like aura.)

Bitcoin Shop wants to expand and consolidate its position as one of the leading players in the Bitcoin space. “We believe the sustained decline in the price of bitcoin has created tremendous opportunities for us to further expand our business and seize opportunities created from the market downturn,” said CEO Charles Allen, commenting on the latest funding round. “With the completion of this financing we believe we are well positioned to be a leading Bitcoin- and blockchain-focused company.”

The funding announcement noted that the company plans to leverage its transaction verification services business while it builds a universal digital currency platform with the goal of enabling users to engage in the digital currency ecosystem through one point of access.

The merger with Spondoolies-Tech is subject to a number of conditions, including satisfactory completion of diligence and execution of definitive agreements, and it will, therefore, probably take some time to work out the details. It’s expected that the merger will build a fully integrated transaction verification services business using Spondoolies-Tech mining technology.

Both companies believe the anticipated combination of Bitcoin Shop and Spondoolies-Tech will create the world’s first publicly traded company to produce Bitcoin transaction verification equipment.

“Our key goal in 2014 was to create the partnerships needed to build an ecosystem and start laying the foundation to put our vision into place,” said Allen. “Once completed, our merger with Spondoolies would be a significant leap forward in making this ecosystem a reality. [O]ur next objective will be to complete the development and production of a next-generation chip to drive our transaction verification services business and to generate revenue from the combination.”

Spondoolies-Tech is a digital currency hardware manufacturer. Founded in 2013 by a group of Israeli high-tech veterans, the company raised $10 million in capital from leading Israeli venture capital firms with the goal of building Bitcoin transaction-verifying servers from the bottom up, creating the infrastructure on which digital currencies will flourish.

Spondoolies-Tech produces a line of bitcoin mining hardware rigs, considered among the best in the industry. Besides, it offers cloud mining services in cooperation with Genesis Mining.

“Over the last several months, we’ve worked closely with Charles Allen and the BTCS team to establish the nature of our potential partnership,” said Spondoolies-Tech CEO Guy Corem. “The synergy between the teams is amazing. I have the utmost of confidence that together we will build a very successful and prosperous company by growing and expanding our business beyond bitcoin mining equipment.”

The Salt Lake City-based online retailer Overstock is working on a revolutionary new development: a new independent stock exchange powered by Bitcoin technology. The new stock exchange could sidestep traditional stock exchanges such as NYSE and NASDAQ and issue corporate stock directly over the Internet.

Overstock, one of the first and largest online retailers to accept bitcoin payments, first announced the project in October 2014.

“There is an opportunity to recreate the financial world as we know it in the parallel universe that is the blockchain,” Overstock’s CEO Patrick Byrne told Wired. “We are writing rules for this whole new universe. “ In a recent Coin Telegraph interview, Byrne said that Overstock is building the platform that will let companies issue a crypto-equity, which is a new frontier with many legal obstacles.

On Friday, Overstock got one step closer to implementation. In a prospectus filed with the Securities and Exchange Commission (SEC), Overstock indicated that it may issue up to $500 million in stock or other securities using the blockchain technology that powers Bitcoin.

“We may decide to offer securities as digital securities, meaning the securities will be uncertificated securities, the ownership and transfer of which are recorded on a cryptographically-secured distributed ledger system using technology similar to (or the same as) the distributed ledger technology used for trading digital currencies,” reads the prospectus. “Digital securities are designed to enable trades to settle immediately or nearly immediately, unlike traditional securities, [and] enable the securities holder to hold its securities directly or through its broker-dealer, outside the system for traditional securities.”

“The prospect of using a blockchain-like public ledger to hold securities or other assets is quite exciting and one that should be explored,” Georgetown University professor of finance James Angel told Wired.

The hypothetical language used in the filing shows that it is but the first official interaction with the SEC, which may take some time to digest and give a green light to this novel and potentially disruptive approach to securities.

The filing is a “shelf registration” meant to introduce future offerings to regulators and investors gradually, with more detailed information expected to come later. However, Overstock’s CEO Patrick Byrne is confident: “I wouldn’t have taken all the time and trouble and expense to do this if I didn’t plan on using it someday soon,” he told Wired.

Angel thinks the SEC will approve the filing eventually, but investors will be initially cautious.

The Overstock digital securities would not be listed for trading on existing stock exchanges, but traded exclusively on a specific trading system to be registered with the SEC as an Alternative Trading System (ATS). The prospectus emphasizes that the ATS will operate with the speed and irrevocability appropriate to the immediate or nearly immediate settlement of digital securities, but warns that “the payment mechanics of the ATS are novel and untested.”

The distributed ledger used to record transfers of ownership of digital securities, represented by ledger balances and secured by cryptographic key pairs, will be available to the public and store the complete trading histories.

The ATS won’t use a Bitcoin wallet approach where the cryptographic keys are controlled by the user – at least not initially – but a centralized key management scheme similar to that used by “Bitcoin banks” such as Circle. Initially, either the ATS itself or each broker-dealer participating on that ATS would hold the private keys on behalf of securities holders.

This centralized or semi-centralized model, which may appear as a step back from the decentralized blockchain, is justified because it will enable securities holders to manage their digital securities account with a simple login and password, similar to traditional online brokerage accounts.

The use of the word “initially,” however, indicates that Overstock may implement a more decentralized model in a second phase. Customer protection against dishonest brokers will be provided by multisig: “There can be multiple private keys, any number of which may be required in order to authorize a transfer of ownership of the digital securities,” notes the filing.

This is a guest post by Elizabeth Ploshay, Connie Gallippi, Victoria van Eyk, and Sarah Martin.

Last week, Nepal was hit with a magnitude 7.8 earthquake – the worst in 80 years. More than 4,000 people died, and hundreds more are without food, water or shelter.

Natural disasters shake not just the core of our communities, but also the core of our humanity. Many of us feel a deep-seated need to reach out and help during major catastrophes. But it can sometimes seem overwhelming when the scale is so large, and hard to know how to make a real difference.

Three leaders in the Bitcoin ecosystem – the BitGive Foundation, ChangeTip, and BitPay – have solutions to help:

The BitGive Foundation is running a campaign to raise donations for Medic Mobile, a nonprofit organization that uses mobile technology to improve health-service delivery. Here’s a message from the Medic Mobile Team:

“The Medic Mobile team is actively exploring how we can help with local, coordinated relief efforts after the earthquake that devastated Kathmandu on Saturday, April 25th. Our third-largest office is based there and very thankfully all of our teammates are safe. The Bitcoin community has already been so supportive of our efforts in the past and we’d be grateful for that support again. Every donation will go directly to our Nepal office and help as we deploy the right technology. Thank you from our whole team.”

Click here for more information about the campaign and how you can contribute.

ChangeTip is encouraging the Bitcoin community to contribute to the Red Cross via Twitter tips. More than 400 ChangeTip community members contributed to the Red Cross from Sunday to Monday as part of an ongoing, weeklong campaign. The campaign currently exceeds more than $3,200 in micropayments.

BitPay also processes donations for Save the Children, an international relief organization mobilizing humanitarian assistance in Nepal. Save the Children began accepting bitcoin donations last fall after a successful 2013 campaign with the BitGive Foundation to raise funds for the Philippines Typhoon Haiyan relief effort. To donate in bitcoin to Save the Children, click here.

How can you help support the people, families, and communities in Nepal? Reach out to more charitable organizations and encourage them to accept bitcoin donations. BitPay charges no (zero percent) transaction fees, and nonprofits receive all (100 percent) of their contributions in their local, fiat currency.

As we all know, Bitcoin is not just a fast and easy way to send money. It’s an incredibly powerful tool to help those most in need. Let’s join together and show the world how Bitcoin can make a meaningful difference in real people’s lives.

Elizabeth Ploshay is an account manager at BitPay and board director at The Bitcoin Foundation; Connie Gallippi is the founder and executive director of the BitGive Foundation; Victoria van Eyk is the vice president of community development at ChangeTip; and Sarah Martin is the head of special projects at the Digital Currency Council (DCC).

Photo via Krish Dulal / CC-BY SA 4.0

 

Chainalysis offers a service that provides financial institutions with the means to obtain regulatory compliance through real-time analysis of the blockchain. Based in Switzerland and headed by ex-Kraken COO Michael Grønager and former Mycelium engineer Jan Møller, the company provides an API for sophisticated in-depth real-time blockchain transaction analysis.

Chainalysis customers – including regulatory entities, law enforcement and financial service providers – are empowered with unique insight on all transactions recorded in the Bitcoin blockchain and tools to determine the origin of the bitcoin held by any address.

Bitcoin transactions are not anonymous. Every transaction and the full transaction history of any Bitcoin address are permanently recorded in the tamper-proof public blockchain and open to analysis. The illusion of anonymity stems from the pseudonymous nature of Bitcoin addresses, which are not explicitly associated to their owners.

But blockchain analysis can often de-anonymize bitcoin users. For example, if a pseudonymous Bitcoin address often sends funds to another address that can be associated to a person (for example a Circle user), it is highly probable that the two persons are one and the same, or closely related.

Recommended privacy practices, from simple measures such as using fresh Bitcoin addresses for new transactions to strong privacy measures such as dark wallets and mixing services, reduce the risk of being de-anonymized. But the fact that all bitcoin transactions are recorded in the blockchain implies that even one mistake can de-anonymize a user, and especially so when sophisticated blockchain analysis tools are available. In particular, the end-point where bitcoin is exchanged for cash, goods or services is vulnerable.

A few weeks ago, Chainalysis was forced to defend itself after allegations it had disrupted services with a “Sybil attack” that created more than 250 “false” Bitcoin nodes to harvest information on the whereabouts of transactions, which provoked strong and often angered reactions by the Bitcoin community. Grønager told CoinDesk that Chainalysis permits monitoring compliance with applicable money transfer regulations, and therefore helps Bitcoin companies to obtain bank accounts and do business with mainstream financial institutions.

It is evident that Bitcoin is moving toward mainstreaming and regulations, and therefore services such Chainalysis are here to stay, but such services likely will continue to meet opposition from an important part of the Bitcoin community. A leaked Chainalysis roadmap, now trending on Reddit, has been received with anger and hostile comments.

The leaked roadmap sheds light on the current and forthcoming features of the Chainalysis API. For example, Chainalysis customers will soon be able to “search by transaction hash, cluster name, category etc. [which] will allow for faster investigations via known clusters of interest but also for the API to answer specific questions about transactions or entities of interest.” Soon after that, the API will support unconfirmed transactions as well as “Shared multi client repositories for known bad actor reporting,” and an “Advanced Profiling API” is in the works. The roadmap also details Chainalysis pricing plans – for example, Institutional clients will pay $500 per month for a set of features including unlimited investigations, shared fraud databases and full API access.

Many participants in the Reddit discussion are expressing support for strong privacy tools, such as Dark Wallet and the Lightning Network, which may offer better protection against Chainalysis snooping.

Bitcoin exchange itBit has filed for a banking license in New York, Reuters reports. Approval for the license may come in the next couple of weeks, people familiar with the matter told Reuters. That could make itBit the first Bitcoin company to be regulated as a bank in the United States.

Founded in 2012, itBit has offices in two key financial markets, New York and Singapore. The company moved its headquarters from Singapore to New York in 2014.

“Bitcoin has become mainstream, the volume of bitcoin trading has grown exponentially, and the majority of bitcoin trading now takes place in the U.S.,” said CEO Charles Cascarilla. “Regulators are getting clearer about their policies, and we’re hopeful that we will be able to serve U.S. investors soon.”

The first Bitcoin company application for a U.S. banking license is part of the general industry trend toward mainstreaming, regulation and full compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements.

“Some highly publicized failures and potentially illegal activity have focused attention on virtual currencies and have highlighted the need for a sound regulatory framework for virtual currencies,” said Cascarilla.

According to the company’s website, itBit is institutional-grade and 100 percent compliant within every jurisdiction it operates, and its strict compliance program ensures the highest level of customer security and protection. Recently, itBit hired Erik Wilgenhof Plante from eBay Inc as chief compliance officer.

Besides Cascarilla and his business partner Emil Woods, the banking license application for itBit Trust Company LLC lists high profile “organizers,” including former Federal Deposit Insurance Corporation Chairman Sheila Bair, former Financial Accounting Standards Board director Robert Herz and former New Jersey Sen. Bill Bradley.

The company is backed by venture capitalists, including Canaan Partners, RRE Ventures and Liberty City Ventures. So far, itBit has received $3.3 million in funding. The application for a banking license is part of itBit’s plan to expand its business into different financial services.

“ItBit is building next-gen digital currency products and services by combining Silicon Valley innovation with Wall Street expertise,” says the company’s website.

The proposed “Bitlicense” regulations for Bitcoin businesses operating in the state of New York won’t be a problem because the final Bitlicense requirements are likely to be, if anything, lighter than those of a standard banking license.

Some Bitcoin financial service companies, such as Circle and Bitreserve, operate with many service features of banks, including audits and insured deposits, and their customers tend to consider them “Bitcoin banks.” Still, they don’t offer the full range of banking services, and therefore they don’t need a banking license and can’t be considered banks.

“Bitreserve is not a bank,” states the Bitreserve website. “Banks make money by loaning out your deposits for interest. This system is called fractional reserve banking. The obligations a bank has to its depositors do not match the assets the bank holds, since most of those assets are in the form of loans made to generate revenue for the bank.”

The requirements for commercial banks in the State of New York are outlined on the New York Department of Financial Services website. In particular, the initial level of capital should be sufficient to support the proposed business plan and the bank’s risk profile. Initial capital should cover operating losses before the bank attains sustained profitable operations, as well as provide a cushion against unexpected losses.

Like many other countries, Canada has been wrestling with the issue of whether to regulate digital currencies and, if so, how and to what extent.

In it’s February 2014 budget, the Canadian government introduced and passed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act of 2000, aimed at digital currencies.

But after more than a year, the amendments have yet to be published and “proclaimed” before they become law, a necessary last step.

And a public consultation paper on the new financial regulations, promised for last summer, has yet to be released, causing some angst, but mostly relief in the Bitcoin community.

“The Canadian government has taken a cautious approach to regulating digital currencies,” said digital currency regulations expert and Outlier CEO Amber Scott. “Instead of rushing in, they are looking at all the options and considering feedback from the Senate and the industry.”

While there does not seem to be an appetite for new regulation, it’s important to have a good fit with existing regulation if that’s the direction that being taken, Scott said.

Senate Committee Hearings on Digital Currencies

The Canadian government asked the Senate Committee on Banking, Trade and Commerce to investigate, hear witnesses and report back on “the use of digital currencies and the potential risks, threats and advantages of these electronic forms of exchange”.

One of the most exhaustive studies of bitcoin and other digital currencies will likely come when the committee releases its report in late May or early June.

Upcoming election, falling price of oil, terrorism on government’s mind

At the moment, the Canadian government has a lot on its plate as it goes into election campaign mode ahead of an election expected in early fall.

Also weighing on its mind is the falling price of oil, (which has made previous economic forecasts outdated), and the ongoing war against terrorism.

Behind the scenes, however, the Department of Finance has been preparing digital currencies regulations.

“The regulations are in development and the timeline for prepublication in the Canada Gazette is unknown at this time,” department official Stephanie Rubec told Bitcoin Magazine.

It has been more than one year since the regulations were announced, and the government may be in an election campaign before anything concrete is put up for consideration.

Bitcoin community testified at Senate hearings

The Senate Committee on Banking, Trade and Commerce heard from a wide range of witnesses, including digital finance experts, legal experts, academics and Bitcoin companies and advocacy groups.

Bitcoin Guru Andreas Antonopoulos was a witness, as were many of the representatives from the Bitcoin advocacy groups which included Michael Perklin and Stuart Hoegner from the Bitcoin Alliance, Jill Friedman from the Bitcoin Foundation and Guillaume Babin-Tremblay and Francis Pouliot from the Bitcoin Embassy. Other witnesses included the Bitcoin Alliance, Bitcoin Strategy Group, CAVirtex, BitAccess, and Rodger Voorhies from the Bill and Melinda Gates Foundation.

Representing the Bitcoin Foundation Canada, lawyers Jillian Friedman and Joseph Neudorfer told the senators that regulating Bitcoin was already happening with the current laws that govern fraud, money laundering and illegal purchases.

The two lawyers told the senators that existing criminal law and financial services law is sufficient to deal with fraud. And Bitcoin businesses already are subject to private contract law and consumer protection laws that deal with the sale of a good.

Francis Pouliot explained how money-laundering fears are overstated because Bitcoin is mistakenly seen as completely anonymous, when, in actuality, every transaction is recorded in a public ledger called the blockchain.

Michael Perklin of the Bitcoin Alliance summarized what other advocates were saying: “We advocate an approach that does not stifle innovation, does not discriminate against cryptocurrencies and takes careful notice of crypto’s benefits to Canadian consumers and merchants alike.”

Most witnesses made the point that the federal government has an obligation to balance any new regulations with their effect on innovation and capital flight. The government has a mandate to promote new technologies and homegrown startups, not tie them up with red tape, they said.

These Laws Currently Apply to Digital Currencies in Canada

The Bitcoin Foundation’s testimony included a list of current laws and regulations that apply to digital currencies:

1. Contracts under private law: Using Bitcoin does not render parties exempt from the application of the rule of law

2. Consumer protection: All of the legal obligations resulting from the sale of a good to a consumer apply to transactions with Bitcoin

3. Fraud: The investing public is protected by existing criminal legislation against fraudulent Bitcoin schemes.

4. Financial services law: The activities of digital currency businesses that are similar to money services businesses will soon have to play by the same rules as their fiat counterparts.

Message to Senators

One message that came through very clearly: Regulations will send promising job-creating Bitcoin businesses off to friendlier jurisdictions such as the United Kingdom, as is already happening in Australia and New York.

Canada can benefit most from encouraging digital currency innovation without tying the hands of innovators who are in new territory that doesn’t necessarily resemble past tech systems, they said.

“I highly encourage digital currency players to respond to draft regulation when it is published through the official channels,” Amber Scott said. “While there have been some cynical comments from industry players about comment periods being ‘window dressing,’ everyone that I have spoken to at the Department of Finance seems genuinely interested in getting it right and taking industry feedback seriously.”

Canada Can Be a World Leader

There was a strong argument made by witnesses that Canada is well placed with tech expertise, cheaper energy rates and a knowledge infrastructure to be the No. 1 Bitcoin country in the world.

Canada already has more ATMs and mining nodes per population than any other country. The Bitcoin Embassy’s Babin-Tremblay said that if the Canadian government provides only a “light and neutral” fiscal and regulatory framework, the economy could benefit from Bitcoin business job creation.

 

Read Susan’s first article in this series from Oct 19, 2014.

Last week, lead Bitcoin developer Gavin Andresen and other Bitcoin Core developers joined the recently established MIT Digital Currency Initiative. This was widely interpreted as an MIT takeover of the roles of leadership, funding and co-ordination of Bitcoin technical development, previously claimed by the Bitcoin Foundation. In parallel, Bitcoin policy think tank Coin Center is claiming the role of interface to policy makers and regulators, with the publication of a framework for state digital currency regulation.

The report, titled “State Digital Currency Principles and Framework,” is a model for digital-currency-specific regulations and laws. The report provides a template with structure, definitions and language for the essential components of any digital currency law: ​who must be licensed, how start-ups are encouraged, how solvency is guaranteed and other necessary elements.

Recently, Bitcoin-friendly bills have been proposed in Utah, New Hampshire and New York City. Texas, Kansas, California, Pennsylvania and North Carolina also have expressed interest in Bitcoin regulations, and New York has proposed the controversial “Bitlicense” scheme, which many observers consider far too strict.

Coin Center hopes that states will use the report as a template for their own bills and regulations.

“The state that reaps the benefits of new technologies, new jobs and enhanced financial inclusion will be the state that first discovers a path worth following,” says Executive Director Jerry Brito. “We hope this report will help in that endeavor.”

Brito adds that, to be a leader in the future of financial technology, a state must carefully forge a path toward consumer protection and avoid the pitfalls of inartful and unnecessarily costly regulation.

Of course, striking an optimal balance between necessary crime prevention and consumer protection on the one hand and equally necessary innovation and technology leadership on the other is challenging. The recent initiative of the Isle of Man government to create a balanced regulatory environment that offers “freedom to flourish” to innovative fintech companies, while keeping crime and fraud out, is an important development in that respect.

The Coin Center report emphasizes that only operators with unilateral control of customer funds should be subject to a license requirement, and that anti-money laundering (AML) requirements, if absolutely necessary at all, should match, but not exceed, federal standards.

“Intermediaries who do not assume a position of trust, nonfinancial uses and individual access are digital currency innovations that should be encouraged,” the report says. “These intermediaries can benefit both consumers and businesses through improved financial privacy, financial inclusion, and vibrant technology-based economies. These uses should not be burdened by compliance costs that lack concomitant consumer protection benefits.”

Brito, who is also a professor of Law at George Mason University, co-authored the report “Bitcoin: A Primer for Policymakers.” Coin Center is a not-for-profit research and advocacy center focused on public policy issues facing cryptocurrency technologies such as Bitcoin.

“Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using blockchain technologies,” says the Coin Center website. “We do this by producing and publishing policy research from respected academics and experts, educating policymakers and the media about blockchain technology, and by engaging in advocacy for sound public policy.”

It’s probably too early to speculate on which organizations will co-ordinate the technical and policy-related aspects of Bitcoin development, but it seems clear that MIT and Coin Center are establishing strong leadership positions.

the Boost VC-backed Bitcoin startup Lawnmower tracks purchases on a user’s account, rounds them up to the nearest dollar to create spare change, and uses the change to purchase bitcoin on behalf of the user. The bitcoin purchased by Lawnmower will be deposited to a Bitcoin wallet of a user’s choice.

The minimum threshold for bitcoin deposit currently stands at $4, meaning that the accumulated spare change of the transactions must be at least $4 before bitcoins can be purchased by Lawnmower. For example, if a user buys a cup of coffee and a bagel at a local coffee shop worth $7.10, then 90 cents will be categorized as spare change and will be used to purchase bitcoin after the accumulated spare change passes the $4 threshold.

Lawnmower CEO Pieter Gorsira explained that the metaphorical definition of Lawnmower as “working backwards.

“It’s like we’re running the lawnmower over the grass and we’re clipping off a little bit of change,” he said. “So, as you go along, we slice all these little blades of grass and collect change from these transactions.”

Lawnmower uses Plaid’s API to integrate bank infrastructure and to access banking data for Wells Fargo, Bank of America, US Bank, Citibank and Chase Bank. The integration of Plaid also allows users to check bank accounts, savings accounts, credit cards and debit cards from the aforementioned banks. If the users do not want their balances from these bank accounts to be rounded off to purchase bitcoin, users can simply turn off the investment function on the app.

Lawnmower’s future revenue model

“We’re live on both platforms now and chose to launch without charging a transaction fee (on each spare change-to-bitcoin purchase, which user’s already pay through Coinbase), a monthly “management” fee, or anything along those lines,” Lawnmower told Bitcoin Magazine via email.

In the future, Lawnmower could generate money through referrals, additional customizability features for users’ spending/investing habits, and other premium features as part of a larger automated money management program, Lawnmower said.

“But we’re really focused on rapid growth now, and don’t want to bog our users down with any additional fees,” the email said.

“We have a lot longer plans once we acquire a user base,” added Gorsira.

Launch

The beta version was launched on iPhone on March 25, and several users were allowed to sign up and test the application.

“We need to see what people like or don’t like so we can start adding features,” Gorsira said at that time. “The point is to have users use it, break it and tell us if they like it. [It goes] beyond three people who live in the same room every day. We get kind of hive-minded”

Weeks later, Lawnmower was launched on Android (a few days ago) to satisfy both sets of users.

Let’s ask a tough question: Will Hillary Clinton become president of the United States in 2016?

If you had people “bet” on the topic, and monetarily rewarded the ones who guessed correctly, you can actually get a good idea whether Hillary Clinton will become the head of state. A better idea, in fact, than virtually any alleged “expert” could give you.

It would work as follows: A market would be opened in which possible answers to the question (yes or no) are “stocks” that cost anywhere from 1 cent to $1. Automatically, the market price of the “yes” and “no” would reflect the possibility of Clinton’s election. So if a share of “yes, Clinton will be elected” costs 63 cents, then the likelihood of her being elected can be understood as 63 percent.

The option worth more (yes or no) is probably the right answer.

Since humans care about their money, this market data can provide accurate aggregated information for a myriad of purposes.

This is called a prediction market, a market where investors can buy and sell predictions about the outcome of an event.

Robin Hanson, Ph.D., professor at George Mason University, was one of the first people to start writing about prediction markets in 1988 and has been working on related projects ever since.

“Prediction markets became more popular around the dot-com boom,” says Hanson. “Presently, there’s been more activity in it.”

There’s been more enthusiasm for prediction markets in academia than in industry.

“Academics have been more willing to test the market’s claims, while businesses are less eager to adopt them – regardless of the fact that repeated trials tend to find that they are more accurate than status quo mechanisms,“ says Hanson.

“For example,” he said, “some of the most dramatic and successful prediction markets have been about deadlines. The question has been stated as: Will this project make its deadline? There are number of dramatic cases where management and officials forecast ‘yes’ and the prediction market data reveals that the answer is in fact ‘no.’ It’s not necessarily information organizations want to make publicized. This is the main barrier to widespread adoption of prediction markets: demand. Not enough people in these organizations want the product that prediction markets claim to produce.

“Prediction markets,” continues Hanson, “claim to produce uniquely accurate estimates and provide more accurate data than can be acquired from anywhere else. They’re a relatively cheap, robust manipulation; they’re timely, precise; they give you the tools necessary if you needed information and you wanted to make it known to people in an organization.”

Past implementations of prediction markets on the Internet did not succeed in the long-term. The most popular was Intrade.com.

Intrade.com, based in Ireland, was a web-based “trading exchange” where users “traded” contracts on the probabilities of various events occurring. They even allowed users to speculate on gold and oil.

In 2012, however, the U.S. Commodity Futures Trading Commission [USCFTC] filed a complaint in federal court claiming that Intrade solicited American customers to trade investment contracts that technically are options. Options can be traded only on approved, regulated exchanges.

Since Intrade was not a licensed exchange, they were forced to exclude U.S. users in 2012, and on March 10, 2013, Intrade ceased all trading.

“Intrade was a place where users got a chance to prove themselves and bet,” says Hanson. “That product, however, was limited by anti-gambling laws.”

In 2015, like many other industries, businesses and software models, prediction markets are now being implemented on blockchain technology. There is a dedicated team of individuals building what will be the world’s first decentralized prediction market platform that goes by the name Augur.

Augur plans to allow users to create their own peer-to-peer prediction markets.

“The important thing here,” says Jack Peterson, core developer at Augur, “is that it is a decentralized system. There’s no single point of failure.”

The Augur team is fully aware of past struggles of centralized prediction markets. “We’re making software,” says Peterson. “We expect the user to follow their respective jurisdiction’s laws. Our whole team has a stipulation in their employment agreement to not create, or participate in, markets on the platform.”

Regarding the upcoming software token sale, Peterson stated: “Augur’s tokens (called Reputation) occupy a unique niche. They are not used in its prediction markets; these are cash markets. Rather, the tokens are used only to report on the outcomes of events, after the events occur. Since this reporting is done after the event happens, no skill at making predictions is required. All that is required is honesty: Augur is designed so that those who report honestly will automatically gain more tokens – at the expense of lazy or dishonest reporters.”

Augur has maintained day-to-day contact with attorneys from Wilson & Sosini and Pillsbury Winthrop throughout the development of their platform. Additionally, they’ll be having a token sale in June. The team is currently finishing up the first version of their software.

“We want to launch Augur as soon as Ethereum is ready to make sure that everything is in sync with the live network,” Peterson said.

Prediction markets have a clean argument for their use and consistently pass tests of accuracy and user satisfaction. Nevertheless, most organizations are not interested in using them.

When Bitcoin Magazine asked Hanson why he thought this occurred, he replied, “It seems to be that the information that they provide is threatening and problematic, politically.”

These prediction markets can provide information that is detrimental to the status quo, and, in simpler terms, tell people/organizations things that they don’t want to hear.

“Do we really want the capability to do that?” Hanson asked. “A lot of people think they do. We’ll just have to wait and see if it’s true.”

Bitcoin Conference is going to make a mash on Europe. Meet the conference dedicated to the currency of the future in Prague!

Everyone has heard about a mysterious currency Bitcoin, but maybe not everyone knows where and what you can spend it on.

The world we live in does not tolerate inertness; it is in a constant process of movement and change. One of the tools changing the image of modernity is digital currencies, in particular Bitcoin.

What is Bitcoin Conference?

A thematic conference devoted to “the currency of the future”, Bitcoin Conference, which was held in 2014 in such cities as Moscow, St. Petersburg and Kiev raises awareness of what is Bitcoin and how to earn on it.

Bitcoin Conference has become the first thematic event in the CIS countries, aimed at the acquaintance of participants with the Bitcoin ecosystem and business prospects.

Bitcoin meetings held in three cities and two countries were able to bring together prominent representatives of the industry, well-known experts and gurus of the crypto currency market, lawyers, foreign experts who shared their experiences and represented the best practices for working with Bitcoin.

In 2015, Smile Expo, an organizer of the conference, is going to push the boundaries and enter the European market, conducting a thematic event in Prague.

Why Prague?

Smile Expo has deicide to expand the geography of its activities due to several important factors. In particular, one of the catalysts have been changes in the structure of the cryptocurrency market in Russia after the ban and blocking of thematic sites by the Federal Service for Supervision of Communications, Information Technology, and Mass Media. After that, many Russian companies operating in the cryptocurrency industry have moved to Europe, where there are no restrictions for Bitcoin business.

In addition, the conference organizer is in an attempt to develop and promote digital currency; and central-eastern regions of Europe are an ideal place for the realization of this ambition.

Bitcoin Conference Prague wants to serve as a unique platform for the exchange of experience between Russian companies, which have something to say and to show Europe, and their foreign counterparts.

That is why, in the heart of Europe, in the historic city of Prague, the organizers will bring together not only the Czech Bitcoin community, but also participants from Russia, Poland, Slovakia, Hungary, Germany, and in general all Bitcoin enthusiasts of Central and Eastern Europe.

Bitcoin Conference. Prague: what to expect?

• Conference covering the latest and hottest topics of the year: forecasts, analysis, best deals for work with cryptocurrencies;

• Exhibition area – an opportunity to get acquainted with the market leaders, innovative products and to obtain first-hand information. Everything that can help your business become more successful will be presented there;

• Alley of start-ups will provide you with new ideas and new offers. The most unexpected and interesting solutions that will touch your feelings;

• Buffet table – new acquaintances and experience + party in the style of the best traditions of Czech beer events. 

The Bitcoin Conference Prague team invites speakers, exhibitors, sponsors and partners to participate. Become a part of the main European Bitcoin event in the spring of 2015!

Join us, as Bitcoin Conference Prague is simply impossible to miss!

To get detailed information about Bitcoin Conference Prague, please go to official event website bitcoinconf.eu.

In March, Bitcoin Magazine reported that the Isle of Man wants to become a leading Bitcoin hub. The government of the tiny island is pushing forward a new regulatory framework to create a true paradise for digital currencies.

Bitcoin Magazine spoke with Brian Donegan, Head of Operations for Digital Development and eBusiness at the Isle of Man Department of Economic Development. Donegan confirmed that the island, a self-governing British Crown dependency located in the Irish Sea between Great Britain and Ireland, is gearing up to become the ideal environment for digital financial technology businesses, entrepreneurs and developers.

“The Isle of Man is investment-grade and has the perfect business environment to maximize value,” said Donegan. “The Isle of Man has a superior technology proposition, excellent bandwidth, Tier 3 Data Centers and self-sufficient local electricity power supplies.”

Donegan confirmed that, besides the advantages of political stability and a world-class computing and telecom infrastructure, the Isle of Man government intends to offer to digital fintech businesses a clear, rock-solid regulatory environment to foster good business models – and keep dubious ones out.

“We will keep crime out and protect the consumer,” he said.

Two relevant pieces of legislation, the “Designated Businesses (Registration and Oversight) Bill 2014” and the “Proceeds of Crime (Business in the Regulated Sector) Order 2015,” are advancing through the approval process and should enter in force in a few weeks.

A decade ago the Isle of Man government recognized e-gaming as a potential strategic growth sector, and established a suitable legal and fiscal framework to attract online gambling and sports betting businesses. As a result, leading operators such as PokerStars flocked to the island and today are an important part of the thriving e-business sector, which accounts for around 19 percent of the Isle of Man economy.

According to Donegan, the government now wants to re-use the same “Freedom to Flourish” approach for Bitcoin and digital fintech, and will make efforts to attract and welcome not only Bitcoin 1.0 businesses focused on blockchain-based financial transactions, but also new Bitcoin 2.0 companies that leverage the technology of the blockchain to address other business opportunities.

Donegan edits an e-business blog on the aptly titled “Where You Can” Isle of Man government website. In the latest post, he notes that a powerful blockchain cluster has emerged with some dynamic start-ups in the Isle of Man.

“The recent surge in crypto 2.0 businesses is clear evidence that an Isle of Man blockchain cluster is also on its way,” he says. “This cluster effect creates a formidable peer group of experts that can share their combined knowledge, expertise and resources to the overall economic benefit of the Isle of Man.” Donegan adds that he has been working with various companies in this highly innovative sector to ensure that they have the support and assistance needed to get started on the Isle of Man.

Blockchain entrepreneurs can move to the Isle of Man and take advantage of interesting financial and fiscal incentives. Alternatively, they can stay where they are and set up a virtual Isle of Man corporation through local registered agents and non-executive directors. The Department of Economic Development can assist in the process, and may also be able to provide introductions to local investors and venture capital companies for funding.

While Internet citizens find it strange that fax machines still exist, everyone still needs to send faxes at times – often to large legacy organizations, banks and public administrations that still live in the 20^th century. Sending faxes is difficult because almost nobody has a fax machine at home anymore, and going to a post office seems a waste of time to those accustomed to living at Internet speed.

There are, of course, Internet fax services that allow using a PC connected to the Internet to send and receive faxes. But Internet fax services require a subscription, which can be expensive. For example eFax.com, probably the best-known Internet fax service, charges $17 a month for a basic subscription, plus 10 centers per page after the first 150 pages. That seems far too expensive, since most people don’t need to send more than one or two faxes per year.

Reasonably priced pay-as-you-go plans without subscriptions would be ideal for sending faxes when the need arises, but the overhead costs of traditional payment systems make that difficult to implement. The problem is that paying costs money – bank wires, credit card payments, and even PayPal have fixed transaction costs. If sending a fax over the Internet costs, say, half-a-dollar, it doesn’t make sense to pay one dollar to cover transaction costs. Therefore, most Internet fax service providers use subscription-based pricing, but buying a subscription doesn’t make sense to casual users.

Bitcoin Fax has now entered the market as a new Internet fax service that allows sending faxes anywhere in the world with no sign-up required. Australian developer Simon Males announced the service on Reddit saying, “Thought I would support the Bitcoin economy by helping those who still need to send faxes from time to time.” Many posts to the Reddit discussion are enthusiastic.

The user interface is very simple: The user needs only to enter a fax number anywhere in the world, upload a PDF document, and send. Payment is in bitcoin, with fees that range from 11 cents USD to send faxes to Japan to $7.58 to send faxes to places such as Afghanistan. Most countries in Europe and the Americas are priced at 17 cents per fax.

According to user feedback on Reddit, the service works well, and sends faxes a few minutes after the payment has been sent.

Bitcoin Fax seems a very good Bitcoin business model. The developer has identified a simple need and a market – the casual users who still need to send faxes every now and then – and provided a solution based on a unique advantage of bitcoin payments – fast and cheap micropayments.

In a recent blog post, Coinbase offered ideas for Bitcoin micropayments applications and business models.

Internet pioneers such as Ted Nelson, Marc Andreessen and Tim Berners-Lee thought that the Internet should have a built-in framework for micropayments. Berners-Lee tried to include micropayments in Web protocols, but the idea was never implemented. Now Bitcoin provides an ideal framework for Internet micropayments, which enables new, simple and efficient business models.

South African Bitcoin startup Bankymoon has built the world’s first blockchain smart metering solution for modern power and utility grids, VentureBurn reports.

The startup outlined its plans in a presentation titled “Smart Grids and the Blockchain – Bitcoin’s first killer App” at the recent Bitcoin Conference Africa in Cape Town, South Africa. Lorien Gamaroff, founder and CEO of Bankymoon, is expected to give another presentation on May 14 at the Bitcoin Conference in Prague.

Modern “smart grids” permit efficient management of supply and demand, with Internet-connected “smart meters” that react to changing conditions and can be topped in real-time in case of need. According to Gamaroff, by 2023 most power grids will be smart: 80 percent of the grids in the United States, 60 percent in Europe and 45 percent in the Asia Pacific region.

“You’d think that with all the smartness happening in our grid, that the problems are solved,” said Gamaroff. “But, in fact, this brings us to the most difficult and biggest problem of all, which is payments. Your grid could be as smart as you like but if all customers aren’t paying, it’s worthless and it becomes unsustainable and will collapse.”

Bankymoon, founded in 2015, specializes in deep integration of bitcoin payments into current processes.

“The power of bitcoin lies in the ability to program functionality to automatically respond to payment transactions,” notes the Bankymoon website. “Unlike bank accounts, Bitcoin addresses can be monitored by predefined processes which can trigger automated actions. These actions can form part of a workflow which will only proceed once Bitcoin transaction has been detected.”

Bankymoon’s smart meters have their own Bitcoin addresses. When a smart meter receives a Bitcoin payment, Bankymoon calculates the tariff and then loads the meter. Bankymoon’s integration of Bitcoin payments into smart metering systems for modern grids allows users to “send” electricity, water and gas to anybody else in the world, from anywhere, by topping their utility meters.

“Imagine a student abroad who needs to have their meter topped up,” said Gamaroff. “They’d phone their parent and ask them to send money. The parent now doesn’t have to remit anything. They can just go and top up the meter using bitcoin.”

The same model permits donating to worthy recipients, for example schools and hospitals, by directly contributing to their utility bills.

Besides the “programmable money” features of Bitcoin, the existence of large unbanked populations in the developing world shows the benefits of bitcoin payment integration in smart grids. Bankymoon’s solution bypasses banks and credit cards – which many users don’t have access to – and, using an Internet of Things (IoT) approach, goes directly to the smart metering devices.

According to Gamaroff, the application of Bitcoin to smart metering shows how deeply digital currencies can pervasively and positively impact societies. “This [solution] is potentially game-changing for driving bitcoin adoption,” he said.

Lead Bitcoin developer Gavin Andresen, chief scientist of the Bitcoin Foundation, has announced that he and other Bitcoin Core developers are joining the MIT Digital Currency Initiative.

A few days ago Bitcoin Magazine reported that the prestigious Massachusetts Institute of Technology (MIT) Media Lab announced the launch of a Digital Currency Initiative, to be directed by former White House senior adviser for mobile and data innovation Brian Forde.

The MIT Digital Currency Initiative will integrate researchers across the institute and leading experts at other universities around the world to address some of the most critical challenges to creating a safe, stable and secure digital currency.

Previously, MIT Media Lab Director Joi Ito had hinted at the forthcoming initiative.

“I’m offering MIT as a neutral academic home for some of the conversations and the technical coordination,” he said, “which I think will give a lot more stability to Bitcoin, which right now is a little bit fragile.”

The Bitcoin Magazine article noted that there is an overlap between the terms of reference of the MIT Bitcoin Initiative and those of the Bitcoin Foundation, and speculated that, in view of the troubled history of the foundation, the Bitcoin community could welcome MIT as an alternative, prestigious venue for leadership and coordination of the Bitcoin ecosystem.

Recently, Bitcoin Foundation board member Olivier Janssens wrote that the foundation had been undermined by “two years of ridiculous spending and poorly thought-out decisions” and was “effectively bankrupt.”

It now appears that MIT is beginning to assume leadership in the Bitcoin development space.

“I’m pleased to announce that I’ve joined the MIT Media Lab’s newly launched Digital Currency Initiative to continue my work on the Bitcoin project,” Andresen said earlier today. “I’m looking forward to working with all the amazing people associated with the initiative,” he says. “Wladimir van der Laan and Cory Fields, both formerly of the Bitcoin Foundation, have also decided that MIT is the best place to continue their work on Bitcoin Core and have joined the Media Lab as well.”

“Over the last couple of months [it] became obvious that the foundation wouldn’t be able to raise the funds necessary to continue supporting Wladimir, Cory, and me,” notes Andresen, and adds that MIT hasn’t taken over from the foundation as the center for core development, because “the Bitcoin Foundation was never the center of development.”

Andresen concludes by thanking Ito and Forde for their leadership and support of the Bitcoin community through the Digital Currency Initiative.

Forde, MIT Digital Currency Initiative director said he hopes that the MIT initiative will provide the support needed for the digital currency community to help realizing the “tremendous opportunities to increase access to critical financial services for all, create more transparent democracies, and develop services that dramatically reduce barriers for global commerce,” and looks forward to connecting with anyone who has feedback or new research.

Bitcoin Magazine will continue to follow this story and publish updates shortly.

 

Image via Web Summit / CC BY 2.0

It’s been a long time coming, but Mt. Gox customers who lost their funds can finally make claims against the exchange, which filed for bankruptcy in February of 2014.

According to the Notice of Commencement of Filing of Bankruptcy Claims issued on April 22, 2015, by bankruptcy trustee Nobuaki Kobayashi, users can register their claims online under certain conditions or by mail.

Customers can choose to file the Exchange-Related Bankruptcy Claim online form via the Kraken Bitcoin Exchange system or through the bankruptcy trustee’s own system on the MtGox website. In order to file through Kraken, users are required to be verified Tier 2 account holders.

Claimants opting to use either of the two online options must know their usernames or email addresses and passwords originally registered with MtGox. They also must still be able to use that same email address. If not, they will have to fill out and mail paper claims.

By filing through Kraken, customers may be able to receive their eventual payouts in bitcoin rather than fiat, though that possibility is still under investigation by the trustee. Kraken is also offering claimants up to $1 million in free trading volume at the lowest fee tier of 0.1 percent, as well as claim and payment support via live chat and email.

“We see our involvement in this process as an opportunity to restore faith in the community by showing what we need more of in the Bitcoin space — trusted leadership,” said Kraken CEO Jesse Powell in a post on the Kraken blog.

Kraken announced in November that it would be assisting the trustee in the investigation of Mt. Gox’s missing bitcoin assets, in the creation of the system to file and investigate claims, and in the eventual disbursement of assets to creditors.

At a third creditors’ meeting held on April 22, 2015, the trustee confirmed that JPY 1,375,885,620 (USD $11,507,618) worth of MtGox’s missing user funds had been recovered thus far.

Regarding the expected timeframe going forward, Powell added in a Reddit post, “It’s expected that there will be a two month period of filing claims followed by a two month period of evaluating claims. No firm payout date has been made yet but I believe we’ll see payouts by the end of 2015.”

 An FAQ document released by the trustee, however, is cautiously vague: “The timing of the bankruptcy distributions has not yet been determined, and it will be announced when a decision has been made.”

Users have until May 29, 2015 (Japan time) to file their claim. Anyone who filed a claim electronically will eventually be able to view the results of that claim online as well. Users who make paper claims will receive notices in the mail.

Bitspark becomes the latest Bitcoin company to integrate Clef’s two-factor authentication to provide secure, “passwordless” logins for their users.

Why Is This Important?

Earlier this year, the Canadian Bitcoin exchange, Cavitrex, shut down temporarily due to security concerns. The exchange was hacked just weeks prior to the announcement, which caused users’ passwords and two-factor authentication secrets to be compromised.

Bitspark is a Hong Kong-based exchange and remittance company that has recently announced a new round of funding. They are the first company in the world to offer end-to-end bitcoin remittances and were recently featured in Goldman Sachs’ report The Future of Finance.

Bitspark offers two major services: an exchange and a remittance service. The exchange supports 18 currency pairs and five fiat currencies. The remittance service works in Hong Kong, the Philippines, Indonesia and Australia.

Prior scandals surrounding previous Bitcoin exchanges such as MtGox and Cavitrex make security a huge priority for Bitspark.

“When we think about the next generation of Bitcoin technology, Bitspark is exactly the kind of product that gets us excited,” said Brennen Byrne, CEO of Clef. “It is absolutely critical that we find ways to make Bitcoin useful to more people, and I’m excited that Clef can help make that happen.”

Bitspark chose Clef because of how easy it is to use. Typically, sites that offer two-factor authentication see less than 1 percent of users opt in to protect their accounts, but sites that use Clef have seen more than 50 percent of their users opt in to the safer login. Two-factor authentication – or ‘2FA’ – is a simple feature that asks for more than just a user’s password. To make login seamless, Clef recognizes a user’s phone instead of anything he or she needs to remember or type.

Instead of storing secrets in a central server like other forms of two-factor authentication, Clef is a distributed system for logging in. Private keys are generated and stored on the user’s phone. Nothing secret ever needs to be sent to Clef and therefore no 2FA secrets would be compromised.

“From the first time I saw someone log in with Clef, I knew that this was the future of logging in,” said George Harrap, CEO of Bitspark. “Our whole team got excited about the technology, and the integration was really quick.”

A New Kind of Security

Traditional 2FA requires a user to have two types of credentials before being able to log into an account. 2FA typically asks the users to confirm that it is in fact them trying to access the account.

Examples of this include:

• PIN or password sent via text
• phone call giving a code
• fingerprint

2FA security is far from 100 percent secure, as illustrated with the Cavitrex 2FA factor security breach. To hack an account protected by two-factor authentication, hackers must gain access to the physical feature being sent (PIN sent via text to mobile phone). According to CNET, the second way a hacker can gain access through 2FA is by gaining access to the “cookies or tokens placed one the device by the authenticator.”

2FA is not perfect, but it is certainly more secure than a single-factor authentication. 2FA is likely to become the norm, followed by 3FA or 4FA.

Here is how Clef security improves upon the 2FA model: Customers can log into Bitspark on any computer in the world by holding their phones up to a computer screen. Using the phone’s camera and an animation called the “Clef Wave,” the phone seamlessly syncs with the computer and logs the user in.

The process already protects about 50,000 sites and is backed by cryptography. Instead of storing secrets in a central server like other forms of two-factor authentication, Clef is a distributed system for logging in. Private keys are generated and stored on the user’s phone.

By taking advantage of the rapid spread of mobile devices, Clef has built technology that is not only much more secure than traditional logins, but also easier to use. Since 2013, Clef has spread to more than 46,000 sites and received accolades from The New York Times, Inc. Magazine and The Economist.

Clef is funded by Morado Ventures and angel investors from a broad variety of product and security backgrounds.

The rapidly growing Latin American social network Taringa! will start paying its content-providing members in bitcoin, offering a service that could boost Bitcoin adoption in the region, The Wall Street Journal reports.

With its 75 million users mostly located in Spanish-speaking Latin America, Taringa! (the exclamation mark is part of the name) is the second-most-popular social network after Facebook and one of the main destinations in the Latin American Web. The social network, whose slogan is “Collective Intelligence,” is a hybrid of Facebook and Reddit, offering a crowdsourced social bookmarking and commenting platform similar to Reddit.

“Today we are launching Taringa! Creators, a revolutionary program that allows Taringa! users to receive a monetary compensation for the valuable content they share in our community,” announces Taringa! (in Spanish). “This is a super innovative project, because we will pay in bitcoin: the new virtual currency that works without banks or governments and allows paying via Internet without a credit card or a bank account, instantly and without transaction costs. For that, we signed an agreement with the company Xapo, founded by Argentine entrepreneur Wenceslao Casares, based in Silicon Valley, which offers the virtual Bitcoin wallets where we will transfer the money earned by you, which you will be able to use as you prefer.”

Offering a financial compensation to those who dedicate part of their time to power the social networks that are an increasingly important part of everyone’s online life is certainly revolutionary but also overdue, and bitcoin payments are an ideal implementation. Perhaps other social networks such as Facebook, Reddit, and Twitter will follow.

“Xapo’s partnership with Taringa! implements the largest bitcoin integration the community has yet to see and is a historic moment for both bitcoin and social media,” notes the Xapo announcement. “Top content creators can now earn bitcoin through Taringa!’s Revenue Sharing Program, rewarding users who bring quality content to Taringa!. The platform is supported by a simple one-click integration with Xapo’s secure bitcoin wallet.”

The initiative is likely to will have a huge impact on Taringa!’s user base, largely under-banked despite having access to smartphones and Internet, and could introduce millions of people across the globe to the benefits of Bitcoin. According to Xapo, the partnership has the potential to quadruple the current number of bitcoin transactions worldwide.

The traditional payment infrastructure couldn’t support Taringa!’s plans to reward its loyal users for content shared on the social network, and therefore Taringa! had to look for alternatives. Latin America’s “horrendous,” underdeveloped financial system made it impossible to deliver funds, said Taringa!’s co-owner Hernán Botbol. Credit-card networks aren’t developed enough and bank account penetration isn’t deep enough for users to receive payments in their traditional currencies.

“We have had this on our mind, mainly because we think we can bring more people to create great content and also because we think that it’s fair, given that all this that we have is just because our users are creating the content,” said Botbol. “But we never were able to do that because the infrastructure is horrendous – even if you send someone a check, they don’t know what to do with that.”

The Wall Street Journal notes that the initiative, which exploits bitcoin where the traditional financial system is unable to deliver, could be an impetus for wider adoption in the developing world, where many believe digital currencies have their best chance of success.

One of the main issues that has slowed the adoption of Bitcoin as a currency and payment system has been the complexity of Bitcoin addresses.

The blockchain lacks the human-friendly names normally found with websites and email addresses, which can make sending payments a rather cumbersome process. Netki wants to help people move away from confusing Bitcoin addresses, such as 15eA82FZLogpSb8nkQ5h5qaF3QNEwSeyCm, toward human-readable names such as kyletorpey.tip.me.

Any bitcoin user would be able to send bitcoin to anyone else as easily as a Gmail user can send an email to someone using a web browser.

How Does it Work?

Netki uses a combination of the Namecoin blockchain and Secure DNS (DNSSEC) to take care of name storage and mapping between a name and an address.

“Your base records reside in the Namecoin blockchain proving ownership, and allowing for full, censor-proof control,” Netki CEO Justin Newton explained via email. “The actual wallet name-to-address lookups occur on standard DNS records secured and authenticated using DNSSEC.

“This combination of decentralized and distributed [solutions] provides the control and ownership of the blockchain along with the privacy of keeping your name to address mapping off of a public ledger,” Newton said.

The Netki CEO also explained that wallet providers will be able to hand out names in a manner similar to how email addresses are handed out to Gmail, Outlook, Yahoo and other online mail providers. He specifically mentioned ChangeTip’s use of the tip.me domain as an example of this feature.

Newton was also able to share his thoughts on the differences between Netki and another Bitcoin name system, OneName:

“We believe that a lot of what OneName is doing is really fantastic. There is a need for a decentralized way to validate your social identity, and their roadmap feature of using signatures instead of passwords for logins is excellent and long overdue. We do believe, however, that tying your identity to your wallet address on a public ledger negates the possibility of privacy on the blockchain. For us, making it easy to share your address with anyone without having to publish it to everyone is one of the keys to our service. We’d love to see OneName support Wallet Names where they currently support bitcoin addresses.”

A Problem for Privacy?

The obvious question when talking about name-mapping systems for digital currencies is what it will mean for user privacy. After all, privacy and anonymity are still desirable features for a large number of bitcoin users.

Newton said the protection of privacy was also a concern for Netki, but he added that the use of HD wallets “allows the return of a unique address every time.”

Netki also supports Payment Requests, which are sometimes referred to as the “SSL for wallet addresses.”

Newton explained that the integration of Payment Requests will allow users to see a green lock next to an address in the “To” field of a Bitcoin wallet. That lock helps users confirm that they’re sending bitcoin to the correct individual, organization, or company. This process is similar to the green lock found next to website URLs that have been secured via SSL and an HTTPS connection.

“The combination of HD Wallets and Payment Requests with Wallet Names increases the privacy and security of sending bitcoin, while at the same time making it more user friendly and reassuring to end users,” Newton said.

An example of this system can be seen in the video below:

In addition to ChangeTip, Netki has also partnered with Gem, Snapcard, Purse.io, ShapeShift, BitQuick, Coinprism, Fold App, and many other companies in the Bitcoin space.

So, I have spent the last few days at the Kraken headquarters in San Francisco with the legendary Jesse Powell, who I interviewed for the Bitcoin Knowledge Podcast, and the rest of the team and there is some very exciting news about the $500m MtGox bankruptcy. We discussed some of the logistics during the interview but there is even more actionable stuff, as discussed in the trustee letter, you can do today to claim your money!

Kraken Now Accepts MtGox Creditor Claims Through Website, Offers Free Trades

SAN FRANCISCO, CALIF. – APRIL 21, 2015 – Kraken, a San Francisco-based Bitcoin exchange, is now accepting MtGox creditor claims and offering up to $1 million in free trade volume per creditor as a bonus for claiming funds through Kraken. The claim and payout service through Kraken is available in all areas of operation, including all US states.

Kraken was selected by the MtGox trustee in November 2014 after extensive and objective review to assist MtGox creditors in investigating missing Bitcoin, filing claims, and distributing remaining assets.

“Thanks to Kraken, filing of claims can be done through their system,” said the MtGox trustee. “We expect this to enable smooth filing of bankruptcy claims and distributions.”

Creditors claiming funds with Kraken can expect the following benefits:

• 100,000 KFEE credits redeemable for up to $1 million in free trading volume at the lowest fee tier of 0.1%
• Creditor claim and payout support with live chat and email
• Option to receive funds in the form of Bitcoin
• An easier and more convenient process from claim to payout

MtGox creditors should file their claim as soon as possible in two steps:

1. Go to https://www.kraken.com and create an account.
2. Click the “MtGox Claim” tab in your account and follow the instructions.

“We see our involvement in this process as an opportunity to restore faith in the community by showing what we need more of in the Bitcoin space – trusted leadership,” said Kraken CEO Jesse Powell. “We’re dedicated to delivering an exceptional experience. What is that? It’s fast execution and reliable service – all done over a secure platform. Whether you’re a long-standing client or trying us for the first time, we’re committed to putting your best interests first. That’s our philosophy. It’s simple. Put people first.”

To learn more about the KFEE promotion restrictions and use: https://support.kraken.com/hc/en-us/articles/204802628

About Kraken

Founded in 2011, San Francisco-based Kraken (www.kraken.com) is the largest Bitcoin exchange in euro volume and liquidity and also trading US dollars, British pounds and Japanese yen. Kraken is consistently rated the best and most secure Bitcoin exchange by independent news media and is trusted by hundreds of thousands of traders and institutions, including the Tokyo government and court-appointed trustee and BaFin regulated Fidor Bank. Kraken is the first Bitcoin exchange listed on Bloomberg terminals, the first to pass a cryptographically verifiable proof-of-reserves audit, and partnering to create the world’s first cryptocurrency bank.

Press contact:

Christina Yee

Chief Brand Officer

415-323-3402

press@kraken.com

http://www.kraken.com

Facebook: http://www.facebook.com/krakenfx

Twitter: http://www.twitter.com/krakenfx

The State of Digital Money conference held in Los Angeles on April 18 focused on a variety of issues involving digital currency.

The conference showcased financial technologies and hosted expert conversations on the future of currency and financial activities. It was organized by Cureativ and took place in Rhubard Studios, a spacious studio in downtown Los Angeles’ Financial District.

Rhubbarb Studios is a venture builder that has emerged to become the tech center of Downtown Los Angeles.

Some of the speakers included Connie Gallippi of BitGive, Steve Beauregard of GoCoin, Andew Lee of Purse.io, Paul Puey of Airbitz, Changetip’s Nick Sullivan and Bitcoin Core Developer Jeff Garzik.

The event lasted 12 hours with multiple “networking” breaks. It was a more personal experience than most Bitcoin conferences. During talks and panel discussions, conference attendees were able to network in the large space.

Topics covered included regulation, security, law, blockchain technology, investments in digital money, and merchant adoption of digital currency.

A panel discussion covered merchant and mass adoption of digital currency and was moderated by Steve Beauregard, CEO and founder of GoCoin.com. The panel included Connie Chung, senior payments product manager at Expedia; Andrew Lee, Purse.io CEO; Paul Puey, CEO and co-founder of Airbitz; Justin Newton, CEO of Netki; and Nick Sullivan, founder of Changetip/Changecoin.

The panel explored some of the challenges to mass Bitcoin adoption, the main one being the current price of bitcoin. This has caused a relatively small number of customers paying with bitcoin in comparison to other payment methods.

The panelists discussed each other’s contributions to the merchant space and presented how each group is working to spur Bitcoin adoption.

Garzik’s talk closed out the conference. He spoke to the audience about his initial skepticism of Bitcoin and his subsequent decision to work as a developer on the project, and communicated his vision for the future of Bitcoin.

He spoke of some “layer-two” type services to be released in Bitcoin’s near future. Among them, “smart transaction fees” that determine how little a miner’s fee you need to pay to get a transaction confirmed.

One of the newer features will allow bitcoin users to lock funds on the blockchain for specified periods of time. It’s called BIP65, otherwise known as Check Lock Time Verify (CLTV).

“From the game theory perspective,” said Garzik, “this reduces the risk of someone else cheating you.”

Some have proposed using it for anti-spam products where the user can commit any amount of value, such as a dollar, and get an anti-spam technology, he said.

For the longer term, he spoke of the possibility for improved real-time supply chain infrastructure on blockchain technology and a network of satellites that enable the blockchain to be broadcast in space and on most parts of Earth.

Bitcoin has been faster and more secure than BitTorrent since the new version was released earlier this year, Garzik said.

“We’re in the early stages of Bitcoin,” he said “The services built on top of Bitcoin are just now being constructed. It’s very early.”

The State of Digital Money conference outlined many topics and provided a clear idea of development of blockchain technology use cases. The conference organizers’ intention was to create a different type of conference.

“We started Cureativ to curate unique, great events,” Alan Tse, co-founder of Cureativ, told Bitcoin Magazine. “We want to focus on emerging trends with good discussion points in a unique environment. Bitcoin was a good topic because there is a large community around it. It’s also young and creating a lot of buzz. We saw an opportunity for this in Los Angeles because it is home to a rapidly growing tech scene and there hasn’t been a Bitcoin conference of this magnitude here yet.“

Cureativ plans to host more Bitcoin conferences.

 

Photos courtesy of Melissa Yee, Rob Mitchell, and Jason Okuma.

An unusual Indiegogo campaign will launch on Tuesday, April 21 that brings together the worlds of music, Mixed Martial Arts and bitcoin.

OSS Mentality is the brainchild of Brian Byrne, lead singer of the Canadian rock band I Mother Earth and avid MMA practitioner, and Jon Foster, former fighter and current gym owner. The idea of OSS Mentality is to create a hub of resources for MMA practitioners – including trainers, nutritionists, sports psychologists, and instructors – allowing fighters to help other fighters while providing “a positive force in the world of combat sports.

Byrne was introduced to bitcoin by Anthony Di Iorio, founder of Decentral in Toronto and co-founder of Ethereum. Di Iorio worked with Byrne to set up bitcoin payments for the Indiegogo campaign.

“Decentral is pleased to be working with OSS Mentality on the integration of their bitcoin into the fundraising campaign,” said Di Iorio. “It’s very positive to see the growing trend of organizations implementing Bitcoin strategies into their business activities.”

The term “OSS” refers to the traditional greeting between fighters to both begin and end a match or training session. It means “to persevere when pushed, never give up, have determination and grit, and withstand the most arduous of training.”

Besides providing a valuable resource to fighters looking to connect with an industry professional, it also helps to support competitive fighters when they are between fights due to injury or other personal issues.

“Like musicians who are recording and touring, fighters can do really well making a living when they are out there fighting,” says Byrne. “But during the downtimes, like when they are recovering from an injury or when they get too old to fight, OSS Mentality gives them a way to still work in the industry.”

Fighters can offer services to other fighters including fight review, video analysis, personal instruction, and workout planning.

“When you do anything through OSSMENTALITY.COM you will be giving back to the fighters who drive this entire industry,” the campaign website says.

Byrne emphasized the grass-roots component to OSS Mentality.

“This is based on the idea of fighters helping fighters. We really listened to the community and made changes that reflected what the fighters said they really wanted – what was important to them. And we’ll keep on doing that.”

Byrne added that experts offering their services through OSS Mentality are free to set their own rates and schedules. “They know their own market,” he said.

The campaign will run for 30 days and aims to raise $30,000. The funds will be used to get the OSS Mentality website running, develop an online store and pay creative freelancers. The organization has already scored sponsorship ahead of the campaign from companies such as Hayabusa MMA Gear, Headrush apparel, Rockwell watches, and Vane Protective Gear.

“We added bitcoin to the campaign to help start the conversation,” said Byrne. “We’re hoping that having that knowledge and that conversation, it will lead it somewhere else – to a whole community of people who aren’t familiar with it. It shows that we are looking at the future and currency and where it will eventually be.”

Visit the OSS Mentality Indiegogo campaign page to watch the video and find out more about the organization.

Today, Infinity Algorithms and Factom are proud to announce a new partnership. Infinity Algorithms will integrate Factom’s time stamped immutable ledger into the SAFE network providing an additional layer of security for users. This will build trust by providing complete transparency and real time audibility of SAFEX network systems of record, while at the same time maintaining user privacy. Factom will also be explore ways to utilize the SAFE network within the Factom protocol.

Infinity Algorithms and the SAFEX Protocol

Infinity Algorithms uses Factom for time-stamping and verification in its SAFEX protocol

“We are proud to announce a partnership in which the SAFEX protocol will enable Factom’s time stamped immutable ledger into the SAFE Network.” Said Daniel Dabek, Co-Founder and CEO of Infinity Algorithms.

“Infinity Algorithms is providing an important bridge between the SAFE Network and other blockchains and Factom is proud to be a part of that integration.” Said Peter Kirby, Factom’s President.

Who is Infinity Algorithms?
Infinity Algorithms is a software and technology firm based in San Francisco. They pioneer decentralized automation software and hardware configurations for commercial use. Infinity Algorithms makes it possible for people to be totally in control of their private information through their software and hardware. The SAFEX protocol is a major breakthrough in preventing fraud in the field of exchange. Each person can download a client and trade in open markets without giving up their assets to a custodian. Through Infinity Algorithms, People have the security that their financial decision are their own and not at the mercy of an unknown entity. Learn more at InfinityAlgorithms.com.

Who is Factom?

Factom is an immutable and time stamped data layer for the blockchain that allows users to publish and verify any kind of digital information. Factom technology is especially compelling for those who want to build trust with users by providing complete transparency and real time audit ability of their systems of record, while at the same time maintaining user privacy. Blockchain based authenticity verification and auditing of document and offers significant value for any business process one wants to make honest and accountable. Check out examples and videos that explain how different companies can use this new platform: Factom.org.

 

Brad Garlinghouse, the former CEO of Hightail and a long-time executive of Yahoo! has been appointed as Ripple’s first Chief Operating Officer, as the company passes the 100-employee mark.

“Brad’s experience will be invaluable as we advance our focus from building a strong pipeline to execution and exceptional growth,” said Ripple Labs CEO and co-founder Chris Larsen in a statement. “We share a vision for the future of finance and the creation of an Internet of Value in which value exchange is as fast, free, transparent and secure as information exchange is on the Internet today.”

Prior to Hightail (formerly known as YouSendIt), Garlinghouse worked for AOL Inc. as the former president of applications and commerce and for Yahoo! as an executive.

During his stay at Hightail in 2012, Garlinghouse focused the company on “file sharing and remote document access, placing it in competition with Dropbox Inc. and Box Inc.,” creating advertisements such “Your files should be neither Dropped nor Boxed.”

A year later, Garlinghouse rebranded YouSendIt to Hightail and stepped down from the position. By 2009, Hightail supported more than 8.5 million users, of which 100,000 were paying users.

Based on Garlinghouse’s success in his former tech companies, Ripple believes that the appointment of Garlinghouse will support the “incredible momentum for Ripple as a new infrastructure for global payments.”

Although Garlinghouse has a tremendous amount of experience in the technology industry, Garlinghouse admitted that the fintech space is relatively new to him.

“My honest answer is this is a new category for me — I haven’t worked in [the financial tech] space,” he said. “I think any time a leader is joining a new company, almost always the right strategy is to listen and learn, and for me the next 30 days for sure will be that, maybe even 60 days. These [are] people who are truly kind of geniuses in their field, ranging from cryptography to open source systems, and I’ve got a lot to learn.”

 

Photo via Yahoo / CC BY 2.0

Digital currency startup NeuCoin’s 60-day crowd pre-sale aims to raise the additional funds needed to prepare for the company’s public launch this summer.

One hundred million NeuCoin will be up for sale April 28 in exchange for bitcoin. The price will start at 25,000 NeuCoin for 1 Bitcoin (approx. $0.01 per NeuCoin) and increase by 1 percent each day. The pre-sale will end after 60 days or after all coins have been sold.

The Paris-based NeuCoin startup has already raised $2.25 million from a group of investors.

Co-founder Dan Kaufman is confident about the launch of NeuCoin and told Bitcoin Magazine:

“We’ve been getting thousands of emails and feel there’s a lot of interest and anticipation for the pre-sale. People seem to appreciate our solid angel investors and consumer-friendly micropayments approach. Since there are no daily caps, the 100 million NeuCoins may sell out very fast.”

In addition, the company will be distributing its “freemium” model free to consumers who just want to try it out, and there will be more for customers who recruit other new customers. Businesses that promote NeuCoin and accept micropayments in NeuCoin will also receive “freemium” coin.

What is NeuCoin?

NeuCoin is a digital currency that is easy to use and ideal for online tipping and micropayments. Co-founder Dan Kaufman says he made the consumer his first priority and his goal was always to develop the most user-friendly of all the digital currencies.

NeuCoin uses a similar model to Peercoin and is often referred to as a peer-to-peer coin. It is based on proof-of-stake (PoS), rather than proof-of-work (PoW) and pays interest to owners as the coin is staked (as opposed to miners).

Neucoin says that its high PoS rates reward early NeuCoin adopters and address a key security issue by rewarding PoS miners to stake numerous NeuCoins and operate many nodes.

Why NeuCoin instead of Bitcoin?

According to Dan Kauffman, the real motivator for developing NeuCoin was the inaccessibility and techie nature of Bitcoin – a great idea but too hard for consumers to access and use. 

Kaufman, with his partners Johan Sandstrom, Ophélie Pubellier and Scott Walker, recently released a whitepaper arguing that Proof of Stake (PoS) is superior to Bitcoin’s Proof of Work with its high costs, mining centralization and the ever-increasing costs of Bitcoin mining hardware.

Kaufman maintains that Bitcoin suffers from too much centralization, particularly in the area of mining, with fewer companies owning more and more mining equipment.

And he says it is more than likely that Bitcoin transaction fees will go up in the future.

Early Investors

Major angel investors include Emil Michael, SVP of business at Uber, Henrik Kjellberg, president of Hotwire, Patrik Stymne, co-founder of King (Candy Crush Saga), Rob Goldman, head of growth at Facebook, Ted Rogers from Xapo, and dozens of other top tech and media executives.

Strategic advisers to the startup include Spotify’s Alex Norstrom, Dogecoin creator Jackson Palmer and Brock Pierce, entrepreneur and Bitcoin Foundation board member.

Three Nonprofit Foundations designed to decentralize NeuCoin

Three nonprofit groups located on the Isle of Man will develop and support NeuCoin, each with their own focus – core development, growth and utility.

Each foundation has different council members, budgets and priorities and is ultimately controlled by all the people who own NeuCoin (one coin equals one vote).

About 2.4 billion of the total NeuCoin supply has been placed in the hands of these three independent foundations, and they are responsible for distributing these coins to developers and entrepreneurs.

The NeuCoin team is planning a public launch for July and has said they will guarantee that if the NeuCoin platform isn’t up and running by September they’ll return the pre-sale funds, which will be held in escrow until the coin is issued.

“With the funding from our angel investors…we already have all the money needed to finish the code, the super easy online wallet, the consumer on-boarding site and more,” Kaufman said. “The proceeds from the pre-sale will go to NeuCoin’s nonprofit foundations and fund later consumer marketing and development of micropayment platforms with MondoMedia, a video content producer with the largest animation channel on YouTube, to develop and Jango.com, a streaming music service with 8 million monthly listeners.”

BitSIM is a thin, flexible card that can be stuck on any existing SIM card as an add-on hardware layer. BitSIM converts the SIM card into a fully encrypted bitcoin wallet compatible with a wide range of cell phones, including cheap and unsophisticated feature phones.

“BitSIM puts bitcoins on any SIM, on any mobile phone, for mass adoption and frictionless ecosystem uptake,” claims the BitSIM website. Users will be able to pay locally with NFC-enabled phones, but also send and receive bitcoin with a simple SMS to other users anywhere in the world.

The BitSIM website notes that this simple application can disrupt the $1 trillion remittance market, which is poorly served by companies such as Western Union.

BitSIM seems tailor-made for sending remittances to developing regions of the world where the adoption of cell phones is booming, but most users have only cheap-feature phones. And remittances are just the first application: The BitSIM technology could add a simple bitcoin payment layer to the Internet of Things (IoT), the upcoming pervasive network of smart, connected devices.

BitSIM, based in Hong Kong, is funded by Seedcoin, a seed-stage Bitcoin and blockchain startup virtual incubator.

In a video interview titled “BitSIM: Bitcoin Between SIM and Phone,” the startup’s founder, Leon Gerard Vandenberg, shows how, by slipping a zero-footprint SIM between the carrier’s SIM card and the phone, BitSIM “up-techs even ancient feature-phones with a new technology stack.” Providing NFC and fully-encrypted Bitcoin transactions over SMS, even a smart-contract-capable JVM runtime, BitSIM is “a stealthy technology injection that routes around the carrier monopolies without their permission.”

An interesting feature of the BitSIM add-on sticker is that it doesn’t require the authorization of the phone manufacturer, or of the carrier that provides the SIM.

“The hardware is called a ZSIM,” explains Vandenberg. “It’s a zero-footprint SIM that sits between the original SIM and the carrier’s cell phone and interposes SIM commands between the original SIM and the phone. So the phone thinks there is a SIM there, and the original SIM thinks there is a phone there.” (See this trending discussion on Reddit for explanations of how the BitSIM technology works.)

BitSIM’s ZSIM is a “thin SIM” (also known as “overlay SIM”), a chip embedded into a thin plastic sheet that sits on top of an ordinary SIM card, making available to the user services that were not foreseen by the carrier or the phone maker. Thin SIMs have been denounced as a security risk by phone carriers, but that is likely due to their potential to disrupt the carriers’ business models more than to an actual risk for consumers.

In a September 2014 interview with Brave New Coin, Vandenberg noted that, with the globally adopted use of SMS technology, BitSIM can literally bank the unbanked overnight by giving power back to users, effectively allowing anybody with a cell phone to be their own bank. “Anything running on top of the Bitcoin protocol is also within the reach of bitSIM users,” he said, and noted that bitSIM is a platform supported by a developer community.

Stanford professor David Mazières thinks he has a faster, more flexible and more secure alternative to Bitcoin, MIT Technology Review reports.

Two independent reviewers, from Stanford and Cornell universities, agree that the new technology could make digital payments and other transactions cheaper, safer and easier.

Alternative blockchains are often dismissed as worthless “me-too” copycats or scamcoins, which, unfortunately, has some element of truth. But Mazières’ approach deserves a place among the serious alternatives to Bitcoin that have been proposed, alongside Ethereum and Ripple.

Public digital currency ledgers rely on distributed consensus protocols to propagate valid transactions. In the Bitcoin network, independent nodes (miners) work together without preferential trust relations. In other words, each node implicitly trusts every other node.

In the new protocol, called Stellar Consensus Protocol (SCP), each node explicitly selects a set of publicly trusted peers, and forwards only the transactions that have been validated by a certain majority of its trusted partners.

If correctly implemented with a critical mass of nodes with overlapping trust circles, valid transactions propagate in ripples through the network and eventually achieve systemwide consensus.

“Bitcoin is good, but we wanted to start from scratch,” says Mazières. He is persuaded that the SCP can overcome important limitations of Bitcoin, such as the long confirmation delays and the fact that mining is now a very energy-intensive process. The new system would be able to reliably verify transactions much more quickly and with less energy, and provide enhanced scalability.

Mazières’ protocol has been adopted by Stellar (hence the name SCP), an open-source protocol for value exchange, launched in 2014 by Ripple Labs founder Jed McCaleb (who also founded the infamous Mt.Gox exchange), and backed, among others, by payment processor Stripe. Besides bitcoin payments, Stellar supports fiat currency payments, for example in euros or U.S. dollars, via Stellar exchanges and gateways.

Initially, Stellar used the Ripple protocol, which also requires nodes to identify a set of trusted nodes to achieve a rippling effect across overlapping trust circles. But a fork in the network prompted Stellar to take steps to build a new consensus protocol, which resulted in the SCP. Ripple maintains that its consensus network is not vulnerable to the issue encountered by Stellar.

Mazières is taking leave from Stanford to work four days a week on the project as Stellar’s chief scientist.

The SCP whitepaper, titled “The Stellar Consensus Protocol: A Federated Model for Internet-Level Consensus,” is available online on the Stellar website. The whitepaper is a technical paper not easy to understand for casual readers, and therefore Stellar has provided a readable summary.

The SCP implements “Federated Byzantine Agreement,” a new approach to achieving consensus in a real-world network that includes faulty “Byzantine” nodes with technical errors or malicious intent. To tolerate Byzantine failures, SCP is designed not to require unanimous consent from the complete set of nodes for the system to reach agreement, and to tolerate nodes that lie or send incorrect messages.

In the SCP, individual nodes decide which other participants they trust for information, and partially validate transactions based on individual “quorum slices.” The systemwide quorums for valid transactions result from the individual quorum decisions by individual nodes.

According to Stellar, the SCP is the first provably safe consensus mechanism that simultaneously enjoys four key properties: decentralized control, low latency, flexible trust and asymptotic security. The SCP achieves optimal resilience against ill-behaved participants, allowing an organic growth model similar to that of the Internet for the Stellar network.

 

Image via stellar.org.

A few days ago Bitcoin Magazine reported that Joi Ito, director of the prestigious Massachusetts Institute of Technology (MIT) Media Lab, was about to unveil a plan for the institute to become what he called an independent, neutral home to help with Bitcoin standards development.

“I think within a couple of weeks we’ll be announcing something which will be a little bit more substantive,” said Ito. “And I’m not pushing it, but I’m offering MIT as a neutral academic home for some of the conversations and the technical coordination.”

MIT has now formally announced the launch of a Digital Currency Initiative, to be directed by former White House senior adviser for mobile and data innovation Brian Forde, who joined the MIT Media Lab as director of digital currency. Forde will work with researchers across the institute and leading experts at other universities around the world to address some of the most critical challenges to creating a safe, stable and secure digital currency.

“As a technologist, there’s no more exciting place to work than the MIT Media Lab,” said Forde. “The innovations that come out of the Media Lab have made a truly global impact. I look forward to working with the faculty and students and collaborating with developers, academics, entrepreneurs, governments, and nonprofits to help us get closer to a more robust and viable digital currency that could have tremendous benefits around the world.”

At the White House, Forde was responsible for determining how the Obama administration would leverage open data and emerging technologies to address the president’s national priorities.

“While at the White House, Brian led extraordinary initiatives to leverage the power of tech and innovation to make the future of America ever brighter,” said Todd Park, White House adviser for technology.

“We are fortunate to have Brian join the Media Lab to help organize an important research agenda to get cryptocurrencies right,” said Ito. “Brian’s experience mainstreaming emerging technologies from the rural mountains of Nicaragua to the White House will be invaluable as he tackles the challenges of digital currency – one of the most promising emerging technologies for the next 10 years.”

In a Medium article, Forde gives more information about the MIT Digital Currency Initiative. He is persuaded that we are at a pivotal point for the digital economy.

“Getting digital currencies right and realizing the projected impact, present daunting challenges that will require significant research and development to overcome,” he says.

Several renowned MIT experts of economy, cryptography and system security, mentioned in the Medium article, will actively participate in the Digital Currency Initiative together with interested companies, developers, and forward-thinking policy makers. The MIT student community, including Jeremy Rubin, the undergraduate who launched the MIT Bitcoin Project, also will be involved.

According to Forde, the goals of the MIT Digital Currency Initiative are to:

• Conduct research and engage more students on digital currency topics that address questions about security, stability, scalability, privacy and economics.
• Convene governments, nonprofits and the private sector to research and test concepts that have high social impact.
• Provide evidence-based research to support existing and future policy and standards.

There is an overlap between these terms and those of the Bitcoin Foundation. It seems likely that, in view of the troubled history of the foundation, the Bitcoin community could welcome MIT as an alternative, prestigious venue for leadership and coordination of the Bitcoin ecosystem.

Forde hopes that the MIT initiative will provide the support needed for the digital currency community to help realizing the “tremendous opportunities to increase access to critical financial services for all, create more transparent democracies, and develop services that dramatically reduce barriers for global commerce,” and looks forward to connecting with anyone who has feedback or new research.

 

“MIT Media Lab (E14)” by Sayamindu Dasgupta – Modified / CC BY-SA 2.0

A group of Czech citizens has declared a new state, the Free Republic of Liberland, in a tiny 6-square-kilometer territory along the Danube River between Croatia and the Republic of Serbia. The Liberland territory is not claimed by either of these two states, which according to the group permits it to declare a new “microstate” in compliance with international law.

After the Yugoslav Wars, some borderland territories have been disputed, but this area has remained unclaimed. Liberland was created entirely in accordance with international law because it is based on the no man’s land which was claimed neither by Serbia or Croatia in the process of demarcation, InSerbia News reports.

On April 13, 2015 a Preparatory Committee declared the new state on the spot and raised a flag to claim the land. Vít Jedlička, who was elected by the committee as president of the republic, is preparing a constitution as well as diplomatic notes, to be sent to the two neighboring states and to the United Nations, and later to other countries, to inform them about the establishment of the new state of Liberland.

Creating a new micronation and getting it formally recognized is a daunting task, but Jedlička is persuaded that the initiative will succeed.

“The only thing that could stop us is an army,” he told Bitcoin Magazine. He added that the process to claim sovereign nation status recognized by the international community has started.

Jedlička is associated with the Czech Party of Free Citizens, a libertarian political party in the Czech Republic. The party is against too much government intervention in the economy and in the personal lives of citizens. Its members are free-market advocates and oppose the centralization of political power. In accordance with libertarian politics, the motto of Liberland is “To Live and Let Live.”

While BBC News questions whether Liberland is actually just a publicity stunt, the microstate is accepting applications for citizenship from people everywhere – provided they don’t have a “communist, Nazi or other extremist past.”

“The objective of the founders of the new state is to build a country where honest people can prosper without being oppressed by governments making their lives unpleasant through the burden of unnecessary restrictions and taxes,” states the Liberland website. “One of the reasons for founding Liberland is the ever expanding influence of interest groups on the functioning of existing states and the consequent worsening of living conditions of people. The founders are inspired by countries such as Monaco, Liechtenstein or Hong Kong.”

This sounds very appealing to libertarians everywhere, but the challenge is big. It seems likely that the powers that be could easily crush the new microstate as soon as they notice it. Perhaps the only thing that could protect tiny Liberland in its delicate launch phase is a massive display of popular interest. And, in fact, it appears that Liberland is going viral on the Internet, with tens of thousands of signups on its Forum and Facebook page and a lot of applications for citizenship from all over the world in only a couple of days. It appears that many people are ready to try alternatives to traditional politics.

The idea that Liberland could adopt a cryptocurrency, and make it official, is trending on the Liberland Forum and Reddit. Jedlička briefly discussed the idea with the Czech press, and a participant in the Reddit discussion provided a translation. Jedlička answered the question “So do you want to create your own currency?” by stating that Liberland is planning to create its own cryptocurrency (a digital currency like Bitcoin), but on the territory of Liberland it will be possible to use any currency.

Jedlička confirmed to Bitcoin Magazine that Liberland will not have an official currency, but accept all currencies, including bitcoin and other digital currencies. There are plans to establish a Liberland banking system and, according to Jedlička, some banks have already expressed interest.

Perhaps the tiny libertarian dreamland in the Balkans doesn’t have much of a chance in the harsh reality of real politics, but the adoption of bitcoin as one of the currencies accepted by a sovereign state could have a huge impact.

 

Image via liberland.org.

If you are interested in working in the growing field of digital currencies or you’re a financial technology startup looking for new talent, the Sunnyvale Job Fair at the Plug and Play Tech Centre is the place to be this weekend.

This will be the fourth edition of the Bitcoin Job Fair, building on the success the event has had in Sunnyvale, New York, and Los Angeles.

It’s all happening in the auditorium of the Plug and Play Tech Centre in Sunnyvale, California starting Thursday, April 16 and ending Saturday evening, April 18. A number of top Bitcoin startups including BitGo, BitPay, BlockCypher, ChangeTip, and ShapeShift will be there to connect with job seekers.

Bitcoin Businesses step up to the plate

Some of the biggest names in the digital currencies world have stepped forward to sponsor this event, a sure sign of the growing maturity of the Bitcoin community.

There’s lots of buzz around the lead sponsor, secretive startup 21 Inc., which joins companies like BitPay, BitGo, ChangeTip, ShapeShift, FreshPay, CoinBeyond and Bitwage.

Although the exact nature of its business is not public, 21 Inc. was recently reported to have raised $116m in venture funding, the most ever raised in the digital currency space. Backers include Qualcomm, PayPal co-founder Peter Thiel and venture capitalist Andreessen Horowitz.

The Plug and Play Tech Centre and Coinality, an online job board for the Bitcoin industry, are producing the fair. Coinality Founder and CEO Dan Roseman is being cautious about the turnout but thinks there’s a much broader range of skill sets in demand now that Bitcoin startups have matured.

“Bitcoin is creating new career opportunities in the tech sector as venture capital continues to accelerate growth among bitcoin startups. A couple of years ago, most bitcoin careers required an advanced technical skill set. However, today we are seeing more demand for a broader range of skill sets (administrative, creative, marketing, legal/regulation, etc.) as bitcoin startups begin to mature beyond a Minimal Viable Product. “

BitHack Included

In addition to the Job Fair, the event will also feature a hackathon sponsored by ChangeTip, BitGo and ShapeShift, and organized by the College Crypto Network. The 72-hour bithack is designed to showcase new talent as companies look to more sophisticated program development.

Participants in the BitHack will have their choice of 4 3PIs to build on top of, including ChangeTip, ShapeShift and BitGo.

Victoria van Eyk, VP Community Development with ChangeTip, will be there and welcomes the opportunity to reach out to the community: “Job fairs and hackathons like this are a great opportunity for people to congregate, get acquainted, and create value together – both immediate and long term. We are really excited to meet everyone and see what people are up to, find great talent and see what people use our API for.”

Wall Street Journal’s Mike Casey and Paul Vigna will take your questions

Wall Street Journal reporters Mike Casey and Paul Vigna have been keeping Wall Street and us up-to-date on the evolving world of digital currencies and recently published The Age of Cryptocurrency. They will be answering your questions Saturday evening at a Q&A panel held in the Plug and Play Tech Centre.

As Coinality’s Dan Roseman noted: “Most of the hype around bitcoin is around merchant adoption, with little attention given to job creation. Coinality believes that the bitcoin job market is one of the most important indicators of the technology’s success. We are encouraged by the steady growth in the bitcoin job market and are pleased to work with Plug And Play to host Bitcoin Job Fairs as a way of connecting bitcoin startups with the talent they need to succeed.”

Plug and Play is a global startup accelerator that specializes in growing tech startups. Plug and Play’s international network includes 300+ tech startups, 180+ investors and a community of leading universities and corporate partners. The first Sunnyvale job fair in May 2014 featured 34 startups including BitPay, Circle, Xapo, and Kraken and over 400 job seekers. Admission to the job fair is free for job seekers.

How do digital currencies work? What will be the impact for the global financial system? Are they an opportunity or a risk?

On April 23, Madrid will host the second edition of the Digital Currency Summit, a meeting specially designed as a training and discussion forum with the participation of internationally recognized experts on finance.

The first event was held in Andorra, a country with a strong tradition of financial businesses. The second will be in Spain, where bitcoin is gaining more attention on a national scale.

The Spanish Bitcoin scene includes Calle Bitcoin in Madrid, as well as a growing network of ATMs and a promising group of businesses and entrepreneurs such as Coinffeine, the first company in the world that was legally funded using Bitcoin as a capital.

Jan Kees de Jager, former Dutch finance minister, and Chris Gledhill, head of technological innovation and digital banking at Lloyds Banking will be among the main speakers at the Digital Currency Summit.

The conference will bring together the most innovative thinkers, bankers, financial regulators and finance thought leaders providing key insights about this new industry. There also will be a representative from the European Commission, Harald Stieber, who will share the institution’s point of view on cryptocurrencies and what the commission is doing in the area.

Attendees will receive a wide overviews about digital currencies as well as specific issues regarding the Internet of Money, such as legislative and legal frameworks, their impact and their integration into the banking system and new business and investment opportunities.

De Jager will talk about his experience with digital currencies from a political point of view, and European regulators’ ideas about cryptocurrencies.

There also will be a place to learn about the Bitcoin apps and projects that are bringing Bitcoin to new people. They include Circle, a user-friendly payment platform with an easy learning curve that can be ready for use in a few minutes, and the Japanese e-commerce giant Rakuten, which recently began accepting bitcoin.

After a positive experience at last year’s conference in Andorra, BBVA, IEB, EFPA Spain and Madrid Financial Center will be among the sponsors to participate in this year’s event.

This a guest post by Barry Silbert; the views and opinions expressed are those of the author.

The success of the Digital Currency Council (DCC) is exciting and timely for everyone involved in, and everyone who will become involved in, the digital currency economy. Similar standards-based professional organizations have been critical to the functioning of our traditional economy, and there is little doubt that the DCC will play an equally important role in the emerging digital currency economy.

Historical Parallels

The DCC Certification is similar to other certifications that assure clients that the professional has the expected level of competence. Such certifications enable the professional to differentiate him or herself from the crowd. Certifications allow us to hold professionals who are advising clients to a higher standard, and provide a benchmark for evaluating skill and professional value.

For example, the Chartered Financial Analyst (CFA) certification began over 50 years ago in response to increased interest by the public in investing, and a growing recognition that advisers should have the expertise that met the need for sound financial advice. Original members were grandfathered in through work experience alone, but now the exam is one of the more difficult in the industry and the certification one of the more prestigious. With an annual pass rate of only 50 percent or fewer, the CFA certification guarantees that the holder has the requisite depth of knowledge to offer sound guidance to clients seeking risk adjusted investment returns.

The DCC is on track for a similar outcome, where holders of the DCC certification can present to clients that they are held to a higher standard of knowledge and ethics. There is a significant and growing opportunity for professionals in the digital currency economy. I am glad to see the development of the DCC and to be a part of its membership community, as it will support professionals in developing their respective businesses and add a credible, even foundational, structure to the ongoing growth of digital currencies.

The Impact

In my opinion, the development of digital currencies will have as much an impact, if not a greater impact, on society as did the Internet. Digital currencies revolutionize the manner through which goods and services can be purchased, and by which business can be transacted across the globe. The Internet offered instant open-source global communication and information exchange, and now digital currency offers the same open access for financial exchange. The future of the digital currency economy will be molded by the accountants, lawyers and financial professionals who step up today.

Governments at all levels are attempting to keep pace with the growth of digital currency, and are reacting with a variety of definitions, laws and regulations in an attempt to fit digital currency into existing frameworks. This dynamic presents significant challenges to any professional seeking to guide clients through the perilous, unclear and evolving landscape.

With this backdrop, the DCC is offering professionals a means to obtain the knowledge and skills required of professionals in the digital currency economy, along with a respected credential that will identify their unique expertise.

The Demand

When I began educating myself on digital currencies, there were no obvious resources for trusted, unbiased and accurate information. It took me six months to learn all that was available through multiple resources, many of which were conflicting or unclear. I needed an unbiased and accurate place to discover the facts behind digital currency and test my hypotheses amongst trusted peers. I only wish the DCC was available when I was finding my footing in the ecosystem. The DCC provides the professional adviser an efficient means for getting quickly up to speed on digital currencies, so he or she can take a leadership role in the new economy.

As millions of individuals, businesses and investors are already actively engaged with digital currencies; and as governments begin to share guidance and promulgate regulations – there is no shortage of demand for competent professional advice. Yet there are an inadequate number of professionals who have invested the significant time necessary to get educated on this new area of practice. And consumers of these professional services are left wanting for clarity with regards to the skills and experience of their prospective advisers.

The DCC will help professionals efficiently separate fact from fiction; equipping them to advise individual consumers, merchants and investors. Further, it will provide a mark that will enable consumers of professional services to identify and engage advisers with the requisite expertise and commitment to ethical conduct.

Jon Matonis has joined First Global Credit Board as a non-executive director where he will play an advisory role related to strategic direction, security, due diligence and other matters.

First Global Credit is a finance company that focuses exclusively on digital currency products. Its aim is to bridge the gap between bitcoin and fiat currencies through trading services, debt instruments, merchant services and other strategies.

In a press statement, Gavin Smith, chief executive and founding director of First Global Credit said, “We are delighted to welcome Jon to the board; we have found we share a mutual vision for both the future of bitcoin and how First Global Credit will fit into that ecosystem. Jon’s comprehensive knowledge and connections within the Bitcoin community will be extremely beneficial to the growth and development of the business.”

Matonis, a founding board member and former executive director of the Bitcoin Foundation, has an extensive career in finance and Bitcoin. His resume includes prior positions as CEO of HushMail and Director of Financial Services at VeriSign. A high-profile figure and thought leader in the digital currency community, he also serves on the boards or advisory boards of several other companies in the space, including BitGame Labs, BitPay, GoCoin and CoinDesk.

“There are a lot of companies that maintain bitcoin on their books,” Matonis said in an interview with Bitcoin Magazine. “Those bitcoins usually sit there dormant or even depreciating in value. What First Global does is offer to collateralize those bitcoins so that they can actually get a return.”

Matonis gave the example of online gaming. Traditional casino operators are able to get a return on their floats. But up until now, bitcoin casinos have not been able to do this. First Global offers them an opportunity to generate a yield, said Matonis.

“I’m also excited by the ability to use bitcoin assets as collateral for trading in the futures and options markets,” Matonis added. “Currently, T-bills can be used as collateral on various exchanges, but no one has structured it with bitcoin. First Global Credit plans to add futures markets as one of the markets available via their program.”

“Jon has the big picture,” said Marcie Terman, communications director for First Global. “He has the Bitcoin background and the financial background. He can look at our systems and make sure they are as robust as possible. It will be great to have him as a resource to speak on our behalf with government bodies.

Matonis has presented at conferences across the world on bitcoin and its disruptive economic implications to a wide variety of audiences, including members of the Federal Reserve, Bank of England, European Central Bank, SWIFT, IRS, DHS, payment networks, major financial institutions,, hedge funds and family offices.

Terman also expressed a hope that Matonis would be helpful in bringing in outside financing as the company starts to look outward for equity participation.

“The Bitcoin market is at a pivotal stage in its development,” Matonis said “Having been adopted as a transaction currency by many, the next necessary step in bitcoin’s evolution is to prove itself as a true investment vehicle, an instrument with a fully functioning capital market.”

The Reserve Bank of Australia (RBA) will not intervene in oversight of digital currencies such as bitcoin at the moment, The Australian Business Review reports.

In reply to an Australian Senate inquiry, RBA’s representatives said in their opening statement that the limited use of the currency had no discernible impact on competition or risk to the financial system and that digital currencies represent a potentially important development.

“Digital currencies represent an interesting development in the payments and financial system landscape,” the RBA opening statement notes. “The concept of a decentralized ledger is an innovation with potentially broad applications for a modern economy.”

The Senate inquiry, which is being run by the Senate Economics Committee, has heard from a number of other witnesses from government and industry and will release its report into digital currencies later this year.

“Given the very limited use and acceptance of digital currencies in Australia, digital currencies do not currently raise any issues for the bank in terms of the bank’s monetary policy and financial stability mandates,” said RBA’s head of payment policy Anthony Richards. “The bank’s judgment is that the current very limited use of digital currencies means they do not raise any significant concerns with respect to competition, efficiency or risk to the financial system.”

“Accordingly, it is currently unlikely that any benefits of regulation would outweigh the potential costs,” added Richards. Therefore, the RBA will adopt a wait-and-see approach. If and when bitcoin or other digital currencies start to grow significantly and raise public interest concerns, the RBA will reconsider appropriate regulations.

But for the time being the RBA will trust market-driven solutions rather than engaging in costly regulations. Richards said that consumers should be careful not to misunderstand the degree of protection offered by regulation or oversight, which may lead them to exercise less caution than warranted when selecting and using service providers.

Jonathon Miller, co-founder of Bitcoin trading platform Bit Trade Australia, replied to the Senate inquiry, stating that the double taxation hitting Bitcoin trades in Australia – where a 10 percent Goods and Service Tax (GST) is applied to Bitcoin transactions – forces Australian bitcoin users to go offshore.

“That is 10 percent more than buying bitcoins in other jurisdiction,” he said. “The net effect has been a shutdown of some businesses and a reduction of volume and trade in this jurisdiction.”

Meanwhile, the Australian Digital Currency Commerce Association (ADCCA) has announced a new constitution. In an interesting twist, the new ADCCA constitution has been recorded on the Bitcoin blockchain.

“ADCCA used the Blockchain technology behind Bitcoin to certify the authenticity of its constitution,” ADCCA chairman Ron Tucker said. “Everyone can now easily determine which copies of our constitution are authentic.”

Tucker hopes that the constitution will allow ADCCA to develop more formal relationships with those who have a stake in the digital currency, and represent the wider fintech industry in the future.

“Today saw organizations such as Westpac and the Australian Banking Association give favorable nods to the work of ADCCA, including our work on ensuring all digital currency businesses comply with best practice standards on consumer protection,” he said.

 

Australian Treasury / CC BY-SA 3.0

A new fleet of BitXATM machines is set to launch across Canada in the coming months.

Quadriga CX, Canada’s largest Bitcoin exchange, has big plans to install their new SumoPro two-way bitcoin ATMs in prime locations across the country. These units will be delivered in batches of five and placed in several major cities including Vancouver, Toronto and Montreal.

In 2014, CAVIRTEX attempted a similar rollout of BitAccess bitcoin ATMs, installing them in Gateway Newstands across Canada. The experiment was far from successful, and the company shut down the endeavor a few months later. They ended up selling off their machines at a substantial loss.

While the locations gave the CAVIRTEX bitcoin ATMs high visibility, their failure has been attributed to the fact that they were inadequately staffed and prone to malfunction, with little to no troubleshooting support.

 Quadriga said this new rollout will be different.

“We are excited to finally be bringing some functional and beautiful two-way bitcoin ATM machines to Canada,” said Cotten.

 He explained that the new BitXATM devices are among the most reliable, intuitive and user-friendly bitcoin ATMs on the market. It features an industry-leading 17-inch touch screen that promises to promote ease-of-use. Furthermore, the rollout will happen in small batches, allowing for time to ensure that each new machine is supported and operating properly from the outset.

“We’ve done our research,” says Cotten. “We know the owners of every major bitcoin ATM company. We have used many of them and spoken to previous owners. We have conducted extensive due diligence and feel as though our track record with regard to bitcoin ATM distribution across Canada will allow us to continue to provide a superior service.”

QuadrigaCX has been responsible for installing the first Lamassu and Skyhook units in Canada. Since then, they have placed more than 40 machines across the country.

The world’s first bitcoin ATM, the Robocoin at Waves, was launched by Bitcoiniacs in Vancouver at the end of 2013. Quadriga installed the second bitcoin machine, Canada’s first Lamassu, three months later. The company went on to purchase and install more than a dozen additional Lamassu machines across Canada last year, as well as Canada’s first Skyhook.

Like most other independently owned bitcoin ATMs across Canada, these machines will trade on the Quadriga CX platform. These new BitXATM machines also will be modified to allow for direct cash deposits and withdrawals from customers’ Quadriga CX balances.

Cotten expects to launch the first of the new machines in the heart of downtown Vancouver in early June. Transactions will carry an introductory zero-percent fee as users become acquainted with the new bitcoin ATMs.

In a vote consisting of five ayes and one abstention, the Bitcoin Foundation Board has elected lifetime member Bruce Fenton to the position of Executive Director, replacing interim director Patrick Murck who held the position for the five months following Jon Matonis’s resignation.

In an announcement posted on Monday afternoon, the Foundation stated that it decided that “in opinion of the board, [Fenton] is the best candidate for the job.” In February of 2015, Fenton lost his bid to win one of the two open Board seats during the general election, finishing in fourth position behind Olivier Janssens, Jim Harper, and Michael Perklin.

“Bruce Fenton is a solid leader for individual and industry members,” Board member Elizabeth Ploshay told Bitcoin Magazine. “His experience is extensive and he has an understanding of the Bitcoin space and Bitcoin Foundation.”

Fenton posted a message to Bitcoin Foundation members via the Foundation’s blog. In it, he detailed the series of events that led to his election. According to Fenton, his position is part-time and volunteer (it had historically been a paid position), and his name had been put forward in consultation with the rest of the Board members.

The new leadership announcement comes at a time of uncertainty for the beleaguered Foundation which has been struggling with issues of solvency, transparency, and public image.

In an interview with Bitcoin Magazine, Fenton stated, “The first order of business will be both getting the most accurate picture of where we are [financially] and communicating with members and stakeholders on the best ideas and priorities moving forward.” He added, “I’m not sure how long it will take…but certainly I’ll work to get the most full picture as quickly as possible.”

The Foundation’s Financial Reality

Despite recent reports of the Foundation’s precarious financial position, Fenton is optimistic about its future. “I’m very confident the Foundation can remain in the black partly because prior to my joining as Executive Director, outgoing costs were cut quite a bit.  We can do many things in a cautious and financially responsible manner that help the organization and its mission.”

“We need to adapt to our current financial reality — this means focusing on those activities with the highest impact and lowest costs,” Fenton says. “Spending has been reduced a good deal.  One of my main goals is to have the Foundation operate at the right size for positive impact while being financially prudent.”

Pivoting Back to a Broader Role

Unlike his predecessor, Fenton anticipates a broader role for the Foundation. Where Murck advocated a “pivot” in the Foundation’s direction toward core development, Fenton aims to focus “on those activities with highest impact and lowest costs.”

“The space moves fast and I think that the Foundation found that a focus on core development has some challenges — for example, funding it is expensive and relies on large donors who may have their own ideas or plans which might not mesh with an elected board and member-driven organization.”

Fenton added, “Going forward, I think the Bitcoin Foundation can be an asset to Bitcoin by working in education, financial inclusion, advocacy and other areas.”

Transparency and Accessibility: Concrete Suggestions Welcome

Regarding issues of transparency, Fenton thinks that the most important areas of transparency are in finances. “I also plan to personally be very accessible on the internal and external forums and other means,” he says. “I want to see as much transparency as possible, provided we always respect the privacy of all members when it comes to membership, communications and other areas which individuals may want to keep private.

“What I’d like to have is people make specific, concrete suggestions on what [members would] like to see.  Some of those we can and should implement — some of those suggestions may come at a sacrifice to privacy or have other drawbacks, so I’d communicate with the membership on any areas of a transparency push that I disagreed with.”

Fenton brings an extensive background in finance, as well as in the Bitcoin space, to the position of Executive Director. He is a prominent investor, consultant and advisor who helped to organize the Dubai Bitcoin Conference and Satoshi Roundtable retreat. His resume includes founding Atlantic Financial, a global-focused consulting and wealth management firm, and a stint at Morgan Stanley, specializing in emerging technologies and emerging markets. He is currently Managing Director of Boston Gulf Advisors Group and on the advisory board for Bitcoin Shop, a publicly traded e-commerce marketplace.

Joi Ito, director of the prestigious Massachusetts Institute of Technology (MIT) Media Lab, is about to unveil a plan for the Institute to become what he calls an independent, neutral home to help with Bitcoin standards development, Xconomy reports.

Ito has been prominently involved in the development of the Internet from the very beginning, from helping start the first commercial Internet service provider in Japan to investing in Twitter and helping bring it to Japan. A former CEO of Creative Commons , Ito also has served on the boards of the Open Source Initiative, ICANN, The Mozilla Foundation, Public Knowledge and the Electronic Privacy Information Center (EPIC).

In collaboration with other high profile MIT experts such as economist Simon Johnson and cryptographer Ron Rivest, Ito plans for MIT to become a non-commercial, neutral place for academics to talk about Bitcoin.

“I think within a couple of weeks we’ll be announcing something which will be a little bit more substantive,” says Ito. “And I’m not pushing it, but I’m offering MIT as a neutral academic home for some of the conversations and the technical coordination. Which I think will give a lot more stability to Bitcoin, which right now is a little bit fragile.”

The Bitcoin ecosystem doesn’t have a central governing body, but the Bitcoin Foundation probably is the closest thing. However, the short history of the foundation has been troubled by rumors and scandals, and there has been opposition to the foundation’s leadership in the Bitcoin community. Recently, Bitcoin Foundation board member Olivier Janssens wrote that the foundation had been undermined by “two years of ridiculous spending and poorly thought-out decisions” and was “effectively bankrupt.”

In view of the troubled history of the Bitcoin Foundation, which is now considering splitting into two separate organizations for promotional activities and core development funding, it seems likely that the Bitcoin community as a whole could welcome MIT as a more suitable, prestigious venue for leadership and coordination of the Bitcoin ecosystem.

“What I’d like to do as a contribution from MIT – and this is one of my first forays into going Institute-wide from the beginning, by bringing Simon Johnson for the economics and Ron Rivest for the crypto – is to try to come up with a non-commercial, neutral place for academics to talk about Bitcoin,” says Ito. “What I’m really trying to do is offer us as one of the neutral places to do this. And I do think academia plays a role.”

Ito published his first Bitcoin essay in January. In the essay, titled “Why Bitcoin is and isn’t like the Internet ,” he explores parallels, similarity and differences between the history of Bitcoin, the new digital currency of the Internet, and the history of the Internet itself. An important difference is that the financial establishment, which mostly left the Internet alone at the beginning, has been substantially involved in the early development of cryptocurrencies.

Ito summarizes this point for Xconomy:

“With Bitcoin, it was sort of on the Internet, but the financial interests got very involved before there was a lot of standards-setting,” he says. “It’s going at hyperspeed, much faster than any other standards body. And you have the added problem that there’s a lot of money involved. “

Before the Xconomy interview, Ito outlined his developing plans at the MIT Bitcoin Expo 2015 in March. He thinks MIT could and should provide a neutral and prestigious academic home for the development of blockchain standards, technologies and best practices, independent of the powerful commercial and regulatory interests that are forming around the emerging digital economy.

The full video recordings of the MIT Bitcoin Expo 2015 are available online. Ito’s talk starts at about 2 hours and 45 minutes in this video.
Headshot by Joi Ito / CC BY 2.0, MIT Media Lab photo by the Knight Foundation / CC BY-SA 2.0

This is a guest post from Digital Currency Council member Kirk Phillips.

The burden of managing a tax calculation every time you buy something with bitcoin creates adoption friction that’s counterintuitive to the frictionless nature of bitcoin that we all know and love. (More on this in my article titled, “A Gift from the IRS and the Coffee Problem.”) So what if there was a better way to align the tax rules with the uses and benefits of bitcoin, to naturally accelerate adoption? How about eliminating short-term capital gains rules for bitcoin and other digital currencies?

Old world ways

Most folks generally understand the tax implications of using bitcoin by now, which includes having to track bitcoin to calculate a gain or loss whenever you buy a cup of coffee. Bitcoin may have become a victim of its own volatility when the IRS, during its decision-making process, was perhaps looking at the rise of bitcoin without considering price drops. Nonetheless, the application of property rules with short-and long-term capital gains is consistent with the taxation of any other assets going up and down in value. Bitcoin, however, deserves an exception, one that will take us into warp-speed and mass adoption.

Bitcoin simultaneously encompasses two wonderful traits of money, serving as both a store of value as well as a medium of exchange. The frictionless, almost instant transfer of value speaks for itself by transforming the Stone-Age model full of fees and headaches we’ve come to expect. Bitcoin has a magical store of value component because it’s a self-contained system combining a currency, a protocol and a network into something useful and scarce. The IRS short-term capital gains rules, as pointed out in the coffee reference, erroneously add friction to bitcoin’s otherwise frictionless medium of exchange. Ironically, the very same rules are like a gift from the IRS when applied to bitcoin’s store of value. Long-term holds of bitcoin or any other asset have the lowest possible tax rates — 15 percent in some cases — compared to ordinary income as high as 39.6 percent.

 Exploring a new frontier

A few IRS rule changes could easily transform this strange dichotomy into a slam-dunk for bitcoin. My assertion is simple: The cost of supporting the rules is greater than the benefit. The aggregate cost of compliance for taxpayers, combined with the IRS costs to administer the rules, outweighs the benefits to the U.S. Treasury.

Here are just a few of the most obvious costs:

• IRS staff training on understanding digital currencies
• IRS staff training on how to field bitcoin-related questions
• IRS resources spent on processing tax returns with pages and pages of bitcoin transactions (an effort that diverts resources away from areas that produce a higher return)

To illustrate this wasted use of resources further, let’s take data sets from individuals and businesses, while assuming the transactions were in an all-bitcoin world, and calculate the net gain or loss at the end of a year. An analysis of 2014 would likely result in a net gain close enough to zero to justify eliminating the short-term capital gains rules for bitcoin and other digital currencies. For bitcoin to become a truly frictionless medium of exchange, these rules need to be eliminated. Meanwhile, long-term gains for bitcoin held longer than one year would remain intact because larger, infrequent transaction amounts are easy to track. It’s also consistent with taxation of asset appreciation related to bitcoin’s store of value property.

A long-term relationship

The modification I’m proposing creates the perfect dance between store of value and medium of exchange while making things easier for the IRS and the taxpayer. If a business or individual holds bitcoin for 10 months, the question they will ask is: Do I want to continue holding bitcoin into the long-term capital gain zone or use it now for things I need anyway? Those in the game for a long-term play won’t flinch and those who are not will spend the bitcoin and get it flowing again.

In addition, the IRS “wash sale rules” would apply, essentially prohibiting a repurchase of the same cryptocurrency within 60 days of a sale. The wash sale rules normally prohibit sales and repurchase of securities within 30 days so taxpayers can’t recognize a loss. In this context, however, it would extend the 30-day period to 60 days to thwart the game of resetting the clock on a long-term hold. The wash rules would not apply if bitcoin was used to purchase goods or services. It applies only when bitcoin is sold for USD. For example, if you use bitcoin to buy office supplies, you can’t turn around and use office supplies to buy back bitcoin. On the other hand, if you sell bitcoin for USD you can use the USD to buy back bitcoin, which is why I’m proposing a modified wash sale rule.

If you don’t like the above example, consider these alternatives:

1. Increase long-term capital gains to 22.5 percent

If the IRS were to eliminate short-term gains, then let’s increase the long-term rate to 22.5 percent to offset the revenue that would have been gained from short-term gains, while still remaining a bargain for the taxpayer. Within the current system, collectibles, such as paintings, antiques and baseball cards, have a special tax rate of 28 percent; therefore, bitcoin and other digital currencies should be able to have a special tax rate.

2. Implement de minimis transaction relief

Transactions for purchases of goods or services less than $100 would not be subject to short-term capital gains (for individuals). Similarly, transactions less than $250 would not be subject to short-term capital gains (for businesses). Long-term term capital gains rates would still apply to bitcoin held longer than one year.

3. Establish a volatility threshold

Both individual and business taxpayers would be exempt from short-term capital gains when the price of bitcoin fluctuates within a volatility threshold. As long as the highest price at any point during the year is less than 150 percent of the lowest price during the year, then no transactions will be subject to short-term capital gains tax. For example, if the lowest price was $400 and the highest price was $595 then no capital gains would apply because 150 percent of $400 is $600 and $595 is less than $600. In this case as well, long-term term capital gains rates would still apply to bitcoin held longer than one year.

4. Create a 5-year short-term capital gain exclusion

Under this exclusion, all bitcoin transactions for purchases of goods or services, for both individuals and businesses, would be exempted from short-term capital gains. This proposed five-year sunset is consistent with other sunsetting provisions that end temporary relief. Long-term term capital gains rates would still apply.

Any of these proposed changes would likely come with unintended consequences, but progress always comes with growing pains. Any new rules that stimulate bitcoin adoption, reduce taxpayer burden, and give the IRS a fair share, should be welcomed.

How would you change the IRS rules?

In September 2014, eBay announced plans to separate eBay and PayPal. In a recent SEC filing, eBay confirmed that a newly formed corporation named PayPal Holdings, Inc. (“PayPal”) will take over the businesses that make up eBay’s payments segment. eBay, the existing publicly traded corporation, will continue to operate its marketplaces business.

The separation, which will provide current eBay stockholders with equity ownership in both eBay and PayPal, will be effected by means of a pro rata distribution of 100 percent of the outstanding shares of PayPal common stock to holders of eBay common stock.

“As two distinct publicly traded corporations, eBay and PayPal will be better positioned to capitalize on significant growth opportunities and focus their resources on their respective businesses and strategic priorities,” reads the eBay announcement. “As independent companies, we expect eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets. eBay and PayPal also will benefit from additional flexibility and agility to pursue new market and partnership opportunities.”

“Following the distribution of all of the outstanding shares of PayPal common stock by eBay Inc. to its stockholders, PayPal will be an independent, publicly traded company focused on making money work better for people and businesses around the world,” says Daniel H. Schulman, President and CEO-Designee of PayPal Holdings. “The access to and movement of money is an important market that affects the lives of almost everyone. Our mission is to increase our relevance for consumers, merchants, friends and family to access and move their money anywhere in the world, anytime, on any platform and through any device (e.g., mobile, tablets, personal computers or wearables).”

In the SEC filing, eBay and PayPal confirm that merchants with a standard PayPal account also can integrate with Braintree to begin accepting bitcoin payments.

Payment processor Braintree, which was acquired by eBay for USD $800 million in September 2013, will be part of PayPal Holdings under the new structure. Braintree permits merchants to accept bitcoin payments seamlessly in partnership with Coinbase, allowing their customers to pay with bitcoin instantly and securely on any device without manually transferring bitcoin or scanning QR codes. The Braintree bitcoin payments service, currently in public beta, has zero transaction fees on the first $1 million in bitcoin sales and a 1 percent fee for cashing out bitcoin to a bank account.

“Sell your products and services in the currency of your choice and let your customers pay with Bitcoin,” reads Braintree’s invitation to its clients. “We take care of the conversion, transfer, and transaction reporting that fits in with your existing Braintree workflow. Bitcoin transactions are confirmed in less than a few seconds, eliminating chargebacks, which reduces your exposure to online fraud.”

Besides bitcoin, PayPal allows merchants to accept Apple Pay and Venmo payments via Braintree.

The separation of eBay and PayPal, which will take place in 2015 (no exact date is given in the SEC filing) will allow the two companies to more effectively pursue distinct operating priorities and strategies and opportunities for long-term growth and profitability. In particular, PayPal’s management will be able to focus exclusively on its payments business, and enjoy “increased flexibility to pursue new partnership and strategic opportunities that may have previously been unavailable for strategic or other reasons.”

It seems likely that the increased flexibility and exclusive focus on online payments could result in PayPal taking a more active role in the Bitcoin ecosystem.

If you are a developer who is currently working on an Ethereum-based project, there could now be additional funding available to you.

In a recent blog post, the Ethereum Foundation announced ÐΞVgrants (originally named ΞTHgrants): a program intended to support developers who are making significant contributions to the Ethereum ecosystem.

According to the announcement, written by grants administrator Wendell Davis, the goals of ÐΞVgrants are threefold:

1. To provide developers interested in contributing to the Ethereum ecosystem the opportunity to spend significant time on their project in order to bring it to completion.
2. To extend the codebase with useful components that are not the main focus of ΞTHDEV, but which would be very valuable to users of Ethereum generally.
3. To increase outreach to other communities and the general public.

Grants are not part of a venture capital program, nor are they intended as bounty offerings. The focus is on projects that are already in progress, that show a clear direction and that have a methodology for reporting on progress and outcomes.

While businesses and developers need not be considered not-for-profit, projects must be open-source with a distinguishable public benefit in order to be eligible for consideration.

“Fueled by what can only be described as impassioned determination, developers from all walks of life have risked their time and credibility to pioneer in this radical and largely unknown domain of innovation,” Davis states in the blog post. “Today we are launching a new program to support and thank those who continue to take this journey with us.”

The size of the grants will range from USD $1,000 to $10,000 per project and will be determined by the ÐΞVgrants administrator and board through a two-step evaluation process. A ÐΞVgrants website is in the works. In the meantime, interested applicants can follow the @ÐΞVgrants Twitter account or contact the ÐΞVgrants administrator at grants@ethereum.org.

Funds for the grant program will come from the monies raised in Ethereum’s Ether sale, held over a 42-day period last summer. Ether is the “fuel” necessary for operating the Ethereum system and is used to pay for all operations of processing and storage performed by the network.

The sale of 60,102,216 ETH raised 31,531 BTC, worth approximately $18,439,086 at the time.

Ethereum is a next-generation smart contract and decentralized application (Dapp) platform. Dapps that will run on the Ethereum platform will include financial applications (subcurrencies, financial derivatives, hedging contracts, savings wallets, wills, full-scale employment contracts, real estate), semi-financial applications (self-enforcing bounties for solutions to computational problems, insurance), and nonfinancial applications (online voting and decentralized governance, file storage).

Other potential Dapps could include secure auctions and prediction markets, decentralized customer matching services (along the lines of Uber and AirBnB), and a host of Internet of Thing apps.

Bitcoin company Xapo announced a partnership with e-sports company CEVO and bitcoin-based gaming service Leet to provide a seamless, bitcoin-enabled competitive gaming experience to players.

“We believe that gaming presents one of Bitcoin’s most exciting growth opportunities, as fast, inexpensive and secure bitcoin payments have the potential to open the global gaming community to players who lack access to a bank account or credit card,” notes the XAPO announcement. “CEVO users will now be able to earn and challenge their friends for bitcoins across some of the world’s most popular games.”

Founded in December of 2004 with the intention to transform competitive online gaming into a professional sport, CEVO (“Cyber Evolution”) hosts free and pay-to-play tournaments across a variety of AAA games such as Counter-Strike, a first-person shooter video game developed by Valve Corporation, League of Legends and Team Fortress 2. Most CEVO e-sporting tournaments are based on the latest game in the Counter-Strike franchise, the online tactical first-person shooter Counter-Strike: Global Offensive (abbreviated as CS:GO). Leet also offers CS:GO and League of Legends tournaments.

CS:GO players join either the Terrorist or Counter-Terrorist team and attempt to complete objectives or eliminate the enemy team. Players purchase weapons and equipment at the beginning of every round, and winners receive compensation after the game ends. CS:GO is extremely realistic and addictive to hordes of adrenaline-filled online gamers who enough energy (and money) in the game to justify the label “e-sport.”

Upcoming Virtual Reality headsets such as the Oculus Rift, are expected to be able to provide even more realistic 360-degree immersion in online games, will further increase the appeal of e-sports.

“Over the last several months Xapo has invested substantial resources in trying to better understand how Bitcoin can be used to improve a game’s engagement, retention and monetization,” says XAPO’s Director of Business Development Fernando Gouveia. “As part of that effort, we have been developing new APIs that allow game developers to easily build in-game functionality for managing bitcoin deposits, withdrawals and transactions.”

“Do you play @CounterStrikeGO?” – asks Gouveia on Twitter. “Well now you can play against your friends for #bitcoin with @xapo, @cevo and @leetgg! “

XAPO recently partnered with multiuser Minecraft server BitQuest to explore the potential of bitcoin in online games and virtual worlds. BitQuest leverages the Xapo API and the open-ended feature set of the massively popular Minecraft game to create a compelling online gaming experience with an easy-to-use internal economy based on bitcoin.

“Bitcoin is the best candidate to be the official currency of virtual worlds and BitQuest, making it beyond gambling, using it to fuel virtual societies for fun and connecting people together, is a leap forward in the direction we want to see Bitcoin in gaming,” chief BitQuest developer Cristián Gonzáles told CoinDesk.

BitQuest has “serious gaming,” including a virtual architecture contest. That’s but a first example of converging virtual reality and blockchain technology, and shows how bitcoin can be a solid foundation for the in-game economies of social games such as Second Life and forthcoming virtual worlds such as “Second Life successor” High Fidelity.

Meanwhile, CEVO is giving away $21,000 in bitcoin to new users who open a CEVO account and link it to their XAPO bitcoin wallet.

Operating a small business with Bitcoin just got a bit easier. Online billing service Hiveage has announced its integration with Bitcoin wallet and exchange Coinbase, allowing its 45,000-plus small business and freelance clients around the world to invoice and accept payments in bitcoin.

“Bitcoin is quickly becoming a useful way of transferring value, and it’s been highly demanded over the past few months by our users,” says Hiveage founder and CEO, Lankitha Wimalarathna.

The company started receiving requests to add bitcoin support in June 2014, citing high transaction fees charged by other payment methods as the main reason.

“Many of the customers who wrote to us were already accepting payments in bitcoin,” said Prabhath Sirisena, co-founder and creative director of Hiveage. “Our new integration with Coinbase allows them accept direct bitcoin payments on their digital invoices sent via Hiveage. This makes it easier for them to keep track of their business finances, regardless of the currency.”

Hiveage offers clients the ability to send invoices and estimates, accept payments online, track time and expenses, manage teams and view detailed reports. While invoicing is a free service, other features are offered at an additional cost.

Connecting a Coinbase account and adding bitcoin as a payment and invoicing option will cost users $1.95 per month.

With clients in more than 140 countries worldwide already, Hiveage is planning a major push into the EU market, beginning with the Netherlands and Germany. Adding new payment services options, including bitcoin, is an important part of their global expansion strategy.

“Coinbase has a very strong position in the U.S., and they’re actively expanding in Europe,” said Sirisena. “This aligns well with our plans, too: The majority of our customers are from the U.S., but this year we’re focusing on making Hiveage an attractive option for the European market, where 20 percent of our customers come from.”

The company decided to focus on Amsterdam as a starting point after attending the Uprise Startup Festival in March. Amsterdam is also known to be a hub of Bitcoin activity, boasting an active meet-up community and Embassy. It was also the host of the Bitcoin 2014 conference last May, and will host Bitcoinference 2015 this May.

“There’s no shortage of great startups looking to share their experiences,” said Sirisena. “I’m really looking forward to seeing how people react to us and learning how we can make their billing workflows easier.”

When Canadian exchange Cavirtex closed its doors in February, there was a lot of speculation about the reasons it shut down, but few expected the exchange to come back to life. Cavirtex shut down amid security concerns after a major breach.

Now, New York-based digital currencies exchange Coinsetter is expanding into the Canadian market by buying previously closed exchange Cavirtex for close to $2 million, according to Fortune Magazine. Coinsetter, which specializes in institutional trading for investment firms, is confident it can win back all of Cavirtex’s old customers in Canada and grow its presence there.

Cavirtex may have stiff competition in Canada

In a bold statement, Coinsetter CEO Jaron Lukasiewicz was quoted as saying there were currently no good exchanges for the Canadian market. In fact, he said, “Every single exchange that currently exists in Canada is very poor quality, it’s almost unbelievable…the other options in that market are very bad.”

After Vault of Satoshi and Cavirtex closed down earlier this year, Canadian exchange QuadrigaCX  comfortably slipped into first place in the Canadian market.

Responding to comments by Lukasiewicz, Gerald Cotten, Founder and CEO of QuadrigaCX, told Bitcoin Magazine, “We welcome the additional interest in the Canadian digital currency space. We will work hard to continue providing the best trading experience for all of our clients.”

Regulations not really an issue

There was speculation at the time Cavirtex closed down that new federal regulations and a new set of regulations local to Quebec were factors in Cavirtex’s decision.

But Amber Scott, digital currencies specialist and Chief AML Ninja at Outlier Solutions had always said that she doubted that regulations by Canada or Quebec regulations were a factor in Cavirtex’s closing.

“I would say that Cavirtex took steps to be prepared for regulation relatively early on,” Scott told Bitcoin Magazine. I don’t expect that the Canadian regulatory environment was closely related to their temporary closure.”

Coinsetter is known more for wholesale rather than retail investing, working with investment firms and institutional traders to enable margin trading.

 

March 21, 2015. Los Angeles, CA –

On April 18^th, 2015, for the first time in downtown Los Angeles, the State of Digital Money will paint a picture of a future vision shaped by the leaders of the digital currency community. Key speakers include, Jeff Garzk, Bitcoin core developer at Bitpay, Steve Beauregard, Co-Founder and CEO at GoCoin, and Connie Gallippi, Founder and Executive Director at the BitGive Foundation. Executives from innovative startups such as Factom, Changetip and Airbitz, will also be represented.

Hosted at rhubarb studios within the U.S. bank tower building in downtown Los Angeles, The State of Digital Money will showcase technologies and host expert conversations on the future of currency and financial activities in a developing global economy. With digital payments becoming increasingly more commonplace, new and emerging technologies are disrupting the global financial system. Blockchain technology, cryptocurrencies and decentralized applications are rapidly taking off as funding and investments continue to fuel the movement.

Whether you are new to the movement or are a seasoned professional in the space, attend and network with over 20 top industry professionals and 4 focused panels on regulation, investments, mainstream adoption and blockchain technology. Additional presentations will also cover the issues of digital currency security, social impacts, bitcoin mining and even bitcoin in space!

Confirmed Speakers Include:

Scott Bambacigno, Vice President, Alphapoint

Judd Bagley, Director of Communications, Overstock
Steve Beauregard, Co-founder & CEO, GoCoin
Andrew Beal, Associate, Crowley Corporate Attorneys
Flavien Charlon, Founder, Coinprism
Connie Lin Chung, Senior Payments Project Manager, Expedia
Edward Clements, Creator and Owner, Bitbrew.net
Adrian Fenty, Business Development, Perkins Coie
Connie Gallippi, Founder & ED, Bitgive Foundation
Jeff Garzik, Bitcoin Core Developer, Bitpay
Lingyun Gu, Founder, Chairman & CEO, Equinox Decisions
Alyse Killeen, Venture Capital Investor, March Capital Partners
Andrew Lee, CEO, Purse.io
Alex Rozman, Senior Manger, Deloitte Transactions and Business Analytics
Paul Puey, CEO / Co-founder, Airbitz
Matthew Roszak, Founder & CEO, Tally Capital
Marco Santori, Counsel, Pillsbury Winthrop Shaw Pittman
Paul Snow, Creator and Founder, Factom
Brett Stapper, Co-Founder, Falcon Global Capital
Marco Streng, Co-Founder and CEO, Genesis Mining
Nick Sullivan, Founder, Change Tip
Michael Terpin, Co-Founder, BitAngels
Micah Winkelspecht, Founder & CEO, Gem
Sam Onat Yilmaz, General Partner, Decentralized Applications Fund

 

To learn more about the event and to buy your tickets visit:

www.cureativ.com/sodm

Eventbrite:

stateofdigitalmoney.eventbrite.com 

Twitter:

Twitter.com/cureativ

Contact Information
events@cureativ.com

French telecom carrier Orange is looking to invest in Bitcoin startups in the coming months, Bloomberg reports. Orange (formerly France Telecom), one of the largest telecom firms worldwide, is now one of the first big international phone carriers to become interested in the technology behind the digital currency.

“There’s something intriguing in this technology, so we want to be there as early as possible,” said Georges Nahon, CEO of Orange Silicon Valley. “This could be a digital platform of the future.”

Orange Silicon Valley has been holding Bitcoin events at its offices in San Francisco and is talking to two Bitcoin companies, Nahon said. The group can directly invest $20,000 per startup and tap into the larger funds of Orange Digital Ventures, the venture capital arm of Orange, which plans to support 500 startups worldwide by 2020 as outlined in its “Essentials 2020” strategy plan.

The Bloomberg article notes that venture capital investments in digital currency startups hit an all-time quarterly high of $233.95 million in the first quarter of 2015.

It may seem odd that Orange is planning to invest in Silicon Valley startups when there is plenty of talent in France and throughout Europe, but Nahon is persuaded that Silicon Valley still has an edge when it comes to disruptive technology development.

“Here’s where the spark of digital innovation is located and how the communication ecosystem is rapidly evolving,” he wrote in February. “This is why Orange Silicon Valley is in the San Francisco Bay Area. We’re here to work with companies to actively participate in these disruptive innovations.”

According to Nahon, the digital payments space will begin to see a marriage of new tech with incumbent institutions, which will opt for acquiring smaller, more agile and mobile-based startups, reminiscent of when mobile advertising firms were rapidly purchased in the past two years.

The Bloomberg article reports that, according to Nahon, Bitcoin technology could be used to cheaply transfer money between different countries. Orange already has more than 12 million users for its money transfer service Orange Money in Africa and the Middle East, and is looking to expand the business.

But Nahon realizes that the blockchain technology can have far-reaching implications beyond money transfer.

“Cryptocurrencies such as Bitcoin will remain a popular topic, but the focus starting in 2015 will be the adoption of blockchain,” Nahon wrote in January. “Developers and companies will flock to the technology in pursuit of developing the ‘blockchain killer application.’ Innovation like this will have implications far beyond payments, as it’ll be a new way for us to trust each other more generally, and facilitate changes in how society exchanges things of value.”

He added that new sources of funding and support for tech startups will come from renewed accelerators and incubators.

A related initiative is Orange Fab, the startup accelerator for Orange. It’s a three-month program that works with exceptional startups that are changing how people connect and communicate. Those accepted into the Orange Fab program receive help from engineers and business analysts onsite at Orange Silicon Valley, and also from thought-leaders, industry experts and investors active in Silicon Valley and the San Francisco Bay Area.

Startup OneBit is developing a Bitcoin wallet app that lets users pay at any store with contactless mobile payments via the MasterCard PayPass payment network.

OneBit securely converts bitcoin on the fly at market rate into any major local currency using BitPay, and pays the merchant via their NFC payment terminals. OneBit will permit users to pay at any MasterCard PayPass-accepting merchant worldwide, with zero fees.

“The magic that happens underneath” is done by BitPay, which converts the OneBit user’s bitcoin to the local currency of the merchant, and MasterCard, which actually sends the money to the merchant.

OneBit was developed by entrepreneur Toby Hoenisch at a Mastercard Hackathon and, according to Hoenisch, got very positive feedback from MasterCard.

MasterCard is helping OneBit get a partnership with a card issuer, and OneBit is trying to secure funding for industrialization. OneBit is available on an invitation-only basis to selected early-access testers.

“We don’t want to launch a half-assed Bitcoin wallet that gets us in trouble for violating KYC laws,” says Hoenisch on Reddit. “And yes, legal is the main reason we can’t just ship it.”

Anyone can apply for early access on the OneBit website.

Hoenisch has a background in AI, IT-security and cryptography, and his co-founders have backgrounds in user interface design and security.

“I have been fascinated by Bitcoin for the last three years, but never quite found the right idea to form a company around until now,” says Hoenisch. “We managed to get MasterCard and DBS bank interested in OneBit and with their help, I am confident that we can build OneBit without getting burned like Charlie Shrem did.”

OneBit has been invited to the selection days of the startup bootcamp fintech accelearator in Singapore. If Hoenisch and his team get into the startup bootcamp accelerator program, which will also give them access to DBS bank and their network, they plan to launch OneBit at the end of their three-month program on July 28th.

If Hoenisch and his team manage to get funding and launch the project, OneBit promises to be nothing short of revolutionary: Bitcoin holders will be able to pay merchants directly from the Bitcoin wallet on their phones without requiring merchants to take direct steps to accept bitcoin.

NFC-enabled PayPass payment terminals are very common in Europe and Singapore, and increasingly common in Canada and Australia. Therefore, it seems likely that OneBit will make the life of daily bitcoin users much simpler and reduce their dependency on exchanges.

The direct involvement as a partner of MasterCard, whose APIs and SDKs are used together with those of BitPay to power the OneBit platform, may seem surprising to those who remember recent statements by MasterCard that indicated hostility to Bitcoin.

In a December 2014 submission to an Australian Senate inquiry, MasterCard urged regulators to move against the pseudonymity of digital currencies such as bitcoin.

“Contrary to transactions made with a MasterCard product, the anonymity of digital currency transactions enables any party to facilitate the purchase of illegal goods or services; to launder money or finance terrorism; and to pursue other activity that introduces consumer and social harm without detection by regulatory or police authority,” said the MasterCard statement.

It’s interesting to note that the Reserve Bank of Australia (RBA) recently replied to the same Senate inquiry by stating that it is unlikely that any benefits of Bitcoin regulation would outweigh the potential costs. RBA’s head of payments policy Tony Richards also said that, while digital currencies are not legal tender, there is nothing to prevent two parties agreeing to settle a payment using a digital currency.

Perhaps, after many similarly open-minded positions on Bitcoin taken by governments worldwide, MasterCard realizes that Bitcoin is here to stay and moving toward more integration with mainstream fintech.

Image via OneBit.

Former Nike CIO and member of the exclusive Fortune 40 Under 40 list Anthony Watson has joined the Bitcoin bank Bitreserve as President and Chief Operating Officer.

“I am thrilled to join Bitreserve at such a pivotal moment in the evolution of cloud money and financial technology,” says Watson. “Money is a common language around the world, and Bitreserve democratizes how people access, hold and move value. We have the unique opportunity to craft a lasting legacy of delivering transparency, massive innovation and positive social impact to financial services and in peoples’ everyday lives.”

“Anthony will drive Bitreserve’s efforts to inform industry leaders and work with members of the global financial services community to deliver transparency, portability and independence to current and future customers around the world,” says Bitreserve founder and CEO Halsey Minor. “His knowledge and deep insight into financial systems is invaluable as we continue to grow and make strides towards a future that enables anyone to access and participate in the digital economy.”

“I was itching to make an impact,” Watson told Fortune. “I wanted to do something that is valuable for people broadly, not just in one industry. And what Bitreserve is looking to achieve really democratizes finance. It’s going to help people all over the world. The financial system is inherently unfair – it’s always the richest who have access, and the poorest don’t have access, or when they do, they have to pay astronomical rates.”

Bitreserve solves bitcoin’s volatility problem by enabling users to hold bitcoin as stable, real-world currencies. Bitreserve currently offers eight options: U.S. dollar, euro, U.K. pound, yen, yuan and the latest two additions – Indian rupee and Mexican peso.

Bitreserve, which also offers commodities – for now, the metals gold, silver, platinum and palladium – recently expanded to Mexico in partnership with its largest investor, Grupo Salinas CEO Ricardo Salinas-Pliego.

With this expansion, Bitreserve wants to grab a slice of the large market for remittances sent from migrant Mexican workers in the United States back to their families in Mexico. It is working in partnership with a major financial services company and community bank.

The plan combines the faster and cheaper remittances permitted by Bitcoin with the convenience of using the national currency.

Minor told Fortune that “the great magical beauty of bitcoin” is that it allows for the creation of financial institutions without having to go through the traditional financial system.

“We’ve taken the idea of Bitcoin and applied it to the world consumers already live in, rather than trying to force consumers into a new world that has high risk,” he said.

Minor’s thoughts about the future of Bitcoin are especially interesting: “I’ll be surprised if Bitcoin is here in five years,” he said. “It’s a means to an end. The value of Bitcoin isn’t the currency, but the technology. I think once the world becomes more accustomed and attuned to the platform of Bitcoin, the noise will go away, and the currency will go away, too.”

Watson is a high-profile spokesman for a growing number of workers who value work-life balance and refuse to sacrifice personal life for their career. As such, the Fortune article notes, he values the modern, distributed workplace at Bitreserve.

“Millennials don’t want to or need to work in one big concrete building in one location,” he said. “That’s not how the world works anymore,” he said. “Some people want to work remotely from home, some want to work from a coffee shop, some want to work at an office.”

According to an internal document obtained by Bitcoin Magazine, the Bitcoin Foundation is considering splitting into two separate organizations. Under this proposal, an entirely new entity would be created to fund core development (the Bitcoin Foundation’s current focus), while a slimmed-down Foundation would continue as a promotional organization supported by its current membership. This pivot would return the Foundation to its original vision in a bid to ensure its survival.

The internal document cites the many challenges that the Foundation has faced, including reputational damage, declining membership, and continued operating losses. These hardships are the same ones mentioned by newly-elected Bitcoin Foundation Board Member Olivier Janssens in his controversial weekend post, which claimed that the Foundation was “effectively bankrupt.” However, according to the leaked document, the Foundation still has several months of operational expenses covered at its reduced burn rate.

The proposal advises that the new entity to fund core development be created immediately and kickoff a $2 million fundraising round led by Patrick Murck and Gavin Andresen. By doing this, the Foundation could separate itself from the increasingly-controversial but essential topic of core development and return to its original vision of being a community-driven promotional organization for Bitcoin. Andresen would take an active role in leading the new organization for core development through this critical time.

This is a developing story and Bitcoin Magazine will update it as more information becomes available. Attached is the full document obtained by Bitcoin Magazine.

 

Jacob Dienelt is the latest Morgan Stanley veteran to leave Wall Street and join the Bitcoin industry. Following the likes of former JPMorgan Chase executive Blythe Masters and former JPMorgan Managing Director Paul Camp, Dienelt has made the move from traditional banking at Morgan Stanley Private Wealth Management to join the emerging digital currency industry as head treasurer of Factom .

Factom, a Bitcoin 2.0 company creating a notarized audit trail with blockchain technology, has hired Dienelt as part of its focus on bitcoin asset management for its software token sale. Dienelt brings his experience managing a Futures Specialists desk at Morgan Stanley’s New York office to the nascent Bitcoin industry. He graduated from Kenyon College in 2003 where he majored in Game Theory. After graduation, he worked at a private real estate asset management company performing REIT analysis.

On leaving his Wall Street job, Dienelt states, “After two years traveling to Bitcoin conferences, mining, and running a paper wallet company, I’m glad to have found a home in the space.

“Factom is the first non-financial application of the distributed ledger technology that will, over the next decade, change how people prove their data is authentic, and so much more. I spent almost ten years at Morgan Stanley, and I’ll miss my friends and clients dearly. I just couldn’t miss an opportunity to help shape such an important ecosystem as it develops. I’m very excited to be working with [founders] Paul, David, Peter, and the rest of the team.”

Factom has been featured recently for their series of partnerships involving Bitcoin price stability with Tether, documenting gold exchange trades with Serica, and providing notarized audit trails for the Internet of Things with Rivetz.

David Johnston, Chairman of the Factom Foundation, welcomed Dienelt to the team, saying, “As the world’s large companies and institutions begin adopting blockchain technology, it naturally follows that their top people will get involved in projects such as Factom in order to be leaders in that transition.”

Johnston is referring to the recent trend of Wall Street executives who have left to join Bitcoin companies despite the public skepticism Bitcoin has received from banking executives. Jamie Dimon, CEO of JPMorgan Chase, was quoted last March stating that ‘Bitcoin [is] a terrible store of value that could be replicated over and over.’

“The question isn’t whether we accept it,” Dimon said in a recent interview with CNBC. “The question is, do we even participate in people who facilitate Bitcoin?”

Unlike Bitcoin companies which are focused on Bitcoin’s use as a digital currency for payment solutions which Mr. Dimon is referring to, Factom is only using the technology of Bitcoin – namely the distributed ledger and consensus system that makes up the blockchain. Factom provides a distributed consensus and audit trail leveraging the Bitcoin blockchain. The company’s open source platform stores a compressed and encoded version of data into the immutable blockchain record as a hash. Factom recently began a crowdsale of tokens supporting the development of the platform and has raised over 1000 bitcoins to date. Upon close of the token sale at the end of the month, Dienelt will be taking the lead on managing the bitcoin received during the sale, bringing his wealth of knowledge and experience from Morgan Stanley to Bitcoin 2.0.

Editor’s note: In the interest of full disclosure, Lisa Cheng is an advisor to the Factom project and does not hold any financial stake in the company. She will be participating in the token sale and receiving Factoids.

For the first time, bitcoin has been used to incorporate a legal entity in Italy. The legal status of Bitcoin varies by country, but the Bank of Italy defines it as an unregulated digital decentralized virtual currency based on peer-to-peer, encryption on a shared blockchain.

According to Italian Civil Code, the formation of a private limited company requires that the company have a minimum capital amount of €10,000. This minimum capital requirement means that business owners must make an initial contribution to the company.

According to Art. 2464 of the Italian Civil Code, “1. The value of the contributions may not be less than the total capital. 2. Any assets capable of economic assessment can contribute to capital.” Based on that definition of capital contributions, Thomas Bertani incorporated a new private limited company using bitcoin.

On March 24, 2015, Bertani incorporated Oraclize Srl (Extract of Public Register) with a capital contribution of 45 bitcoin, which was registered by Public Notary Giacomo Pieraccini (Act of Incorporation).

Stefano Capaccioli assisted with the incorporation to ensure proper identification, traceability and proof of property through the validation of the signature that manages the Bitcoin address. Capaccioli, CPA and auditor in Arezzo, Italy, is founder of AssoB.it, an Italian association that aims to represent businesses and promote the activities on blockchain technology.

Bertani created a Bitcoin address during the incorporation, transferred 45 bitcoin, and delivered the private key to the appointed director. That transaction was included in block 349007.

This form of contribution is made during the process of incorporation. The transparency and traceability of this process is important, most notably during the passage of the ownership of bitcoin and verification of any further transaction. Making this contribution in bitcoin allows for additional transparency.

This process is similar to the one used by Spanish Bitcoin exchange Coinffeine, which used bitcoin as initial capital funding called “social capital” in Spain. As in Italy, Spanish law permits the social capital for a corporation to be real goods rather than cash only. In this case, the four engineers who founded Coinffeine used bitcoin instead of Euros.

The newly incorporated company aims to build a platform (www.oraclize.it) for the creation of smart contracts, in which some bitcoin transactions can take place based on the occurrence of some verifiable real-life event, based on third-party services which were already acting as oracles such as Wolfram Alpha.

Oraclize brings the computable knowledge of these complex engines to the Bitcoin world. The main purpose is setting up a powerful platform to create and execute smart contracts while keeping the users in control of their funds, thanks to the use of multisig wallets.

This article has been updated to include information about Coinffeine’s incorporation using bitcoin as social capital.

This is a guest post by Digital Currency Council member Amor Sexton  

Western Union released a report on the role of women in global remittances. According to the report, women currently move 50 percent of the estimated $582 billion global remittances, and they send a greater percentage of their wages than men.

Women also are the largest group of recipients, receiving over two-thirds of remittances. The flow of money to these women can be a matter of life and death if they have no alternative means of earning a living. The United Nations reports that despite women working two-thirds of the world’s working hours and producing more than 50 percent of the world’s food, women earn only 10 percent of the world’s income and own less than 1 percent of property.

With the flow of remittance having such a major impact on the lives of so many women, it is fitting during Bitcoin Women’s Week to consider how digital currency may be able to help.

How can digital currency make a difference?

The global remittance market is ripe for disruption from a low-cost, frictionless value transfer mechanism such as Bitcoin. The remittance market is plagued by commercial monopolies, outrageous fees and opaque transfer records.

The World Bank reports that the average cost of sending money through commercial banks is around 12 percent, and the global weighted average cost of sending money through all channels is about 8 percent.

Alternative remittance services can provide lower cost alternatives to commercial banks, but they often rely on risky internal processes such as “netting out.” An example of a netting out process is where a person in Australia (Company A) has an agreement with a person in Cambodia (Company C). The sender in Australia pays Company A and the receiver in Cambodia is paid by Company C. However, no physical transfer of currency takes place between Company A and Company C.

These informal transfer systems present significant regulatory challenges due to the lack of transparency in the transactions. Effective monitoring of these systems is entirely reliant on the accuracy of the records that both Company A and Company C keep. It is a regulatory double-entry nightmare.

Online and account-to-account services still make up only around 17 percent to 20 percent of global money transfers. But the adoption of mobile technology will see the digitization of remittances increase rapidly in the near future. With estimates that mobile phone use in Africa alone will increase twentyfold in the next five years, and reports of smartphones retailing for less than $50, a mobile-driven digital currency such as bitcoin could find a comfortable home.

The Opportunities of Digitizing Payments report says that this mobile finance revolution could have a direct positive impact on women’s economic empowerment. With women unable to access traditional banking services in many countries, the ability to use mobile technology to send and receive funds will facilitate financial inclusion for women.

Digital currency also has the potential to solve both the cost and regulatory issues with remittance. Transfers on distributed ledgers, such as the blockchain, provide a transparent public record of transactions that can be settled for nominal amounts.

Technology such as Eris Industries’ distributed application stack can take this a step further by enabling distributed ledger technology to be employed in an internally fully auditable, yet externally private transfer system.

Bitcoin companies such as BitPesa, Rebit.ph and igot.com are actively working on opening remittance corridors and using bitcoin to facilitate the flow of money in a cost-effective and transparent manner. With BitPesa in Africa, Rebit.ph in the Philippines, and igot.com in more than 40 countries, bitcoin is starting to make a splash in the remittance markets.

With a presence in both the United Arab Emirates and India, igot.com operates a strong remittance corridor between these two countries. In the Philippines, Rebit.ph reports that they had more volume in February 2015 than their entire volume since they launched. The low transfer cost also has resulted in transactions as low as $10USD being made on their platform.

What challenges does digital currency face?

A significant challenge for digital currency remittance businesses is the cost of regulatory compliance. As Juan Llanos (contrarian compliance consultant extraordinaire) regularly points out – compliance is more than just having a written policy document. Substantive regulatory compliance requires constant monitoring of transactions and vigilance in the identification and authentication of customers.

Rick Day, co-founder of igot.com, reported recently that his company has stopped more than $1.2 million in fraudulent transactions in the last 6 months alone. This hasn’t been an easy process. To reach this level of fraud detection, igot.com has had to introduce extra KYC measures such as Skype verifications, and intensive manual oversight of the transaction monitoring system. Vigilance is resource-intensive and costly.

In the very near future, technology like Subledger’s Continuous Real-time Auditing project or Coinalytics’ AML risk profiling may increase efficiency and reduce costs. If they do, it will be another way that distributed ledger technology has helped improve the remittance process.

For the billions of women around the world who rely on remittances, this can only be a good thing.

 

Image by Jim Holmes-AusAID /  CC BY 2.0

Giant Swiss bank UBS is planning to investigate blockchain technology in a new innovation lab based in London, FInextra reports. The innovation lab, located in Level39’s high growth space, HighGrowth:42, will explore the role of blockchain technology in financial services.

UBS, a Swiss global financial services company with its headquarters in Basel and Zürich, Switzerland, provides investment banking, asset management and wealth management services for private, corporate, and institutional clients worldwide. Operating in more than 50 countries with about 60,000 employees around the world, UBS is the biggest Swiss bank and is considered as the world’s largest manager of private wealth assets, with more than 2.2 trillion Swiss francs (CHF) in invested assets.

Established by Canary Wharf Group plc, Level39 is Europe’s largest technology accelerator space for finance, cyber-securities, retail and future cities technology companies. Six months after launching in March 2013, Level39 opened the High Growth Space: 42 on the 42nd floor of One Canada Square.

“By establishing a dedicated innovation lab at Level 39 we are moving away from a purely in-house innovation strategy, optimizing collaboration opportunities with the growing FinTech business, startup and investor community in an open and transparent way,” said UBS Group CIO Oliver Bussmann. “Our innovation lab at Level39 will provide a unique platform to explore emerging technologies such as blockchain and cryptocurrencies, and to understand the potential impact for the industry.”

“The UBS team have already established their credentials at Level39 over the last two years through mentoring alongside other leading experts at various accelerator programs,” said Eric Van der Kleij, Head of Level39, Canary Wharf Group. “Oliver Bussmann’s bold public statements and vision about the future of finance show that UBS is an organization that is genuinely determined to transform and thrive in a new world of finance.”

The blockchain technology that powers Bitcoin can enable participants to share financial transactions on a common public ledger and, therefore, enhance transparency and trust while significantly reducing transaction and processing cost. Therefore, it has the potential to trigger far-reaching changes in banking processes.

By creating a dedicated lab for financial technology innovation at Level39, UBS will explore new technologies in partnership with others and will be fully involved in the innovation ecosystem.

“It is always good news to see a global bank take a purposeful step outside of its traditional environment to work with – and learn from – the innovators who are helping to transform financial services,” said FinTechCity Co-Founder Julie Lake.

The Wall Street Journal notes that, while many in financial services have expressed an interest in the underlying technology of Bitcoin, UBS is one of the first major banks to go public with their plans. Bussmann said in October that the blockchain is the technology with the biggest potential to disrupt financial services and trigger massive simplification of banking processes and cost structure, changing not only the way we do payments but also the whole trading and settlement topic.

The Wall Street Journal article mentions other major banks, such as Barclays and Banco Santander, that are backing or launching initiatives to increase their interactions with the fintech start-up ecosystem as they seek to stay abreast of the rapid changes in technology which threaten their businesses.

 

“UBS sign” by twicepix / CC BY-SA 2.0 

In a thoughtful blog post, Coinbase offers ideas for new Bitcoin applications and business models. Based on the applications under development by the more than 7,000 developers using the Coinbase API, it appears that four main categories of Bitcoin applications are gaining popularity among developers: P2P tipping, cross-border payments, international microfinance and reputation platforms.

The Coinbase post identifies other promising Bitcoin application categories and business models that haven’t been targeted by many developers so far, and recommends to Bitcoin developers and startups: “Here’s 10 ideas for Bitcoin startups that we would love to see more developers working on.”

Coinbase recommends developing innovative email and online content services based on bitcoin micropayments. We are used to a “free” Internet where nobody has to pay, but, of course, there is no such thing as a free lunch. The price that we pay for free email is spam, and the price that we pay for free content is rampant advertising – often annoying, intrusive, and ugly – and disclosure of browsing habits to marketers. Paid models based on bitcoin micropayments could change that.

For example, email could be a pay-as-you-go service, with a small fee (say 0.1 cents) to send a message. That wouldn’t be too much of an annoyance for normal email users, while at the same time it would impose prohibitive costs to bulk email campaign and mass spamming. Similarly, web ads could be replaced by micropayments for viewing articles and videos. For example, an article or a video could be unlocked for one hour when a dedicated Bitcoin address receives a micropayment.

Micropayments are impossible to implement with traditional payment systems, because the overhead costs (transaction fees) would be too high. But the fast micropayments with low transaction fees, permitted by Bitcoin, allow the switch to alternative models for paid online content.

That would also permit creators, such as artists, fiction writers and filmmakers, to make a living with their work.

Coinbase also recommends developing applications that incentivize nodes to provide resources to communications networks, such as the Tor network or the Bitcoin blockchain itself, by rewarding participating nodes with micropayments.

Internet pioneers such as Ted Nelson, Marc Andreessen and Tim Berners-Lee thought that the Internet should have a built-in framework for micropayments. Berners-Lee tried to include micropayments in Web protocols, but the idea was never implemented.

“The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution,” a 2014 book by Walter Isaacson, has the full story:

“In the late 1990s Berners-Lee tried to develop a micropayments system for the Web through the World Wide Web Consortium (W3C), which he headed. The idea was to devise a way to embed in a Web page the information needed to handle a small payment, which would allow different ‘electronic wallet’ services to be created by banks or entrepreneurs. It was never implemented, partly because of the changing complexity of banking regulations.”

Berners-Lee revived the effort to develop an official W3C micropayments framework in 2013. The work hasn’t been completed so far, but Bitcoin is a good solution, because sending a micropayment with Bitcoin can be as easy and immediate as clicking a button.

Isaacson reports that Andreessen mentioned Bitcoin as a good model for standard Internet payment systems. “If I had a time machine and could go back to 1993, one thing I’d do for sure would be to build in Bitcoin or some similar form of cryptocurrency,” Andreessen said.

Images by Freepik

Being one of the richest couples in the world has allowed Bill and Melinda Gates the freedom to help alleviate world poverty in the ways that they think work best.

In their view, shifting financial payments for the world’s poorest from cash to digital, can only make their lives easier and help bring them into the formal economy.

According to its 2013 annual report, the Gates Foundation distributed almost $1.8 billion in funding in the 2013 calendar year to global development programs, with 5 percent, approximately $90 million, going to the Financial Services for the Poor program.

Rodger Voorhies, director of Financial Services for the Poor recently appeared as a witness before the Senate of Canada’s Committee on Banking, Trade and Commerce to talk about the foundation’s approach to digital currencies.

Gates Foundation funds digital payment systems

The Financial Services for the Poor program aims to reach the majority of people in poor and rural areas with low-cost digital payment systems who use their countries’ current currencies.

As Voorhies explained to the Canadian senators, they are taking advantage of the fact that cell phones are even more plentiful than indoor plumbing for many of the world’s poorest.

“We believe digital services will be transformative and will improve the lives of the poorest over the next 15 years, and we will see a greater acceleration in this service than at any other time in history,” Voorhies said.

The Foundation hopes that by 2030, 2 billion people who do not have a bank account will be storing money and making payments with their phones and other digital devices.

Waiting to see about Bitcoin

The Gates Foundation is an advocate and an enabler for digital payment methods for the developing world including M-PESA’s M‑Shwari in Kenya, M‑Pawa in Tanzania and bKash in Bangladesh that are based on current currencies.

But the foundation is staying away from digital currencies for the moment although Voorhies told the senators they are eagerly awaiting the Senate’s report and haven’t made any formal decisions about Bitcoin.

“[W]e have stated, or as has been quoted by Bill Gates and others, the technology is exciting, but it does have some weaknesses on anonymity and fluctuation,” Voorhies said. “I think that governments need to look at that carefully. I don’t have a good answer; and it sounds like I’m trying to be evasive about whether the Canadian government should regulate.

 “That being said, we think that cryptotechnology is a very exciting area and one that we’re currently doing research on and are engaged with many of the large providers in this space trying to understand it better, and maybe even doing some testing around it,” he said.

At the moment, the foundation is concerned about the anonymity of Bitcoin making it more risky for the unbanked instead of these people becoming a known quantity. This case wasn’t clearly made, so the senators seemed a little puzzled.

But the Canadian senators did understand the foundation’s problem with the “volatility” of digital currencies.

The senators said they also were glad to be told that the Gates Foundation is interested in their work as they go into the report-writing stage of the hearings into digital currencies.

The final report release date has not been set, but Bitcoin Magazine will be covering the report when it is released.
Photo by World Economic Forum from Cologny, Switzerland [CC BY-SA 2.0], via Wikimedia Commons

On the Nasdaq website, Martin Tillier asks, “Could Bitcoin Destroy the Global Banking System?”

Tillier imagines a possible “Kodak moment” for the whole banking industry. In the early days of mobile phones, only a few enthusiasts dared to imagine that camera-equipped phones could ever threaten established camera manufacturers, but Kodak was forced to declare bankruptcy only a few years later, in 2012.

Tillier’s answer is that yes, Bitcoin could seriously hurt the banking system. The reason is very simple:

“Banks are so used to taking a cut every time money changes hands that they cannot imagine life without that particular revenue stream.”

Transaction fees are only a small part of banks’ revenue, and therefore banks could survive without that particular revenue stream. But they would be seriously annoyed:

“[Transaction revenue] is some of the only money that banks make that has zero associated risk and very little associated cost,” notes Tillier. “There is no risk, and hardly any cost, in charging you $30 to receive a wire transfer, especially when the bank takes three days of interest on that money by delaying payment to you. If that revenue is removed or even seriously reduced, it will have to be replaced, meaning that a higher proportion of bank revenue will be coming from increasingly risky loans or trading.”

The unique advantage of the blockchain technology behind Bitcoin is that it permits faster, cheaper, and transparent transactions. Every bitcoin transaction is permanently recorded in the tamper-proof public blockchain, which is maintained by Bitcoin users at zero cost to the banks. The fact that we can transfer bitcoin instantly (in a few seconds, or a few minutes waiting for the transaction to be confirmed by the network) to the other side of the planet, at a very low cost, shows that traditional banking fees are obsolete legacy practices that must be abandoned. Innovative Bitcoin “banks” such as Circle (which is not technically a bank, but plays an equivalent role for its clients) are doing just that, and beginning to offer cheap and fast money transfers.

“[Bitcoin] may well be a threat to the easy money that banks currently take from you and me, but that doesn’t pose an existential threat to the system,” concludes Tillier. “The banks’ reaction to a reduction in that easy money, on the other hand, could be a different story.”

Of course, the banks won’t give up their easy money without a fight. Barclays’ CEO Antony Jenkins recently discussed the growing concern among financial institutions that faster, cheaper payment systems will start to seduce their consumer and business customers in the coming years.

In a recent report titled “Digital Disruption – UK Banking Report,” the British Banking Association argues that Bitcoin is a threat to the banking industry.

“As digital and cryptocurrencies gain traction, the threat to banks’ free-income streams will grow,” notes the report. “Banks must invest time and energy in understanding how best to use the technology behind principles like bitcoin, before other players step in to make that decision for them.”

Of course, banks can (and do) also lobby to make digital cryptocurrency illegal, but the United Kingdom and other governments recently have expressed open-minded positions in the interest of common good. Meanwhile, forward-looking banks such as German Fidor Bank are integrating Bitcoin with their consumer banking operations.

The term “threats” frequently occurs in official reports related to the emerging digital economy. In a recent discussion paper, the Australian government mentions bitcoin and digital currencies as potential threats to tax collection.

“New ways of transacting, including cryptocurrencies such as bitcoin, were not contemplated when the current tax system was designed,” notes the report. “These developments make determining the appropriate tax outcome for a particular company in a specific country difficult and raise concerns about the ability of companies to relocate profits to minimize their tax.”

Other governments are less scared of Bitcoin as a threat to taxation, probably because they are confident in their ability to de-anonymize bitcoin transactions and trace them back to their originators. In the United States, there have been proposals to gradually introduce tax payments in Bitcoin, which would constitute a quite radical shift from early libertarian perceptions of Bitcoin as a financial privacy tool.

Photo via stantontcady / CC BY-ND 2.0

Commentary by Mark Rees.

Why Virtual Reality is different this time:

The celebrated release in January of the Samsung Gear VR, co-created by Oculus, set into motion an official paradigm change.

Mark Andreesen’s early investment in the virtual-reality maker already is bearing fruit as the hot item is flying off shelves. And a newer,slightly improved version being slated for the release of the Samsung Galaxy 6 beginning in April.

Virtual reality is not just about games anymore. By some accounts, the hottest ticket at last month’s annual Sundance Film Festival in Park City, Utah was to the Oculus Virtual World Simulator demonstration.

Some are convinced it is the future of filmmaking. Several Hollywood studios are actively exploring and creating content for virtual reality. It is estimated that 170 million users will own virtual reality hardware within the next three years.

Digital currencies and blockchain technology are frequently referred to as a paradigm shift, and the virtual world may become dependent on the blockchain.

Shows such as Cirque du Soleil have captured a portion of a live performance in VR, placing the viewer on-stage during in the three-dimensional experience. Live rock concerts and sporting events are likely to follow soon.

A Paul McCartney concert in virtual reality is now available from the Google Play store for those using the Google Cardboard virtual reality home-kit. Last year, Facebook founder Mark Zuckerberg announced that Facebook would acquire Oculus for $2 billion, with plans to connect their 2 billion users with this entirely new platform.

The tech world is now putting the possibilities into imagination.

What does this have to do with Bitcoin?

A blockchain might be necessary to bind a real-world person with a virtual-world persona. Facebook and other social media sites are struggling to prevent ISIS terrorists from recruiting on their sites. The terrorist recruiters have learned tricks from Internet trolls’ methods to easily create new identities each time they are banned.

The blockchain invention might prove invaluable when a company needs to tie a virtual persona to a real person through a technique known as proof of existence . This could be used to create an identifying hash tied to a retinal scan or other biometric data that is unique for each real person using VR equipment in real time.

A possible result would be an identifying hash stored permanently on the blockchain that would represent you over a multitude of experiences. This one single identifier tag might defeat identity fraud or act as one of the component signatures in a multi-sig wallet.

It is portable and can be used by a multitude of companies and systems creating content throughout the world. A negative aspect is that it could be possible to ban one’s identifier address tag, which might send one into a sort of VR purgatory. In the future, just the threat of having your online identity tag banned might be a de-facto method of control.

Where is this headed?

In 2011, author Ernest Cline wrote a futuristic novel Ready Player One. Steven Spielberg has agreed to direct the big-budget epic for Warner Brothers Studios. The studio won the bidding rights to the movie before the book was finished and has spent years trying to find a way to bring the futuristic story to life on the big screen.

Hollywood studios have been increasingly transfixed by the ideas and possibilities explored for the world of virtual reality explored in the story. Ready Player One was so influential that it was cited by Oculus’ then 19-year-old founder Palmer Luckey as one of the primary reasons he started the company.

The author himself admitted he might have underestimated where the technology will be 30 years in the future when the story unfolds. Because of the respect and example his work has provided for the thousands of people working on the technology and the tens of thousands of content creators soon to follow, it might considered the benchmark to measure our place in the technology roadmap.

In Ready Player One, the lines between the real world and the virtual world become fuzzy. The concept of earning monetary “credits” for income and spending between the two realities mix seamlessly. The human desire to share experiences will quickly lead to interconnection of the hardware so that one need not feel alone in the experience. It might not take long before “real” human representatives could act as their own avatars and become real-time tour guides.

As the technology improves, entire careers might happen inside a shared virtual world experience. In this world there are no borders. Countries and concepts such as national currencies might seem as antiquated as paying for things with sea shells.

As our children take virtual tours walking among the dinosaurs as part of a school project, they might view our current concept of money and think we must have lived at the time of the dinosaurs ourselves. One might ask if it possible that currencies restricted by borders that only exist in the physical world might just become … irrelevant?

How close are we to virtual reality?

Many of the industry watchers consider the Gear VR product the first mainstream virtual device laying down the gauntlet for many to follow. This technology could bring the ability for the disabled to do the things impossible in the real world. Seeing, touching and experiencing places one could never afford to travel seem to be just around the corner. Those gateways and portals will cost money, however. So whose national currency would you use for this travel?

Already, live 3D feeds can be experienced that give a sense of “presence” never experienced before. Users have to remind themselves their physical existence is in a place and time they aren’t seeing.

There are still a couple of drawbacks. Some people experience “simulator sickness,” although this problem is been dramatically reduced with new understanding and technology. And the pixel count isn’t quite high enough (at least in the 720p resolution) for a perfectly clear picture when magnified with goggles.

At the 2015 Gamers Development Conference in March, HTC reportedly stole the show with Vive, a unit more advanced than the Oculus products personal computer-connected devices. It is expected to be in consumer hands before Christmas.

Sony is working on its own virtual reality product called “Project Morpheus” for PlayStation 4. There are rumors of other companies also in the space, though no official announcements have been made.

YouTube already has joined several other companies offering 360-degree full immersion videos. The conversion is happening at breakneck pace. The center of the three converging technologies is once again the high-tech investor Mark Andreesen. The creator of the first web browser is now a top venture capitalist with board membership on Facebook, and a lead investor in both Oculus and the world’s biggest U.S.-based Bitcoin exchange and wallet service Coinbase.

In a world where it’s becoming more difficult and complex to believe what you see, it might pay to keep an eye on Andreesen to see what’s coming next. His predictions in both of these new emerging technologies might be destined to meet.

Image Sergey Galyonkin from Kyiv, Ukraine – Orlovsky and Oculus Rift Uploaded by Yakiv Gluck / CC BY SA 2.0