18 January 2014

Bitcoin Can Thrive In Canada

It may not be such a surprise that more technologically advanced nations would be more open to the use of Bitcoin inside their borders, as well as developed countries would accept Bitcoin more than developing countries. Why? Developing countries are still continuing to encourage their own local economies to grow, and do not want Bitcoins […]

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Six myths about Bitcoin


Myth: No one knows who started Bitcoin.

Truth: “Satoshi Nakamoto” is a fictional name for a single person, or, potentially, a group of people who wish to remain out of the public eye. Since they’ve managed to do this so far, it’s likely that they have a long history of secrecy keeping. This suggests strong bonds, such as one finds in a governmental context (i.e. ex-NSA employees, like Snowden), or organized crime. In any case, it’s likely that a few people, potentially including governmental security agencies, know who “he” is. Some of these people are undoubtedly becoming extremely rich along with Satoshi.

Myth: Bitcoin only has 21 million possible coins and therefore can’t be used broadly as an exchange mechanism.

Truth: Each Bitcoin can be subdivided, so presumably after there is widespread usage the basic unit of exchange will not be a Bitcoin but something like one millionth of a Bitcoin. This will undoubtedly have some other name, like a Bitdollar.

Myth: Bitcoin is criminal.

Truth: The pseudonymous aspect of Bitcoin led to a lot of early growth from people doing things that their governments didn’t want them to do. However, since Bitcoin transactions are easily tracked, it can actually be a honey pot for the US government. All they need to do is find one “exit node” (i.e. a known criminal), and they can trace back the source of the funds. It’s also a guarantee that as Bitcoin grows governments will regulate it. This is already the case where it is quite difficult to buy Bitcoins without providing your personal identity. So, for better or worse, the ability of people to use Bitcoin to perform transactions their governments wouldn’t want is decreasing over time.

Myth: Bitcoins are not based on inherent value.

Truth: The Bitcoin protocol includes both a payment network and a currency. As basic economics dictates, value is based on scarcity. Since Bitcoin is a currency that can’t be generated at will, this forced scarcity insures value rather than decreases it. Are credit cards valuable? It’s not just the piece of plastic, it’s the network and associated infrastructure that provides the value. In this case, the network and forced scarcity combine to create something that is extremely valuable, a sort of digital gold.

Myth: Bitcoin is inherently volatile and unfit to be a currency.

Truth: If you want decentralized, irrevocable, near fee-free payment, you have to give up something. Some degree of price stability is probably one of those things. There are also ways to solve this problem, like systems that are only partially Bitcoin backed. It is also likely that some of this volatility will disappear as there is greater volume.

Myth: Bitcoin is a bubble.

Truth: This claim essentially states that Bitcoin is overvalued, something that is unlikely. As we’ve stated, there is value in the deflationary aspect, the scarce aspect, the low-to-no fees payment aspect, the irrevocable payment aspect, and as an insurance policy against an unstable government. The rapid growth, which is likely to accelerate, might be compared to the birth of the stock markets. There were both upward and downward movements of epic proportions. Although both are likely here, the fact is that Bitcoin offers a unique value proposition that no one else is providing at this moment. The value is there, it just remains for the world at large to discover it. Many people are understandably excited about the upside potential.

The post Six myths about Bitcoin appeared first on Bitcoin Magazine.

Silicon Valley VC Thinks a Single Bitcoin Will Be Worth $100,000

Illustration: Dylan Boelte/WIRED
Illustration: Dylan Boelte/WIRED
Just a year ago, a bitcoin was worth $13. And today, the same piece of digital currency is valued at more than $800 on popular online money exchanges. But Chris Dixon believes that’s still a serious bargain.
Dixon, a partner with the big-name Silicon Valley venture capital firm Andressen Horowitz, is adamant that bitcoin could become the primary means of making payments on the internet, and if that happens, the price of a bitcoin will skyrocket. “I think it could be easily worth $100,000,” he says.
That may seem crazy, but Dixon is not alone. Many among the bitcoin faithful believe that current bitcoin prices are on the low side compared to what they will become. You see, there are only a limited number of bitcoins — the worldwide software system that drives the digital currency will stop minting money sometime in the next century, when there are about 21 million in circulation — and this means that a spike in popularity will likely drive a huge increase in price.
Chris Dixon. Photo: Andreessen Horowitz
Chris Dixon. Photo: Andreessen Horowitz
Still not convinced? Dixon points to what has happened with another scarce but widely used internet resource. “Domain names are an analogy,” he says. “It would have been absurd to say in 1993 that domain names were worth $10 million each.” But now, that’s a reality. Sure, $10 million domains aren’t the norm. But according to Dixon, the startups funded by Andressen-Horowitz typically pay a “couple of hundred grand” for a domain name that includes a no-more-than-average word. “Probably the best investment in computer history would have been buying domain names in 1993,” he says. “Better than Amazon. Better than Google.”
At the very least, Dixon is worth listening to. He not only knows the bitcoin market as well as anyone, he is putting Andressen’s money where his mouth is, leading a $25 million investment in CoinBase, the first Silicon Valley bitcoin startup to receive such funding. Andressen-Horowitz has also made a seed investment in Ripple, a marketplace where you can trade Bitcoin and many other currencies.

It’s the Politics, Stupid

Dixon joined the VC firm a year ago, after leaving a job at eBay, and almost from day one, he was meeting with bitcoin companies. To Dixon, bitcoin had a mix of elements that he’d seen before in other technologies before they made it big, including the Linux open source operating system or, well, the internet itself.
For one thing, he saw a technological breakthrough. Through a new breed of distributed computing and cryptography technologies, the bitcoin community created the first global public ledger that could operate in a secure and trustworthy fashion. But more than that, bitcoin had politics on its side: Libertarian-leaning advocates saw it as more than a low-cost way to send money. For them, it’s a movement, and many of them have worked tirelessly to evangelize bitcoin. “Every interesting large scale technology movement has had a political component,” Dixon says.
‘Every interesting large scale technology movement has had a political component.’
Even bitcoin’s well-known drawbacks auger a bright future, Dixon says. It’s hard to buy bitcoins. It’s hard to spend them. If you lose them, they’re gone forever. And the value of a bitcoin is subject to huge swings, so it’s hard to really know what you’re signing up for when you invest in them. All these issues echo the pattern that we’ve seen with the personal computer, Linux, and the internet. “All of these things were dismissed, and there was a sense in which this dismissal was correct because at the time those technologies were not capable of serving the most valuable customers. They weren’t good enough,” says Dixon.
But critics “systematically underestimated” the power of these technologies as platforms, he says. Platforms get developed. It can be hard to see where the improvements are coming from, but they happen nonetheless. “They get better at an exponential rate and all these criticisms go away,” Dixon says. CoinBase, for example, is working to make it easier to buy bitcoins, and it’s making it easier for companies such as Overstock.com to accept them. “I can’t imagine what they were saying about Linux 15 years ago. Microsoft, I’m sure, had a million reasons why no serious person could use it. Now there will be a billion Android phones shipped with Linux. Every web server that matters in the world runs on Linux.”
Dixon admits that he doesn’t have the answers to all of bitcoin’s problems. But he understands why so many geeks find bitcoin so compelling: They see bitcoin as an new frontier for software development. “I’m going to place my money on millions of smart developers figuring these things out rather than the critics,” he says.

Saving the Web From Google and Apple

While Linux has kept the web open, there’s a growing problem, and it’s one that Dixon thinks bitcoin could solve. How do you keep the web viable on mobile devices? It’s easy to buy things through Apple or Google’s app stores, but making a purchase using a mobile browser is trickier.
“One reason the web’s in danger is there’s no payment system for the web,” Dixon says. “I go to a mobile app; I can hit a button and pay 50 cents. I go to the web, and good luck.”
‘Among other things, Apple and Google take 30 percent, which makes it impossible for our companies to make money. More importantly, I think, it just stifles innovation.’
But bitcoin, he believes, can provide an payment system on mobile devices that’s not controlled by any one company. “From my perspective, it’s a much better outcome for that to be an open system than to have that controlled by Apple and Google,” he says. “Among other things, Apple and Google take 30 percent, which makes it impossible for our companies to make money. More importantly, I think, it just stifles innovation.”
If you poke about in the internet standards written years ago by Tim Berners-Lee and others, you can see that they intended to offer a payment standard on the web. It never gets used, but there is a “402 Payment Required” error that was designed to pop up whenever the web’s payment system was due to kick in.
“If you talk to Marc Andreessen, he’ll say there was always a plan everyone had back then,” Dixon says, referring to his boss, the man who created the Netscape web browser. “Nobody thought of a way to do it right.”
That’s what Dixon hopes bitcoin will become — a way to do it right.
But, still, he admits that bitcoin is a highly speculative investment. He says he owns less than one bitcoin himself. Andreessen Horowitz is in the business of investing in software companies, he explains, not currency speculation.
That said, he did buy a few bitcoins as Christmas presents for some of his family members. “I think this is going to be big,” he told them. “I don’t know, but if it is, I want you to have a little piece of it.”
Robert McMillan
Robert McMillan is a writer with Wired Enterprise. Got a tip? Send him an email at: robert_mcmillan [at] wired.com.
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The Darkhorse Gains a Bit of Gravity

The Dark Horse Gains a Bit of Gravity written by Scott Williams The world of cryptocurrency is a competitive one driven by profit margins. In the past there was a particular problem with Bitcoin miners hopping pool to get the most profit for mining Bitcoin. In present day, the problem has evolved into larger mining-pools, […]

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Israeli Regulators Take “Wait and See” Approach on Digital Currencies

Over the past two months numerous regulators have issued warnings against the use of digital currencies, and some have even taken concrete steps to halt trading, most notably China and India.

Israel, however, appears to be taking a different approach.

Israeli regulators are not ignoring digital currencies, they are simply waiting to see what the rest of the world does about them.

Certain Israeli financial institutions are engaged in bitcoin transactions, and they would like to see clear guidance from regulators. However, the Bank of Israel, the Israel Securities Authority and government ministries have not said a word on the matter. Yet, this may be about to change.

Lack of applicable legislation

According to Haaretz, regulators do not feel the need to prohibit transactions related to digital currencies at this time. Attorney Shiri Shaham, who specializes in banking law, told reporters that there is no legislation in Israel today that could address bitcoin and similar digital currencies.

Therefore, the use of digital currencies remains legal, or ‘unregulated’ to be more precise. Shaham said:

“Bitcoin brings with it a lot of innovation that has not existed until now. Consequently, it’s no wonder that it was not in the wherewithal of lawmakers in Israel and around the world to foresee this development and address it.”

Lawyer Guy Lachmann points out that currency is defined as the country’s legal tender and since bitcoin is not recognized as legal tender anywhere in the world, it should not be seen as a currency.

Taxation concern

Although Israel can apply existing money laundering legislation to questionable bitcoin transactions, there are still a number of issues that need to be addressed.

Taxation is perhaps the biggest problem. Traders must report their trading income to tax authorities, but there are some exceptions that might attract tax dodgers. In addition, value-added tax does not apply to the purchase of bitcoin.

Shaham believes the Bank of Israel should not ignore digital currencies, but she cautions that it should not adopt a conservative position either. She argues that there is nothing lawmakers can do to prevent trading in bitcoins, even if such trades are outlawed. She said:

“People who want to get their hands on bitcoin will always succeed, and it would be a pity if it were to occur in the shadows and not under the supervision of the banking system.”

United Kingdom has changed their mind due to pure public pressure

Yesterday we published the news Will The UK Exclude Bitcoins From Taxation? and it is now clear that United Kingdom is going to completely change their rules on Bitcoin taxation. Richard Asquite from the TMF Group breaks the news and says that the new clarification will give people and businesses using Bitcoins a far more […]

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Litecoin Leads Bitcoin in Dramatic Price Move

Yesterday proved rather interesting for the digital currency markets, particularly as related to alt coins. While prices were mostly up on the day across the board, one particular dynamic stood out as noteworthy: a massive leap in LTC / USD was followed shortly thereafter by a similar climb in XBT / USD. We’ve written previously about the interaction of bitcoin and litecoin, noting that their trading indicates a strong relationship between the two (see here and here for further detail), but for litecoin to so visibly and dramatically lead trading is relatively unprecedented and largely unexpected. Bitcoin maintains a total cumulative market size some 15x larger than litecoin, with the latter often looked at as the first example of the ease of creating new digital currencies devoid of network-driven value. Yet, today’s trading showed that not only is the relationship between the two strong, but also that the perennial favorite may even be subject to a much smaller asset. Despite having a lower overall USD-equivalent capitalization, trading volume in litecoin...

The post Litecoin Leads Bitcoin in Dramatic Price Move appeared first on The Genesis Block.

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