15 March 2014

Bitcoin Trading Volume Concentrating in Largest Exchanges

The vast majority of bitcoin trading volume has traditionally been handled by a relatively small number of exchanges.

However, the latest data indicates that volume has concentrated even further as smaller exchanges are being pushed aside, leaving them with a much lower share of the total volume of bitcoins traded than just a few months ago.

Lost monopoly

Prior to the start of its decline in mid-2013, Mt. Gox had what amounted to an effective monopoly on bitcoin trading volume, often commanding upwards of 80-90% of total US dollar-denominated volume.

Continue reading at CoinDesk

March 15, 2014 at 02:09PM

How Bitcoin is Changing Everything

Perhaps the single most prominent, and telling, feature of bitcoin today is its massive controversy in the media. Not a single day goes by without an article or televised mention about its dangers, risks, and dubious mainstream appeal.

Many in the mainstream seem set in their beliefs that bitcoin is a fad, or even worse a ponzi scheme, and is destined to fail. Yet when was the last time a ponzi scheme attracted global attention and prominent venture capital investment? Since when has a fad incited the simultaneous and largely hostile reactions of governments across the globe?

Why did other payment technologies like PayPal or Western Union apparently fail to meet the requirements to be discussed in virtually every central bank on the planet, yet cryptocurrency is being so thoroughly scrutinised? Ironically enough, the on-going debate about whether or not bitcoin is truly a valuable disruptive technology, is all the evidence you need that it is.

Continue reading at CoinDesk

March 15, 2014 at 12:50PM

14 March 2014

TigerDirect Tops $1 Million in Total Bitcoin Sales

Florida-based online high-tech retailer TigerDirect passed $1m in total bitcoin sales on 13th March, less than two months after it began accepting the digital currency.

TigerDirect began taking bitcoin on 23rd January, partnering with Georgia-based merchant processor BitPay, and has been active at incentivizing its budding bitcoin customer base.

Steven Leeds, director of marketing at Tiger Direct, told CoinDesk that his company has been very pleased with its decision so far.

Continue reading at CoinDesk

March 15, 2014 at 12:48AM

Menufy Now Supports Bitcoin Payments at 400 US Restaurants

US-based online restaurants service Menufy has integrated Coinbase into its e-commerce platform, allowing consumers to spend bitcoin at hundreds of US restaurants.

Menufy didn’t make much of a fuss out of the news, however – the Coinbase deal was announced only on Twitter and reddit.

The company says its service is available in nearly 400 restaurants across 28 states.

Continue reading at CoinDesk

March 14, 2014 at 08:52PM

Mt. Gox Issues Chapter 15 Statement

Mt. Gox has filed a petition to protect itself in the US as it tries to reorganize.

The defunct bitcoin exchange said that a petition for Chapter 15 protection was filed in the US Bankruptcy Court for the Northern District of Texas on 10th March, and a temporary relief order was issued the same day. The preliminary relief order is scheduled for confirmation on 1st April. The exchange stated:

“This means that the effect of the Civil Rehabilitation applies now on a temporary basis to assets located in the United States which will be preserved. Accordingly, the acceptance by the US court of the Civil Rehabilitation means that any enforcement of a judgment against MtGox Co., Ltd, any attachment of its assets, the creation of any lien against its assets or the disposition of any assets located in the United States are temporarily no longer possible.”

Continue reading at CoinDesk

March 14, 2014 at 06:08PM

Warren Buffett Urges Investors to ‘Stay Away’ from Bitcoin

Renowned investor and Berkshire Hathaway CEO Warren Buffett spoke out about bitcoin for the second time in as many weeks, calling the digital currency “a mirage” in an interview with CNBC on 14th March.

The comments follow Buffett’s first statements on bitcoin on the network on 3rd March, when he suggested that bitcoin was not a currency, writing it off as a passing fad.

Buffett was similarly dismissive of bitcoin again in his latest interview, at least as an investment opportunity, advising investors to “stay away from it”. He added: “It’s a mirage basically.”

Continue reading at CoinDesk

March 14, 2014 at 05:42PM

For us by us: What Bitcoin needs to do to move out of the crypto-enthusiast box

Barriers to Adoption

The fascinating emergence of Bitcoin has been powered largely by a “for us by us” dynamic, the growth of specialists intimately involved with cryptography, embraced by highly technical people of a wider variety. Eventually this bubbled up to the venture capitalist world, with a concerted attempt to “bring Bitcoin to the masses,” including PR campaigns like that recently waged by Marc Andreessen in the New York Times.

Although the “for us by us” approach has been successful in many instances, it also presents very large barriers to mainstream adoption. One of these that surfaces the most frequently is the political issue, exemplified by the strong libertarian leanings of many involved in the Bitcoin community. Although venture capitalist backers of Bitcoin (i.e. Marc Andressen, Chris Dixon, Fred Wilson) have sworn that they have mainstream political opinions (i.e. that they voted for Obama), there remains a strong core of dissenters who believe that government involvement destroys the principle of Bitcoin (i.e. Robert Ver, Erik Voorhees).

The Politics of Cryptocurrency

With the Mt. Gox collapse, it seems like the “move to the center” VC contingent is winning. Whether or not this is a good thing for Bitcoin is not clear. Much of the early adoption of currency is based on a certain degree of political radicalism. AuroraCoin has recently exploded largely on this basis. It’s a direct threat to an existing political order. What makes it dangerous is also what makes it exciting. Although I am doubtful that this is the best model for the long term, I did acquire a handful of AuroraCoins to be part of this important historical moment.

Navigating these political issues is one of the most important aspects to cryptocurrency growth, but so far there have only been two options. Like many things, it seems to be either “let’s get rid of the government” or “move to the center.” The first puts people in a perpetual state of clashing and conflict with state authorities (i.e. via Silk Road). The second is “pure business,” which is to say, it compromises the exciting disruptive power of cryptocurrency.

I have a more radical proposal. What if we evolve the nature of governance itself? For thousands of years governance was primarily ethnicity based. With the birth of the American republic, it moved back to a doctrine of “free assent.” Practically, however, it remained primarily location based. This means that all government has effectively been “opt out” instead of “opt in,” and many times you can’t even “opt out.”

I believe in the fundamental principle of human freedom, but I also believe that “with much freedom comes much responsibility.” The growth of high growth, high volume networks for transferring money means that we need to evolve frameworks that provide greater accountability and trust than the current financial system. Although decentralized networks are an amazing start, we also need to re-align incentive structures so that people are not encouraged to “cheat the system.”

Some of the fundamental innovations which are part of Cryptocurrency 2.0, especially Ethereum and Mastercoin, allow us to build the structures that we need to move out of a phase of dependence on existing infrastructure for accountability, to new structures which complement human freedom and work on the basis of free assent. Simply “moving to the center” by tweeting that one voted for Obama or “welcoming regulation” as has Charlie Schrem, are, I believe, fundamentally short-sighted.

The Big Picture

One additional set of very important concerns regards macroeconomic policy. Price volatility in a distributed asset on the free market is a major concern, particularly when there is both no underlying asset and no coherent long-term demand. Creating long-term demand via the adoption of a particular nation-state is extremely risky, as boom bust cycles will inevitably hurt the most vulnerable. In the event of a downturn, engaged traders who constantly watch the markets in this globalized “open society” will be the first to dump the assets. Like so many other recent financial cases, mom and pop will be left footing the bill, while the new George Soroses of Bitcoin fund campaigns for even greater “openness.”

Although Bitcoin is touted as a “store of value,” comparable to gold, it’s not at all clear that Satoshi thought the same way. I personally think of it more as a pioneering experiment on what can be done on a purely anarchistic model, potentially with the awareness that transition to a true “currency” that serves as both a unit of account and means of exchange will require a good deal of tweaking and evolution. Thankfully, within Bitcoin we have minds like Vitalik Buterin, who is currently bending his rather considerable mental faculties to one of the more difficult current problems of cryptocurrency, the creation of incentive-aligned non-volatile cryptographic asset.

Without this “regulative principle” in place within the network, you have the possibility and perhaps even likelihood of a “subprime 2.0” unfolding on an epic scale within the Bitcoin world, as people move their Bitcoins into the next alt coin of the month. My own expectation regarding Bitcoin volatility is that, perhaps ironically, it has been limited because of the lack of liquidity in the Bitcoin market. The easier it is to move from fiat to Bitcoin, the potential greater shock each new time we are goxed or find out that the Bitcoin Foundation board members are not as virtuous as we once suspected.

“There goes my hero,” goes the lyric, and, for better or worse, in this post-modern age, we have done away with heroism – hopefully we had a low expectations to start with. But, perhaps, something else is stirring on the Blockchain, a blending of ethereal wisps and slumbering embers into a movement that has the potential to stir the intellectual fires we need to solve the problems that previous generations have left us with.

There have been many political movements in the centuries that emphasized the will of the people and mass propaganda. Currently democracy worldwide seems to be increasingly tablotized and incapable of asserting its full strength. But I what I see in the Bitcoin world gives me great hope in the incredible power of humanity to address the problems in the world ahead of us.

One of the most promising aspects concerns the mass of intellect currently concentrating their mental efforts on these problems. Increasingly, the first generation of cryptocurrency enthusiasts has either become aware or been complemented by folks intimately aware of the larger macroeconomic issues that are necessary to address to have a currency that works at a larger global scale.

These problems include faster transaction clearing times, increased in-network trust, exchange rate stability, secure programmable contracts, distributed consensus systems, and rewards proportionate to value provided to the network (in which hashing power provided is not the only definition of “value”).


One of the most important shifts accompanying cryptocurrency 2.0 is the movement from tokens to platforms. A token is something you can trade. DogeCoin is a tradable doggy. Much excitement. Such wow. To the moon.

The problem with trying to get to the moon (or, my own goal, Alpha Centauri) you need a pretty big engine, and you need to be able to build it in stages. You need a rocket that gets you to the atmosphere and another that puts you into outer space. Cryptocurrency 1.0 provides the first stage of the rocket; Cryptocurrency 2.0, by iterating on itself, has the potential to provide the 2 … n stage.

That’s because it provides a platform. A platform gives you the power to create whatever application fits the need that you have. It’s a toolkit that enables people to build what they need to solve the problems that we face every day. Even at this moment, I am closely engaged with people building the next generation of reputational currencies, distributed systems of trust that were not possible prior to Ethereum.

What changes can we expect to see as cryptocurrency shifts in this direction? The first is a shift from hostility towards existing political structures to a movement to create new consensus systems that make many types of contractual arrangements no longer necessary. It’s a move from antagonism toward governments, to a metalayer that increases trust within a network.

Part of this will be necessary. Although governments, especially irresponsible governments, will not necessarily be able to totally shut down alternative currencies they perceive as threats, they will be able to make life very difficult for people using currencies that are designed to serve as replacements for nation-state money. Along these lines, I suspect AuroraCoin and MazaCoin will be interesting experiments that will illustrate the pros- and cons- of this particular model.

That said, there is another exciting future possibility for cryptocurrency. One of the major shifts in the last half century has been the near extinction of the middle class. Why have artists and artisans and workers faced wage stagnation and loss of power globally? Part of it has been a natural consequence of globalization. In an open society, “the world is flat,” and there is perfect competition on low cost jobs. Even where there is a minimum wage for citizens, you can bring non-citizens across the border and pay them under the minimum wage. Kickbacks are promised for votes by the financing class, which finds that legislation that would bring life back to main street is never passed.

Who wins in this scenario? It’s certainly not the people. Instead, it’s always the infrastrustructure providers who take the tolls on the highway that you ride. In a monopolistic situation, something that has been artfully designed by the global banking elite, you also get to decide just how high the tolls will be. Unsurprisingly, they have decided that it should be quite high.

For instance, it’s almost unimaginable today that a single wage earner would purchase a house and provide for a family only a few years out of university. Property costs have risen far in excess of purchasing power, creating a cycle of debt and choking productive growth.

What’s Next?

The next phase of cryptocurrency evolution needs to be “for the people, by the people.” This is, among other things, because nerds are already doing just fine in the present system. They build the infrastructure that you use and make the money that could be yours. In the Bitcoin context, they even make money trading the latest currency of the month. But, more often than not, they do not create valuable content.

Take Youtube as an example. Nerds built the infrastructure. You provide the content. Is it free to create the content? No. YouTube will make money advertising. You will make nothing, unless you make something that gets millions of views, and even then you will get a fraction of what Youtube does.

Is that fair? Is that the world we want to live in? Everything is free, except massive amount of advertising that is presented to you by the end user. That’s fundamentally wrong, it’s counter to the idea of flow, and the idea that the people who contribute to the success of a platform should share in the success later on.

One powerful new idiom that is emerging via cryptocurrency is micropayments. The costs of transacting in a digital currency are already extremely low compared to existing payment solutions. Through third party APIs (including that which we provide at Evergreen) they can be literally nothing. This allows the easy monetization of any digital content, a conceptual shift we are already seeing with the tipping culture of Bitcoin and DogeCoin. It’s recognizing that economic streams need to be just that, streams that flow from high places to low places, filling in the places where there is need and providing the irrigation that leads to long term growth.

Perhaps there is something we can learn from ditching the quarterly earnings reports of contemporary post-modern economics and cycling back to the seasonal approach of agricultural society. Water rains, things grow.

Here there is time, but it is not the moment that is privileged, nor the expectation of an immediate return. What is privilege is the concept of flow, a harmony that is attained by a deep appreciation of nature.

Did I say we need governance? We do, but it must be governance that facilitates human freedom rather than constrains it, that facilitates flow rather than erects blockades and toll collection booths, that inspires us to create new realities instead of forcing us to live in fear.

That’s still “for us, by us,” but it’s no longer a small group of technical people trying to create an alternate reality, it’s a new global paradigm re-inventing and bringing flow to money. That’s a revolution and it’s happening right now on the Blockchain.

The post For us by us: What Bitcoin needs to do to move out of the crypto-enthusiast box appeared first on Bitcoin Magazine.

March 14, 2014 at 04:44PM

ASICS for Litecoin. Here They Come.


An ASIC is an Application Specific Integrated Circuit. They are specially designed pieces of hardware for performing the hashing algorithms necessary to mine a specific coin and verify hashed transactions. These pieces of hardware are designed and manufactured to perform necessary hashing and nothing else.

With the increasing valuation of Bitcoin, in fiat terms, the economic viability of ASICs begun to make sense some time ago. The development of ASICs to do SHA256 became a reality. There were issues along the way with bringing them to market, but ASICs have arrived.

With the increasing valuation of any coin the same is true: ASICs become a viable option. It is difficult and some would say impossible to avoid ASIC development in the face of viable economic incentives.

ASICs are considered undesirable for a variety of reasons, not the least of which is that they concentrate mining power too heavily and diverge from the original ‘one cpu one vote’ intention of Satoshi.

The proof-of-work also solves the problem of determining representation in majority decision

making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone

able to allocate many IPs. Proof-of-work is essentially one-CPU-one-vote. The majority

decision is represented by the longest chain, which has the greatest proof-of-work effort invested

in it. – from Satoshi Nakamoto’s white paper on Bitcoin.

There are two main mining computations for crypto-currencies in use at the moment: Scrypt and SHA. Scrypt was most popularly implemented in Litecoin in 2011. It was an attempt to resist ASIC development as much as economically possible, through memory hardness.

Litecoin has been wildly successful, achieving a market cap of over 1 billion dollars last year, at its peak. It has an emerging chart pattern that mirrors the market price movement of Bitcoin. So, the economic incentives are now there to develop ASICs for Litecoin.

This is exactly what one company has done.

Mining ASICs Technologies B.V. (MAT) is in development of an ASIC Litecoin SCRYPT miner and FPGA Litecoin SCRYPT miner.

They have signed a partnership with German Company Dream Chip Technologies. Dream Chip Technologies is a German engineering company with a strong track record in System on Chip and embedded Software design.

The PLATINUM FPGA Litecoin SCRYPT miners will be embodied in two products , the 10 MH/s device and the 30 MH/s device. Shipments are planned to start in August of 2014. Pricing for their mining gear is available on their website.

The company is taking pre-orders. As always, in line with the principles of Caveat Emptor, consumers are encouraged to conduct all the necessary checks and due-diligence. Check the scam list on bitcointalk.org.

These promise to be high performance and very efficient Litecoin miners. The company will be taking only 35 percent as a deposit payment. There is no full payment for pre-orders needed. These Scrypt Litecoin miners will able to mine Litecoin, and all other Scrypt cryptocurrencies like Dogecoins, Feathercoins and many others.

Mining ASICs Technologies B.V. (MAT) is providing its mining and Cryptocurrency expertise while Dream Chip Technologies will handle hardware development, production, and quality assurance.

FPGAs and ASICs for Litecoin mining would represent a significant increase in computing
 power backing the Litecoin network. At present, most mining of different
 Scrypt coins takes place on regular graphics cards/GPUs, as did Bitcoin mining before ASICs become popular for mining.

Mining ASICs Technologies B.V. (MAT) has begun with an FPGA conceptualization of Litecoin’s primary Scrypt hashing algorithm, before designing dedicated ASIC hardware.

All specifications at the moment are pre-release and subject to change. Mining ASICs Technologies B.V. (MAT) has additionally announced the start of development ‘Titanium’: a new-generation of powerful ASIC Bitcoin miners using 28nm chips that will provide at least 6 TH/s of power.

Any images currently floating around of the miners are only representative of the device. The actual final product may look different.

Full information, details and contact information is available from the companies website.

The post ASICS for Litecoin. Here They Come. appeared first on Bitcoin Magazine.

March 14, 2014 at 02:41PM

Australian Tax Office Explains Bitcoin, Intends to Tax it

The Australian Tax Office (ATO) has provided businesses with some more guidelines on how it intends to deal with bitcoin, stating that income and profits derived from bitcoin transactions are taxable.

The letter, sent to an Australian bitcoin entrepreneur in response to a request made last June, was a private ruling to specific questions and noted its contents were valid only to that case. But it gives digital currency businesses in the country a better idea of how they should act to comply with tax regulations.

The first question asked if transferring bitcoins to a private company in return for shares would count as income, either ordinary or that from a for-profit undertaking. The answer was simply “Yes”.

Continue reading at CoinDesk

March 14, 2014 at 11:36AM

13 March 2014

Coins for Bands Hope to Disrupt Music Industry

Altcoins targeting specific communities are starting to emerge. This month sees the introduction of two separate cryptocurrencies aimed at musicians. Songcoin and FUNK each take different political and technical approaches to helping the independent music economy.

Songcoin is the brainchild of Pimovi, a subsidiary of Australian natural gas exploration firm The Chancellor Group.

Co-founded by Kasian Franks, who formerly founded now-defunct multimedia search firm SeeqPod, Pimovi is a digital entertainment company, eager to get involved in the cryptocurrency space.

Continue reading at CoinDesk

March 14, 2014 at 04:04AM

Xapo Raises $20 Million for Ultra-Secure Bitcoin Storage

California-based bitcoin security company Xapo has raised $20m as part of an initial round of fundraising led by Benchmark, Fortress Investment Group and Ribbit Capital.

The funding round is the second largest public round in the bitcoin space, trailing Coinbase’s $25m Series B completed in December, but coming in ahead of Circle’s $9m Series A round in October.

Founded by Wences Casares, former CEO and founder of digital wallet startup Lemon, the company maintains bitcoin cold storage facilities in two undisclosed locations.

Continue reading at CoinDesk

March 13, 2014 at 09:00PM

Mobile Ad Platform Vungle Offers Publishers Payouts in Bitcoin

Good news for mobile app developers who want more options when getting paid from their advertising revenue: mobile advertising platform Vungle has just announced plans to offer their publishers the option to receive payments in bitcoin.

Vungle is one of Silicon Valley’s fastest growing companies in the mobile app monetization space, and after receiving $17m in series B fundraising last month, the tech company is looking to expand its reach.

The move to start offering bitcoin payouts to the publishers of more than 4,000 apps on the Vungle network comes in response to demand from app developers who expressed their desire for more flexibility in receiving payments from their advertising revenues, says Vungle’s VP of Marketing Andrea Sharfin:

Continue reading at CoinDesk

March 13, 2014 at 05:07PM

Pock.io Becomes First UK Retailer to Sell Gift Cards for Cryptocurrencies

Consumers in the UK can now use their bitcoin and other cryptocurrencies to buy gift cards for major online retailers like Amazon, Google Play Store, ASOS and Starbucks.

Launched at the end of January, Pock.io has become the first British service to exchange retailer gift cards for digital currencies – with eight different cryptocoins currently accepted.

Pock.io CEO and co-founder Rusty Nash said that the driving force behind the launch of this service was to make digital currencies more mainstream in the UK.

Continue reading at CoinDesk

March 13, 2014 at 03:32PM

GoCoin to Support Dogecoin Following Good News for Miners

International payment platform GoCoin has today announced plans to support dogecoin.

The move means merchants using the platform will soon be able to accept payments in the canine currency, in addition to GoCoin’s existing currencies, bitcoin and litecoin.

“We’ve been carefully prioritizing the latest altcoins, and dogecoin really stands out as a viable currency due, in large part, to the strength of its community,” said GoCoin founder and CEO Steve Beauregard.

Continue reading at CoinDesk

March 13, 2014 at 02:15PM

Bank of England: Digital Currencies are Similar to Commodities

The Bank of England (BoE) has published an article on the role of money in the modern economy and one topic was the future of digital currencies and payment technologies. The currency v commodity debate has been going on for a while and the Bank of England is clearly on the commodity side of the argument.

“Digital currencies are not at present widely used as a medium of exchange. Instead, their popularity largely derives from their ability to serve as an asset class. As such they may have more conceptual similarities to commodities, such as gold, than money,” the bank concluded.

Not a generally accepted medium of exchange

Digital currencies were brought up in the context of alternative currencies and recent developments in payment technologies. The advent of e-money and services like PayPal and Google Wallet was discussed and the bank concluded that these forms of money have similar features to bank deposits.

Continue reading at CoinDesk

March 13, 2014 at 01:02PM

12 March 2014

The Geostrategic Implications of Bitcoin


The Geostrategic Implications of Bitcoin post image

Argument for the US leading Bitcoin adoption

The US exports inflation through the US Dollar’s status as a reserve currency. Over time as countries adopt Bitcoin as legal tender alongside their FIAT currencies, whether voluntarily or not, the Eurodollar inflows will rise as the world shifts from USD to BTC as the reserve currency. As those inflows rise, the value of the dollar falls precipitously, creating runaway inflation, perhaps “hyper”.

The US at that point has no choice but to join the rest of the world in the BTC camp.

Under that calculation it actually behooves the US to lead that transition rather than follow. At least in leading it, the US would be able to influence the speed of adoption and the manner in which the Eurodollars are repatriated.

Bitcoin Momentum

As BTC increases in value, adoption and market cap it becomes a “critical infrastructure” component alongside the telecom links and switches along which interbank communications run now.

But this component has a very critical difference from current StratOps infrastructure. It doesn’t actually reside in the US borders. Certainly a part of it does, but the bulk of it, now and potentially in the future would not. There are only 300 million people in the US and 6.7 Billion, or more, in the rest of the world. While hash capacity won’t correlate to per capita distribution, it’s unlikely, IMHO, that more than 51% of the blockchains hash will reside in the US.

In addition, tying a FIAT currency to BTC creates other issues. As BTC value fluctuates external operations are affected. Cost of borrowing changes quickly, intra country settlement becomes time sensitive, whole industries might become unprofitable. (The Philippine Call Center/BPO industry is a good example). This then affects internal operations. Industries close, people are thrown out of work, kids go hungry, protests and riots can happen. This is serious. This can make governments fall, and in troubling times a “better” government is not certain.

But it’s not as if countries can actually stop BTC. When Bitcoin was first introduced and the difficulty was low you could mine on your CPU. Even if suppression of BTC was effective, which is highly unlikely, over time the difficulty would fall and GPU and CPU mining would become profitable. If that happened every computer and every video card could be used to mine Bitcoin. This would at some point establish equilibrium between suppression and difficulty resulting in a stable Bitcoin anyway. Granted a precipitous fall of difficulty like that is an unlikely scenario, but about as unlikely as any sovereignty’s ability to actually stop the use of BTC.

Example of an international cryptocurrency attack

In addition, the beginning of any new warfare in the 21st century not initiated by the US will almost certainly begin through cyber and economic means. The US eschews economic warfare (though not cyber) because it is the richest country in the world. Trade benefits the US disproportionately. On the other hand, other state actors and non-state actors are more likely to use asymmetric warfare tactics to disrupt communication and logistic streams prior to and perhaps in lieu of physical warfare.

So imagine the scenario: Beijing decides to flex its muscle and see how the US would react if they tried to make a move on the Spratleys. They spend time seeding the block chain with small transactions so that we all accept “dust” as a normal course of business and mapping the BTC landscape and actors. Now they turn up the volume and start dusting the block chain growing it very rapidly and increasing contention, bad blocks, and orphan chains causing problems for mines and pools. The block chain begins to fracture with separate orphan chains appearing in different places, a lot of unsettled and unconfirmed transactions, and increasing confusion and loss of trust in the block chain. People start to sell. As BTC falls, older unprofitable miners go off line.

Then they direct all of their miners (a significant % of the global total, with perhaps reserve dark hash capacity in their order of battle), to one pool, and use that pool to establish a consensus leadership position over the global block chain. Alongside this they dispatch their fleet to the Spratleys on a “training” exercise, and use their cyber warfare capability to disrupt US NOC operations, transoceanic switch nodes, US mining pools, and US banks in general.

Achieving surprise and superiority over the global block chain they write bad transactions to the chain, disrupting global BTC economies. They use the topological map previously discussed likely using the dusting method in evidence last week. This by the way also gives China plausible deniability in case they decide they don’t really want this fight. They can blame the block chain and cyber-attacks on “private actors”, and call the naval movement a “training exercise”.

The US reacts by disconnecting China from the Internet Exchange Points, by initiating their own offensive attacks, and by rolling back the US BTC chain to prior to the attacks. But we are not organized as China is. Our “private” actors truly are private and unless the BTC chain is declared as a “critical infrastructure” component previously to this initiation of action, and we have a “reserve” mining corp that has existing 3CI infrastructure in place, we’ll be slow to react.

It’ll take days to stop the attack and days or weeks more to roll back the bad changes while leaving in real transactions. In the meantime people would resort to trading USD instead of BTC using old fashioned means, but the damage would have already been done.

One of the scariest components of the scenario outlined above is the “plausible deniability” component. Something of that nature makes war more likely IMHO, not less, and above all, as a Buddhist, I am against initiation of force.

Scary thoughts and idea. I welcome public discourse on this topic.

The post The Geostrategic Implications of Bitcoin appeared first on Bitcoin Magazine.

March 13, 2014 at 03:43AM

Multisig: The Future of Bitcoin

Bitcoin Networked

Over the past month we have seen a large number of Bitcoin services dramatically fall over into the abyss. Silk Road 2, the intended successor to the Silk Road anonymous marketplace that was shut down in October last year, lost $2.7 million worth of BTC consisting of all of its users’ account balances and is struggling to figure out how and if it will ever be able to relaunch. MtGox, once the world’s largest Bitcoin exchange with over 90% market share, stopped processing withdrawals early in February and has since shut down entirely, admitting to having lost a staggering 750,000 BTC. Flexcoin, an old “bitcoin Bank”, shut down after having lost 900 bitcoins, and a site called Poloniex gave its users a Cyprus-style haircut after finding out that it was short around 75 BTC

Some people, initially including myself, are seeing this as a “changing of the guard” moment for the Bitcoin community, where it was amateur and badly managed services that were at fault for their own thefts and professionals would soon come in and take over. If this was a mere one or two thefts, then this would indeed be a reasonable, and fully satisfactory, explanation. In reality, however, Bitcoin users and services are losing substantial sums of bitcoin every week, and without chargeback-like consumer protections there are several high-profile stories of companies particularly in the mining industry taking users’ bitcoins and only delivering a low-quality product several months too late, if at all. Given the sheer number of these cases, and the sheer difficulty that even highly competent individuals face trying to secure their funds, a large portion of the intelligentsia, and the press, is willing to pronounce Bitcoin 1.0 dead.

As it should be; Bitcoin 1.0 has been around for five years and given what we know now is already very much an outdated technology. Rather, now is the time for Bitcoin 1.5 to shine.

Enter Multisig

So what is Bitcoin 1.0, and what is this Bitcoin 1.5 that I am so boldly claiming will come to replace it? In short, Bitcoin 1.0 can be described as a simple send-receive system. In a Bitcoin account, there is a set of 34-character Bitcoin addresses, like 1JwSSubhmg6iPtRjtyqhUYYH7bZg3Lfy1T, that you can use to receive bitcoins, and each address has an associated 64-character private key, in this case c4bbcb1fbec99d65bf59d85c8cb62ee2db963f0fe106f483d9afa73bd4e39a8a, that can be used to spend bitcoins that are sent to the address. Private keys need to be kept safe and only accessed when you want to sign a transaction, and Bitcoin addresses can be freely handed out to the world. And that’s how Bitcoin wallets are secured. If you can keep the single private key safe, everything’s fine; if you lose it the funds are gone, and if someone else gains access to it your funds are gone too – essentially, the exact same security model that we have with physical cash, except a thousand times more slippery.

The technology that I am calling Bitcoin 1.5 is a concept that was first pioneered and formalized into the standard Bitcoin protocol in 2011 and 2012: multisignature transactions. In a traditional Bitcoin account, as described above, you have Bitcoin addresses, where each address has one associated private key that grants the keyholder full control over the funds. With multisignature addresses, you can have a Bitcoin address with three associated private keys, such that you need any two of them to spend the funds. Theoretically, you can have one-of-three, five-of-five, or six-of-eleven addresses too; it just happens that two-of-three is the most useful combination.

Choose Your Own Arbitrator

So how can multisig be used in practice? The first major use case of the protocol is consumer protection. When you make a payment with a credit card, if later on you do not get the product that you paid for you can request a “chargeback”. The merchant can either accept the chargeback, sending the funds back (this is what happens by default), or contest it, starting an arbitration process where the credit card company determines whether you or the merchant have the better case. With Bitcoin (or rather, Bitcoin 1.0), transactions are final. As soon as you pay for a product, your funds are gone. And in Bitcoin 1.0, we saw this as a good thing; although it harms consumers to not have chargebacks, we would argue, it helps merchants more, and in the long term this would lead to merchants lowering their prices and benefitting everyone. In some industries, this argument is very correct; in others, however, it’s not. And in Bitcoin 1.5 we recognize that, instead providing a real solution to the problem: escrow.

Multisignature escrow works as follows. When Alice wants to send $20 to Bob in exchange for a product, Alice first picks a mutually trusted arbitrator, whom we’ll call Martin, and sends the $20 to a multisig between Alice, Martin and Bob. Bob sees that the payment was made, and confirms the order and ships the product. When Alice receives the product, Alice finalizes the transaction by creating a transaction sending the $20 from the multisig to Bob, signing it, and passing it to Bob. Bob then signs the transcation, and publishes it with the required two signatures. Alternatively, Bob might choose not to send the product, in which case he creates and signs a refund transaction sending $20 to Alice, and sends it to Alice so that Alice can sign and publish it. Now, what happens if Bob claims to have sent the product and Alice refuses to release the funds? Then, either Alice or Bob contact Martin, and Martin decides whether Alice or Bob has the better case. Whichever party Martin decides in favor of, he produces a transaction sending $1 to himself and $19 to them (or some other percentage fee), and sends it to that party to provide the second signature and publish in order to receive the funds.

Currently, the site pioneering this type of approach bitrated.com; the interface at Bitrated is intuitive enough for manual transactions such as contracts and employment agreements, but it is far from ideal for consumer to merchant payments. Ideally, marketplaces and payment processors like BitPay would integrate multisig technology directly into their payment platform, and Bitcoin wallets would include an easy interface for finalizing transactions; if done correctly, the experience can be exactly as seamless as Bitpay or Paypal are today.

So all in all, given that this multisig approach does require intermediaries who will charge fees, how is it better than Paypal? First of all, it’s voluntary. In certain circumstances, such as when you are buying from a large reputable corporation or when you’re sending money to an employee or contractor you have an established relationship with and trust, intermediaries are unnecessary; plain old A to B sends work just fine. Sending to charities is a similar circumstance, because charities don’t really owe you anything when you send them money in any case. Second, the system is modular. Sometimes, the ideal arbitrator for a particular transaction is a specialized entity that can do that particular job much better; for example, if you’re seling virtual goods the ideal arbitrator would be the operator of the platform the virtual goods are on, since they can very quickly determine whether a given virtual good has been sent. At other times, you might want a generic arbitrator, but you’re in an industry where mainstream providers are too squeamish to handle the task. And, of course, at other times a generic Paypal-like institution is indeed the best approach. With multisig, you can easily choose a different arbitrator with every single transaction, and you only pay when you actually use arbitration; transactions that go through as planned are 0% fee.

Solving the Bank Problem

Although multisignature escrow is a very interesting application in its own right, there is another, much larger issue that multisignature transactions can solve, and one that has been responsible for perhaps the largest share of Bitcoin’s negative associations in the media, dwarfing even Silk Road, in the last three years. That issue is the concern of security and trust.

One of the larger philosophical divides throughout the course of human history has been one between two different methods of achieving security. One of these is individualism: every person having the power, and responsibility, to directly protect themselves and their families by putting the ultimate, base-level tools for doing so directly under their control. The other is delegation: trusting centralized authorities with high levels of resources and expertise to manage security for everyone. In the United States, this is the dichotomy between every family keeping a gun in their cupboard and not having any civilian-owner guns at all and letting the police do the work. In Cyprus, it’s the question of whether to store one’s money under one’s mattress or in the bank. In every case, both sides of the debate have their merits and both sides have their faults.

And the same situation is true with Bitcoin. Some people, faced with the large number of exchanges getting hacked, see technologies like paper wallets, offline laptops and brainwallets with prepended usernames and twenty-character passwords as the solution; essentially, a return to the tried-and-tested best practices for storing gold in the twentieth century, plus a bit more complex technical magic built in. Others, however, see the sheer difficulty that even technically skilled individuals face properly securing their funds, and see better centralized services, like Coinbase, as the solution. In the case of physical security, either the wholesale victory of one strategy or some crude linear combination of the two – centralized storage of 90% of one’s cash and local storage of 10%, or keeping a gun but having it locked up in a safe in the basement, are the only possibilities. And in the case of Bitcoin 1.0 exactly the same holds true as well. In the case of Bitcoin 1.5, however, we are dealing with a world of factum law and decentralized technology, so we can be much more clever with how we combine two approaches – arguably, in fact, it is possible to get the best of both worlds.

Leading the Charge

The company that is currently taking the lead on bringing Bitcoin 1.5 technology to the world at large is CryptoCorp, created by Tradehill co-founder Ryan Singer. CryptoCorp’s core offering is something that a large number of people, including myself, have been trying to implement and push forward for nearly a year: multisignature transaction wallets. The way that a multisignature wallet works is simple. Instead of the Bitcoin address having one private key, it has three. One private key is stored semi-securely, just as in a traditional Bitcoin wallet. The second key the user is instructed to store safely (eg. in a safety deposit box), and the third key is stored on the server.

Normally, when you want to spend your funds, your wallet would make a transaction and sign it locally, and then it would pass the transaction on to the server. In the simplest implementation, the server would then require you to input a code from the Google Authenticator app on your smartphone in order to provide a second verification that it is indeed you who wants to send the funds, and upon successful verification it would then sign the transaction and broadcast the transaction with two signatures to the network.

What CryptoCorp is doing is taking this basic idea, and applying two major improvements. First of all, CryptoCorp is introducing a technology that it calls “hierarchical deterministic multisignature” (HDM) wallets; that is, instead of having three private keys, there are three deterministic wallets (essentially, seeds from which a potentially infinite number of private keys can be generated). Address 0 of the HDM wallet is made by combining public key 0 from the first seed, public key 0 from the second seed and public key 0 from the third seed, and so on for addresses 1, 2, etc. This allows the CryptoCorp wallets to have multiple addresses for privacy just like Bitcoin wallets can, and the multisignature signing can still be performed just as before

Second, and more importantly, CryptoCorp is doing much more than just doing two-factor authentication. Every time the CryptoCorp server receives a transaction to co-sign, it will run the transaction through a complex machine-learning fraud-detection model taking into account the amount, the frequency and amount of prior transactions and the identity of the recipient, and will assign the transaction a risk score. If the risk score is low, the server will simply co-sign the transaction without asking. If the risk score is higher, the server can ask for a standard two-factor confirmation via Google Authenticator or by sending a code as a text message to the user’s phone number. Email confirmation is another option. At very high risk levels, the server would flag the transaction for manual review, and an agent may even make a phone call or require KYC-style verification.

What is important to note is that none of this is new; such risk metric schemes have been in use by mainstream banks and financial institutions for over a decade, and they have existed in low-tech form in the form of withdrawal limits for over a century. All that CryptoCorp does is marry these benefits of the traditional financial system with the efficiency, and trust-free nature, of Bitcoin – even if CryptoCorp denies your transaction you can still process it yourself by getting your second key from your safety deposit box, and if CryptoCorp tries to seize your funds they would not be able to, since they only have one key.

The Future of Cryptocurrency

So what will the Bitcoin world of 2015 look like? First of all, if either CryptoCorp proceeds according to plan or CryptoCorp fails and some competitor decides to take charge, nearly every address will start with a ’3′. The question of “where do you store your funds?” will be dead; instead, the question will be: “what are the withdrawal conditions of this account, and what is the policy of each key?”. Consumer wallets will all be 2-of-3 multisig, sharing the keys between either a low-security local-storage key, a high-security key in a safety deposit box and a central provider, or two central providers and a low-security key. The way CryptoCorp is designed is as a highly modular “verification oracle” service that anyone can plug in. If a user wants to make their wallet have CryptoCorp as one of the keyholders, they will be able to. If a company wants to have CryptoCorp, and a similar competitor, serve as two of their five treasurers, they will be able to; the underlying math is exactly the same.

In the long term, the multisig story gets even more interesting once cryptocurrency 2.0 technologies go into full tilt. Next-generation smart contract platforms allow users to set arbitrary withdrawal conditions on accounts; for example, one can have an account with the rule that one out of a given five parties can withdraw up to 1% per day, and three out of five parties can withdraw anything. One can make a will by setting up a account so that one’s son can withdraw any amount, but with a six-month delay where the account owner can claw the funds back if they are still alive. In these cases, CryptoCorp-style oracles will play an even larger role in the cryptocurrency world, and may even fuse together with private arbitration companies; whether it’s a consumer-merchant dispute, an employment contract or protecting a user from the theft of his own keys, it’s ultimately all a matter of using algorithmic and human judgement to decide whether or not to sign a multisig transaction. As we sit here today on the other end of what may well come to be known as the “great crisis of MtGox”, the merger of cryptography and finance is only just beginning.

If you want to play around with the multisig technology yourself, feel free to either check out CryptoCorp or use one of my own tools:

The post Multisig: The Future of Bitcoin appeared first on Bitcoin Magazine.

March 12, 2014 at 11:55PM

Pybitcointools Multisig Tutorial

Bitcoin Networked

There has been a large amount of interest in multisignature transaction technology in the past year, especially with the recent announcement of CryptoCorp. If you want to play with multisig technology yourself on the command line, here are the gritty details of how to do it. First, run sudo pip install bitcoin to install the Python Bitcoin library. Then, to generate the three private keys, run the following:

> k1=`pybtctool random_key`
> k2=`pybtctool random_key`
> k3=`pybtctool random_key`
> p1=`pybtctool privtopub $k1`
> p2=`pybtctool privtopub $k2`
> p3=`pybtctool privtopub $k3`

You now have three private keys and three public keys; run echo $k1, echo $p3, etc to see these values in the raw form. Now, we make the multisig script and address:

> script=`pybtctool mk_multisig_script $p1 $p2 $p3 2 3`
> address=`pybtctool scriptaddr $script`

Let’s see what these values are:

> echo $script
> echo $address

Due to randomness, your values will be different, but of the same general form. Notice the 3 at the start of the address. Now, send some BTC to your address, and run the following to make sure you actually received the funds.

> pybtctool unspent $address
[{"output": "9e123938b7625ef7807f31ad61c3b818484fed93eb951d981abd83413005080f:0", "value": 20000}]

Now, we can make the transaction, sending the funds to the Methuselah Foundation‘s donation address:

> tx=`pybtctool mktx 9e123938b7625ef7807f31ad61c3b818484fed93eb951d981abd83413005080f:0 1GRF5cmvAqQPNVPRHe1TpMZGS1mYFHFQHu:10000`
> echo $tx

Now, let’s sign it with keys 1 and 3:

> sig1=`pybtctool multisign $tx 0 $script $k1`
> sig2=`pybtctool multisign $tx 0 $script $k3`
> tx2=`pybtctool apply_multisignatures $tx 0 $script $sig1 $sig2`

The final transaction looks like this:

> echo $tx2

And now we push:

> pybtctool eligius_pushtx $tx2

And there we go, we’re 0.0001 BTC closer to at least mitigating the effect of the single most deadly disease on the planet.

The post Pybitcointools Multisig Tutorial appeared first on Bitcoin Magazine.

March 12, 2014 at 11:52PM

Bitcoin Derivatives Platform BTC.SX Resumes Trading After Mt Gox-Induced Freeze

Derivatives trading site BTC.SX has resumed trading after a few weeks of downtime induced by the Mt. Gox collapse. The company has signed BitStamp as its new exchange partner, said BTC.SX CEO Joseph Lee.

BTC.SX suspended its operations until further notice on February 25, after Mt. Gox imploded. At the time, Lee told CoinDesk that he had no prior warning from the exchange, even as a business partner. BTC.SX went to Gox to trade bitcoins on behalf of its customers, who were using Lee’s site to trade bitcoin-based derivatives.

The company was up to around $40m in brokered trades by the time Mt Gox collapsed.

Continue reading at CoinDesk

March 12, 2014 at 10:36PM

Inside North America’s ‘$8m-a-Month’ Bitcoin Mining Operation

In a perfect world where mining difficulty was lower, bitcoin prices were higher and a warehouse full of mining rigs could be run by one man, Dave Carlson, the owner of North America’s largest bitcoin mining operation, could be earning $8m a month.

However, just like reports of bitcoin’s death, reports of Carlson’s personal earnings are, unfortunately for him, exaggerated.

With the mainstream media continuing to paint bitcoin as a modern-day gold rush, Carlson’s rags-to-riches story has been of particular interest, even if it hasn’t always been put in the proper context.

Continue reading at CoinDesk

March 12, 2014 at 05:01PM

Goldman Sachs: Bitcoin Isn’t a Currency But Underlying Tech Holds Promise

A new Goldman Sachs report on digital currencies has found that while bitcoin is not a practical currency, its underlying ledger technology could hold promise.

The top-of-mind report, entitled ‘All About Bitcoin’, appears to have been compiled recently and it is possible Goldman Sachs commissioned it following the highly publicised Mt. Gox collapse.

The report outlines the basics, citing bitcoin’s advantages and shortcomings, backed by statements from critics and supporters.

Continue reading at CoinDesk

March 12, 2014 at 03:58PM

Inside Bitcoins NYC Names Circle, Blockchain CEOs as Keynote Speakers

Inside Bitcoins New York has announced its keynote speakers for this year’s conference to be held from 7th to 8th April at New York’s Javits Convention Center.

Headline speakers at the event will include Circle’s Jeremy Allaire, who will give the opening keynote; and Blockchain‘s Nicolas Cary, who will present the afternoon keynote on the 7th April.

In addition to these notable speakers, a second event track has been added to day two of the event, which will be dedicated to exploring the financial issues associated with bitcoin.

Continue reading at CoinDesk

March 12, 2014 at 02:00PM

Perseus Telecom Launches Digital Currency Initiative, Integrated Exchange

Perseus Telecom has launched a new initiative with the aim to provide industrial-strength security for bitcoin exchanges, e-commerce, online gaming and multimedia sites.

Perseus started accepting bitcoin payments just last month. The company is a provider of high-speed communications used by hedge funds, trading firms and media organisations in major financial hubs from London to Tokyo.

The company’s Digital Currency Initiative (DCI) is being introduced just weeks after the Mt. Gox failure and Perseus seems to think that no crisis should ever go to waste. In fact, it is hoping to capitalise on bitcoin security concerns.

Continue reading at CoinDesk

March 12, 2014 at 01:28PM

Finnish Firm Transforms Web Kiosks into Bitcoin ATMs

Bitcoin ATMs are on the march across the globe, with machines recently being launched in Dublin and London.

In addition to the well-known manufacturers like Robocoin and Lamassu, however, other companies are trying to hop on the ATM bandwagon, including one Finnish company that’s taking a slightly different approach.

Deltacom Finland Oy, founded in 2001, is a family business based in Helsinki. The small company was started by father and son team Timo and Mika Reinikainen in 2001 and operates web kiosks around Finland.

Continue reading at CoinDesk

March 12, 2014 at 11:53AM

11 March 2014

BitPay Dumps Texas Gun Retailer


Central Texas Gunworks LLC found itself without a Bitcoin payment processor last week as Atlanta based BitPay abruptly dropped the firearms seller from service. According to the company’s owner, US Army veteran Michael Cargill, the move came without warning or explanation. This, in spite of the fact that his company is a duly licensed firearms dealer engaged in lawful commerce in a gun-friendly state. As a result, Central Texas Gunworks had no choice but to change processors. With only a few days’ notice, the team from CoinVoice reportedly worked overtime to implement online Bitcoin payment capability for the retailer.

For his own part, Cargill says that he was taken by surprise by BitPay’s freeze of his account and expected to have an opportunity to meet with BitPay CEO Tony Gallippi soon to discuss the matter. BitPay’s terms of service as listed on its website explicitly prohibit firearms related transactions. However, Central Texas Gunworks claims that BitPay was fully aware of its business model at the time the company signed up for service. Whether the restrictive provision was present from the beginning or BitPay added it after dropping Central Texas Gunworks is unknown. What is clear is that BitPay has made a business decision to join mainstream payment processors, such as PayPal, in declining to facilitate commerce in weapons and ammunition.

Bitcoin has proven very popular among civil Libertarians, many of whom are likely to be firearms owners or supporters of gun rights, especially in Texas. Firearm sales are among the most regulated transactions in the United States. Indeed, “firearms are the only product that requires an FBI background check prior to purchase,” according to Michael Cargill. BitPay has built its business around the idea that Bitcoin is a disruptive technology that empowers consumers and businesses by providing a low cost, secure, independent way to transact business over the internet. BitPay’s decision is especially baffling, since it seems to run counter to the spirit of Bitcoin, though it is unlikely to harm the company in any significant way.

Central Texas Gunworks is the first known company in the United States accepting Bitcoin in exchange for firearms, ammunition, and training. The company’s retail storefront also boasts one of the first Bitcoin ATMs in the US. The ATM promotes adoption of crypto currency by providing purchasers with an opportunity to take a small discount by paying with bitcoins (firearms sellers often allow a small discount on cash purchases), while Central Texas Gunworks saves the processing fee associated with accepting credit cards. As firearms generally sell for several hundred dollars each, recapturing fees spent on processing can add a substantial amount to a retailer’s bottom line.

The post BitPay Dumps Texas Gun Retailer appeared first on Bitcoin Magazine.

March 12, 2014 at 03:44AM

Singapore Bitcoin ATM Producer Tembusu Gets $300,000 Seed Funding

Singapore bitcoin ATM producer Tembusu announced today it has closed its seed funding round and raised over S$300,000 (US$236,600), just one and a half weeks after launching its first machine and after the company itself was valued at S$5.1m (US$4.02m).

Company spokesman Jarrod Luo said the extra capital would form the bulk of the working capital the startup requires to “fulfil its outstanding machine orders in a timely fashion”, including stockpiling raw materials and expanding its team.

Tembusu was the first company to open a bitcoin ATM in Singapore, and it is also the first to design and manufacture its machines there. It is also Asia’s first home-grown bitcoin ATM producer, having just beaten South Korea’s Coinplug to launch by a couple of days.

Continue reading at CoinDesk

March 12, 2014 at 01:03AM