31 May 2014

Mark T. Williams to Bitcoin Bulls: Time Will Vindicate My Prediction

 Mark T. Williams to Bitcoin Bulls: Time Will Vindicate My Prediction

Last December, Boston University School of Management professor Mark T. Williams issued a prediction that drew rapt attention from the mainstream media, as well as the united ire of the bitcoin industry, when he boldly projected that the price of bitcoin would lose 99% of its value and fall below $10 by the end of June 2014.

However, at press time, the price of bitcoin on CoinDesk’s USD Bitcoin Price Index remains well above this figure, rising 34% in May to pass the US$600 mark. But, if Williams was hoping the community would forget his prediction, he was proven false this week when a number of leaders in the bitcoin space began to call for Williams to comment on what they feel is the inaccuracy of his prior remarks.

For example, Bitcoin Magazine published an extensive piece dedicated to analyzing Williams’ past statements on bitcoin, while VC investor Erik Voorhees took to Twitter to question whether Williams would face his critics now that his projections haven’t come to fruition.

Williams remains definant

In a new interview with CoinDesk, Williams opened up about his famous prediction, offering a defiant analysis of why he is still convinced the current high price of bitcoin won’t remain for long.

Williams told CoinDesk:

“I continue to stick to my 2013 prediction that bitcoin is grossly overpriced and the price will eventually adjust dramatically downward as the priced-for-perfection expectations set by bitcoin promoters cannot be met.”

Williams suggested that while “asset bubbles cannot be easily timed”, the dramatic swings in price displayed by bitcoin provide evidence that consumers should be weary of making digital currency investments.

He added: “Will this bubble be completely deflated in the next six months to a year? Time will tell. In January 2013 it was worth only $13. If the question is, ‘Do I still see bitcoin dropping to these much lower levels in the future?’ The answer is yes.”

History will decide

Responding to the veracity of his prediction, Williams stated that he believes his projection, that bitcoin would decline in value by as much as 99%, has perhaps been more accurate than those in the digital currency community concede.

For example, he cited the February flash crash that drove prices down at major bitcoin exchange BTC-e to as low as $102, a drop, he says, of more than 90% from bitcoin’s market peak of roughly $1,200.

Williams reiterated that, long-term, his prediction will be more correct than those issued by the industry’s thought leaders, in part because of the demonstrated instability in the market:

“In contrast to the Winkelvoss twins that prognosticated that Bitcoin would rise to a mind boggling price of $40,000, I am confident that the true value of Bitcoin is closer to my estimate than theirs.”

Ecosystem improvements aren’t enough

When asked whether the bitcoin community has done enough to address and improve the safety of the ecosystem in the wake of Mt. Gox, Williams was equally critical.

In particular, Williams took aim at the industry’s major trade organisation, the Bitcoin Foundation, stating that this group has been especially slow to address the technology’s central issues or to raise awareness of these potential faults to the general public, stating:

“The bitcoin ecosystem still remains shaky as measured by the drama that continues to unfold at the Bitcoin Foundation. This organization continues to lack strong corporate governance and does not send out a positive message to the market.”

Williams also laid the blame on regulators, who he criticized as not going far enough to protect consumers, despite the wide range of warnings issued by central banks and government bodies internationally:

“For bitcoin to be successful regulation needs to be coordinated on an international basis. [...] Recent stern warnings to consumers by the SEC and FINRA about the high risks of bitcoin do not address the critical issue of which agency or group of agencies should regulate and have oversight and enforcement control.”

Bitcoin bubble remains

Williams indicated that despite bitcoin’s recent price resilience, he still feels that it remains “grossly over-inflated” due to what he views as its “concentrated ownership, artificially limited supply and overhyped demand”.

The capital markets professor suggested that rather than looking at bitcoin’s comparative recent price stability, the ecosystem should remember the losses that consumers incurred in the wake of the insolvency and bankruptcy of Mt. Gox, stating:

“The important story which seems to be missed is that there many investors that bought at the top of the market at $1,200 only six or so months ago and are now sitting on sizable market losses.”

Williams also suggested that he is not alone in this prediction, saying that more academics are likely to begin taking his viewpoint publicly. Specifically, he mentioned Yale University professor Robert Shiller, who has previously come forward to denounce bitcoin as an asset bubble.

Williams concluded: “I am not alone in the view that bitcoin is in a hyper bubble that will eventually pop.”

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May 31, 2014 at 12:33PM

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30 May 2014

HashFast Staves Off Involuntary Bankruptcy In San Francisco Court

 HashFast Staves Off Involuntary Bankruptcy In San Francisco Court

Bitcoin mining hardware manufacturer HashFast has avoided being forced into involuntary Chapter 7 bankruptcy proceedings by signing a deal with its creditors.

Under the deal, signed in a federal bankruptcy court in San Francisco, HashFast will commit to an accelerated restructuring in order to meet its obligations. Mining company Liquidbits sought court approval last week for HashFast to enter an involuntary bankruptcy in order to recoup funds lost after HashFast failed to deliver on a $6m order.

Ars Techina reported that HashFast is now able to resume part of its business. However, the bankruptcy court placed restrictions on the manner in which the company can sell products in keeping with previous agreements struck during arbitration.

The court order read:

“Subject to the other provisions of this Paragraph 2, HashFast may operate only in the ordinary course of its business.”

Permission to sell inventory

US Bankruptcy Judge Dennis Montali gave HashFast the go-ahead to begin selling some of its mining chip inventory, up to 1,000 units, as a way to raise funds. As part of the agreement, the company can raise no more than $100,000 by this method.

The court order also stipulated that the company’s creditors may grant future approval for more chip sales.

HashFast has provided its creditors with pricing figures for the products it intends to sell, and must abide by an agreement to not sell them for any more than the agreed-upon amount. The court also said that HashFast’s creditors must keep this information in strict confidence.

HashFast to hire chief restructuring officer

HashFast has agreed to hire an outside counsel to serve as chief restructuring officer during the process. Any candidate is subject to approval from the company’s creditors, the court said.

According to Ars, HashFast has reportedly retained the services of an attorney from the Brincko Group, a law office specializing in corporate restructuring and bankruptcies. The company’s lawyer also noted that this person has already been brought onto the team to help begin the restructuring effort immediately.

The court decision represents the first hint of a turnaround for the company, which in March had its bitcoin wallets frozen.

For months HashFast has been dogged by customer complaints and allegations of fraud. In early May, the company announced that it was firing 50 percent of its staff, saying the layoffs were a result of a business model restructuring rather than preparations for possible bankruptcy.

Bankruptcy court image via Shutterstock


May 30, 2014 at 10:45PM

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Bitcoin in the Beltway Conference to Make Waves in Washington D.C.

May 2014

Contact: M.K. Lords

Email: mksilent.h@gmail.com

Website: bitcoinnotbombs.com


Bitcoin in the Beltway Conference to Make Waves in Washington D.C.

(Washington, D.C.) This year has seen a rise in the amount of Bitcoin conferences, but one in particular is priding itself on featuring the most radical movers and shakers in the Bitcoin community while also putting charity center stage. Boasting such rebels as Defense Distributed’s Cody Wilson, Overstock CEO Patrick Byrne, Antiwar.com’s Angela Keaton, and Blockchain’s Andreas Antonopoulos, Bitcoin in the Beltway will be highlighting the most disruptive elements of blockchain technology in the heart of government regulation—Washington D.C.

Jason King, founder of Sean’s Outpost Homeless Outreach, came up with the idea of the conference. Sean’s Outpost has been one of the most inspiring bitcoin charities, delivering 60,000 meals to the homeless in the Pensacola area in one year. The co-chair of Bitcoin in the Beltway is Elizabeth Ploshay of the Bitcoin Foundation, who is also known for her great work with bitcoin charity projects. A keynote panel comprised of Jason King, Davi Barker, Andreas Antonopoulos, and M.K. Lords will be discussing the broken nonprofit system and how blockchain technology can provide better solutions.

“I come from a technology background out of the start-up technology world, and there’s a concept of methodology there that a small team of highly trained, efficient people can knock an incumbent off of their seat by being more focused and result oriented, so we’re trying to apply that same thing to philanthropy and nonprofits.”—Jason King of Sean’s Outpost in a Bitcoin Not Bombs interview.

Music will be another feature of the conference. Bitcoin in the Beltway will feature the talented Tatiana Moroz, creator of the infectious Bitcoin Jingle, DJ/hacker extraordinaire YT Cracker, and Zhou Tonged, also known as the bitcoin world’s Weird Al Yankovich.

The conference will take place June 20-22nd at The Marriott Renaissance DC Downtown. Tickets can be purchased at bitcoinbeltway.com and 10% of proceeds go to Sean’s Outpost Homeless Outreach. You don’t want to miss this revolutionary event built around the most exciting technology since the internet.

May 30, 2014 at 08:42AM

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29 May 2014

Coinffeine to Challenge Centralized Bitcoin Exchanges with Distributed Alternative

 Coinffeine to Challenge Centralized Bitcoin Exchanges with Distributed Alternative

Bitcoin and other digital currencies are well known as decentralized technologies, meaning that processing power is spread out across multiple points that reduce the chance of failure and network disruption.

Other elements of the digital currency ecosystem, most notably bitcoin exchanges, are centralized islands in a sea of decentralization. Concepts of decentralized bitcoin exchanges have been put forward in the past, but none have moved far in terms of development.

A team based in Spain is hoping to change that by creating an open-source, decentralized exchange algorithm called Coinffeine. CoinDesk spoke with co-founder and chief technology officer Ximo Guanter, who stated that the goal is to create a trustless, truly peer-to-peer exchange platform similar to BitTorrent.

Guanter told CoinDesk:

“Our approach is to have zero trust on the actual exchange. Users are always in control of their money, both the bitcoins and the local currencies, dollars, euros or whatever. We are completely decentralized.”

Additionally, Coinffeine plans to charge no transaction fees and offer faster transfer times compared to centralized exchanges.

Exchanging with no central authority

Nearly all digital currency exchanges are centralized, browser-based destinations that facilitate transactions and are responsible for safeguarding customer funds. This approach has been criticized as being too vulnerable, especially in the wake of the fall of Mt. Gox.

Coinffeine seeks to circumvent this issue by using downloadable applications that act as points within the decentralized exchange network. When the exchange client is open, each computer effectively becomes a node within the network. The system does not require the use of any central server or host to organize transactions.

Guanter explained:

“Even if some government thought this was a really bad project and shut us down, the network would still work. It doesn’t depend on us existing as a company.”

How it works

Currently, anyone seeking to engage in a pure peer-to-peer bitcoin transaction will need to have faith that the other party is going to hold up their end of the bargain. This arrangement is a source of fraud within bitcoin.

To combat this problem, Coinffeine’s exchange algorithm employs a distributed contract concept known as a micropayment channel. It leverages deposits between the two parties involved in the transaction to ensure that both sides play fair.

In a micropayment channel setting, both parties engage in a multi-step transaction that incentivizes completion, according to the Coinffeine’s Github breakdown:

“Once the deposits have been set up, which proves that both parties are serious about the exchange since they have committed funds, the actual exchange begins. A micropayment channel is a series of transactions in which the deposits and the bitcoins to exchange are split between Sam and Bob.”

After the steps are completed, both sides receive their initial deposit as well as the final bitcoin amount that was exchanged. Then, the transaction is broadcast to the mining network for confirmation.

Development pace to grow

Guanter told CoinDesk that to date, most of the coding has been done on the side while those involved have worked full-time on separate projects. He said that soon the team would be devoting their full attention to Coinffeine.

The project is currently in the pre-alpha phase, but the company claims to have received an undisclosed amount of seed funding to support development of the exchange algorithm as well additional features that are being currently being coded.

Guanter suggested that Coinffeine is poised to become the first operational decentralized bitcoin exchange owing to the progress made so far and the commitment by the development team, saying:

“I think we have an advantage over other decentralized exchanges just because we’re in a different phase. We’re far along in our coding process.”

It remains to be seen what the final product will look like, but Coinffeine holds the promise of a decentralized solution to a problem that has cost countless investors millions of dollars worldwide due to the vulnerability inherent in centralized exchanges.

Business diagram image via Shutterstock


May 30, 2014 at 12:23AM

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7 Things Every Misinformed Person Says About Bitcoin

It’s not always easy to be an early adopter of a disruptive technology like bitcoin.

In addition to dealing with bitcoin’s price volatility, sometimes rough-around-the-edges user applications and the uncertainty about the digital currency’s regulatory standing, as pioneers we also have to answer to our friends and families about our interest in this new technology.

 7 Things Every Misinformed Person Says About Bitcoin

More often than not, people with only a cursory knowledge of bitcoin tend to be grossly misinformed. To their credit, the technology underlying bitcoin is very complex. It’s no secret that as bitcoin enthusiasts, we acknowledge the need to more effectively educate the general public about this new digital currency so that we can debunk the myths that plague bitcoin’s reputation.

With that said, it is almost dumbfounding how predictable it is to hear certain phrases from our loved ones whenever the topic of bitcoin arises. These phrases are usually founded in concern, curiosity, and sometimes just plain ignorance, but every member of the bitcoin community has heard them at least once:

1. “So if there aren’t any physical coins, it’s not real money, right?”

The concept of a purely digital currency is a bit tough to swallow for some people, even in 2014.

Computer scientists have been trying to solve the double spending problem for decades, and thanks to Satoshi’s ingenious block chain invention, the technology has finally allowed the financial world to catch up with the rest of society’s digitally focused culture.

It’s hard for some to define the intrinsic value of bitcoin because it doesn’t exist in the physical world.

Society has trained us to value paper and metal as stores of value, but the reality is that it’s about time for us to have a secure, global currency that operates solely in the digital space. The value of email as a digital substitute for snail mail may have been hard to see at first, but few would argue its merits today, and skeptics who say that bitcoin is not “real money” will most likely be eating their words in a few years.

2. “Didn’t bitcoin just go bankrupt?”

A lot of misunderstanding surrounding bitcoin lies in people’s perceptions of the currency as a company, not a technology.

Even for those who barely follow the news, it was hard to escape the stories about Mt. Gox’s collapse back in February. The unfortunate bankruptcy of Mt. Gox combined with journalists using reckless headline bait to cover the story led many people in general public to believe that bitcoin itself had gone bankrupt, which we all know simply isn’t true.

Most of us have had to explain the distinction between bitcoin as a technology and a currency and the (sometimes shady) companies that are operate around the currency at least once to friends and family.

For the sake of saving us all time and for the overall reputation of bitcoin, hopefully we won’t have to deal with this again in the future.

3. “Isn’t bitcoin a Ponzi scheme?”

There are no shortage of stories about Everyday Joes becoming millionaires off of their bitcoin investments, particularly after the sharp rise in price toward the end of 2013. Bitcoin made countless tech-savvy investors very wealthy, and naturally a wave of skeptics followed.

It’s uncertain what exactly caused all of the price volatility, and the pseudonymous nature of bitcoin means that we will never know exactly how many people have become rich off their investments, nor will we ever know exactly who all of these people are. In reality, bitcoin is nothing like a Ponzi scheme, but the misinformed will still point their fingers at the newly minted millionaires, either out of spite, jealousy or unwillingness to learn more about the digital currency.

4. “I thought people only use bitcoin to buy drugs online”

Bitcoin got its first big break in mainstream media last year after the FBI closed down Silk Road, the Internet’s largest black market.

The press was in a frenzy to cover the arrest of Silk Road’s mastermind Ross Ulbricht, and bitcoin took center stage as reports suggested the FBI seized 170,000 bitcoins from both Ulbricht and the illicit marketplace.

Bitcoin’s reputation certainly took a hit, but people seem to quickly forget that the most common form of currency used to buy drugs and finance other illegal activities is still good ole’ cash. In fact, bitcoin can be used to buy almost anything online, and more brick-and-mortar stores are accepting the digital currency as a form of payment every day.

5. “I heard the CEO of bitcoin [got arrested/died/resigned]“

This phrase comes back to the notion of bitcoin as a company, not a decentralized currency.

There have been unfortunate news stories about CEOs of bitcoin companies committing suicide and getting arrested, but the truth is these sad events have no effect on the technology underlying bitcoin and the blockchain.

It’s important for us in the bitcoin community to explain to our loved ones that these types of unfortunate events aren’t directly related to bitcoin, because bitcoin has no CEO and the actions of a few bad players should not have a disproportionate effect on the reputation of this revolutionary invention.

6. “Can’t the person who invented it just run off with everyone’s bitcoins?”

There’s a lot of mystery surrounding Satoshi Nakamoto.

The person, or group of people, who invented bitcoin has been able to avoid being identified despite numerous attempts, including a high profile cover story from Newsweek .

Those who are unfamiliar with how bitcoin works under the hood are understandably suspicious about Satoshi, and while he does reportedly own a substantial amount of bitcoins, even a brief explanation of how bitcoin wallets work can help set the skeptics straight about the security of our bitcoin holdings.

7. “I don’t understand what’s so special about it”

This may be the most frustrating phrase to hear from our loved ones, because as enthusiasts, we all know the significance of the invention of bitcoin.

Bitcoin reduces transaction fees considerably compared to credit cards, allows for fast, easy and secure financial transactions to and from anywhere in the world, and the implications of the block chain technology are only just starting to be seen.

Of course, we all feel this way because we have taken the time to learn more about bitcoin, its different applications, and the entrepreneurs, investors and regulators who are working to bring digital currency to the mainstream. It’s important to put ourselves in the shoes of less informed people whenever we’re faced with phrases like these, and to be patient in educating our loved ones about why we are so passionate about this novel technology.

Confused image via Shutterstock

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May 29, 2014 at 09:03PM

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27 May 2014

Superbike Racer to Wear Bitcoin Logo at Isle of Man TT Classic

Australian bitcoin payments infrastructure company Diamond Circle is bringing bitcoin to the racetrack, sponsoring local superbike rider David Johnson in this week’s famous Tourist Trophy (TT) race on the Isle of Man.

Taking a cue from the recent successful (at least in the attention-getting stakes) covering of NASCAR racer Josh Wise’s car with dogecoin livery, Diamond Circle will put its logo alongside the orange ‘B’ on Johnson’s helmet as he rides in the 107 year-old race classic, which is broadcast around the world.

CEO Stephen Rowlison believes that such associations and global sponsorship deals are the best way to bring light to the digital currency revolution as it rolls out its products, and thanked associates such as Jason Kelly of the Manx Digital Currency Association.

 Superbike Racer to Wear Bitcoin Logo at Isle of Man TT Classic

He presented one of Diamond Circle’s bitcoin debit cards to Johnson’s racing team Lloyd James PR Kawasaki as part of the promotion.

Bitcoin friendly jurisdiction

The Isle of Man has made bitcoin headlines outside of motorcycle racing too. A recent ruling by the island’s Financial Supervision Commission determined that licenses are not required for bitcoin exchanges, and over 15 bitcoin exchanges are said to be interested in setting up there.

Fast internet and low taxes have already made the territory an e-commerce hub, including a large number of online gambling sites.

Business leaders on the self-governing British Crown dependency have formed the Manx Digital Currency Association, whose role is to assist government and protect the reputation of the Isle of Man through sensible policies.

Diamond Circle’s ecosystem

Diamond Circle is developing a bitcoin payments infrastructure consisting of ATMs, debit cards, merchant POS systems and online exchanges, with plan to use near-field communication (NFC) technology to send and receive coins.

Selling its system both locally and internationally, Diamond Circle says overseas interest had been strong, and it recently sold six of its ‘cashless’ ATM terminals to a customer in the Middle East.

Diamond Circle was also recently named in Gartner’s Cool Vendors list for 2014, and will list on the entrepreneurial capital raising market the Australian Small Scale Offerings Board at 1 cent per share, through merchant bankers Funding Strategies.

Image courtesy Diamond Circle

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May 28, 2014 at 01:53AM

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Investor Jim Rogers: I Missed the Boat on Investing in Bitcoin

 Investor Jim Rogers: I Missed the Boat on Investing in Bitcoin

Investor Jim Rogers, of Rogers Holdings fame, has said he missed the boat on investing in bitcoin.

In a recent interview with China Money Network, the veteran investor said he still does not know much about digital currencies, but he admitted that he should have got on board a long time ago:

“If I were smart, I would have bought it in the early days when people first told me about it. I still don’t know enough about it to invest in it.”

Future of money?

Rogers said there have always been great investments around the world, so he was not focused on digital currencies in the past. Furthermore, it all seemed too complicated at the time, he said.

He indicated that he might invest in digital currencies in the future, provided he learns enough about them.

When asked whether or not digital currencies like bitcoin have a future, Rogers said the world has serious currency needs and serious problems, but, he is not sure whether or not digital currencies are the answer:

“The US dollar has dominated the world for the past 70 to 80 years. [...] We need something to compete with the US dollar, and something to replace it eventually. Whether it’s the bitcoins, the RMB or seashells, I have no idea.”

Artificial liquidity

Rogers discussed various economic and geopolitical issues in the interview. His biggest concern in terms of economics, he said, is that all major banks have been “printing huge amounts of money” over the past five or six years.

“It’s the first time in recorded history that we have the Japanese, British, European and Americans all printing money at the same time. So we have this artificial ocean of liquidity, which is making markets do well, but it’s not doing much for the economy worldwide. When it ends, we will all pay a terrible price,” he cautioned.

In spite of ominous developments on the monetary front, Rogers said the geopolitical situation should not be overblown, although he does expect to see bigger conflicts over the next decade.

“Politicians have always made foolish mistakes throughout history. They will make mistakes again, and we will all pay for it,” he said.

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May 27, 2014 at 01:09PM

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