10 October 2014

Coinme Brings Bitcoin to the University of Washington

In May of this year, start-up Coinme released their first Robocoin kiosk at the Spitfire sports bar in downtown Seattle. On October 1st of this year, they added to their fleet with a new machine located on the University of Washington campus. The release event at UW’s “Startup Hall” also coincided with a Bitcoin meet-up for interested people in the local community to come network and listen to speakers talk about their personal projects. There were about 40 people in attendance.

I interviewed the guys behind Coinme when they opened their first ATM and was excited to catch up and see how the business has been doing. According to general manager Nick Hughes, their first machine is seeing use on a “daily” basis and has proven that, in Seattle, “there’s definitely interest here, there’s curiosity.” He added “It’s a niche product in a niche industry…it’s not like a normal ATM that has hundreds of thousands or millions of dollars of usage. We’re seeing usage and growth but nothing out of this world.”

While he was unwilling to give hard figures on daily transaction amounts, Nick said “we sometimes see upwards of double digits of transactions a day. On the low end you’ll see a handful.” When I asked Nick if he had noticed traffic fluctuations based on news or overall price movements “It seems to be more correlated with the price…when you saw the price of bitcoin drop you saw a slightly different usage based on the price. Now, can I say when the price drops people buy or sell? No. Some people want to hop on it when it drops and some people want to sell.”

When I asked Nick what people are most curious about when it comes to the machine he said “The two questions we get is what is it and how do you use it, what do you do with it…Sometimes depending on the person I’m talking to it’s slightly difficult to explain to them. I think the biggest problem with bitcoin to this day still is the clear use case. We’ll get there but we’re not there.”

He added “the biggest hurdle of these machines is still user experience. Robocoin built the software we’re running, it is not very user friendly to a new person. They don’t know what buy or sell bitcoin is. They think of withdraw or deposit. So they are coming out with new software that will help that…We’ve had a few people that don’t fully get what’s going on and they think the machine, like, stole their money. And we’re talking like four hundred, a thousand dollars. They wanted to buy bitcoin but were confused what happened. I had to explain to them what you did was basically you put money in this machine and purchased bitcoin and it’s now on the receipt with a QR code. After a conversation I turned this guy from mad into a huge supporter…but one out of three need a little bit of help. Maybe one out of four.”

Nick hopes that having a kiosk at one of Western Washington’s educational hubs will help people get past this learning curve. Commenting on why they chose this location for their new release he said “we’re excited about this move because it’s putting it in an environment that’s tech-savvy. There’s a student population, there’s an international student population here, and also it gets conversation and research happening on campus, where I think it needs to be happening.” With this installation, Coinme’s kiosk becomes the first ATM operating on a United States university campus that allows for both buying and selling of bitcoin.

Another thing that sets Coinme apart is that they have gone through all the procedures necessary to become a licensed money transmitter, operating closely with the Washington State Department of Financial Institutions (DFI). At the time of the kiosk release, Nick said they had “just finished a 3 month overview with them (the DFI) monitoring the machine” and that they had passed with the DFI being “excited” about the company. Coinme considers itself “a model business and a model company as other companies in Washington State associated with Bitcoin begin operation.”

According to Nick they have a third machine and are looking for a location. They would like it to be on the Eastside because there are already two in Seattle-main, but they have “a few places in mind.“ He also added that Robocoin users should soon be seeing a useful update to their machines. While deposits and withdrawals currently take around 20-30 minutes, Nick said “they will be rolling out a new software update that should shorten that big time. You’ll be able to withdraw in, like, 30 seconds.”

October 11, 2014 at 03:31AM

Merchant Mining and the Proof-of-Commerce Protocol

The “mining” industry is bursting with innovation, right now. It started as a way to incentivize people to support the Bitcoin network without allowing any one entity to take control, but has grown with new blockchain technologies. Cryptocurrencies are now being used to incentivize contribution to all kinds of initiatives, like solar energy adoption and the race to cure diseases like cancer. Instead of mining bitcoins by solving a cryptographic math problem, you can mine solarcoins or curecoins by generating photoelectricity or folding proteins, respectively, rather than by wasting processing power. Society could accomplish a lot of great things this way without the need for a central authority, but if we want to have a real impact, we need to get more people using cryptocurrency.

Merchant mining is the process of doing exactly that. Merchants are “mined” by convincing them to adopt cryptocurrency; the idea was conceived by MerchantCoin, which plans for miners and merchants alike to be rewarded with XMC for Bitcoin adoption. This still requires another mining mechanism to secure the blockchain, which in the case of MerchantCoin is handled by Bitcoin miners that utilize the Master Protocol in return for Mastercoins. MerchantCoin tokens are automatically redeemed when a merchant has transacted at least $25 in in BTC, thus stimulating the Bitcoin economy with a supplementary altcoin.

This could do great things for merchant adoption of Bitcoin. MerchantCoin can verify it has signed up many miners (or “advocates” as they call them) via their website, already. The founder has real estate platform and development experience and has already facilitated the sale of some large properties for cryptocurrency. Their team is also developing some other co-projects, such as a decentralized point-of-sale platform, exchange, and multi-coin wallet as they search for a way to generate revenue in the process.

This still leaves unanswered one very important question: how can we validate that cryptocurrency-based commerce has occurred? This led to the development of another new concept called proof-of-commerce. Rather than proving to have solved a SHA256 function or held coins for a certain amount of time–as in proof-of-work or proof-of-stake — proof-of-commerce is the process of validating the use of Bitcoin. Although the technology for this has not yet been developed, several hypothetical methods exist, and the MerchantCoin team is in a convenient position to do this.

Since MerchantCoin runs on Mastercoin, which runs on the Bitcoin blockchain, it can see all bitcoin transactions (and therefore account balances). Bitcoin miners embed information about the Merchant Coin network in blocks alongside Bitcoin data; link a MerchantCoin address to a Bitcoin address, and XMC can be granted to an advocate and merchant when one or more Bitcoin transactions totaling over a certain amount are detected. If Mastercoin was integrated with other cryptocurrencies’ mining networks, it could detect commerce conducted in those, as well, potentially in a trustless manner.

The exact manner in which they plan to proceed isn’t clear yet; although I was given the chance to look at the draft of their white paper, it’s not yet ready to show to the general public. The talk I heard about a decentralized POS system seemed to be a step in the right direction, though. The concept behind it is sound, and if Merchant Coin is going to be as successful as Bitcoin, it will follow the same open source and trust-free principles.

October 10, 2014 at 09:00PM

A New Way to Fund Ideas: Crowdfunding, Crypto-Assets, and the Future of Decentralized Investments

With the rise of Kickstarter, the average person now has a greater opportunity to raise money for his or her ideas than ever before. The Kickstarter model, in which campaigners solicit donations to support a project that produces something they can share with their funders and others at large, is a new technological take rooted in an old idea. For instance, in 1713 Alexander Pope rallied funding to publish English translations of Greek poetry by offering generous donators credits on a page in the finished translated publication, once enough funding was gathered to bring the project to fruition. The crowdfunding method was also employed in 1783 by Mozart who developed a campaign to fund the performance of three new concertos he scored by offering funders copies of the manuscripts, in exchange for live performance funding. And finally with the rise of the Internet, Kickstarter democratized the funding of projects even further by allowing unprecedented connectivity to the common person’s creative endeavors—and by leveraging funding from backers across the world. The site offers streamlined simplicity that empowers the common person located in any of 10 countries throughout the world the ability to quickly raise funding to bring their idea to life. From the standpoint of investors, one advantage of Kickstarter’s funding platform is that funding requires that a project is completely funded before the backers are charged for their contribution. In this fashion, backers are not left on the hook for a partially funded project that may not produce the intended results outlined in the campaign. Kickstarter currently takes a 5% cut of the total funds raised for a particular campaign, and Kickstarter’s credit card processor, Amazon, levies another 3-5% charge on the total funds raised in a campaign. An additional value added tax (VAT) of 1-2% on the total funds raised will also be applied if you happen to run a campaign in the UK. Despite the usual 8-10% charge on the total funds raised in a campaign, the requirement that campaigns need complete funding before backers are charged results in nearly 42% of projects being successfully funded. Additionally, the campaign requirement that something must be produced for others to experience adds a tangible deliverable to the campaign. However, it is important to realize backers’ investments are donations in nature that primarily add capital to the store of human knowledge and innovation—as opposed to offering the investor a share in the equity of a project. One recent success story on the Kickstarter crowdfunding platform involved Ladar Levinson’s “Lavabit Dark Mail Initiative” campaign that raised upwards of $200,000 to deliver open-source, PGP strength encrypted email that also hides message metadata. However, for those who want the freedom to fund any idea they may have, the folks at Kickstarter do place more restrictions on what projects are deemed appropriate for funding, compared to the campaign restrictions placed on a similar crowdfunding platform, Indiegogo.

Indiegogo also empowers the common person by providing the ability to raise funds for ideas that might otherwise fall on deaf ears from the more traditional capital raising institutions. Indiegogo leverages the ability to draw backers from around the world and accepts PayPal in addition to credit cards, as opposed to Kickstarter which only accepts donations via credit cards. Furthermore, Kickstarter only allows campaigns located in 10 select few countries, as opposed to Indiegogo that enables even greater access to the common person by allowing campaigns in over 200 countries. Another interesting feature Indiegogo employs is its use of two campaign funding models. One model requires the campaign to reach its funding goal for any funds to be dispersed and the other allows any funds the campaign brings in to be received by the campaign creator–with the latter involving a higher fee paid to Indiegogo to incentivize reaching the initial funding goal. Once again, it’s time to run the numbers. Under the all-or-nothing campaign model, Indiegogo charges 4% on the total funds received and additional credit card or PayPal processing fees ranging from 3-5%. The flexible funding model, where funds are still released despite the funding goal not being reached, involves an Indiegogo fee of 9% on the total funds raised and credit card or PayPal processing fees ranging from 3-5%. Albeit Kickstarter and Indiegogo do not allow backers a stake in the equity, or ownership, of the finished product of the campaign, they are still powerful tools that allow access to otherwise nonexistent capital that enriches the innovation ecosystem. Overall, Indiegogo offers a compelling comparable crowdfunding option. On the other hand, the future of decentralized crowdfunding and the introduction of crypto-assets beckons on another front.

Swarm is a crowdfunding platform that takes a decentralized approach to the idea of crowdfunding. Simply put, the platform runs on a cryptocurrency known as Swarm Coin that allows campaigns to issue their own separate campaign cryptocurrency tokens that act as shares of equity in crowdfunding campaigns. The Swarm founder envisions the platform will allow vetting of campaign ideas through a decentralized voting process that helps determine which campaigns receive funding on the Swarm platform. A decentralized reputation system will help establish credibility of those who backed successful campaigns in the past and will help guide newer users to decide on what campaign ideas to fund. The campaigns that receive backing by credible members in the Swarm community are in turn given more weight. As for the funding process itself, campaigners generate unique campaign cryptocurrency tokens that are then sold to project backers as assets in the campaign. If a project is successfully funded and the finished product does exceptionally well out in the open market, then the holders of the campaign tokens will share in the wealth of the success via increased valuation of the crypto tokens they purchased. As a result, the added equity incentive in crowdfunding campaigns may help drive the success of future campaigns. Joel Dietz, the founder of Swarm, points to one crowdfunding equity debacle involving the Oculus Rift campaign on Kickstarter that successfully raised over $2 million dollars to develop a virtual reality headset and subsequently a little over a year later the Oculus Rift company sold to Facebook for $2 billion—leaving some of the Kickstarter backers wishing they had the option to invest in an equity arrangement instead.

Another admirable contender in the decentralized crowdfunding ecosystem is the NXT currency platform. It is important to realize NXT is not just another alternative cryptocurrency because it actually makes decentralization possible through a proof-of-stake model, as opposed to the Bitcoin proof-of-work model. On the decentralized NXT platform, anyone can create their own unique asset tokens and sell shares that can support a crowdfunding campaign, among other things. Asset tokens can also be used to represent physical assets, a culmination of other assets known as asset bundles, and can be used to represent a whole range of other assets. Currently, it costs 1,000 NXT, or roughly around $30 worth of Bitcoin at the time of this writing, to issue asset tokens for any particular crowdfunding campaign. Furthermore, the NXT platform also touts a decentralized marketplace that allows anyone to sell any kind of digital good. Overall, it appears the future of commerce and investments will come in a decentralized, cryptocurrency form if the recent trends are an indication of anything.

Regardless of which crowdfunding method is employed, we are entering an age of unprecedented innovation—and the age seems to be one focused on individual empowerment.

October 10, 2014 at 06:43PM

9 October 2014

Butterfly Labs Asset Seizure Spurs On Mining Industry Competition

Amid the FTC injunction of Butterfly Labs additional insight was gleaned about the operations of the company. Butterfly Labs (BFL) sells high-performance computers that are designed solely for mining Bitcoin. BFL operated primarily on a pre-order basis that meant customers knew they would be ordering a product that would not be ready for some time–but customers were not forewarned of the wait time which according to the FTC would include “delays ranging from from six months to one year.” In the world of mining, time of delivery is one of the crucial factors that miners consider before deciding to invest their hard earned money in mining equipment at any price point.

The nature of the Bitcoin network makes mining rig delivery time such an important factor for mining investments because the Bitcoin difficulty level, or total mining processing power of the Bitcoin payment validation network, determines how easy it will be for miners to compete for bitcoins among other prospectors. Receiving mining equipment with processing power and power efficiency as advertised—and receiving the equipment as quickly as possible–is key in successful mining ventures. If mining equipment is received late, the investor could incur considerable losses because the mining difficulty level of the Bitcoin network goes up exponentially as more high-powered miners come online—thereby making older, less-powerful mining equipment nearly obsolete and unprofitable.

The FTC claims BFL failed to reasonably project accurate timelines during which the customers would receive their purchased mining equipment by which in turn the profitability of the mining rigs may have been reduced. In part, the FTC believes a Return on Investment (ROI) calculator, provided on BFL social media sites and on a company linked blog, might have contributed to incorrect profitability estimates of mining rigs. For example, the ROI calculator estimated mining profitability of mining equipment by using the delivery date and figures such as, mining equipment power consumption, Bitcoin difficulty level, and processing power of the mining equipment. It is possible that the use of incorrect data used in the ROI calculator could have been one of the deciding factors that helped entice customers make their final decision to purchase mining equipment–based on the ROI profitability results.

Samuel Johnston, first a BFL customer in 2012 and later a BFL employee in 2013, was aware of changes in BFL hardware specifications with his firsthand experience of purchasing the BFL $15,000+ mini-rig back in July of 2012. Instead of receiving his rig as one complete unit as pictured in the BFL advertisement, according to Johnston’s FTC testimony he “[received] three separate . . . machines in separate boxes with separate power supplies,” and he further stated “as a result, it consumed six to seven times more power than advertised.” Johnston also stated as part of his FTC testimony as the former Head Burn-in Technician at BFL, the company tested customers mining equipment for quality control in a manner that tested, or burned in, customers’ machines “longer than the usual ten to 30 minutes,” on the actual Bitcoin network instead of on the Bitcoin test network. Johnston said three rooms were filled with customers’ mining equipment being burned-in with units sometimes for as long as two days. Johnston also stated he learned from co-workers “. . . the burn-in process was set up to mine bitcoins for the company’s benefit,” and after asking the BFL production manager about the reasoning behind the practice Johnston described the conversation thusly: “when I asked Mark [the production manager] why the machines were not tested on the testnet, he responded that there was no point in doing so because the company would not make any money from the testing.”

It is not clear if the burn-in bitcoins were being allocated to BFL research and development purposes, but contrary to this notion when BFL introduced one of their new product lines they did a short question and answer section that included the following question: “Why don’t you guys mine? This is a popular question. The answer is pretty simple. Hardware is the focus of our passion. We’re hardware designers.” If the mining were done in a transparent manner with clearly stated intentions for what the funding would be put towards, it is possible consumers may have embraced the practice. However, it should be made clear that customers would have to compete with the BFL burn-in miners on the Bitcoin network as a result—with the possibility of BFL burn-in miners increasing the Bitcoin difficulty level for customers’ own mining operations. According to Johnston, the collective power of the mining rigs being tested at BFL equaled around 3% of the processing power of the entire Bitcoin network in August 2013.

BFL seems to be no stranger to customer complaints. The FTC claimed some customers ordered BFL mining equipment that was never delivered, delivered but arrived so late customers would have realized little profit, or was refunded after escalating complaints through payment processors. Some customers had to go even as far as filing lawsuits against BFL just to receive a refund. For some customers, the BFL refund process became something of a mysterious process, with some customers having no problem receiving a timely refund, while others had not received a refund—instead being stonewalled by BFL after trying to inquire about a refund. Some customers even resorted to posting in forums on how to effectively receive a refund from BFL with successful word-for-word escalation scripts of their refund experiences with payment processors for the benefit of other BFL customers facing refund difficulties.

The FTC injunction of BFL also revealed some insight on what may be perhaps a view of the BFL culture. In medieval fashion, BFL chose to create foam torches and pitch forks with the phrases “BFL is late!” and “Y U NO SHIP?” written on them that seem to deride their customers. They presumably served as the proverbial foam finger showing perhaps not only the spirit of the BFL corporate culture, but possibly the company’s relationship with its customers.

FTC finds foam torches and pitchforks at a BFL Facility. The comments written on the foam spirit products seem to deride customers and describe the corporate culture of BFL. (FTC Photos)

FTC finds foam torches and pitchforks at a BFL Facility. The comments written on the foam spirit products seem to deride customers and describe the corporate culture of BFL. (FTC Photos)

As of October 2nd, the FTC granted BFL the ability to resume its operations on a limited, restricted basis. Despite the FTC freeze on all BFL assets in the states and abroad, one FTC lawyer said the limited reopening of BFL will help to bridge possible funding gaps if there is a need for customer recompense. If the allegations put forward by the FTC turn out to be warranted, then BFL may have to implement sweeping changes to vie for the leading position in the ever-evolving mining industry.

Going forward, it seems those mining hardware companies that have a stronghold in consumer confidence and consistently deliver mining equipment that offers high value to its customers will likely be the next leaders in the cryptocurrency mining industry. Despite negative sentiments in the mining industry from the recent allegations as of late, investors will continue to vote for companies that align with values they hold important, and they will support those companies that do–through their purchases. The companies that can match technological prowess with an equal share of business acumen will be positioned to reap generous rewards in the coming years.

October 09, 2014 at 09:11PM

Interview with St. Louis Fed Vice President on Bitcoin

andolfatto Dr David Andolfatto, who is Vice President of the St. Louis Federal Reserve, has been one of the most forward-looking people at central banks around the world when it comes to crypto-currencies. Here he speaks with Max Rangeley, Editor at The Cobden Centre, and gives his views on what Bitcoin means for commerce, finance, and the dollar itself.

Max Rangeley: How have you found the reactions to Bitcoin within the Fed?

Dr David Andolfatto: Bitcoin is barely on the radar screen for most Fed researchers and policymakers. This is to be expected, given the large size of the Fed’s balance sheet and the debate over how to conduct monetary policy with the existence of large excess reserves. But I am aware of a small group of researchers scattered throughout the Fed system that seem interested in the Bitcoin phenomenon. Some, like Francois Velde of the Chicago Fed, have written nice primers on the phenomenon. I am also aware of a cryptocurrency workshop that meets monthly at the New York Fed. The reaction of most people (who study it) might be described as “academic agnosticism” in the sense that people are curious, but not enthusiastically in favor or against the idea.

How do you see Bitcoin being used in the future? Do you foresee private currencies being commonly used on the high street alongside state-backed currencies, or remaining largely online phenomena?

Who can say how the future will evolve, especially in this space? My best guess is that Bitcoin will find a niche market. It’s cool to use bitcoin to pay for your Starbucks latte on university campuses (this is what my university is doing). It may very well find a place on the high street, at least among some shops catering to the “cool” crowd. But for advanced economies, at least, it is hard to see how consumers will benefit directly by using bitcoins instead of dollars or pounds. As Satoshi Nakamoto wrote in his seminal 2008 paper introducing Bitcoin, “…the [current] system works well enough for most transactions…”

If the use of private currencies became more widespread, do you think that central banks would ever track monetary aggregates in circulation, even if just approximately, much as M2, M3 etc are tracked now?

Anything is possible, but I doubt it. One issue is that there many of these “wildcat” currencies, with more appearing every day (every online game has its own currency for example, as do most social media sites). In a sense, these currencies are “local” monies (much like the local currencies that have always existed, like the Ithaca hour, for example). I’m not sure how a statistical agency could keep track of all these little local currencies, or whether it would even be worthwhile to do so. But who knows?

If private currencies were to become widely used around the world, do you think that this could have an effect on the business cycle, since central banks would not have as much control over monetary factors?

I do not think it would have much of an effect on the business cycle, which I think is rooted more in “real” and “financial” factors, rather than “monetary” factors, per se.

You mentioned in your presentation on Bitcoin that although supply is fixed, demand can fluctuate significantly, which causes volatility, would you say this is a weakness inherent in private currencies, or is there the possibility that algorithms could evolve to incorporate a degree of elasticity?

Remember that Bitcoin is *more* than a private currency: it is a payment system and monetary policy with *no trusted intermediary* involved. Most private currencies entail the use of trusted third parties. EVE online, for example, an online game founded in 2003 has evidently managed its money supply in a manner that keeps its value relatively stable. It may be possible to code an “elastic money supply” rule in the Bitcoin protocol, but it is not immediately clear to me how this might work. Injecting new money into the system would be easy. The tricky part would be in how to destroy money (having the algorithm debit Bitcoin wallets that are secured by private keys).

You mentioned that you welcome the competition for central banks; if private currencies became widely used, could it chip away at American supremacy, a degree of which is based on the dollar, the so-called “exorbitant privilege?”

In my view, America supremacy is not based on the dollar. The status of the dollar simply reflects American supremacy, which is based fundamentally on the structure of that economy (something “real” not “monetary”). The America dollar already faces stiff competition from a variety of alternative candidates, including the Yen, the Euro, and gold. If gold cannot displace the USD, why would we expect Bitcoin to?

Max Rangeley is the Editor of The Cobden Centre(http://ift.tt/12E69C2 about/our-team/, http://ift.tt/12E69C2 about/our-advisory-board/). He is the CEO of ReboundTAG Ltd, which produces microchip luggage tags and has been showcased by Lufthansa and featured on BBC World among other media outlets. Max has a Master’s in economics, following this he was given a scholarship to do a PhD at the London School of Economics, but decided instead to go straight into business.

October 09, 2014 at 01:46PM

7 October 2014

‘The Bitcoin-technology by itself is worth nothing'; an interview with Dark Wallet front-man Amir Taaki

If Bitcoin has its enfant terrible, Amir Taaki is it. Living on a shoestring-budget in squats throughout Europe, Taaki is leading the anarchist Bitcoin-countermovement known as unSystem, has built the alternative Bitcoin-implementation Libbitcoin, and helped to invent the peer-to-peer marketplace DarkMarket (which is taken over and re-branded as OpenBazaar). He is currently best-known as the front-man of the Dark Wallet, a Bitcoin-wallet designed to obfuscate Bitcoin users’ identities.

Amir, your main focus within the Bitcoin-sphere is clearly on the anonymous features of Bitcoin, and keeping the internetcurrency that way. Why do you care about this so much?

Anonymity is important because the current financial system is rigged against us. Right now the state steals from people through taxes and inflation, which not only contributes massively to state power and war, but it enables them to control who gets to accumulate capital. Anonymity will help us to avoid paying taxes, enable us to launder money, and facilitate us to evade restrictions by the state on how to manage our resources. It will protect the small guy.

Isn’t income from taxes used by the state to help the small guy as well? Through public services for instance, or subsidies, or welfare…

Yeah but these are very small things compared to the restrictions on how we live. Welfare in particular is just the by-product of a broken system. The cost of living in our society is artificially high, so if you can’t afford to pay for that your only other option is to go into welfare until you can sort yourself out to be placed on that narrow path that everyone should follow, and become a small part of a large institution or superstructure: work for the man.

But collecting welfare is not empowering, paying rent is not empowering, and working for the man is not empowering. What is empowering is for people to be cooperating together, to form their own businesses, to be independent and autonomous.

Some people do need help of course, but this should be something we provide together within our communities. I’ve lived in all sorts of communities where people help each other all of the time.

The tools you are developing can also be used by arms dealers or terrorists, while there was even an alleged IS-document floating around the web which mentioned the Dark Wallet. Surely these are not things you support?

Look, we can try to always manage our world and strive to purge it of some perceived threat or evil, but I think that in the end that logic is a faulty one. The way to change things is not by trying to create some sort of system with rules and police and courts and judges. If you want to make something that’s effective, it needs to be in the people’s own interest to promote that.

I believe that everything is so f*d up right now because we have been abstracted from our human values. It’s not natural to get up at nine o’clock in the morning only to sit in an office all day being told to fill boxes under strip lighting. When we evolved, we lived in bands of roving people who acted as an economic union. In the wild, the environment was constantly changing, continually facing us with new challenges. We’re fundamentally social and creative creatures. It might seem more comforting to manage the risk to certain levels, but it’s destroying us as human beings. Part of growing as a person is having these lows, these dangers, these dynamisms.

And at the same time, we need to have fun, which is also something we have taken out of our lives. It’s all devoid of passion. We’re all utilitarian people trying to live in comfort with smiles on our faces, but how many of us are really happy beneath that veneer?

Wouldn’t it be wiser to not actually promote Dark Wallet as a money laundering tool though?


Well, for one, it might get you into trouble with the law. Secondly, most people would probably not consider it the best possible PR either.

But I’m not acting through fear! I’m doing things as I think they are right. I would just be dishonest with myself if I try to play with words or cover up my intent. I want people to know what I think, and as many people as possible, because it’s not just about the technology we’re building. In fact, the technology by itself is worth nothing. What is important is the narrative, or the ideal that is being constructed through that narrative.

Bitcoin is a decentralized and uncensored money with privacy features. As such, it has opened up a new front in the ongoing struggle for freedom.

Moreover, one of the oldest artefacts in the world is the Code of Hammurabi, a Babylonian document dating back to almost 2000BC which deals with contract law. Contract law is the foundation on which civilizations are built. And it is the basis for how we – no, they – have been able to create corporate society. Through contract law, you get access to a set of legal tools in order to incorporate and scale upwards.

With Bitcoin, we now have a new set of tools, that are not based on the law of the state, but based on the laws of mathematics. This enables us to create decentralized law, digital governance, and a wide scope of means for trade and business.

Then why is the narrative so important in and of itself?

Because the design of Bitcoin is not set in stone. It evolves and morphs through the actions of people. There’s this silly honey badger meme going around, like, “Bitcoin doesn’t give a f*k, Bitcoin is the honey badger of money”, but that’s false. Bitcoin is a consensus-system subject to all the different power groups acting upon it. And Bitcoin certainly can be corrupted. In very big ways.

Is Bitcoin being corrupted right now?

In some ways, yes. The Bitcoin Foundation is trying to establish itself as a central point of Bitcoin through which it can fund and steer development, while at the same time working together with the state and Wall Street. What’s going to happen, is that governments will use the Foundation to pressure Bitcoin development in certain directions.

Chief scientist and former lead-developer Gavin Andresen is paid by the Bitcoin Foundation, while his friends are the big Bitcoin-corporations. So, naturally, he’s more favourable towards their outlook of Bitcoin. And if you look at his actions and decisions…

He talks about Bitcoin as a payments-innovation, he developed the payments protocol, and now he’s pushing to increase the blocksize limit which would raise the maximum number of transactions on the network at the cost of even further centralization of mining. That is in effect in direct opposition to the idea of Bitcoin as a decentralized, private and uncensored system.

You don’t really see Bitcoin as a payments-innovation, do you?

No, it’s not very good for that. The Bitcoin-network is currently subsidized through inflation, meaning transactions cost about thirty dollars each. This vision of Bitcoin as a faster, cheaper and better payments-network is simply not tied to any technological grounding of what Bitcoin is really about. If we want to make Bitcoin a competitor to Visa or MasterCard, we would need to increase the blocksize and centralize mining so much that it is basically the same as existing payments networks. And even then, at some point, we’ll reach a limit where Bitcoin is just not cost-efficient. We don’t need to have all these miners crunching numbers just so people can buy a coffee. That’s insane.

If we do not increase the blocksize, however, Bitcoin would merely be able to handle seven transactions per second, meaning its scalability is rather limited…

Scalability, be very careful with that word. If we increase the blocksize limit, the bloated blockchain would make it harder for people to run full nodes. You’d need bigger hardware to store all of the required data, so in that sense it wouldn’t scale nicely at all.

But if we keep the blocksize limited people can always use Bitcoin for payments, they’d just have to pay a bigger fee. This doesn’t need to be a problem, in particular for the functionality of Bitcoin as an instrument to settle debts. The way banks work today is not that every transaction done between two parties is sent directly from one bank account to the other. Instead, they add up all transactions between the different banks, and settle the debts at the end of the day.

In a similar way, Bitcoin could grow to become the backbone of a whole new financial paradigm, as opposed to a payments network that merely papers over the cracks of the existing monetary infrastructure.

And yet, the general public will probably not care about any of this all that much. They just want cheap and fast transactions…

Well, a lot of people within the Bitcoin-community care about mass adoption way too much. They want to reach it at any and all cost. It doesn’t matter to them how much compromise we need to make, because they think Bitcoin will hit some critical point where – BAM – everything is revolutionized. This kind of quick fix mentality is very easy for people to grasp, but is not based around real social change. It’s an illusion.

It reminds me of the Esperanto movement, which had a split in the community. The Fina Venko aimed to one day reach this pivotal point where suddenly there would be some global revolution of people speaking Esperanto. This idea was later rejected by the Raŭmismos. The Raŭmismos appreciate Esperanto as a cultural movement, as a social movement, and as a language in and of itself.

I reject the Fina Venko of Bitcoin. That’s not to say some kind of global revolution can’t happen, but this focus on it is a diversionary tactic from the real thing that matters. Lots of consumers using bitcoin in their day to day lives doesn’t benefit Bitcoin. It might benefit the price, but the two are not the same.

So how would you suggest we move forward on a protocol-level?

I would actually suggest we step back for a second. Let’s really fix the fundamentals of the software, and make resilient and well written Bitcoin-implementations rather than trying to stuff everything into the protocol. I’m very conservative in that regard, because Bitcoin works as it is now.

There are problems, but I think that meddling with it by opening up the protocol is more of a risk than it is a benefit. Especially because a lot of developers don’t see the consequences of their actions. They’re just looking one step ahead when trying to fix problems, while totally ignoring all of the social implications and how it changes the politics.

Bitcoinj- and Lighthouse-developer Mike Hearn, for instance, was just pushing for an extension to the protocol in order to eliminate possible double-spend transactions in point-of-sale situations. He proposed a system in which miners can vote to steal the block reward from other miners if they accept double spends. The problem is that this opens up the possibility for large mining pools to collude against smaller miners, and use this power to blacklist transactions.

And this is just one example, there are many more like it. But it really is insane, it’s ludicrous. Just to be able to buy coffee with our Bitcoin-creditcards, and make it a little bit more convenient, we want to destroy all of the freedom it provides? Lose out on the opportunity to enable people to economically organize themselves over wide geographical areas, between different communities, and different organizations with different financial instruments, with tools we have never before seen in the history of humanity? Do we really want to give that up for a silly dream of a few corporations that want to sell a product to consumers, to pump the price? Come on… We’re really losing a big thing if we sacrifice Bitcoin for that.

You’re obviously very passionate about these issues, and you don’t hold back in voicing your opinions. As a result, you’ve berated some of the Bitcoin-developers before, and in particular because of their cooperation with regulators. Can you understand why they’d be annoyed with your attitude at all?

I’ll explain the mindset of these people. Some of them are just dumb-asses who actually believe we need the government to protect us and all that. But most of them really think of themselves as some kind of libertarian ninja going through the shadows to sabotage the system from within. They believe something in private, but act something else in public in order to build support for Bitcoin, not realizing that Bitcoin itself is subject to change.

And then people who oppose that façade suddenly become a threat, because it doesn’t conform to the front they’re putting on. So the libertarian view now all of a sudden becomes something they have to push out and censor, thinking we need to gain support from powerful actors. But this mindset slowly leads to the corrosion of their ethics, because they start to think that it’s OK to do one evil for a greater good, and somehow rationalize their own actions through this construct.

This is the real path to corruption. It’s not these big decisions, but small day-to-day things. If you compromise once, it becomes easier to compromise again. So you keep going and going and going until you end up with govcoin or corpcoin. We need to be guarded against this.

October 07, 2014 at 07:00PM

Airbitz Launches Mobile Bitcoin Wallet Designed for Mainstream Consumers San Diego Startup Brings Bitcoin User Experience and Security to New Levels

LAS VEGAS, NV – October 7, 2014 – Airbitz today announced the release of its integrated mobile bitcoin wallet and business directory, now with 3,200+ listings and coverage in 14 countries, at Inside Bitcoins Las Vegas. Airbitz CEO Paul Puey will present a session on “Bitcoin Wallets: Balancing Security, Privacy, and Ease of Use” at the conference on October 7th at 2:00PM.

“In order to increase adoption of bitcoin and grow our ecosystem, we recognized the need to make transactions easier and more approachable,” said Airbitz CEO Paul Puey. “This was our impetus in creating a product with a carefully crafted UI and user experience, and we are extremely proud to bring the Airbitz wallet and directory to the masses.”

The Airbitz Wallet and Business Directory features simple account & wallet creation using just a username, password and 4 digit PIN, making bitcoin as familiar as mobile banking.

Features implemented for robust security, safety, and privacy include:

– Automatic wallet encryption and cloud backup

– Device-to-device account sync across phone, tablet, iOS, Android

– Local, client-side encryption giving Airbitz zero-knowledge and zero-access to user data or funds

– Great privacy through HD Wallets (changing addresses with each transaction)

Additional exclusive features:

– Payments via Bluetooth Low Energy (BLE) without QR code (iPhone only)

– Merchant Mode with the ability to detect partial payments

– User provided transaction data including Payee, Category, Notes and ability to search by these fields.

Airbitz is available for free on Android and iOS mobile devices at http://airbitz.co and in the Google Play and Apple App Stores. The Airbitz source code will be released as open source by the end of October 2014.

About Airbitz

Airbitz was founded in January 2014. Airbitz aim to bring bitcoin to the next billion users through amazingly simple yet feature rich applications focused on ease of use and ease of security. Its focus is to deliver software, services, and products with an amazing user experience, both visually and functionally, simplifying this advanced technology and delivering it to the masses while still retaining Bitcoin’s core principles of decentralization and privacy. For more information, visit www.airbitz.co and follow us at http://ift.tt/1s8YtI7

October 07, 2014 at 06:00PM

Coins In The Kingdom Wrap Up

Though the price of Bitcoin is shaky, and the mood of Bitcoiners is somber, Jason King is throwing quite a party down in Orlando, Florida. Coins in the Kingdom has come to an end after a packed weekend of speakers whose topics spanned the gamut of introductory programming and usage of Storj (Shawn Wilkinson) to the pragmatic applications of smart contracts by a seasoned attorney (Pamela Morgan). The atmosphere of the event was unique in the world of conferences in that: it is located in the heart of American consumerism, it embraces the simplicity of the world as espoused by Disney, and spent most of the weekend showcasing speakers who decry the absurdity of this surrounding circus.

Lower bitcoin prices means less conference attendees, but with the smaller crowd comes an intimate setting. While questions abounded as to whether the benefits of “The Mouse” were a positive or negative contribution to the greater good, all in attendance were in agreement over the benefits of a smaller conference. There is a significantly greater charm in playing poker with your favorite Bitcoin celebrity with YT Cracker rapping at the end of the hall, then there is in being a sardine in the proverbial can amongst a thousand newbies at the back of a giant conferencing warehouse. “Wishes upon a star” as promised, were being delivered.

This year has been a wild ride for bitcoiners (like there’s any year that isn’t). But for the tight-knit group of bitcoiners at the Coins in the Kingdom conference, the recent bubble was a comforting return to the wilder frontier of days gone by. Though the drop from $1100 to $250 was a wall of sadness to the speculators looking to cash out on a get rich quick program, for the veterans, the price drop was merely a chance to catch their breath from the insanity that characterized the last nine months.

Highlights for Saturday included an excellent keynote by Antonopoulos and Tucker, which featured two monologues and a Q&A session with the audience. Antonopoulos’ keynote discussed the ‘whitewashing of history’ that is practiced by historians, and highlighted the tendency of history books to gloss over the bumpy ride to success that characterizes most of society’s technological disruption. Tucker’s monologue was a similarly riveting speech exploring uses of the Blockchain outside of its uses for payment, chief amongst them, the impending Blockchain wedding.

The second day of the conference brought additional talks, a keynote by Bruce Fenton, and the world’s very first Bitcoin wedding. The highlight of the second day’s session was the announcement by Jason King of a mobile app, in development, that would would bring to the homeless a little bit of what Uber brought to the car-less. King’s app, named “Outpost Everywhere”, empowers the charitable to find homeless members of their community, and bring them the blankets, food, and help that they require. The app features an SMS gateway that enables the homeless to declare their location, and what they need. While many in the media choose to deride Bitcoiners for their anarchic Silk-road-esque applications, missing in this coverage is the compassionate disruption of bitcoiners with applications such as Jason’s.

While Paul Krugman gloats over the impending doom of Bitcoin, and the naysayers start their next round of pronouncements that “Bitcoin is dead,” the mood here in Coins in the Kingdom couldn’t be brighter. Counterparty’s XCP is appreciating rapidly, merchandise is selling, and the crowd is amused to see a reluctant Antonopoulos spending fiat at a nearby Mickey Mouse cafe. (Certainly, some small rock in hell has frozen over.)

While the wildest ride here at the Magic Kingdom turned out to be Bitcoin itself, Coins In the Kingdom brought to its attendees a welcoming and educated crowd, an encompassing roster of speakers, and a very smug mouse. Whether Bitcoin or Disney was the star of the amusement park this weekend was unclear, but what was clear was the wonder and magic that was Coins in the Kingdom.

October 07, 2014 at 05:20PM

Go Ahead – Peer Inside the DarkWallet

When you first lay eyes on the DarkWallet, you know you’re looking at something unique. For starters, it’s literally dark—the background is jet black. But the color theme is just the beginning of what sets this new privacy tool apart from all other wallets.

For starters, the DarkWallet offers something that no other crypto wallet has before: a stealth Bitcoin address. Because Bitcoin’s ledger of ownership, the blockchain, is available for all to see, the current balance and the full transaction history of any address is totally public. If your Bitcoin address is publically known, you have little privacy. That’s where a DarkWallet stealth address comes in.

A stealth address is 102 characters long (whereas a traditional Bitcoin address is between 26 and 34 characters long). The DarkWallet software comes pre-installed with “spending”, “business” and “savings” pockets. Each pocket has its own stealth address, and you can create as many new pockets as you want.

stealth address, bitcoin stealth addresses

Funds sent to a stealth address are automatically re-routed by the DarkWallet software. A new traditional address is generated to receive each stealth payment. In other words, the sender of a payment could check the blockchain to see which address his payment went to, but he couldn’t determine which other addresses belong to the stealth user. Aside from this specific payment, the sender has no access to the stealth user’s total number of bitcoins or her transaction history.

Why would anyone want a stealth address? There are likely as many reasons as there are Bitcoin users, but here are just a few examples:

1) You’re an online merchant, and your website doesn’t provide a new sending address for each customer order. All your revenue goes to the same address. Anyone can see your company’s account balance, transaction history and frequency of transactions.

This creates a competitive disadvantage, especially for startups and small businesses. A low account balance may make a business appear less attractive to potential customers. The inability to keep financial records private essentially creates a barrier to entry. A stealth address for receiving customer payments solves this problem.

2) You run a newsletter or site that publishes controversial opinions or content. You rely mostly on donations, and readers of your content are more likely to donate if they know that their donation cannot be traced back to them. Your publication’s freedom of speech is protected because donors can send to its stealth address.

3) You’re an average Joe or Jane, and you’d like to publish your Bitcoin address’s QR code on your business cards, in your outgoing email signature, on your blog and just about anywhere else you can think of. You feel awkward and even embarrassed, however, handing out a business card that’s essentially a free pass to view your current balance and transaction history. Publishing the QR code of your stealth address instead solves this problem and restores your privacy.

In addition to its totally unique offering of stealth addresses, the DarkWallet also provides the service of coin mixing (which is also found in a few other privacy-conscious wallets). Coin mixing swaps the inputs of multiple transactions, so that it’s hard to tell which sender sent to which recipient. Most wallets with this feature, however, require that a user take multiple steps to initiate the process. The DarkWallet, on the other hand, empowers the user to mix his coins with just the click of a button.

coin mixing, coinjoin

Lastly on the DarkWallet’s list of offerings is support for multisignature Bitcoin addresses. A “multisig”, as it’s called, is an address that requires the signatures of multiple private keys before funds can be moved. This is useful for securing money that’s shared by multiple individuals, or as a tool of escrow to protect buyers and sellers. The DarkWallet allows the creation of new multisig addresses or the importation of existing addresses.

The DarkWallet is currently in alpha testing phase. The wallet’s designers recommend that you use testnet coins to try it out, or that if you choose to use real money, do so knowing that it’s still unstable software.

Use of stealth addresses is only possible between DarkWallet users at this time, but if the feature becomes popular, it’s possible and even likely that other wallets will support them in the future. The DarkWallet is completely open-source, so anyone is free to use, improve upon and distribute the softwarethe code themselves.

So go ahead—try it out by downloading the software. If you like what you see, consider sending a token of support to the DarkWallet’s developers at their multisignature address 31oSGBBNrpCiENH3XMZpiP6GTC4tad4bMy.

October 07, 2014 at 09:49AM