27 February 2015

Russian Lawmaker: Bitcoin is a CIA Conspiracy

Russia, Duma A lawmaker from the Liberal Democratic Party of Russia is speaking out against bitcoin and other digital currencies on the grounds the technology is part of a US plot to undermine the country’s efforts internationally.

The comments, made by MP Andrei Svintsov, came during remarks addressing the ongoing debate in Russia over whether bitcoin and digital currencies should be banned as part of a broader effort to stop capital flight.

Nonetheless, Svintsov’s remarks count as some of the more extreme to emanate from the discussion. Svintsov told Russian broadcast news agency REGNUM:

"All these cryptocurrencies [were] created by US intelligence agencies just to finance terrorism and revolutions.”

Svintsov reportedly went on to explain how cryptocurrencies have started to become a payment method for consumer spending, and cited reports that terrorist organisations are seeking to use the technology for illicit means.

While pointed, the statements do not seem to represent the views on bitcoin from within the federal legislature. For example, the chairman of the State Duma Committee on Financial Markets has stated as recently as August that she opposes criminal penalties for bitcoin use.

Svintsov has also been associated with such movements as one that would find tobacco and alcohol products removed from the windows of retail outlets.

Russian Duma image via Shutterstock


February 27, 2015 at 07:35PM

Bitcoin Goes Hollywood: An Interview with Gem COO Ken Miller

A guest interview by Jeff Handler

Silicon Valley has become a symbol of technological innovation and achievement in the digital age – a shining beacon of progress and “disruption.” It’s hard to find someone in the Bay Area who isn’t working on some app or technology that promises to change the world forever.

As Bitcoin has grown from an obscure, niche technology embraced by a few small, highly technical circles into an actual (though still obscure) “industry,” it shouldn’t surprise anyone that San Francisco/Silicon Valley has become the de-facto go-to spot for American Bitcoin companies to set up shop.

While the Bay Area is certainly a great spot for a Bitcoin start-up, I invite you to hop on the 101 and travel about 380 miles south to my hometown of Los Angeles (La La Land for you Midwesterners), where a growing group of Bitcoin startups is transforming the City of Angels into a hotbed of digital currency innovation.

Known to some as “Silicon Beach,” LA is now home to several Bitcoin ventures, including Expresscoin, Tether, Holy Transaction, Ambisafe, Gem, GoCoin, Interwallet, and the company I work for, Netki. (If you work for a Bitcoin company based in LA that I did not mention, I apologize for the omission. And please reach out to me, I’d love to connect!)

Known primarily as the entertainment capital of the world, LA is actually a great place for Bitcoin. The monthly Bitcoin meetup, hosted by Gem, has more than 1,000 members, with a waitlist for almost every event. Engaged crowds highlight the real passion and camaraderie that has formed among a growing community that has a strong appetite for Bitcoin growth and adoption in their city.

Los Angeles has a massive immigrant population and acts as a hub for digital content creators (YouTube stars, writers, artists, etc.), making it a fantastic testing ground for two of the “killer” use cases that Bitcoiners are most excited about: remittances and micropayments to content producers.

To gain more insight into what makes LA such an appealing place to run a Bitcoin business, I spent a recent morning on Abbot Kinney Boulevard in Venice Beach, talking with Gem COO Ken Miller about LA tech, Bitcoin adoption, and the Venice Skate Park (where I have some fond childhood memories).

Gem is a secure multi-sig Bitcoin wallet for developers. With Gem’s API, a developer can integrate a fully functional and secure wallet within minutes.


For Miller, a key aspect that makes one location better than others is access to talent. It’s no secret that finding talented software engineers in Silicon Valley is easier than say a Little Rock, Arkansas. (Sorry to Razorback fans out there.) But is it really the only place where tech startups can hope to find qualified employees?

For Miller, the answer to that question is no, and he points to access to colleges and universities as a key component:

“If you’re a tech start-up that needs to start hiring, access to top talent is extremely important,” he said. “Good colleges are a huge part of that, and in LA we’ve certainly got them.”

It’s no secret that Stanford being located in Palo Alto played a huge role in transforming Silicon Valley into the tech hub that it is today, filling the area with talented, forward-thinking young people who would go on to build, drive and invest in the future of technology.

But just as ‘The Valley’ has access to top talent from Stanford and Cal-Berkeley, Silicon Beach has the likes of Cal Tech, UCLA, USC, and the Claremont colleges right in our backyard.

With access to a top technical institution (only MIT is ranked above Cal Tech), the most applied-to university in the country (UCLA, also a top-20 ranked university), and two of the best liberal arts colleges (Pomona is No. 5; Claremont McKenna College No. 8), LA companies have access to a large pool of highly intelligent candidates with academically diverse backgrounds. (Rankings per a 2015 U.S. News report.)

While most would assume that graduation day brings a mass exodus of “tech” people from LA colleges to jobs and companies in the Bay Area, increasingly, this is not the case.

“There’s a growing sentiment amongst these students that the Bay Area tech scene has become saturated, and that it’s a real dog-eat-dog type of environment,” Miller said. “A lot of them want to stay in Southern California, and with a growing number of tech companies sprouting up out here, they actually have real opportunities to work and thrive in LA.”


Line for the Gem booth at USCs career fair

In addition to LA colleges, Miller notes that Gem has received a number of applications from highly qualified computer science majors at universities such as Michigan and MIT who have expressed their desire to become a part of LA’s new tech scene.

What’s particularly interesting about this is that these students have expressed a desire to do “something different,” noting that “everyone goes to San Francisco.”

In other words, we are now seeing young computer scientists and software engineers who have explored the possibility of life in Silicon Valley and are actively choosing to work in LA instead. While this is not to say that Silicon Beach will replace Silicon Valley as America’s tech or even Bitcoin capitol, these changes are important, and the community should take note.

If you’re thinking about starting a Bitcoin company, or your current startup needs a change of scenery, take a look at LA, we’d love for you to become a part of what we’re building (and the weather’s not too bad either).

February 27, 2015 at 03:55PM

Bitcoin-friendly Bills Unveiled in Utah, New Hampshire, New York City

Pay your taxes in bitcoin? Maybe, if you live in one of three states now considering bills in support of that option.

In January, Utah Republican state representative Mark K. Roberts introduced a bill, H.C.R. 6, to create a Council on Payment Options for State Services that will study how Utah could accept Bitcoin as a valid form of payment. The bill includes the possibility for Utah residents to pay state taxes using Bitcoin.

In February, eight New Hampshire state representatives introduced a bipartisan bill, NH HB552, to propose that New Hampshire should officially accept Bitcoin for taxes and fees. The bill calls for the development of a detailed implementation plan, followed by operational acceptance of Bitcoin by the state before July 1, 2017.

It seems almost surreal that Bitcoin, often portrayed by the popular press as a means to avoid taxes and hide cash and illicit activities from the government, could find one of its first official applications in tax payments.

The short and pragmatic text of the New Hampshire bill only mentions the financial implications of collecting tax payments in Bitcoin. Republican Representative Eric Schleien believes that the adoption of Bitcoin for tax payment purposes would be a boon for the state, and argues that Bitcoin transactions are cheaper and more secure than those made with credit cards, so that the law would offer both state and taxpayers a more reliable payment option at a reduced cost.

The Utah bill is more visionary. It mentions the important benefits that an official adoption of Bitcoin could bring to the state’s technological leadership and economy:

“Technology industries, including emerging technologies, play a growing role in [economy] and culture. The state must also remain open to new technologies and ideas to continue attracting talented and educated entrepreneurs. [Bitcoin] provides merchants with an attractive alternative mechanism for accepting payments, because transaction fees for Bitcoin are generally much lower than those imposed by other payment processors. “

Reading between the lines, a key passage here is “attracting talented and educated entrepreneurs.” Rep. Roberts seems fully aware that new, disruptive technologies can create fast growth and “iPhone moments” that boost entire industries. He appears to be persuaded that Utah could become a Silicon Valley for cryptocurrency business. Perhaps someday visitors to Utah will be greeted by a “Bitcoin Rockies” sign.

Utah is also the home state of Overstock, a large online retailer that allows customers worldwide to pay in bitcoin. Overstock is also behind one of the most interesting and potentially disruptive developments in the Bitcoin space: their Medici crypto-stock exchange project aims to create an open alternative to traditional stock exchanges such as NYSE and NASDAQ, based on blockchain technology and accepting Bitcoin payments.

The Free State Project, a hardcore Libertarian group based in New Hampshire, greeted the New Hampshire bill with a blog post titled “Bitcoin for Taxes and Fees? Only in NH.”

“New Hampshire is known as a libertarian hot spot, and the Bitcoin community here is strong. Read about the rich connections between Bitcoin and the Free State Project here.”

Meanwhile, last week, Democratic member of the New York City Council Mark Levine introduced a bill that would allow residents to pay for any fines and fees they owe the city using Bitcoin. In an interview with CoinDesk, Levine said:

”It started with realizing how much money the city of New York is losing on transaction fees on credit cards, ultimately it’s several million a year because of all sorts of fees and fines. [I] think that being the first major city in the U.S. to make this move sends a clear signal that we’re innovators here.”

Levine’s arguments are similar to those used to promote the New Hampshire and Utah bills: accepting Bitcoin payments would save the city a lot of money, and a vibrant Bitcoin economy would attract top tech talent to the city.

The passages quoted represent two often conflicting aspects of the developing Bitcoin economy: the business-oriented vision of a regulated Bitcoin economy that informs the Utah and New York City bills, and the free-wheeling Libertarian spirit reflected in the Free State Project comments to the New Hampshire bill. As often happens, future Bitcoin developments are likely to be influenced by both.

February 27, 2015 at 04:47PM

26 February 2015

Former Goldman Sachs Director Launches Bitcoin Derivatives Brokerage Crypto Facilities

Crypto Facilities Ltd., a London-based broker founded by former Goldman Sachs Executive Director Timo Schlaefer, has announced the launch of its bitcoin derivatives trading platform.

In financial jargon, a derivative is a contract that derives its value from the performance of an underlying entity, in this case the exchange value of bitcoin. Crypto Facilities trades financial products such as bitcoin options and futures, allowing users to “go long” and bet that the price of bitcoin will rise, or “go short” and bet the price will fall. The first derivative offered by Crypto Facilities is a forward contract – a contract to buy or to sell an asset at a specified future time at a price agreed upon today – on the U.S. dollar price of bitcoin. The forward contract serves to hedge against bitcoin volatility, or to benefit from future swings in the bitcoin price.

The forward contract comes with different maturity months, and traders can choose from the nearest three in the March, June, September and December cycle. Once a forward reaches maturity, it will be settled automatically. Traders do not have to wait until maturity to get out of their position, but can trade out at any time. Buying one forward – the minimum trading unit – requires a minimum deposit of 0.50 bitcoin. To sell short one forward, the minimum deposit is 0.25 bitcoin.

As of this morning, one forward at September 15 was trading at USD $242, while the current Crypto Facilities Instantaneous Bitcoin Price Index (CF-BPI) was USD $236. The CF-BPI is calculated continuously based on the current best bid and ask prices observed on major bitcoin exchanges.

“Our forward is probably the simplest and most effective tool out there to protect yourself against bitcoin volatility,” said Crypto Facilities Co-Founder and COO Jean-Christophe Laruelle. “If you want to lock in the value of one bitcoin, you sell one forward.

Forward contracts are traded between investors on the platform developed and managed by the brokerage, which matches sellers with buyers without acting as a central counterparty and takes a commission on all trades based on the official fee schedule. The brokerage, targeted at institutional investors and expert individual investors used to trading derivatives and futures, operates in bitcoin.

Crypto Facilities, which employs a team of qualified financial experts, was founded by Laruelle, a former Senior Trading Architecture Designer at BNP Paribas/Société Générale and Schlaefer, a former Executive Director in Credit Quantitative Modelling at Goldman Sachs who holds a doctorate in financial engineering.

The firm, registered with the U.K. Financial Conduct Authority (FCA) as an appointed representative for broking exchange-traded futures and options, adheres to strict compliance and security standards and holds bitcoin deposits in cold storage on offline, encrypted servers.

The availability of mature financial products such as Crypto Facilities derivatives shows that Bitcoin is taken more and more seriously by the financial establishment and that – like or not – the Bitcoin space is becoming more professional and mainstream.

“The Bitcoin space still lacks professional, reliable marketplaces, and this is what we provide,” Schlaefer said. “We apply the same standards in terms of risk management, compliance and reporting as you would see in the traditional finance space.” He added that the firm has a number of additional financial products in the pipeline and plans to expand its range of services.

Schlaefer told CNBC that he saw real potential in the technology behind Bitcoin – the blockchain – which is a publicly-distributed ledger system that makes sure all transactions are verified in a transparent, decentralized and secure fashion. The CNBC article observes that, like Schlaefer, the Bank of England has also said it sees huge potential for the technology behind Bitcoin.

In a recent paper titled “One Bank Research Agenda,” the central bank said that Bitcoin could reshape the financial industry. A section of the paper (Page 31), dedicated to a Fedcoin-like scenario where central banks might issue digital currencies such as Bitcoin, notes that both the technology and financial sectors need to be engaged, as each brings important and distinct expertise.

“Creating such a system would entail creating a protocol for value transfer over the Internet, akin to what Berners-Lee did for information,” the Bank of England paper says.

February 26, 2015 at 06:52PM

Commonwealth Secretariat Commissions Bitcoin Report for Developing Nations

Commonwealth Secretariat A two-day event that brought together representatives from the Commonwealth Secretariat has ended with agreement that member states draft a formal report on virtual currencies.

The main intergovernmental body behind the Commonwealth of Nations, the Commonwealth Secretariat represents 53 states, mainly in the developing world. The final report will be presented at the Commonwealth Heads of Government Meeting to be held in Malta from 27th to 29th November.

A spokesperson for the organisation provided further details of potential subject matters the report might discuss, telling CoinDesk:

“At the end of the two days, representatives of member governments issued a set of recommendations – these included preparing technical guidance for member states on effective legislative, regulatory and criminal justice responses to virtual currencies.”

Reports from the organisation itself indicate that the Virtual Currencies Round Table saw representatives from 10 member states present a variety of views on the subject of bitcoin and digital currencies over its two-day run.

A representative from Singapore, for example, explained that the country’s approach has been one of embracing new technologies, including bitcoin, while a representative for India reportedly described the technology as “very concerning”.

The official summary suggests all members recognized the need for “a broad range of legislation” to “prevent the exploitation” of digital currencies and related technologies.

The agency declined to release the formal recommendations formulated at the meeting, cautioning that discussion is “still in very early stages”.

Flag image via Shutterstock

Commonwealth SecretariatRegulation

February 26, 2015 at 06:15PM

25 February 2015

CNN’s Morgan Spurlock Spends Week “Living on Bitcoin”

Morgan Spurlock, Academy Award nominated director of “Super Size Me,” is CNN television’s “Inside Man.” In 2014, he spent a week living on bitcoin. The resulting “Inside Man” episode aired on February 19, 2015, affording a large television audience an in-depth Bitcoin experience that was no doubt a first for many viewers.

The episode begins with a brief explanation of Bitcoin founder Satoshi’s goals, as defined by the white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System”.

“[Satoshi] wanted to create a global currency that existed outside of a central bank or government,” Spurlock explains.

Starting at the Bitcoin Center in New York City, Spurlock buys his first bitcoin from the live auctioneer at the site. He then proceeds to make his first bitcoin purchase, a slice of pizza and a bottle of water. He buys groceries and later, a massage.

Morgan interviews Dan Kaminsky, a white hat hacker (ethical hacker) and Chief Scientist of White Ops Inc, about the average consumer’s number-one concern: whether or not Bitcoin is safe. Dan explains how, when he first heard about Bitcoin, he was quoted as saying: “This is going to fall immediately.”

Dan continues to explain how, like many of us, he was wrong. That although some businesses plugged into the network may have failed, Bitcoin, the core, is solid.

What Spurlock does not mention here is the open source nature of the core. Bitcoin is available for any and all to view the source code, and exactly how it works– if you understand it.

Bitcoin’s open source nature is one of the key reasons why it is a trusted system. If it had been released as closed source software, with limited transparency, there would have been far more distrust in the system. Bitcoin’s open source nature has allowed for global reading, understanding and inclusion.

The open source nature not only allows anyone to read the code, but it also allows anyone, worldwide, to contribute (via GitHub) additional changes to the core. This contribution does go through a rigorous testing and approval phase, and it allows for continual strengthening of the system’s reliability.

After making his purchases, Morgan visits a Bitcoin mining facility.

Viewers here should be aware that although the blockchain discussion in this segment is excellent, the Blockchain.info on screen is not the actual blockchain, but a third-party business that performs a variety of bitcoin-related services, one of which is watching the blockchain and reporting information for users of the site.

The blockchain can be viewed via a variety of other third party businesses, and is not limited to Blockchain.info.

Notably, the blockchain is not “stored on the Internet” as Spurlock reports. The blockchain is stored by people who provide bitcoin nodes. These are the individuals (or mining businesses) who hold full copies of the blockchain.

If the Internet went down tomorrow, the blockchain would still exist, and would simply be waiting to be used.

Spurlock goes on to try to pay his utility bills with bitcoin, make a purchase on the internet, and discuss the future stability of bitcoin compared with fiat currencies. He winds the broadcast up with a conversation with U.S. Senator Joe Manchin of West Virginia, who called for a ban on bitcoin in early 2014. Manchin mistakenly states that Bitcoin “ … has been banned in two different countries – Thailand and China – and South Korea stated that it will not recognize bitcoin as a legitimate currency.”

Bitcoin is actually thriving very well in South Korea, and there are no signs that it will not continue to do so.

Realising that Bitcoin adoption depends on each individual’s ability to teach others the merits of digital currency, Spurlock ends his show by convincing a coffee shop to accept bitcoin, and walking the shop owner through the process.

Spurlock’s final interview, with tech entrepreneur Andreas Antonopoulos, lifts the curtain on the future of Bitcoin.

Antonopoulos explains how Bitcoin investment (at that time, summer 2014) has experienced more growth than the Internet had in its dotcom boom period. Antonopoulos goes so far as to label digital currency as the “third wave” of Internet growth (dotcom was the first, social media was the second).

“It takes time, and for more regular people to be seen using bitcoin for legitimate activities,” Antonopoulos comments.

Whether you have been involved in the sector for years, are new to the ecosystem, or want to explain the subject to someone you know, this video does a very good job and is highly recommended. But keep in mind that this documentary was made more than eight months ago, and that is a long time in the Bitcoin world.

February 25, 2015 at 03:01PM

Android-based Apple Pay Competitor Will Support Bitcoin

A new secure mobile payment solution for Android will be showcased at the Mobile World Congress, March 2 – 5 in Barcelona, Spain. The new payment app developed by Rivetz and other partners – an Android alternative to Apple Pay with Bitcoin support – will be available in the second quarter of 2015 and is compatible with over 350 million existing Android devices, including Samsung smartphones. Demonstrations on a Samsung Galaxy 4 smartphone will be held daily at the Samsung partner booth (Hall 8.1), Trustonic booth (Hall 7, Stand 7G81), and at the Intercede booth (Hall 7, Stand 7B81).

“We are very pleased to be combining trusted computing technology with the innovations in Bitcoin and blockchain technology to offer consumers the most secure bitcoin payments,” Rivetz CEO Steven Sprague told Bitcoin Magazine. “For consumers, the killer app is having money on the phone, and for the merchants, the built-in security of the system will make it easier to persuade them to accept bitcoin.

Rivetz developed this application over the last year, integrating the contributions of the partners and using the Trustonic Trusted Execution Environment (TEE) as an operating system for the application. “Our solution reflects the latest specifications for mobile payment technology by Global Platform and Trusted Computing Group,” he said.

With Apple Pay, announced at the iPhone 6 launch event last September, Apple wants to grab a big slice of the exploding – and potentially very profitable – mobile payments market. Apple Pay is compatible with a wide range of point-of-sale payment solutions used by merchants, including the terminals provided by the major credit card companies, but requires an Apple device (iPad, iPhone 5 or higher) on the consumer side. That is an important limit since only 12 percent of smartphones in use are made by Apple, and most are older iPhones that don’t support Apple Pay.

Google is not watching idly – it recently acquired Softcard technology to power its payment solution Google Wallet — and established agreements with Verizon, ATT and T-Mobile to pre-install Google Wallet on the smartphones sold by the carriers. Google Wallet is available for Android smartphones, which have an 85 percent market share. (Note, however, that not all Android devices support Google Wallet at this time.)

Besides smartphones, both Apple Pay and Google Wallet will also run on next-generation smart personal devices, such as connected watches, which will add to their appeal and ease of use. But Apple Pay and Google Wallet don’t support Bitcoin, which is an important limitation for the fast-growing community of Bitcoin users, consumers and merchants alike. The new Android payment solution, developed by Rivetz, Trustonic, Intercede and Bitcoin payment processors Coinapult and BitPay, supports bitcoin payments and can be integrated with bitcoin wallets.

“Rivetz is delivering state-of-the-art support that will help Bitcoin [become] a standard, secure capability on every handset,” said Tony Gallippi, Co-Founder and Executive Chairman of BitPay. “We look forward to enabling the Rivetz capability as an option for millions of Bitcoin users.”

The new open-source payments technology is easy to use and compatible with any Trustonic-enabled smart device. The solution is compatible with many thousands of Bitcoin merchants, offering consumers peace of mind that their Bitcoin transactions are safe, private and secure. Furthermore, the new solution meets all of the requirements of the recently implemented regulations for European payments using smart devices, which opens the way for deployment in Europe.

The new solution developed by Rivetz uses Trustonic’s Trusted Execution Environment (TEE) built into millions of smart devices to store and process Bitcoin private keys, and Trusted User Interface (TUI) technology for secure PIN entry and secure display of the users’ transaction details. Rivetz provides a software developer toolkit for secure TEE-enabled Bitcoin payment apps.

“We are pleased to be working with Rivetz to bring state-of-the-art security and ease of use to consumers,” said Trustonic CEO Ben Cade. “The Rivetz team is offering a great model for any app developer to leverage the advanced security that Trustonic TEE provides.”

Intercede’s MyTAM cloud service is used to protect the user’s bitcoin wallet and data from malware and any threats that may be present on the handset.

“Apps used for executing Bitcoin transactions are an attractive target for hackers, who are developing increasingly advanced methods to deploy their malware onto Android handsets,” said Intercede CEO Richard Parris. “By ensuring the activities of apps are kept separate and secure from the main OS, end users can be assured their Bitcoin transactions are protected.”

This development is important for the Bitcoin ecosystem, because it integrates bitcoin payments in a comprehensive, secure mobile payment solution that is technically as advanced – or more advanced – than competitors Apple Pay and Google Wallet, supported by leading smartphone manufacturers, and fully compliant with applicable regulations. It will facilitate Bitcoin adoption among consumers and merchants, reduce regulatory obstacles and bring Bitcoin closer to mainstream.

February 25, 2015 at 04:37PM

24 February 2015

German Fidor Bank Brings Bitcoin to Mainstream Banking, Expands Overseas

German Bitcoin exchange bitcoin.de and Fidor Bank have announced a new “Bitcoin Express” option for Fidor Bank customers to buy and sell bitcoin instantly on the exchange.

The new option addresses the delays involved in exchange transactions. Bitcoin exchanges like BitStamp, which are not licensed banks, must often wait hours or even days for a transaction to be cleared by an external bank. But because Fidor Bank is fully licensed, it is able to provide a direct interface to the mainstream banking system, eliminating transaction delays.

As a result, holders of a “Fidor Smart Giro Account” are now able to purchase bitcoin directly from a bank account and receive bitcoin immediately after the purchase. They can also sell bitcoin to another Smart Giro Account holder and have the money instantly credited to their account. Since the money is always in the user’s bank account, customers don’t have to worry about the possible insolvency – or dishonest behavior – of an external exchange operator.

The Smart Giro Account is a full bank account with all the standard features, including interest on credit balances and a low-cost credit card. The latter is, in practice, equivalent to a card that can be recharged with bitcoin.

Oliver Flaskämper, board member of bitcoin.de, said, “That is not only good news for all Bitcoin fans, but also good news for fintech companies based in Germany. “

Fidor Bank CEO Matthias Kroener commented: “The prompt conducting of [Bitcoin transactions] from one bank customer to another bank customer enhances security massively. As such Fidor Bank is setting a further milestone in digital banking.”

In related news, Fidor Bank disclosed plans to expand to the U.S. market. Kroener praised U.S. authorities’ open and pragmatic middle-of-the-road approach to Bitcoin regulation.

Kroener is persuaded that traditional U.S. banks are losing their appeal, especially among younger generations, because they don’t offer the innovative services that today’s tech-savvy consumers demand.

“The reason that a lot of very successful fintech startups are happening in the U.S. is not only because there are so many talented people setting up those businesses. It is also because there is a huge gap in innovative services.”

Fidor Bank is known as a modern Internet Bank and an early adopter of new trends in fintech with innovative services for connected consumers. Fast Company named Fidor Bank one of the world’s top 10 most innovative companies of 2015 in personal finance, and described it as a social bank that leverages cutting-edge technology to respond to customer wishes.

Fidor Bank’s fintech community website invites developers, notably dubbed “Pirates of Banking,” to become “part of reshaping the post-crisis banking industry through cutting-edge technology instead of doing the minimum to be compliant.” The deployment of innovative fintech services in the U.S. market could boost the mainstream acceptance of Bitcoin and the digital economy as a whole.

February 24, 2015 at 07:18PM

23 February 2015

Bitrated Unveils Reputation System and Multisig Escrow

Bitrated has announced an online reputation management system for its multi-signature (multisig) escrow service for bitcoin payments. The two innovations combined provide unprecedented consumer protection to Bitcoin users, buyers and sellers alike.

Bitrated‘s bitcoin payment service uses multisig transactions where a trusted third party (trust agent) is nominated to resolve disputes and reverse payments in case of fraud. Two out of three signatures are required to unlock a payment: the seller’s, the buyer’s and the trust agent’s. So if the buyer is happy with the purchased goods or services, the payment can be unlocked by the buyer and the seller alone, with no intervention required from the trust agent. Otherwise, the trust agent will arbitrate the dispute for a fee, and eventually take either the side of the seller, in which case the payment will proceed, or the buyer, in which case the escrowed bitcoin will go back to the buyer.

With multisig, the trust agent is not able to take the money and run, because the payment address is fixed and any decision of the trust agent must still be validated by the seller or the buyer. But as usual, the devil is in the details: a dishonest trust agent could collude with a dishonest seller – or buyer – behind the scenes. Bitrated’s reputation management system addresses this problem.

“We believe that Bitrated holds the key to the next wave of Bitcoin consumer adoption,” said Bitrated CEO Nadav Ivgi . “While disputes about e-commerce are usually settled in a fairly easy process, Bitcoin transactions still hold a major risk of fraud. The new reputation management system is a huge leap forward in consumer protection when combined with the secure payment system, and it can help bring Bitcoin one step closer to the massive numbers of users in e-commerce.”

Bitrated created a marketplace for arbitration services where trust agents can compete for customers by providing quality dispute resolution services, utilizing their domain expertise, building a reputation and offering competitive fees.

“Because trust agents never hold user funds in escrow, we can greatly reduce compliance costs, lower the entry barriers, encourage competition and allow smaller and specialized players to participate in a way that was never possible before.”

To join Bitrated, users need to create a profile like this and link their social network accounts. At this moment, reputation scores are mostly based on the various karma systems and number of friends/followers on the social networks. Later, it’s to be expected that reputation scores will be based on user reviews, successfully completed transactions and dispute resolutions on the Bitrated system itself.

To create a new trade, buyers need to specify what they are buying (a description of the product or service, delivery method and other agreed upon terms), the price in bitcoin, the user name of the seller (an external email address can also be used, in which case the seller will receive an invitation to join Bitrated), a refund bitcoin address, and the user name of the trust agent. Trust agents, who can be found in the Bitrated user database, can specify their fees: a base fee (for example 0.5%) and a dispute resolution fee (for example 2%). If the system catches on, top-rated trust agents whose services are in demand could earn significant fees.

Bitrated is a very welcome addition to the Bitcoin ecosystem, and one that meets an important need. It can be seen as an open and transparent alternative to the native escrow and reputation systems of specific Bitcoin marketplaces – where often escrow and dispute resolution are provided by the operator itself. Bitrated, which is essentially a public marketplace for arbitration services with a crowd-sourced reputation system, is a good solution to manage trust issues in the digital economy.

February 23, 2015 at 10:02PM

This Week on Decentral Talk Live

Decentral Talk Live features a diverse collection of guests this week from all over the decentralized and disruptive technology community. Topics include security and regulatory compliance, publishing, branding, web-development, and building features on top of the Bitcoin blockchain.

Balancing security and privacy with regulatory compliance is a tricky business when it comes to digital currencies. This week, DTL talks with Amber Scott, founder and “Chief AML Ninja” of Outlier Services. Scott is a Certified Anti-Money Laundering Specialist (CAMS) and a Certified Privacy Professional (CIPP) with a degree in psychology from the University of Waterloo, where she helped develop the first applied psychology course on criminal profiling. In 2013, she founded Outlier Solutions to provide AML and CTF compliance for financial services (including casinos, insurance, accountants, real estate, securities/investments, digital currencies and more). Among other security-related topics, Scott delves into the complex world of financial regulation and gives tips on dealing with banks — always a tricky problem for Bitcoin companies.

Craig Sellars, the CTO of the Mastercoin Foundation, joins DTL to discuss its communications protocol. Mastercoin uses the Bitcoin blockchain to enable features such as smart contracts, user currencies and decentralized peer-to-peer exchanges. A common analogy used to describe the relation of the Master Protocol to Bitcoin is that of HTTP to TCP/IP. Like the Master Protocol, HTTP is the application layer for the more fundamental transport and internet layers of TCP/IP, such as Bitcoin.

As co-founder and CTO of Tether, Sellars also answers questions about this fiat currency token platform on the Bitcoin blockchain. Tether aims to provide a quick and secure way to store, send and receive real-world currency as if it were bitcoin.

Themes for this week will also include communication and marketing in the Bitcoin space.

Rik Willard, CEO of MintCombine, a think tank and product lab delivering blockchain solutions for brands and causes, will talk about the challenges of navigating the complex economic environment of emerging decentralized digital engagement ecosystems.

Mitchell Callahan, Founder and COO at Saucal, will provide insight into his Bitcoin & web application development firm.

Jeffrey Tucker, Chief Liberty Officer of Liberty.me, a subscription-based, action-focused social and publishing platform for the liberty minded, will share his enthusiasm for sharing and promoting ideas that support freedom.

Decentral Talk Live airs new episodes at 3 pm EST, Monday through Friday, on decentral.tv.

February 23, 2015 at 08:06PM

Canadian Exchange, QuadrigaCX, Takes Spotlight After CAVIRTEX Bows Out

On Tuesday, February 17, the Canadian Bitcoin community was surprised to learn that its biggest and longest-serving exchange, CAVIRTEX, was to wind down operations by March 25. Enter QuadrigaCX, heir apparent to the title of Canada’s largest Bitcoin exchange.

An older version of the CAVIRTEX database, including 2FA secrets and hashed passwords, may have been compromised. Their website states, “We believe that damage to the company’s reputation, caused by the potential compromise, will significantly harm our ability to continue to operate successfully.” Kyle Kemper, VP of CAVIRTEX, also cited a difficult banking relationship as a contributing factor.

CAVIRTEX was the second exchange to go down in Canada this year; Vault of Satoshi also declared its intent to close as of February 5th, 2015.

“We’ve definitely seen an increase in new accounts over the past few days,” said Gerald Cotten, CEO of QuadrigaCX. He added that the closure of CAVIRTEX came as a “total surprise” to him. Like everyone else following the Bitcoin news in Canada, he knew about some of CAVIRTEX’s difficulties, but didn’t think they were serious enough to close the company. “Security and banking issues…come with the territory when one operates an exchange,” he said.

Can QuadrigaCX avoid a similar fate?

Cotten places his faith in the company’s security system. QuadrigaCX clients’ passwords are encrypted both server-side and client-side, on-site and in-browser. Even if someone managed to hack in and steal their password hashes, as in the case of CAVIRTEX, those hashes would be useless to the thief.

“Total security is incredibly hard to achieve,” Cotten said. “You make one little mistake and a hacker can and will exploit it. Banks can’t guarantee they won’t get robbed; exchanges can’t guarantee they won’t get hacked. That’s why we keep as little [bitcoin] online as possible.” The rest of the funds are kept in cold storage. Cotten added that QuadrigaCX participates in the Bug Bounty program run by Crowdcurity, so their system is continuously being tested for weak points of entry.

As for its banking relationships, QuadrigaCX appears positioned to keep legacy banks onside. When it comes to banks, said Cotten, an exchange is “always walking on eggshells.” Before its launch on December 26, 2013, QuadrigaCX registered with FINTRAC as a money services business, becoming the first exchange to do so in Canada. While it isn’t strictly required by law, such registration is perceived by banks as a sign of legitimacy, and registration has minimized the number of banking issues the exchange has had to face. QuadrigaCX was also the first Canadian exchange to integrate INTERACTM Online.

It also helps to have a little luck. Just before it was thrust into the spotlight, QuadrigaCX began a global marketing campaign to expand its business outside of Canada, targeting more international markets. At the moment, it carries CAD/BTC, USD/BTC and Gold/BTC order books, and accepts clients from most countries around the world. Due to regulatory complexities, however, QuadrigaCX does not accept U.S. clients.

As for the prospect of other foreign exchanges encroaching on the Canadian Bitcoin space, Cotten isn’t worried. He points out that Bitstamp and Bitfinex are already active in Canada, but he doesn’t foresee too many other companies making a push into the Canadian market. “Trading volume is still very low [here],” he says. “It’s not really worth it for them.” And Canadians who might try to migrate toward foreign exchanges are likely to find the process too complicated and expensive by comparison.

To see a recent, in-depth interview with Gerald Cotton, and learn more about QuadrigaCX, visit decentral.tv. For this episode of Decentral Talk Live, Cotten spoke with host Ethan Wilding and guest host Hai Nguyen shortly before the CAVIRTEX announcement.

February 23, 2015 at 05:59PM