Coinffeine to Challenge Centralized Bitcoin Exchanges with Distributed Alternative

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

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

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

Guanter told CoinDesk:

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

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

Exchanging with no central authority

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

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

Guanter explained:

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

How it works

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

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

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

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

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

Development pace to grow

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

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

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

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

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

Business diagram image via Shutterstock

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May 30, 2014 at 12:23AM



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7 Things Every Misinformed Person Says About Bitcoin

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

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

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

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

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

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

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

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

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

2. “Didn’t bitcoin just go bankrupt?”

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

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

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

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

3. “Isn’t bitcoin a Ponzi scheme?”

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

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

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

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

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

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

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

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

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

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

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

There’s a lot of mystery surrounding Satoshi Nakamoto.

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

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

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

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

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

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

Confused image via Shutterstock

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May 29, 2014 at 09:03PM



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

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

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

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

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

Bitcoin friendly jurisdiction

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

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

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

Diamond Circle’s ecosystem

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

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

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

Image courtesy Diamond Circle

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May 28, 2014 at 01:53AM



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

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

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

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

Future of money?

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

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

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

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

Artificial liquidity

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

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

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

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

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May 27, 2014 at 01:09PM



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The Role and Future of Altcoins

Just the name “altcoin” evokes a sense of disdain–altcoin, as in “alternative to Bitcoin,” a copycat late to the scene. Why do we persist in using such terminology when altcoins and Bitcoin are all cryptocurrencies of the same basic category? Many long-time Bitcoiners accuse altcoin developers of pump and dump schemes, longing to be early adopters, and envious of their fortunes.

There are some good reasons to pay attention to emerging cryptocurrencies, however. Like any tool, one size doesn’t fit all, and different cryptocurrencies function more or less effectively in different scenarios. For example, while Bitcoin’s pseudoanonymity strikes a fine balance, there are times when a citizen might wish to have total anonymity; conversely, we might want to use a more traceable solution when it comes to investment firms and tax agencies.

Already, we can see currencies for different purposes emerging. CryptoNote, for example, yields near-total privacy via built-in one-time wallets and group signatures. Dogecoin works great as a mainstream promotional tool for cryptocurrency. Freicoin can be used in situations where deflation is not ideal, and currencies like 4C can be used to tackle political issues like global warming (whatever your position on that particular issue may be).

There are lots different niches for cryptocurrencies to fill, but even if two currencies aren’t readily differentiable, there’s a lot of value in having competition in the cryptocurrency field. In a monopolistic scenario, the developers influential over the leading cryptocoin could become lazy, or worse–corrupt. Most cryptocurrency enthusiasts would agree that the free market is usually the most efficient system, so shouldn’t that apply to Bitcoin, as well?

Critics argue that a plethora of coins will lead to confusion, but the beauty of crypto is that it’s not like traditional infrastructure-based industries: multiple competing power networks leads to a tangled mess, but cryptocurrency wallets are relatively simple programs. One could easily hold varying currencies in a single wallet application, and paying in different currencies at a point-of-sale terminal is one more press of a button. One could conceivably detect which currency is requested by the QR code displayed, making it an easy process.

Another point of criticism is that this will lead to too much volatility in crypto, as investors jump between one coin and another. While it hasn’t become an issue, yet, that’s arguably because altcoins haven’t caught up in market share. While that could be changing soon, there are already plenty of traditional currencies on the planet, so one would think such an issue would have already manifested itself in the fiat realm. Such volatility would make investment in and use of cryptocurrency difficult, but that might be a simple problem for a new coin to solve.

The emergence of multiple competing cryptocurrencies is likely to lead to the development and use of basket cryptocurrencies. As Bitcoin decreases in dominance, people will still want a way to invest generally in cryptocoins, without worrying about variances within the market. By making each basket coin redeemable for an assortment of significanat coins on the market–each in a quantity proportional to the number of that coin on the market–one could efficiently store a fraction of the total cryptocurrency market share.

If that’s still too volatile for everyday transactional use, we can make a coin for that, too–just program its coin production rate to increase or decrease whenever it deflates or inflates (respectively), and set the confirmation time as low as possible. People will use them if they’re necessary to buy things, with or without their investment potential. Unlike traditional industries prone to monopoly, it’s in the nature of crypto to promote the free market; Bitcoin having to contend with competitors is not a matter of if, but when–and how.

May 23, 2014 at 02:52AM



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SatoshiPoint Bitcoin ATMs UK

Bitcoin now has multiple dedicated Bitcoin ATMs in London, allowing the public to buy and sell Bitcoin for cash. This makes London one of the leading cities for these machines globally.

UK Bitcoin based startup SatoshiPoint has just announced the installation of three Robocoin ATMs that will be live from Friday, May 30th. To celebrate, they are throwing a Bitcoin bash. This official launch party will be on the same Friday at Old Street Tube location Nincomsoup, starting from 6pm.

The Launch party will be in conjunction with Bitcoin POS XBTerminal, who is also crowdfunding investment through crowd funding platform BanktotheFuture.

A second launch party will be held a little later, to celebrate the opening of Bristol’s first ATM location on the the 3rd of June. The arrival of these Robocoin machines represent SatoshiPoint’s first. The company plans to import further machines, with a focus on operating full size commercial grade machines that allow the general public to both buy and sell bitcoins for physical cash in seconds quickly and simply.

Satoshi Point’s three machines will currently charge a flat 5% fee over the live bitcoin price on Bitstamp. The company has future plans to integrate with cointrader to allow for faster withdrawals.

SatoshiPoint Locations

The machines will be located at Old Street, Nincomsoup, located within Old St Tube station AKA Silicon roundabout. Also, Oxford Street Rathbone News, Rathbone Place, London W1T 1JS – Closest tube Tottenham Court Road. And, Bristol City Centre, SuperFoods 25-27 St Stephens Street, Bristol, BS1 1JX.

These are second generation Robocoin machines that include a passport scanner (a UK first) as well as biometric palm reader and driving licence reader. These security features will not be implemented from day one but are in place to future proof the machines and make sure they comply with any future regulatory requirements.

SatoshiPoint is a founding member of the UK Digital Currency Association. Managing director Jonathan James Harrison says:

“SatoshiPoint wants to take Bitcoin mainstream in 2014 and believes that Bitcoin ATMs are essential in making this a reality. Bitcoin ATMs provide a familiar and consistent way for normal people to get hold of bitcoin fast, or sell it quickly for real world physical cash.”

SatoshiPoint has been funded by its two director-shareholders Jonathan Harrison and Hassan Khoshtaghaza. The two plan to scale up quickly and roll out more machines nationwide in other major cities. Investors will soon have the opportunity to invest in Satoshipoint Ltd with either bitcoin or sterling in return for real shares in the company.

The company has been through Bank to the Future’s business crowdfunding program and is looking to raise £150,000 to fund rapid expansion. Satoshipoint has already been approved by HMRC for the Seed Enterprise Investment Scheme (SEIS) which allows private investors to offset money invested in Satoshipoint against their personal income tax or capital gains tax.

Anyone interested in attending either of the free opening party events should RSVP the organisers here. They promise to be a lot of fun for all to mark this momentous occasion.

May 23, 2014 at 02:51AM



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Cody Wilson and M.K. Lords Discuss Dark Wallet and Philosophy

This article first appeared at Bitcoin Not Bombs.

I had the opportunity to sit down with Cody Wilson, the creator of the world’s first 3D printed gun and founder of Defense Distributed, at the Freedom Summit in Phoenix, AZ. We were both there to give talks on Bitcoin and the event was put on by radio host Ernest Hancock of Freedom’s Phoenix and Declare Your Independence.

In this interview we discuss philosophy, decentralized resistance, Dark Wallet, Defense Distributed, and the role of humor in activism. I really enjoyed talking with Cody, who is fascinating and frank in this interview, and we covered a lot of ground. Cody highlights the effectiveness of doing activism without asking permission and how Kafka-esque the current system is becoming.

Cody will also be at the upcoming Bitcoin in the Beltway conference put on by Jason King of Sean’s Outpost. You can see him and a lot of other awesome folks and help charity while you enjoy the conference–10% of proceeds go to support Sean’s Outpost Homeless Outreach.

May 23, 2014 at 02:51AM



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Live Tracking of All Things Bitcoin and Altcoin with Blockstreet

There is a new digital currency app in town and it is giving ZeroBlock a run for the money. A California startup, Blockstreet has released its first iOS application, providing everything bitcoin and altcoin. Currently in Alpha stages, the application made its debut in the App Store last week, giving users access to Bitcoin and Altcoin prices, market cap, news and information, along with a fully functional currency calculator. While most other applications just offer information on Bitcoin, Blockstreet provides up-to-the-minute information on everything happening in the world of digital currency.

Blockstreet CEO Ken Feldman runs the company from a Bitcoin incubation space called Bitropolis in Santa Monica. Their aim is to be the mobile Wall Street of the crypto community, and through Feldman’s leadership as a successful serial entrepreneur, Blockstreet is focused on placing the entire marketplace in the palm of your hand. Feldman has a lot of experience in the Bitcoin and Altcoin space and has launched companies in telecom, aerospace and media industries.

Users who download Blockstreet will enjoy the application’s easy-to-use interface and functionality. Blockstreet has the ability to keep users apprised of all trending digital currency news, market cap and information from the world’s leading exchanges. In addition, the application also features a cryptocurrency calculator that easily and accurately calculates rates from fiat-to-crypto. Users can view over a dozen different currencies including Bitcoin, Litecoin and Dogecoin across a variety of exchanges, and every option is customizable to the user’s preference. The initial launch of this free application has been very successful and due to its feature rich interface, Blockstreet gives investors and enthusiasts a new and exciting look into the world of digital currency.

“Cryptocurrency is a burgeoning industry, and the demand for more information continues to increase,” Feldman stated. “There are other apps, but many just focus on Bitcoin, aren’t easy to use, or [are] built as a side project by a developer and have little ongoing support. We are hyper-focused on giving users the best possible tools for them to understand the entire marketplace and make smart decisions.”

Blockstreet is currently rolling out the app to Bitcoin and Altcoin enthusiasts, who are encouraged to send their feedback in order to further improve the user experience. Going forward, the company plans on introducing new features regularly, although none have been specified as of yet. Blockstreet will even name the feature after the user who made the suggestion, which shows just how much faith the company has in the community.

“The Bitcoin and Altcoin communities are very supportive and we just wanted to create an application that is all about the user experience,” the company said in a recent press release. “Users by and large need to access data on the go, which is why we created Blockstreet to meet their cryptocurrency needs wherever they are.”

The iOS app is currently available for free via the App Store with an Android version currently in development. Users can be notified when an Android version is available by visiting the Blockstreet website. http://ift.tt/Tza8kR

May 23, 2014 at 02:51AM



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‘Silk Road’ the Play Seeks Bitcoin Funding for Edinburgh Fringe Debut

A play based on the story of notorious online black market Silk Road will debut at the Edinburgh Festival in August. Like its online namesake, the production will be funded by bitcoin.

The play, entitled ‘Silk Road‘, transfers the Dread Pirate Roberts’ (DPR) story to the north of England, and is reportedly based on writer Alex Oates’ interviews with real-life website vendors.

It’s a one-man play told through the eyes of the still-not-definitely-identified DPR as he encounters both new online and economic realities, and the more traditional characters inhabiting them.

Funding

Producers are inviting bitcoin donations, but ‘Silk Road’ has also reportedly received funding from the Kevin Spacey Foundation, a charitable organisation started by the Hollywood actor that funds development of creative projects and provides scholarships to talented creatives in the UK and US.

‘Silk Road’ the play invites audiences to:

“Take an adrenaline-fuelled ride into Whitley Bay’s underworld. A tale of a struggling young Geordie tech-head, Bruce Blakemore, who gets caught up in a World Wide Web of new age pirates, local gangsters & innovative postal methods.”

A message on the official site says the production aims to raise 40 BTC through donations, by appealing to bitcoin users:

“Writing the play, Alex was struck by the generous and highly intelligent nature of bitcoin owners and Silk Road users.

This play talks about issues of personal freedom and libertarian ideals that are close to the heart of many TOR and bitcoin users and in no way criticizes the use of such marketplaces.”

In reality

The ‘real’ Silk Road was an online marketplace accessible to users of the Tor network, which sold a collection of legal and illegal items and used bitcoin as its primary currency.

Shut down by the FBI in October, it has been both praised for demonstrating the advantages of bitcoin use and condemned for damaging the technology’s reputation.

The man accused of being the mastermind behind Silk Road, Ross Ulbricht, awaits trial after his indictment for conspiracy to traffic narcotics, computer hacking and money laundering. His defense team has questioned whether any evidence exists to convict him, or whether it is even possible to launder a payment token that is not officially money.

Directed by Dominic Shaw and starring UK TV actor James Baxter in the lead and only role, ‘Silk Road’ will appear at the Assembly in Edinburgh during the Fringe Festival. There will also be a preview in London at the New Diorama Theatre on 27th July.

Image via strelka / Shutterstock

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May 21, 2014 at 12:03AM



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Secure Wallet Extension KryptoKit Disappears from Chrome Browsers

KryptoKit, the secure bitcoin wallet and encrypted messaging extension for Chrome browsers, has been mysteriously auto-removing itself from users’ computers – along with easy access to the bitcoins they kept there.

Developers from the KryptoKit project are frantically working to find the reason and a solution, and it is not known for sure whether all users will be able to regain access to their funds.

Around 6:00am GMT users began to flood Twitter and Reddit with messages saying a popup dialog box had informed them the extension had automatically removed itself from Chrome. Two buttons on the dialog said ‘OK’ and ‘Details’ – the latter of which took them to Google’s Chrome web store, from where they found KryptoKit had also disappeared.

Six-month old Kryptokit had support from some prominent members of the bitcoin community and had been well received by users until today. It even had a partnership with BitPay to include a ‘two-click’ solution for easy payment to bitcoin-accepting merchants.

Finding a solution

Within the hour, project backer Vitalik Buterin posted on Reddit that Google had removed the extension “for unspecified TOS violations”, and that KryptoKit co-founder Steve Dakh had “been stonewalled” when asking Google for a clarification.

“If you made a backup, then you should have your brainwallet seed in the backup file, which you can import into blockchain.info or simply pass through sha256 to get your private key out,” Buterin wrote.

“If you did not make a backup, things are a bit more complicated.”

He then posted some command line directions for Windows and Linux users. A 50-character string in a directory containing Chrome’s user data was the brainwallet that could then be imported into blockchain.info or converted to a private key.

Buterin promised more information on the situation soon.

Big move

Whatever the reason, if Google is responsible for the removal it seems to be an aggressive move. Users were presented with no choice as to whether or not to remove software they had installed on their personal machines; software that also held access to their money. Such a sudden removal would usually be reserved for dangerous malware

Unlike fellow tech giant Apple, Google has so far not shown any opposition to bitcoin or its use on devices running its software. There have been no reports of other bitcoin wallets, including those installed on Android powered mobile devices, being removed.

History

KryptoKit launched in December 2013, promising a simple and secure wallet with no logins and passwords, that could also send encrypted messages. One feature was its ability to identify bitcoin addresses on a webpage, allowing a user to select from a drop-down menu instead of copy-pasting or scanning a QR code.

It is the product of developers associated with the Bitcoin Alliance of Canada, including co-founders Dakh and Anthony di Iorio. Launched in December 2013, a month later it received backing from high profile bitcoin figures Buterin, Roger Ver and Erik Voorhees.

CoinDesk will continue to monitor this developing story.

Image via Kamira / Shutterstock

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May 20, 2014 at 07:38AM



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Skyhook Releases Portable, Open-Source Bitcoin ATM for Just $999

Skyhook is new to the bitcoin ATM-scape but already interesting many with its first project, the first ever portable, open-source bitcoin ATM machine starting at $999. The Portland-based manufacturer released it last Monday (12^th May) and demoed it at the Bitcoin2014 conference this weekend.

Giants like Robocoin and Lamassu charge up to $20,000 for an ATM that exchange bitcoin for fiat currencies worldwide. Skyhook’s hardware and software are designed to make bitcoin more accessible to the masses, as well as existing bitcoin users. Chief operating officer Kyle Drake said:

“It’s very difficult for non-experts to buy bitcoin in the United States and around the world right now, without a lot of work. There are some great bitcoin wallets out there, but most of them come with no way to buy bitcoin.”

If usability among the general population is what holds bitcoin back from wider adoption, as some digital currency enthusiasts have argued, developers will have to focus more on making existing technologies useful to Main Street consumers. Drake continued:

“We want to help solve the bitcoin purchasing problem by making it so anyone that wants to try and use bitcoin can just go to a nearby ATM, and get some with cash. The best way to do that is to make bitcoin ATMs affordable, so that anybody can get and use one. It’s a great way for people to get comfortable using bitcoin.”

Small and light, the Skyhook ATM also makes it simple for bitcoin individual users and businesses of any scale to become an exchange, quickly and affordably. The ATM is sufficiently portable, Drake said, but also provides a durable security mounting plate to permanently attach the unit to something, if the user prefers a fixed location – and all with the same level of security.

It also gives merchants the option to generate revenue while protecting them from price volatility. Skyhook sets the bitcoin price automatically using the major exchanges, and allows users to set a percentage rate and minimum price if they like.

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May 18, 2014 at 03:14PM



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How Regulators Should Approach The Bitcoin Derivatives Market

We already know of bitcoin’s complicated relationship with governments and regulatory agencies the world over. But bitcoin’s relationship with the U.S. Commodity Futures Trading Commission (CFTC), the agency responsible for regulating the futures and options markets, is particularly ill-defined.

Bitcoin is in a Catch-22-style bind. As long as the price remains volatile it will remain dangerous for merchants to accept the cryptocurrency, barring adoption on a massive scale. Derivatives might be a useful risk management tool to hedge against volatility. But regulatory ambivalence leaves entrepreneurs timid or unwilling to invest in the infrastructure for these transactions.

While derivatives have the ring of abstruse tools, they could make or break the bitcoin ecosystem.

Despite this uncertainty, the bitcoin derivatives markets are drawing attention. Seed-stage incubator Seedcoin allotted 500 bitcoins to BTC.sx, a derivatives trading platform, in early July. Last year, SecondMarket awarded a leveraged FOREX trading platform, Coinsetter, $500 million in venture capital.

In a Mercatus Center working paper, scholars say that based on current regulations, many bitcoin derivatives should be exempted from CFTC regulation. They also recommend that policymakers use a “bottom-up” approach to the new technology.

The volatility problem

It’s no secret that bitcoin is volatile. In theory, the volatility will decrease as the network reaches a larger capacity.

But for now, a dive in price could impact the future of a company that wants to transact in it, making vending in bitcoin a prohibitively risky move.

What are derivatives?

That is where derivatives come in. The contractual tool “derives” its value from an underlying asset—in this case bitcoin. The value of the underlying asset can fluctuate, but the contract locks it in at an agreed-upon price for a period of time.

There is a lot of uncertainty. It is beneficial for merchants to lock in a long term price, so that they can still operate and plan in the face of possible fluctuations. Traditionally, this has been a useful tool for agriculture, oil, and other markets where the prices of underlying commodities were subject to volatility.

“It will make bitcoin less and less volatile over time.” BTC.sx COO George Samman said. “It provides a proper hedging mechanism.”

There are a number of types of derivatives: options, forwards, futures, and swaps. CoinDesk correspondent Daniel Cawrey touches on the various types of derivatives.

As long as the network is composed of a small number of actors, many institutional players are hesitant to move into the bitcoin market until hedging instruments develop.

Houman Shadab, professor at New York Law School and author of the Mercatus paper told CoinDesk, “The development of bitcoin derivatives means that people are taking bitcoin seriously and want to make it easier to use.”

Mercatus recommendations

Right now, regulatory focus is fixed on bitcoin’s use in money-laundering and illicit purchases. But when the markets for advanced financial instruments expand, the arm of the government will likely follow.

In mid-April, the Mercatus Center, a market-oriented think tank, released a working paper titled Bitcoin Financial Regulation: Securities, Derivatives, Prediction Markets, & Gambling that describes the government’s role in these transactions.

According to the authors – Jerry Brito, Houman B. Shadab, and Andrea Castillo – as bitcoin evolves and the infrastructure develops for bitcoin trade, new financial instruments will pop up to deal with risk. Securities, derivatives, prediction markets and gambling will assume greater significance in the bitcoin ecosystem.

The paper is a draft and is subject to change. The scholars’ recommendations is summarized as follows:

Following the approach to virtual currencies taken by FinCEN, we argue that other financial regulators should consider exempting or excluding certain financial transactions denominated in bitcoin from the full scope of their regulations, much like private securities offerings and forward contracts are treated. We also suggest that to the extent that regulation and enforcement becomes more costly than its benefits, policymakers should consider and pursue strategies consistent with that new reality, such as efforts to encourage resilience and adaptation.

Many Bitcoin derivatives resemble forwards, which are not regulated by the CFTC. Forwards are not subject to regulations outlined in the Commodities Exchange Act (CEA) for a couple of reasons. Forwards contracts are generally tied to a physical commodity, unlike futures which are settled in cash. Since bitcoins have a cap and inherent value it resembles a physical commodity. Bitcoins are also easily transferable.

CFTC regulations are reserved for speculative markets.

Bitcoin derivatives should be treated like any other commodity derivative, Shadab told CoinDesk. “The CFTC should exempt from the full scope of its regulation derivatives that ultimately transfer bitcoins between users, for the same reasons physically settled commodity derivatives are not regulated as heavily as futures.”

“The CFTC should help to foster a liquid and robust market for Bitcoin derivatives so investors and users can decrease their exposure to price risk” he added.

Other opinions

A CFTC spokesman declined to comment because the agency “has not taken any actions with regard to bitcoin.” But last year the former chairman Bart Chilton said the agency was “seriously considering” regulation.

Some think clarity is the number one priority. Early this year Sen. Tom Carper (D-DE) asked the CFTC to clarify its position to “remove the cloud of uncertainty.” Harvard Review reported on the general attraction to regulation amongst bitcoin entrepreneurs, simply because it helps to dispel the paralyzing uncertainty.

Undoubtedly, bitcoin would benefit from clarification from the CFTC.

Pillars of law image via Shutterstock

CFTCderivativesfuturespricesSenator Tom Carper

May 18, 2014 at 01:05PM



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