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TOKYO--Japan's ruling party has decided not to recommend legislation for regulating bitcoin, a party official in charge of discussions over the virtual currency said Thursday.
"We decided not to do anything by law for the time being," said Takuya Hirai, the chair of the Liberal Democratic Party's panel on information technology.
Mr. Hirai was speaking at a committee meeting on Thursday discussing the party's take on the crypto-currency. The committee will announce its view on bitcoin later in the day.
Policy makers have been discussing how bitcoin should be overseen amid concern over how the virtual currency may be used for money-laundering and other illegal purposes and its possible vulnerability to hacking.
Tokyo-based Mt. Gox, once the world's largest bitcoin exchange, applied for bankruptcy protection in late February and announced the disappearance of 850,000 bitcoins -- about 7% of the world's total -- worth more than $470 million at the time.
Mt. Gox's demise amplified authorities' concerns about the stability of bitcoin, which isn't backed by any central bank.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com
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06-19-140105ET
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Gartner critical capabilities for enterprise endpoint backup
Researchers have scuttled Bitcoin mining mammoths such as GHash with a proposed system alteration that would end the money-making collectives and return fairness and stability to the crypto currency.
Cornell University academics (@IttalyEyal) Ittaly Eyal and Emin Gün Sirer (@el33th4xor) say their "Two Phase Proof of Work (2P-PoW)" is a simple solution to de-incentivise large Bitcoin mining pools.
The problem the pair hope to address is the fact that big mining pools can cheat the system with selfish mining. The duo point out that pools with more than 25 percent of the total network could earn more than their fair share, more so for those with 33 percent. Even larger pools could 'double-spend' with low confirmations, while those with over 50 percent control, as in the case of GHash, were an "unmitigated disaster", they said.
The 2P-PoW scheme aims to make collective mining less attractive by making proofs of work delegation harder without erasing a miners' fortunes or negating their hardware investments.
The 2P-PoW platform was developed after the GHash behemoth collective was found to dominate Bitcoin mining by scooping about 51 percent of all coins uncovered to date. The feat was a breach of etiquette -- the pair dubbed it "armageddon" -- as it undermined the key decentralised feature of Bitcoin.
GHash apologised and promised never to repeat the "51 per cent attack", but not before the website was hit with distributed denial of service attacks.
Eyal and Sirer said their platform would help miners by slowing hardware obsolescence which they peg at an astonishing 99.3 per cent loss of value within 28 weeks, leading to a huge turnover of equipment.
The two phase PoW (see a full description here) introduced a second crypto-puzzle alongside the unmodified current quiz. Miners would continue the usual routine to solve the current puzzle but would then need to sign the block with the private key that controlled the payment address.
"This mechanism allows miners to use existing rigs, albeit with a lower difficulty value than the difficulty value currently in effect," the pair wrote on the HackingDistributed blog.
"This would enable miners to produce a lot more potential solutions; that is, headers that pass phase 1 (the existing puzzle) which we call half-solutions. For each such half-solution, miners use a second device, perhaps a CPU or a specialised card, to perform the second check until a full solution is found."
Mining pool kingpins would be prevented from cashing out on initial puzzle solving and simply solve their new quiz due to a requirement for a sign and hash the authors said was comparable in cost to the initial stage's double-hash.
That job could not be outsourced to any web denizen because anyone with the required private key could simply pilfer the pool's Bitcoins.
"Pool operators, being so vulnerable to being robbed, would not be able to admit untrusted individuals into their pools," Eyal and Sirer said.
An individual millionaire could still rule the 2P-Pow Bitcoin roost if they had a huge number of mining equipment each entrusted with private keys. However this would be a feat within the grasp only of state actors, the academics said.
GHash was said to own a quarter of the pool's resources, well below the requirement to again dominate under the proposed system.
The system could be smoothly introduced over 12 months, they claimed. ®
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A list of potential bidders for the Bitcoin auction was accidentally leaked by the U.S. Marshals Service on Wednesday, according to the agency.
The Marshals Service confirmed that it accidentally released the names in an email to update interested parties on the auction's guidelines.
"The U.S. Marshals Service inadvertently sent an email today revealing the email addresses of people who had submitted questions about the Bitcoin auction to a general USMS mailbox that had been created for the auction," Lynzey Donahue, a spokeswoman for the U.S. Marshals, said in an emailed statement.
"The USMS apologizes for this mistake which was in no way intentional," the statement said.
The news was first reported by the New York Times, citing a report from CoinDesk, an online website devoted to Bitcoin. (http://nyti.ms/1lANHXU)
The U.S. government said last week it plans to auction about 30,000 bitcoins, the electronic currency, valued at about $17.4 million, on June 27 the U.S. Marshals Service said.
FBI seized the bitcoins during a raid in October on the Internet marketplace Silk Road, known as a hub for transactions involving illegal drugs and criminal activities.
The seized bitcoins are part of the civil forfeiture and criminal action brought against Silk Road owner Ross William Ulbrich and the assets of Silk Road, the U.S. Marshals Service said.
CoinDesk has a list of people who inquired about the auction, including Fred Ehrsam, the co-founder of Coinbase, a Bitcoin payment processor, the New York Times said.
Gartner critical capabilities for enterprise endpoint backup
The U.S. Marshals Service's auction for the for 29,656.51306529 Bitcoin it seized from online recreational pharmaceuticals purveyor Silk Road has gone off the rails after the Service accidentally spilled a list of interested parties.
Coindesk reports that an email sent to those asking for information about the auction listed those who have asked it more detailed questions about the event.
The list of those who had done so makes for interesting reading, as it includes : Reviews website Yelp; A “quantitative arbitrage” person at French bank BNP Paribas; Venture capital firm Matrix Partners.
The Marshals Service has apologised and pointed out that the fact the above and other parties have made further inquiries about the auction is not a sign they intend to bid for the Bitcoin stash.
The mess is not expected to derail the auction, which is still scheduled for June 27th. ®
5 things you didn’t know about cloud backup
The Middle East region now has its first two-way capable bitcoin ATM after Wednesday evening’s launch of a new Robocoin machine, or ‘branch’, at a fashionable Tel Aviv Hotel.
This gives Israeli residents and visitors a new option to enter the bitcoin economy, rather than going through one of the online exchanges, which meant bank transfers, or buying face to face.
ATMs and bitcoin vending machines are also aimed at exchanging smaller amounts of fiat currency, which means they’re more appropriate and user-friendly for newcomers.
The ATM’s owner is Bitbox, headed by CEO Nimrod Gruber. He said:
“The launch of the first bitcoin ATM in the Middle East will allow any person with no previous knowledge of bitcoin and how it works to easily buy and sell bitcoin 24/7 bypassing the bureaucracy of the banks.”
It also gives tourists a new way to obtain local currency and foreign workers in Israel a new and simpler option to take locally earned shekels and send them to families back home – provided there is another ‘cash-out’ bitcoin ATM at the other end.
Whether it’s actually the first ‘bitcoin ATM’ in the Middle East is open to debate. Dubai company Umbrellab demonstrated integration of a bitcoin-buying service in one of the city’s ManGo payment kiosks back in April.
Umbrellab says it has plans to introduce bitcoin buying to 300-400 ManGo kiosks eventually. At this stage the kiosks allow only for purchase of bitcoins, not sale.
Israel, arguably the world’s most significant technology startup hub outside of Silicon Valley, has displayed a generally friendly attitude to bitcoin so far and is home to several venture capitalists, well-known cryptocurrency projects such as Mastercoin, and bitcoin evangelists like Meni Rosenfeld.
Michael Eisenberg, partner at early-stage VC firm Aleph, wrote earlier this year that the country should leverage its talent, and capitalize on entrepreneurial dissatisfaction with the US’s regulatory mire, to become a bitcoin center.
The new ATM will launch at the Townhouse Tel Aviv hotel in the evening of Wednesday 11th June.
Image via Protasov AN / Shutterstock
June 11, 2014 at 07:05AM
Bitcoin Megaphone, the world’s first Bitcoin-powered pay-per-character publishing platform, is poised to enter its third consecutive month with increased traffic and high user engagement.
Bitcoin Megaphone was created as a side project by Mike Solomon in March of 2014. Mike Solomon lives in New York where he works as Digital Director for Glamour Magazine at Condé Nast Publications. Condé Nast Publications is in no way affiliated with Bitcoin Megaphone.
Since the site’s launch in March 2014, hundreds of people have anonymously posted jokes, advertisements, art, conspiracy theories, commentary, and more – all in the hopes of earning tips.
The site is deceptively simple. Anyone can post whatever they’d like for .00001 bitcoins per character (roughly .006 cents on current exchange rates), with no character limit.
To incentivize people to contribute, each post creates a public Bitcoin address that can collect tips. The private key to this address is given to the post’s author at the time the post is created. This gives users full anonymity while still allowing them to collect tips.
Bitcoin Megaphone Creator, Mike Solomon, notes:
“The website is like a huge billboard where you can scrawl anything you want, completely anonymously and without consequence. And the only thing people can do about it is give you money. We’ve never seen a dynamic like this anywhere.”
The content can be sorted in a few different ways on Bitcoin Megaphone. The default sort shows the most recent posts, while other views show posts with the most tips, posts that are the most profitable, and posts that are the most expensive.
Solomon adds:
“Cost is a rough measure of importance. So unlike on Facebook or a blog – where long chunks of text are often ignored by readers – a long post on Bitcoin Megaphone will attract people’s curiosity.”
Although Bitcoin Megaphone is a centralized service, each post can be embedded into a website or blog via a widget. And in the future, Solomon plans to open up an API so the content can be reorganized and syndicated across the web.
Bitcoin Megaphone isn’t the only service to explore online tipping. But according to Solomon, other services are less focused because they piggyback on existing social platforms and lack anonymity.
Solom notes also that the big social networks already have their own built-in social currency, such as Likes, Retweets, and Upvotes. So existing social media tipping services are generally just another layer that competes with that. But with Bitcoin Megaphone, the tipping structure is built in as the only method of peer recognition. Tipping is what’s expected.
People are tipping. So far the website has generated more than 6 BTC in tips. And although some of those tips are likely from the posts’ authors themselves, the website demonstrates that people with serious money are viewing and participating.
Solomon believes that:
“Publishers should take note. The people using Bitcoin Megaphone are the precious few Bitcoin early adopters who could help fuel a viable revenue stream for online properties in the future. The themes and patterns of posting and tipping we’re seeing here are the proof-of-concept that micro payments in publishing can actually work.”
According to Solomon, Bitcoin Megaphone is helping to explore the viability of user-supported websites in the future.
June 10, 2014 at 07:13PM
What was once the location of New York City’s largest pushcart market at the turn of the century has become one of the most popular street markets on the Lower East Side, known as the Hester Street Fair. In earlier times, the fair started out as a highly curated outdoor market and was the best place to get one-of-a-kind goods and specialty foods in all of New York City. Fast forward to today, and the Hester Street Fair offers everything from handmade jewelry and rare vintage pieces, to wood fire pizza and lobster rolls. The fair features artists, collectors and entrepreneurs every Saturday and Sunday from April 26 to October 26.
Taking place on the corner of Hester and Essex, over 30 select merchants are now proudly accepting Bitcoin. Through a partnership with BitPay, many of the fair’s vendors are accepting Bitcoin in the hopes of attracting a younger and more tech-savvy demographic that attends the fair. Starting on June 15th, and taking place every Sunday until the end of October, vendors will be able to sell their artisan goods for Bitcoin, just in time for a last minute Father’s Day gift. Also sponsoring the “Bitcoin Fair” are Xubicle, APIcoin.io and yBitcoin.
On June 15, tech enthusiasts and Bitcoin companies will come together for the world’s first ever weekly Bitcoin fair. Among the over 30 vendors accepting Bitcoin include: Rosette, Bitcoin Center NYC, Bones and Jones, Fritter, Delicate Raymond Jewelry Bar, HEISEL, La Poubelle Vintage and many more. Attendees will even be able to purchase the latest copy of Bitcoin Magazine as well. Also taking place will be an after party and meetup in celebration of New York City’s first Bitcoin fair. Starting at 4pm, a Bitcoin meetup will be held at the Xubicle office and will attract both the newest and most experienced cryptocurrency users. Following the meetup, attendees can visit Rosette, a Lower East Side hot spot for good food and drink specials for those paying with bitcoin.
In recent months, we have seen bitcoin strike increasing interest from brick-and-mortar retailers across the nation. Hester Street Fair is yet another example of how digital currency has excited local businesses and customers.
The magnitude of Hester Street Fair is growing each year, with more vendors and attendees stopping by each weekend for locally created food, clothing and art. With the addition of bitcoin, the fair will surely see increased attendance and interest from tech-savvy individuals, and will create an exciting buzz for weekend warriors across New York City. In fact, the fair just opened the “Hester Street Fair Promenade,” which attests to its continued growth. This stretch of space along Seward Park contains ample seating and over 28 new vendors.
If you find yourself in the Lower East Side of NYC from now to the end of October, be sure to stop by the Hester Street Fair and get your fix of delicious food, unique clothing, jewelry and art, all locally created in New York City. Before you arrive, be sure to load up your Bitcoin wallet – you will need it.
June 10, 2014 at 07:12PM
Bitcoin mining hardware manufacturer HashFast has formally entered Chapter 11 bankruptcy following a court ruling.
The US bankruptcy court granted the company’s request on 7th June after it filed for bankruptcy protection two days earlier.
The move closes a turbulent chapter in HashFast’s history, nearly a month after laying off half of its workforce and publicly denying that it was filing for bankruptcy.
According to a 10th June blog post, the company is now in the process of reorganizing under Chapter 11. Most notably, CEO Eduardo DeCastro has resigned from his position as part of a broader reduction in HashFast’s operating team. Chief technology officer Simon Barber is now serving as interim president of HashFast, the company announced.
Additionally, HashFast has hired Chicago-based law firm Katten Muchin Rosenman LLP to chart its path through bankruptcy.
In a statement, HashFast said that a Chapter 11 reorganization is good news for creditors as opposed to a Chapter 7 liquidation:
“Our focus is to reorganize the company in a way that provides added value to our creditors, versus a liquidation scenario that would be of less value.”
By entering Chapter 11 bankruptcy, HashFast now has an opportunity to restructure its debt and operations while still functioning as a business.
Under Chapter 11, a bankruptcy trustee is appointed to oversee the reorganization. During this time, a company seeks to change the terms of its debt via counselling with creditors. In some cases, a successful restructuring allows for the repayment of loans, generally with a reduced interest rate or different principal amount.
In addition to hiring Hatten Muchin Rosenman, HashFast has tapped a new chief financial officer, Monica Hushen, to oversee “business operations and bankruptcy matters,” the company said in its statement.
HashFast added that more information is to come regarding its bankruptcy path, saying:
“We will be sharing more specific information regarding our reorganization efforts over the coming days.”
CoinDesk reached out to HashFast for comment but had not received a response at press time.
Prior to being granted Chapter 11 bankruptcy protection, HashFast came close to being forced into Chapter 7, a type of bankruptcy that results in asset liquidation.
One of the company’s creditors, LiquidBits, sought to persuade a US bankruptcy court in May to appoint a Chapter 7 trustee for HashFast. At the time, the firm said that HashFast failed to honor a $6m order.
An emergency hearing was held to hear both sides’ arguments, but ultimately, US Bankruptcy Judge Dennis Montali sided with HashFast and allowed it to continue operating in a limited capacity.
Bankruptcy attorney via Shutterstock
June 10, 2014 at 05:28PM
Ripple Labs announced yesterday it has joined the NACHA Payments Innovation Alliance – a move it says will increase its influence within the financial and payments industry, as well as help promote new technologies in the space.
NACHA, previously the National Automated Clearing House Association, is a not-for-profit industry body of financial institutions that serves as trustee for the Automated Clearing House (ACH) network, the backbone for electronic payments and movement of money and financial data in the US.
The ACH Network is similar to the SWIFT network that facilitates international money movements.
Although Ripple Labs is a software company rather than a financial institution per se, it provides an open-source base platform “that resides at the bottom of the payment stack” for others to build upon.
Ideally, the company sees itself as replacing some of the most basic infrastructure functions of the ACH network:
The company posted the following statement on its blog:
“Our membership with the NACHA Alliance provides us with further opportunity to further our mission of working with everyone within the industry to help drive innovation around the movement of money.”
Ripple Labs has always claimed the Ripple protocol is perfectly suited for use by financial institutions and enterprise, saying its involvement has been a long-standing drive by the company.
Recent announcements and improvements reflect this stance. On 4th June, the company announced it was working to add features to its protocol that would empower gateways to freeze non-XRP balances they have marked for further investigation if they suspect related accounts have been hijacked or are engaging in suspicious behaviour.
The new features are part of Ripple Labs’ commitment to helping gateways with regulatory compliance and giving those gateways tools to better manage compromised and suspicious balances, according to the Ripple wiki.
The protocol will soon gain new messaging and identity features, plus other tools to allow stakeholders to identify such suspicious activity and communicate it to other users who wish to avoid those accounts.
‘Suspicious activity’ would involve money laundering, fraud, or other attempts to manipulate digital currencies and their networks.
Stakeholders would still have the freedom to decide whether or not to implement the tools and enforce risk controls, but could highlight the increased compliance in advertising to potential new customers.
Ripple Labs says it is working on these improvements in order to be more regulation, compliance and law-enforcement friendly – words that will be reassuring to the traditional financial industry.
NACHA represents over 11,000 US financial institutions who fund the organization either directly or via regional associations. The ACH Network itself, which is separate, moves about 22 billion transactions and $39tn (yes, trillion) annually.
NACHA members cooperate to set private sector operating rules including risk management and security of the network, with a mission “to facilitate the expansion and diversification of electronic payments on the ACH Network.”
Image via My Life Graphic / Shutterstock
June 10, 2014 at 11:41AM
Bitcoin users in need of serious transaction privacy should avoid popular services like Blockchain.info’s SharedCoin and other CoinJoin implementations, according to a well-known security expert.
Consultant Kristov Atlas, author of the book Anonymous Bitcoin, published a security advisory today saying weaknesses in SharedCoin offered privacy only from “unskilled examiners of the bitcoin blockchain” – and even then, only until more sophisticated analysis tools were made user-friendly enough for the average user to deploy.
Using such a tool he created himself called ‘CoinJoin Sudoku’, Atlas analyzed thousands of transactions identified as using SharedCoin and determined he could identify relationships between specific payments and payees.
Coinjoin Sudoku works by searching for common ownership of the multiple transaction inputs and outputs that SharedCoin uses to obscure identity, grouping them where ingoing and outgoing amounts match.
Blockchain.info has responded to the warning with a blog post reminding customers that SharedCoin and CoinJoin offer protection only against “casual observers”.
“They do not prevent a determined investigator from correlating transactions or an adversary with information about specific addresses from correlating them to specific payments and payees.”
Blockchain.info’s SharedCoin service is an open-source implementation of the CoinJoin privacy protocol, and is often referred to as a ‘mixer’.
While transactions on the bitcoin blockchain are open for all to see (at least at the public address level), SharedCoin will collect a group of users wishing to increase privacy and join their transactions into one ‘master transaction’ before broadcasting it to the network.
The transaction that then appears on the blockchain would have multiple outputs and inputs, supposedly making it worthless for analysis.
Customers may select the number of times to repeat the SharedCoin process, between two and ten.
While offering enhanced privacy to users, SharedCoin and mixing services hope to better protect all users by making the bitcoin blockchain overall a less dependable tool for connecting bitcoin addresses to individuals.
Blockchain.info officially began offering SharedCoin as a free service to its users last November, around the time Matt Mellon’s ‘CoinValidation‘ and other services that promised to track specific bitcoins and addresses connected to suspicious or other investigation-worthy activity. It did not claim, however, to provide 100% protection from such services.
Older style mixing tools (also known as ‘tumblers’) would forward a payment around several different addresses to make the originator hard to find, usually on a private server, or ‘off-chain’. Such systems, however, required trust from users that anonymous operators would not simply confiscate or steal the bitcoins before they emerged from the mixer.
SharedCoin, and the CoinJoin protocol itself, provided a system that required less trust in the operator, by taking advantage of a bitcoin transaction’s ability to have multiple inputs and outputs.
Atlas analyzed 20,000 transactions across 45 blocks on the bitcoin blockchain and found around 2.6% fit the profile of a SharedCoin transaction.
CoinJoin Sudoku identified groups within a transaction with equal amounts (marked red and blue in the diagram below) then examined inputs and outputs one digit at a time to identify possible relationships.
Currently, he wrote, the new tool is still inefficient and required over 30 hours to complete the analysis on a single processor, even with testing limitations he introduced. More thorough de-anonymization would take much longer, though it remained possible.
“Despite the limitation, the tool was able to group 69% of inputs and 53% of a single transaction’s outputs.”
Through this kind of grouping, he could identify a maximum of two users within that transaction.
Atlas recommended anyone using SharedCoin set the number of cycles to the maximum 10, while remembering that even this did not guarantee 100% privacy.
Blockchain.info provides a ‘Taint Analysis’ tool to test traceability of funds and is designed to evaluate the effectiveness of mixers. If it works, users should not be able to identify sending addresses in the list.
Atlas says the Taint Analysis is a “poor measurement” for this, identifying a 100% and 50% chance of relationship between an output and two inputs, where the Taint Analysis had claimed 4.2% and 4.5% respectively.
He plans to release CoinJoin Sudoku as an open-source project in two weeks. The delay, he said, was to provide SharedCoin users with adequate time to take the steps necessary to protect their privacy.
Blockchain.info disclosed it paid Atlas a bounty (via SharedCoin) for finding the vulnerability and had worked with him to coordinate a schedule to release the information:
“Blockchain.info sincerely appreciates the thoughtful nature of this disclosure from community member Kristov Atlas. We look forward to working with Mr. Atlas and other security researchers, on future improvements and enhancements to SharedCoin.”
“As always, Blockchain.info is committed to transparency, the community, and improving bitcoin services for everyone.”
The company invited everyone to visit its GitHub repository to review its many open-source projects.
“If you want to truly hide transactions, SharedCoin and other implementations of CoinJoin are not for you they are neither sufficient nor convenient. SharedCoin provides a basic level of enhanced privacy transaction but doesn’t guarantee anonymity nor was it intended to.”
Blockchain.info saw SharedCoin’s primary user base as corporations wishing to protect privacy of payroll and bill payments, individuals wishing not to display records of salaries or tips, and political and charitable organizations protecting their donors.
SharedCoin, Blockchain.info says, is actually “not a mixing service” as it never controls or sends any funds on behalf of its users.
Repeating a warning often given to anyone who claims the bitcoin payment network is ‘anonymous’, the company said anyone with sufficient time, money, motivation and computing power could correlate transaction outputs and inputs.
Image via igor.stevanovic / Shutterstock
June 10, 2014 at 05:48AM
