Bitcoin: Magic, Fraud, or Sufficiently Advanced Technology?: Part I

Arthur C. Clarke’s third law famously states: “Any sufficiently advanced technology is indistinguishable from magic.” What Bitcoin makes possible can at first seem almost magical, or just impossible (and therefore most likely fraudulent or otherwise doomed). The following describes the basic technical elements behind Bitcoin and how it brings them together in new ways to make seeming magic possible in the real world.

Clarke’s second law states: “The only way of discovering the limits of the possible is to venture a little way past them into the impossible.” And this, we can see in retrospect, is basically what Bitcoin creator Satoshi Nakamoto did. Few at the time, even among top experts in relevant fields, thought it could really ever work.

It works.

One reason many people have a hard time understanding Bitcoin is that it uses several major streams of technology and method, each of which is quite recent in historical perspective. The main raw ingredients include: an open-source free software model, peer-to-peer networking, digital signatures, and hashing algorithms. The very first pioneering developments in each of these areas occurred almost entirely within the 1970s through the 1990s. Effectively no such things existed prior to about 40 years ago, a microsecond in historical time, but a geological age in digital-revolution time.

Some representative milestone beginnings in each area were: for open-source software, the GNU project (1983) and the Linux project (1991); for peer-to-peer networking, ARPANET (1979) and Napster (1999); for digital signatures, Diffie–Hellman theory (1976) and the first RSA test concept (1978); and for hashing algorithms, the earliest ideas (around 1953) and key advances from Merkle–Damgård (1979). Bitcoin combines some of the best later developments in each of these areas to make new things possible.

Since few people in the general population understand much about any of these essential components, understanding Bitcoin as an innovation that combines them in new and surprising ways, surprising even to experts within each of those specialized fields, is naturally a challenge without at least a little study. Not only do most people not understand how the Bitcoin puzzle fits together technically, they do not even understand any of the puzzle pieces! The intent here is not to enter into much detail on the content of any of these technical fields, but rather to provide just enough detail to achieve a quick increase in the general level of public understanding.

What Bitcoin is about in one word: Verification

It may help to focus to begin with not on the details of each field, but at how each part contributes strategically to Bitcoin’s central function. This is to create and maintain a single unforgeable record that shows the assignment of every bitcoin unit to addresses. This record is structured in the form of a linked chain of blocks of transactions. The Bitcoin protocol, network, and all of its parts maintain and update this blockchain in a way that anyone can verify. Bitcoin revises the Russian proverb, “doveryai, no proveryai,” “Trust, but verify,” to just “verify.”

If a single word could describe what the Bitcoin network does, it would be verification. For a borderless global currency, relying on trust would be the ultimate bad idea. Previous monetary systems have all let users down just where they had little alternative but to rely on some trusted third party.

First, the core Bitcoin software is open source and free. Anyone can use it, examine it, propose changes, or start a new branch under a different name. Indeed, a large number of Bitcoin variations with minor differences have already existed for some time. The open source approach can be especially good for security, because more sets of eyes are more likely to find weaknesses and see improvement paths.

Open source also tends to promote a natural-order meritocracy. Contributors who tend to display the best judgment also tend to have more of their contributions reflected over time. Unending forum discussions and controversies are a feature rather than a bug. They focus attention on problems—both real and imagined—which helps better assure that whatever is implemented has been looked at and tested from diverse angles.

Many computers worldwide run software that implements the Bitcoin protocol. A protocol is something roughly like a spoken language. Participants must speak that language and not some other, and they must speak it well enough to get their messages across and understand others. New protocols can be made up, but just as with making up new languages, it is usually rather unproductive. Such things only take off and become useful if enough others see a sufficient advantage to actually participate.

Second, as a peer-to-peer network, there is no center. Anyone can download core Bitcoin software and start a new node. This node will discover and start communicating with other nodes or “peers.” No node has any special authority or position. Each connects with at least eight peers, but sometimes many more. Some faster and always-on nodes relay more information and have more connections, but this conveys no special status. Any node can connect or drop out any time and join again later. A user does not have to run a full node just to use bitcoin for ordinary purposes.

It is common to say that Bitcoin is “decentralized” or doesn’t have a center. But then, where is it? Thousands of active peering nodes are spread over most countries of the world and each one carries an up-to-date full copy of the entire blockchain.

Some nodes not only relay valid transactions and blocks, but also join the process of discovering and adding new blocks to the chain. Such “mining” activities both secure the final verification of transactions and assign first possession of new bitcoin to participating nodes as a reward. Understanding basically how mining works requires a look at the distinct functions of several different types of cryptography.

Bitcoin cryptography dehomogenized

Bitcoin relies on two different types of cryptography that few people understand. Both are counter-intuitive in what they make possible. When most people hear “cryptography,” they think of keeping data private and secure through encryption. File encryption can be used to help secure individual bitcoin wallet files, just as it can be used for the password protection of any other files. This is called symmetric key cryptography, which means the same key is used to encrypt and decrypt (AES256 is common in this role). Encryption may also be used for secure communication among users about transactions, as with any other kind of secure traffic. This is called asymmetric key cryptography, which means a public key encrypts a message and its matching private key decrypts it at the other end.

However, all of this is peripheral. Nothing inside the core Bitcoin protocol and network is encrypted. Instead, two quite different types of cryptography are used. They are not for keeping secrets, but for making sure the truth is being told. Bitcoin is a robust global system of truth verification. It is in this sense the opposite of the “memory hole” from George Orwell’s 1984; it is a remembering chain.

The first type of cryptography within Bitcoin is used to create a message digest, or informally a “hash.” Bitcoin uses hashing at many different levels (the most central one is an SHA256 hash run twice). The second type is used to create and verify digital signatures. This uses pairs of signing keys and verification keys (ECDSA sepc256k1 for signatures).

The keys to the kingdom

Despite intuitive appearances to users, bitcoin wallets do not contain any bitcoin! They only contain pairs of keys and addresses that enable digital signatures and verifications. Wallet software searches the blockchain for references to the addresses it contains and uses all the related transaction history there to arrive at a live balance to show the user. Some of the seemingly magical things that one can do with bitcoin, such as store access to the same units in different places, result from the fact that the user only deals with keys while the actual bitcoin “exists,” so to speak, only in the context of the blockchain record, not in wallets. It is only multiple copies of the keys that can be stored in different places at the same time. Still, the effective possession of the coins, that is, the ability to make use of them, stays with whoever has the corresponding signing keys.

While software designers are working hard to put complex strings of numbers in the background of user interfaces and replace or supplement them with more intuitive usernames and so forth, our purpose here is precisely to touch on some technical details of how the system works, so here is a real example of a set of bitcoin keys. This is a real signing key (do not use!):

5JWJASjTYCS9N2niU8X9W8DNVVSYdRvYywNsEzhHJozErBqMC3H

From this, a unique verification (public) key is cryptographically generated (compressed version):

03F33DECCF1FCDEE4007A0B8C71F18A8C916974D1BA2D81F1639D95B1314515BFC

This verification key is then hashed into a public address to which bitcoin can be sent. In this case:

12ctspmoULfwmeva9aZCmLFMkEssZ5CM3x

Because this particular signing key has been made public, it has been rendered permanently insecure—sacrificed for the cause of Bitcoin education.

Part II will discuss hashing and the essential roles it plays in the technical structure of Bitcoin, as well how the system has been designed to be self-financing right from the beginning into the indefinite future.

About the Author

Konrad S. Graf (@KonradSGraf) writes on Bitcoin and monetary theory. This work so far is collected at http://ift.tt/1eou0fG. He appeared on panel discussions on Bitcoin and economic theory and monetary history at the Bitcoin 2014 conference in Amsterdam, and in 2013, he presented on Bitcoin and social theory at the Mises Seminar Australia in Brisbane and via pre-recorded interview at the Bitcoin Singapore conference. He is currently focusing on additional research and writing in this area.

Please send Konrad a tip: 174YDzQuMdUgNbd9sQspPdNjZwg7UxQNVi

September 29, 2014 at 05:30PM

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US Commodities Regulator to Hold Public Bitcoin Hearing

The US Commodity Futures Trading Commission (CFTC) has announced that it will hold a public meeting to discuss digital currencies on 9th October in Washington, DC.

Created in 1975, the US CFTC is an independent federal agency that regulates the country’s futures and options markets. The meeting will be presided by the CFTC’s Global Market Advisory Committee, a group that advises the organisation on issues related to market integrity and competitiveness.

The CFTC indicated that the meeting will consist of two panels, one of which will focus on examining bitcoin and questions surrounding the CFTC’s involvement in the creation of a derivatives market for bitcoin, while the other will center on Non-Deliverable Forwards (NDFs), a form of cash-settled short-term forward contract.

The event will be open to the public, as the full release explains:

“Members of the public may also listen to the meeting via conference call using a domestic toll-free telephone or international toll or toll-free number to connect to a live, listen-only audio feed.”

Though larger questions about bitcoin’s classification as a currency or commodity persist, the agency’s first foray into bitcoin is likely to focus on more basic questions.

For example, similar introductory hearings held by the New York Department of Financial Services (NYDFS) and the US Conference of State Bank Supervisors (CSBS) focused on educating those at each respective agency about the basics of the technology, and are only now moving on to more advanced subjects.

Ongoing debate

Despite the continued regulatory uncertainty in this area, the meeting could mark the first step toward more clarity for the bitcoin industry as to what the CFTC’s involvement will be in the industry’s markets.

The CFTC has been publicly discussing whether bitcoin meets the definition of a commodity under the organisation’s rules since March, the time when TeraExchange moved to secure the agency’s approval for its bitcoin derivative.

At the time, acting CFTC chairman Mark Wetjen indicated that the group was still seeking an internal answer to this question.

“The analysis hasn’t concluded, but I think people believe there is a pretty good argument that it would fit that definition, or there are at least arguments that it would,” Wetjen said at a March conference, according to Bloomberg .

Seeking definition

The CFTC’s exploration of bitcoin also comes at time when the bitcoin market is arguably seeing its first influx of more advanced financial trading tools.

Though some resources like Seedcoin-backed BTC.sx have been around for more than a year, new entrants such as BitMEX are now emerging at a time when some of the ecosystem’s largest exchanges are adding similar margin and options services.

Further, prominent members of the bitcoin community argue that such trading activity will have the long-term effect of decreasing volatility in the broader bitcoin market.

Given the evolving nature of this segment in the bitcoin market, many in the industry have called for the CFTC to provide greater clarity on how it will seek to oversee new bitcoin or block chain-based investment tools.

Images via Wikipedia; Shutterstock

CFTCDerivatives

September 25, 2014 at 11:00PM

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Overstock CEO Patrick Byrne to Keynote Inside Bitcoins Las Vegas – Get 10% OFF

by Adam Hofman on September 24, 2014 { }

Inside Bitcoins Conference and Expo will be returning to Las Vegas on October 5-7! The event will feature 35 informational sessions, over 70 speakers, 4 keynotes, and a half day of workshops!

Taking place at the Flamingo Hotel and Casino, the conference will cover a wide range of topics including mainstream adoption, compliance, bitcoin startups, investing, mining, altcoins, equipment, and more. An impressive lineup of bitcoin experts and thought leaders will share their insights and knowledge on the implications of bitcoin, along with predictions on what lies ahead.

The first 300 paid attendees will receive US$50 in bitcoin.

New to Inside Bitcoins Las Vegas will be a half day of small classroom-style workshops taught by cryptocurrency leaders, which will provide attendees with an interactive, informative setting to learn about various facets of the bitcoin ecosystem.

Recently announced is a keynote by Patrick Byrne, CEO of Overstock.com, who will be leading a session titled, “Cryptosecurities: the Next Decentralized Frontier” on October 6 at 3:30pm. Byrne will also be making an exciting announcement at the event regarding Overstock’s latest development on the Bitcoin front.

Featured speakers include:

• Patrick Byrne, CEO, Overstock.com


• Bobby Lee, CEO, BTC China & Board Member, Bitcoin Foundation


• Daniel Larimer, Founder, Bitshares.org


• Perianne Boring, Founder & President, Chamber of Digital Commerce

And many more! See the full roster of speakers here.

Interested in attending? Enter code BMAG14 for 10% OFF Gold and Silver Passports. Register now!

September 24, 2014 at 08:22PM

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PayPal Embraces Bitcoin: Is It Only the Beginning?

PayPal announced a monumental partnership today that will likely play a large part in the adoption of bitcoin throughout the world. The company has partnered with BitPay, Coinbase, and GoCoin to provide bitcoin support to the millions of PayPal users.

The first project consists of integrating with the company’s Payments Hub, which is likely to be a small piece of the puzzle in the future relationship between PayPal and the leading Bitcoin payment solutions providers. Initially, digital goods merchants in North America will be able to accept bitcoin through the Payments Hub, and depending on popularity, may allow merchants around the globe to do the same.

PayPal announced in its press release, “We chose to work with BitPay, Coinbase and GoCoin because of our commitment to offering innovative and safer ways for businesses to accept payments. All three companies have taken steps to ensure that they know their customers and that those customers are offered certain protections. We believe digital goods merchants will be excited to work with these industry-leading companies to sell ringtones, games and music and get paid with Bitcoin.”

What’s it all mean?

This news does not necessarily mean that PayPal is adding the cryptocurrency into its digital wallet, nor does it mean that Bitcoin payments will be processed using its platform. Instead, this appears to be a foray into what has quickly become the most popular digital currency. If growth is noticeable, however, PayPal could be rolling out bitcoin support throughout other services.

This is yet another example of the power of Bitcoin technology. Each partnering company has taken steps to ensure that they know each customer and that customers are offered certain protections. PayPal is proceeding gradually though, but has obviously realized the value of Bitcoin, not only its simplistic payment methods, but also its transaction security and safety.

What the partnership has made possible is an easy way for merchants to test this popular payment method. More importantly, PayPal has long been one of the most established merchant solutions in the payment space, and because of the developed relationship with leading bitcoin businesses like BitPay, Coinbase and GoCoin, a wider range of users will be able to see the value of bitcoin; both as a payment method and technology.

The company has been helping merchants selling Bitcoin miners accept PayPal payments for quite a while. However, to help safeguard customers, PayPal is not offering the bitcoin payment option to merchants who pre-sell products. Meaning, when a company asks for funds up front for a product or service.

Only the beginning

“We believe Bitcoin offers unique opportunities as more people and businesses experiment with it. We are excited to work with businesses and business models that allow us to offer new experiences and the trusted service our customers expect. We hope to do more with Bitcoin as its ecosystem continues to evolve.”

Excitement mounted early this month when PayPal announced that businesses working with Braintree would soon be able to accept bitcoin payments. Is this a sign of what’s to come? Who knows, but it’s only the beginning. PayPal has thrown down the gauntlet. Who else will support Bitcoin and embrace innovation?

September 23, 2014 at 08:50PM

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Network Visibility Product Incorporates Bitcoin Pooled Mining Detection

Bitcoin is gaining popularity. Although the price has declined, people are still asking about and joining the ‘mining frenzy’ with increasingly capable hardware. In fact, the current aggregate hashrate of the Bitcoin network is topping a staggering >200,000,000 GH/s.

Remember that the profitability of mining depends on not only the necessary investment in hardware, but, most importantly, in the recurring cost of the energy required to power mining rigs.

The world is full of people who are willing to game any system for an expected personal profit. Unsurprisingly, there is a trend of individuals engaging in what is called ‘illicit bitcoin mining’, which is, essentially, borrowing computing resources and stealing power to mine for bitcoin.

There are known cases of malware authors who install hidden miners in unsuspecting Internet-using computers all around the globe (see here and here).

Other individuals steal power or computing resources from their employers (see here and here).

The ultimate way to thwart illicit bitcoin mining in corporate infrastructures is by accounting for power consumption. However, Barcelona-based startup Network Polygraph offers a cloud-based network monitoring solution, which could offer an alternative solution.

Josep Sanjuas, CEO of the company that commercializes Network Polygraph, states: “Rather than focusing on power consumption, pooled bitcoin mining can be detected by checking for certain patterns in network traffic.”

Network Polygraph provides network visibility, which helps network managers understand what is happening in their network in order to better manage it. For example, it produces bandwidth usage charts, flags the IP addresses that generate most traffic, and detects network-based attacks.

As part of its core features, Network Polygraph determines which applications have generated network traffic by using complex machine-learning based methods. Its creators have recently incorporated Bitcoin mining detection to their product and it is already reporting illicit mining activities in customer networks.

“We were surprised when Network Polygraph started flagging mining activities in our customers’ networks,” explains Sanjuas. “We expected we would catch some bitcoin-related activity, but we ended up uncovering an illicit Bitcoin miner that had been operating for months,” he continues to explain.

“We are not allowed to disclose much about these cases for obvious reasons, but we expect illicit mining to become a greater problem as bitcoin keeps becoming more mainstream.”

Sanjuas explains that “to our best knowledge, [Network Polygraph] is the first network visibility product that features bitcoin mining detection.” He clarifies that bitcoin mining detection is not the main selling point of Network Polygraph’s product line, but “just another way [the company] can justify its cost, besides regular usage for network operations, troubleshooting or capacity planning.”

It is important to note that Network Polygraph supports bitcoin usage, and promises to “work out a solution” if customers wish to pay in bitcoin for their services.

For more information on Network Polygraph or to explore their business in more depth, please visit https://polygraph.io.

September 23, 2014 at 05:00PM

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Kryptokit releases Video-Based Contest to Showcase the Power of Bitcoin Brainwallets

With 2 bitcoins available to be won, Kryptokit contest tests new blockchain based marketing ideas

TORONTO, CANADA – SEPTEMBER 23, 2014 – Today Kryptokit, the makers of the instant bitcoin wallet RushWallet, launched a video with a twist: embedded in the humorous video is a series of clues that lead viewers to 30 hidden brainwallets filled with bitcoins. Once viewers decipher the clues they are invited to claim the wallets and transfer any bitcoins inside them into their own accounts. There are 2 bitcoins available to be won in a contest that will last 1 month or until all the wallets are claimed.

The aim of the video is two-fold: first, to showcase how Kryptokit’s recently released RushWallet Fundraiser tool works and to demonstrate its ease of use; second, to show how brainwallets can be safely and easily used both as wallets and as a means to implement new marketing ideas.

The RushWallet Fundraiser tool allows users to quickly establish frictionless and free fundraising campaigns within the RushWallet platform. Using a single RushWallet, it is possible to manage and monitor several crowdfunding and collection campaigns at once. Unlike other popular crowdfunding sites, the RushWallet Fundraising tool has no fees, no restrictions, no centralized approval process, and allows you to start spending any collected funds at any time. All data is generated and stored client-side and RushWallet neither stores nor has access to any account information or any funds collected.

The video tells the story of Dmitri, an office worker who wants to raise money to buy his co-worker a less noisy keyboard using the RushWallet Fundraiser tool. As viewers watch the story, they will learn how the tool works. Throughout the video, viewers also will have the opportunity to collect clues to the passphrases that unlock the hidden brainwallets, thus gaining some hands-on experience with the power of brainwallets in an engaging and interactive way. There are 10 bitcoins up for grabs in the contest.

A brainwallet is a passphrase that converts into a wallet without the use of a wallet file. This passphrase is only stored in the mind of the wallet holder; it acts as an access mechanism to your wallet’s private key.

“Brainwallets often get a bad rap. They aren’t understood well in the bitcoin community,” says Anthony DiIorio, CEO of Kryptokit. “When a brainwallet is set up properly, it can be extremely powerful and secure. You are always in control of your assets and able to access your bitcoins anywhere in the world, provided there is internet connectivity. You don’t have to carry anything around – all your bitcoins are stored in your mind.”

According to Steve Dakh, CTO of Kryptokit, “The key to a good brainwallet is creating a uniquely generated personal passphrase that is easy to remember but impossible for anyone else to guess.” Experts recommend a phrase that is many words long that no-one else in the world has likely ever used (Hint: don’t use song lyrics or any phrase that might have ever been printed in a book!)

About Kryptokit

Kryptokit is a Toronto-­based technology company specializing in encryption and digital currencies. Founded in 2013 by Steven Dakh and Anthony Di Iorio, Kryptokit strives to provide software and hardware solutions that are secure, easy to use, and frictionless.

For more information about Kryptokit and its line of products including Kryptokit Extension and RushWallet with its crowdfunding and payment request tools, please contact Anthony DiIorio at anthony@kryptokit.com or +1-416-831-9593.

September 23, 2014 at 04:20PM

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Politician Keen for Vancouver Citizens to Pay Taxes in Bitcoin

A Vancouver politician says the city should allow residents to pay their taxes, fines and fees using bitcoin.

Jason Lamarche won 37,286 votes in a recent council election and now he says he would solicit bitcoin donations if he chose to run again.

In an interview with the Georgia Straight , Lamarche questioned why municipal politicians aren’t discussing bitcoin’s disruptive potential. He pointed out that many people describe Vancouver as the Silicon Valley of the north, yet the city is not doing much to promote new technology.

Lamarche explained:

“Well, when we have companies that are working on the type of innovation that we’re seeing related to bitcoin, why aren’t we helping to promote and use this technology, which clearly has had massive uptake around the world?”

However, the city said it has no plans to consider accepting bitcoin payments at this time.

Bitcoin donations are legal in Vancouver

The issue of whether or not political donations made in bitcon are legal was addressed by Nola Western, the deputy chief electoral officer at election information resource Elections BC.

Western confirmed parties and candidates taking part in Vancouver’s upcoming November elections can accept bitcoin donations. She explained bitcoins are treated as non-monetary property and candidates simply need to report the dollar value of bitcoin donations.

The value is set on the day the donation is received, so if the bitcoin price goes up or down in the meantime there is no need to report any changes in value.

However, anonymous donations are limited to $50 and anyone wishing to donate more will have to disclose their identity, complete with address, full name and other details. Such donations have to be reported by the recipient. Western also cautioned that if a candidate received a lot of anonymous $50 donations in bitcoin, questions about their source would be raised.

Bitcoin campaign funding elsewhere

The use of bitcoin in political fundraising is not new. The US Federal Election Commission (FEC) made it clear that political campaigns and action committees can accept bitcoin as a form of in-kind donation.

A number of US politicians and political groups started accepting bitcoin over the past couple of years. Earlier this month the Republican Party of Louisiana became the first state republican party to accept the digital currency.

Although most US politicians who decided to embrace bitcoin tend to have libertarian views, but many others do not – they come from across the political spectrum.

CanadaPolitical DonationsPoliticsVancouver

September 18, 2014 at 01:19PM

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XCurrency’s New Trustless Ad Hoc Mesh Network

Today, XCurrency has released a brand new trustless mesh network that looks to create revolutionary advancement in privacy, scalability and mobility. This is the final component of the company’s Rev 2 privacy solution and is a single protocol with many possibilities for users and enthusiasts. This new service will allow any node to communicate on behalf of others, without having to trust forwarding nodes.

The addition of XC’s trustless ad hoc mesh networking comes just months after the company announced XMixer, where nodes can earn revenue for the trustless forwarding of transactions. It seems the company is taking large strides toward creating a truly trustless process, one that may play a key role in the advancement of blockchain 2.0 technologies.

How It Works

When someone makes a private payment using the XC application, the transaction is split into several fragments, after which they are sent to other payment nodes. These nodes form mesh networks that only exist for the duration of each transaction. In these types of networks, no node functions as a “hub.” Instead, nodes mix transactions in a manner where no node knows the source or identity of the coins they are forwarding, and there is also no link on the blockchain between sender and receiver.

Due to forwarding, the identities of the sender and receiver are concealed and due to the fragmentation of transactions, the amount sent is also concealed. In other words, an ad hoc mesh network can create true privacy. According to XCurrency, “since all nodes can forward transactions, nodes cannot even tell whether a given fragment originates from the node it receives it from or whether that node forwarded it from somewhere else.”

The company calls this process “trustless multipath mixing,” and serves the purpose of enabling complete transaction privacy. Even further, it has the possibility to set new paradigms for private web browsing, content servers and mobile blockchains. These aspects are at the core of XCurrency’s upcoming Web 3.0 plans.

What the future holds

Many believe that the future of cryptocurrency will be further propelled through continued advancement in cryptographic technologies. This may be true, however, advanced networking technology like the ones created by XCurrency will also play a key role in continued innovation. Before now, one of the most popular techniques for anonymous transactions has been CoinJoin, but the company believes its platform has many implications that put CoinJoin at a disadvantage – so much so that XCurrency is calling its trustless mesh networking platform a “CoinJoin killer.” The company points out some key factors that separate XC from CoinJoin.

• CoinJoin is vulnerable to a denial-of-service attack: if a single node fails (or refuses) to sign a transaction, then every participating node has to re-sign. In contrast, by design XC’s mesh is continually and dynamically altering its topology, and has no trouble of this sort.


• CoinJoin has no intrinsic way of disciplining bad nodes, whereas XC’s mesh is capable of discovering bad nodes and excluding them from the mesh.


• Nodes participating in a CoinJoin transaction generally know the sender, receiver, and amount sent. And even though the blockchain does not record a link between sender and receiver, the information can be extracted from a node. XC’s trustless mixing conceals links between sender and receiver even from forwarding nodes, and its multipath fragmentation conceals the amount. Thus even if nodes are hacked, they cannot reveal sensitive information.


• CoinJoin generally requires a mixing server or some form of semi-centralised supernode (cf. DarkCoin “masternodes”). XC’s mesh networks are entirely distributed, even with the recent addition of Xmixer.

The idea behind trustless mesh networks can also help create a completely private internet browser, one which could replace the popular TOR network. Networks such as these are ideally suited to conceal IP addresses, simply because nodes mix content and are not able to discover the nature of the content, and also, the distribution of the network makes it highly resilient to attacks. XCurrency believes that this will serve as an excellent foundation for next-gen concealment of IP addresses. What trustless mesh networks create is an aspect of the internet that an increasing amount of individuals, especially those in the cryptocurrency space, find very important.

However, these platforms must also be mobile-friendly, an essential piece of the puzzle in order for a cryptographic platform to go mainstream. Early forms of trustless mesh networks in the mobile environment can be seen in technologies like mobile ad hoc networks (MANETs), which are self configuring and have the infrastructure to handle changes in signal strength or location. It may only be a matter of time before we are using trustless mobile mesh networks. However, this will require a continued focus on improving the privacy and mobility of blockchain-based technologies, one we are likely to see as more and more companies focus on blockchain 2.0 innovations. XCurrency appears as though they are focused on exactly that.

September 17, 2014 at 08:00AM

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Introducing the Xmixer: Earn Revenue with XCurrency’s Trustless Mixing

XCurrency’s hotly anticipated finalization of its private payments technology will allow nodes to earn revenue for trustlessly forwarding transactions.

XCurrency is set to release its finalised Rev 2 technology on Monday 15 September, and in addition to a yet-to-be-announced “coinjoin killer” feature, XC’s apps will gain the capacity to earn fees for the trustless mixing of transactions. This will incentivise users to bolster the network’s security, increase its capacity to process private transactions, and of course represent remuneration opportunities for XC users.

In contrast to other cryptocurrency projects, XC’s “Privacy Mode” is fully decentralised and does not make use of “supernodes,” as many coinjoin-based projects do. As a result, XCurrency gains true privacy without sacrificing security. XC-based payments are flexibly private, and at a maximum, reveal neither the amount sent, nor the addresses of the sender and receiver. Additional features conceal the user’s IP address and conceal the receiving address even from the sender. As such, XC represents true privacy for payments.

How it works

Early July 2014, XCurrency unveiled trustless mixing, a world-first in cryptocurrency design. For the first time, it became possible for a third party to forward information on one’s behalf without one being required to trust the third party. That is, the third party can either forward coins or not receive them at all. It is not possible for third parties to steal coins. In fact, forwarding nodes cannot even become aware of who’s coins they are forwarding. With XC, however, the idea of a single third party is inaccurate, as transaction-forwarding is distributed, making each participating node a “third-party” to the other nodes. The system is based on a proprietary protocol analogous to coinshuffle.

Multipath: fragmentation

Forwarding removes all record of a connection between sender and receiver; additionally, in order to conceal the amounts sent in a given transaction, transactions are broken into fragments, and each fragment is sent to different third parties to be forwarded. As such, neither the amounts nor addresses of a transaction are revealed. In fact, since private transactions are broadcast in the same way as normal transactions, there is no way to tell whether a given amount originates from the node sending it or has merely been forwarded – and neither is it possible to tell whether it is a fragment or a whole amount.

Expanding XC’s capacity

The trustless multipath mixing of Rev 2 was successfully implemented in July, but in order for it to scale to handle mainstream adoption, decentralized exchange, and a host of blockchain 2.0 apps, it will require massive capacity. However, since mixing can only be between nodes that are currently making private payments, this gives rise to two underlying scenarios that could limit this capacity:

1. There might not be enough nodes making private payments at a given time, causing transactions to wait or be cancelled.


2. Even though there may be enough nodes making private payments, their combined balances might not be sufficient to support forwarding all the fragments of a very large transaction.

To remove this limitation, XCurrency apps will have a new feature, the Xmixer, which has the capacity to forward transactions even when their users aren’t making payments. Xmixers will make use of the same protocol as Privacy Mode, except that they will collect portions of transaction fees as remuneration. In order to take advantage of this, a user would simply create a dedicated wallet from which to run an Xmixer. Then, to ensure that Xmixers contain enough coins to reliably sustain sufficient transaction volume, a minimum of 1000 XC must be paid into it.

Avoiding (semi-) centralization

A minimum balance of 1000 XC will create a healthy amount of buy-pressure on XCurrency, and so its price can reasonably be expected to increase as users progressively set up Xmixers. However, this scenario does not thereby create a small number of specialised nodes that perform mixing on behalf of the others. Thus XC is not analogous to that of a supernode-based system such as DarkCoin, in which only “masternodes” mix transactions, creating a semi-centralised “security chokepoint.” Instead, every XCurrency node – whether an Xmixer or a regular app – participates equally in private transactions and trustlessly forwards fragments. In other words, all XC nodes mix, but only Xmixers participate automatically in private transactions even when their users are not transacting. Furthermore, Xmixers do not require an advanced server setup and will be entirely user-friendly to run, further aiding the continued decentralization of the network.

As such, from Monday onwards, XCurrency will gain the capacity to scale its truly private payments technology without compromising the network’s security. Add to this its still-undisclosed “coinjoin killer” feature, and the future indeed looks bright for those who value privacy.

xc-official.com

September 16, 2014 at 07:32PM

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First Ottawa-based Not-For-Profit to Accept Bitcoin

by Victoria van Eyk on September 16, 2014 { }

On October 3rd at The SpinBin at 310 Dalhousie St., Ottawa-based not-for-profit Ottawa Charity Ping Pong will become the first organization of its kind locally to accept bitcoin donations. Resilient 21, a local Ottawa-based Bitcoin consulting firm, has set the corporation up using CAVIRTEX merchant solutions.

Many companies are turning to bitcoin as a method of payment due to its many benefits: it’s quick, it’s easy and it is less expensive than traditional payment methods. Charities who operate mostly on a donation basis rely on this source of funding to operate, making every cent valuable. CAVIRTEX takes .75% on transactions when converted immediately to dollars or 0% if kept in bitcoin, which is much less when compared to donations made via credit card, which range from 2-4% on average. It will also enable those who cannot be at the event to donate to the charity from any location. Alastair Mitchell of Resilient 21 notes, “long-term, accepting bitcoin is fantastic. It ensures that more dollars get to the people who need it, and it takes away from fees and administrative costs.”

Mitchell is spearheading the merchant acceptance of bitcoin in Ottawa and says that “merchants who use it absolutely love it.” At the charity event, which will be held on October 3rd, there will be a spot where bitcoin can be donated in person and they can also be donated online today at http://ift.tt/1DfudPe.

The charity is exploring the idea of accepting bitcoin for food and drink, although this has not been confirmed yet. Ottawa Charity Ping Pong is one of the most forward thinking non-profits in the Ottawa area, seeing bitcoin as a natural fit in expanding their donation pool. The organization has already started to receive bitcoin donations via their website, says, Mitchell, explaining that “any charity of any significance will soon be accepting bitcoin” because of these benefits. Ottawa Charity Ping Pong benefits four local charities: Youth Services Bureau; Operation Come Home; Do It For Daron; and Christie Lake Kids. For more information on this event, please visit http://ift.tt/1qc71ae

For media inquiries, questions or concerns, please contact Alastair Mitchell at mitchell@resilient21.com

September 16, 2014 at 06:04PM

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Bracing for Bitcoin in Buenos Aires

A Trip to the Embassy

The Entrance to Bitcoin Embassy. Subtle, and unimposing.

There is a large, imposing steel door along a popular street, in the bustling downtown business hub of Buenos Aires. There are no visible markings, or signs, that would indicate to passers-by what is housed inside. And given the time of day, it may take a few buzzes before anyone answers the door. But when someone does get around to letting you in, you’ll quickly find yourself in the nascent epicenter of Buenos Aires’ burgeoning Bitcoin industry.

Once inside, one will find an environment that is frenetic but welcoming. After a brief introduction to some of the building’s chief organizers, along with a tour of the facility, I was a fellow citizen in good standing, in the world of Bitcoin. Introductions aside, I was left alone with my laptop and an Internet connection, and any contribution to the brave new decentralized world was mine to create. This atmosphere seems to be working.

Judging by the piles of construction debris and unfinished cabling strewn on the floor, one wouldn’t be inclined to believe that this is an active work center. The smell of drying paint permeates the halls, and the occasional moments of silence are quickly disturbed by the jarring thunks of carpenters at work. But if you poke past the construction crew, and peer into the rooms lining the hallways, you will find the who’s who of the burgeoning Buenos Aires Bitcoin scene furrowing an eyebrow, and furiously typing on laptops at their desks.

After climbing the entrance stairs, the first floor greets me with a large, almost-finished reception desk and a poster that reads “The people’s currency.” To my right is a small, 40 person auditorium, decorated with posters sporting similarly patriotic memes. Bitpay is on the first floor, though they’ve only barely moved in. Alberto Vega is the regional manager, and an active participant in the construction of the embassy. Though not one to shirk a guest, introductions are kept short. Alberto is busy man who’s typically in a meeting, or on his way to a meeting that’s about to start. BitPay’s business model in Latin America is very similar to the North American model, but their value proposition is more focused on the response time in which their customers are reimbursed in fiat, whereas in the North America their offerings are typically justified by the low fees that are levied. The time at which a vendor is reimbursed for payment via traditional credit card contracts here in Latin America is typically thirty days. However, when inflation climbs to rates as high as 10% in a thirty-day term such ‘confirmation times’ can cause a vendor to lose their entire profit margin by the time fiat payments are deposited into their bank. With BitPay, a vendor can choose to keep their money in Bitcoin to hedge against fiat-volatility, as well as to receive fiat within one business day of the time of purchase. Seemingly, this cash-flow advantage is a particularly attractive selling point in Argentina, and Alberto is quick to pitch it.

After climbing a second set of stairs, on the second floor I found the smaller, but more densely packed offices of BitPagos. BitPagos’ business model is a bit different than Bitpay in that their target customer is typically smaller businesses, for which Bitpagos will process credit card payments, and compensate the business in Bitcoin. This model is in many ways the opposite of what’s being supplied by BitPay. By processing payments in the United States, and compensating in Bitcoin, BitPagos can circumvent many of the onerous taxes and restrictions imposed by the incumbent credit card processors in Latin America. Judging by what I see on the streets, this seems to be a popular service. Coinmelon and ZipZap are also located on the second floor, though their offices haven’t been fully moved in yet. Also on this floor are a few small stealth-mode startups hacking away in their offices. And not far from them, are the beginnings of a hostel-like room with bunkbeds and a shower. The intent of the dorm room is to house the hackers and dignitaries from the international community during their travels. Just like any other embassy, I would suppose.

On the roof is a very large patio, with a wonderful view of the skyline. The Bitcoin embassy is dwarfed in its size by the financial service and IT consulting neighbors on either side, but the location does afford a wonderful view of the bustling city below. There’s a large and imposing IBM building to the east, and there’s typically a smoking construction worker hanging out and enjoying his break on the corner of the roof just in front of it. The roof will eventually host open-aired parties and events, along with a large barbeque area with which to feed its attendees.

Wandering the halls one day, I bumped into James. James is an American, a student from Tufts University, and he has been hanging around the center since construction renovations started. He’s studying international business, and practicing his Spanish language skills. Walking around the city with James, it’s fresh to see an American’s take on the nuances of culture and attitudes towards money here in Argentina. The relationship that Argentinians have with their currency is significantly more nuanced and complex than most any group of citizens in the world.

The Liberty, it begins with you!

The Peso

Argentina is a free capitalist democracy, with many freedoms that their government is proud to showcase on its state-sponsored television. But seemingly, out of a growing desperation over its dwindling foreign exchange reserves, official policy over the the money supply have become increasingly onerous. Principally, Argentina has a single, official exchange rate that is used to determine the conversion rate of the local pesos to dollars.This rate is mandated by law for use with all banking, credit card, and official exchange purposes. Unfortunately for Argentinians, this official rate of roughly 8 pesos to the dollar is about 33% lower than the ‘actual’ free-market exchange rates that the rest of the world uses. There are many unofficial rates that are more accurately portraying the market’s view of the worth of the peso, but of the many competing rates, the “Blue” rate is the most ubiquitous. In fact, the “Blue” rate is so ubiquitous that it is featured prominently, each day, in the nation’s newspapers directly alongside the official rate. The spread between the official rate and the blue rate works to the advantage of the country’s treasury; it effectively acts as a tax on imports and exports, wherein the spread between the official rate and the blue rate is added to the country’s foreign exchange holdings. Adding dollars to the country’s reserves both provides the government with the ability to pay its debts in the dollars in which they must be repaid, but additionally, holding foreign currencies in its reserves is done in an attempt to prevent inflation from rising further. Whether it actually achieves this latter goal, is highly debatable.

The front door of this bar displays it’s accepted payment mechanisms. Bitcoin is proudly denoted next to it’s legacy counterparts.

The Peso as a Payment Mechanism

While walking the streets of Buenos Aires, and conducting transactions with merchants, you’ll notice that there’s more strangeness at work in the economy of Argentina than just exchange rates. Like other countries, vendors in Buenos Aires proudly advertise a long list of accepted payment mechanisms. These mechanisms include the standard Amex, Visa, and Mastercard logos we’re familiar with, and also list a number of competing mechanisms that Americans would not be familiar with (Visa Electron, Maestro, and Argencard being just a few). Unfortunately for patrons, these indicators are largely just a decoration. During the increasing times of uncertainty, merchants typically won’t accept anything but cash-money pesos. Similar to the US, when accepting credit cards, a merchant doesn’t receive their payments until thirty days have passed. While that’s an acceptable wait time in stable economies, for a currency which is inflating at a rate as high as 10% in a single month, this 30-day wait time on funds can destroy the merchant’s profits outright. As such, merchants are quick to declare that their credit card machine “isn’t working” during these periods of excessive devaluation, in an attempt to preserve their wealth.

Though cash money solves much of the cash-flow problems a vendor encounters on a daily basis, it comes with another set of problems. A visitor to Buenos Aires will quickly note that the money itself is of a notable sub-standard quality when compared to Euros and US Dollars. The largest denomination bill that’s printed by the treasury is worth about $8 US, and the smallest bill is worth about 15 cents. Because the denominations of the currency are so small, bills frequently change hands and deteriorate in their construction. Two-peso bills are often ripped and taped, and 100 pesos bills are very typically faded from so much use. The lack of quality in the currency allows for counterfeiters to more easily slip their bills into the market, and counterfeit 100-peso notes are very common. Even banks stumble on detecting counterfeits, and it’s not uncommon to receive a bogus note from an ATM or teller. Coins are rarely used, and typically all transactions are rounded to the nearest one or two pesos. Seemingly, the lack of coins is an attempt to reduce seigniorage costs on the part of the treasury. While the casual observer would suggest that “printing larger denominations” would solve these problems, the treasury is unwilling to do so, as that decision would be a tacit admission of the rise of inflation.

All of these policies, combined with years of mismanagement of fiscal resources, have eroded the public’s trust in the Argentinian currency, and citizens are reluctant to hold pesos for very long, let alone maintain a peso-based savings account of any kind. These problems further beget trust issues, and the peso’s cycle of inflation seems intent on continuing onward without an end in sight. In fact, prices in Buenos Aires change so often that it’s common to see printed menus featuring a blank space where the price should be. In this space will be a penciled-in notation of the current cost of the item, often with a dull coloration behind it caused by the erasings of multiple adjustments from the prior year.

In years prior, citizens were allowed to purchase dollars and Euros, at the official rate, in limited quantities. Typically these purchases were made under the auspices of a need to travel internationally, though in practice these purchases were made by citizens who had no other reasonable path to save their earnings. Though this program is supposedly still in existence, it appears to be largely a figurative gesture of equity by the central bank, as no-one seems to be able to qualify and actually use this program. Instead, as would be expected to arise in an underserved market sector, is a highly organized, albeit completely illegal, shadow banking industry.

Unstable prices require that many merchants denote the price of their goods in pencil.

The Peso as a store of value

There are two economies fighting in Buenos Aires: the black market economy and the official economy. Their territories are well established, and on the line between them, is Florida street. Driven by the blue dollar exchange rate, and the need to service a store-of-value for its users, a shadow banking industry has arisen around the fair-market denomination of the peso. All over Argentina, nearly everyone has at least some relationship with this black market economy. Principally, this market exists to facilitate currency exchange functions, though speculations abound as to the other customers and services of this system. US Dollars are the primary currency in this market, and they are most typically fed into this economy by international travellers. Upon arriving in Argentina, it’s made very obvious to tourists that the official exchange rate is not to be settled for. And, tourists are quickly funneled into “Florida Street”, which has plenty of obvious exchangers looking to make you a better deal than what you’d find at a brick and mortar exchange. These exchangers, affectionately called ‘arbuelitos’ (little trees) by the locals, are on every corner on Florida street and are shouting “Cambio!” into the air every minute or so, announcing their availability to onlookers. Once a tourist flags this person down, exchange terms are quickly negotiated, and the tourist is presented pesos in exchange for their greenbacks at a near-blue-dollar rate. These transactions are entirely illegal, and while police constantly patrol these areas and clearly witness these exchanges transpire, no action is taken on either the exchangers or the participants. The arbuelitos typically carry very little money on themselves, and between transactions, report and store their reserves at nearby ‘banks’ which operate clandestinely out of small un-advertised apartments or offices. These regional, black-market banks are called ‘cuervos’ (caves), and are the lifeblood of the black market banking system. The cuervos typically take the dollars earned from tourists, and sell them to local citizens who are in need of dollars as a store-of-value for their earned income. Argentinians will typically form relationships with specific cuervo operators, and make regular purchases of foreign currency as part of their relationship with the cuervo bank. This currency is typically hidden away at the Argentinian’s home, where the money will stay for as long as the holder can afford to keep it. The cycle is constant, and a mainstream, if not absurd, part of living in Argentina.

Enthusiasm, though still comparatively small, is growing. This Argentinian is learning to use a BTM at a local meetup

Enter Bitcoin

Standing against all of these improbable institutions, and working tirelessly on the third floor of the Bitcoin embassy, you will find the very ambitious Diego Gutierrez-Zaldivar. If Bitcoin needed a champion in the madness of the streets, it would be hard pressed to find someone as likable and friendly as Diego. By way of will, or mere talent, Diego is the emissary of Bitcoin that has appeared to represent the community to the general public, lawmakers, embassy tenants, and the world at large. Diego’s presence at the embassy is constant. And when he’s not pitching a presentation to investors, settling the fears of politicians, or explaining the workings of Bitcoin to citizens at a meetup, Diego can be found coordinating construction workers, welcoming international travellers, or even taking out the garbage around the embassy. Diego’s embassy is the culmination of a lifetime of experience in the Argentinian IT space and Diego is happy to share his vision with anyone who wishes to hear it. He’s well suited for the job, and it’s an infectious enthusiasm that he offers to everyone around him. His followers include all in attendance there at the embassy, plus the thousands of members in Bitcoin meetup groups all around Latin America to which he travels. Diego clearly sees Bitcoin as a solution for many of the problems that Argentinians currently deal with, but as the face of the embassy, and as its primary ambassador to the government, he has honed a reserved and practiced focus in the way he delivers his message.

Despite his enthusiasm, Diego is quick to suggest that Bitcoin has a long and hard road ahead of it in Argentina. While on the surface, Bitcoin in Latin America looks ripe for widespread and immediate adoption, once you look a bit deeper, the path towards adoption is far more complicated than hanging a welcome sign. Capital controls have worked in Argentina primarily due to a very effective border control, and where it has not worked, the entrenched black market is already working with dollars to great success. While Internet broadband rates in Argentina are amongst the highest in Latin America, there is still a large number of Argentinians who have been ‘robbed’ of their savings due to opaque banking systems that they do not understand. This pessimism has caused many Argentineans to be understandably wary of the fantastic claims being made by Bitcoin enthusiasts, who are still viewed as being a bit extreme, if not altogether indifferent to the cultural subtleties of the current regulatory frameworks. Boding well for Bitcoin is a government that has thus far provided no friction against the movement, as well as a large percentage of young adults who have been marginalized by their elders by not having the credit opportunities to own homes and cars, or to start a business. As international tourists begin to flood the market with Bitcoin, either by way of BitPagos, or their own bitcoin wallets directly, it would be expected that public acceptance and adoption will build. Perhaps thereafter, or in tandem, the large service-export sectors of the economy will similarly adopt and leverage Bitcoin for payment when working with international partners.

Argentinians take to the streets to celebrate their semi-final victory during the World Cup.

The Future

It’s Sunday in Buenos Aires, and the people at the embassy have long ago left to watch the World Cup with their friends and family. The plans for economic domination are on hold while a nation comes together to seek validation of their heritage, and their way of life. Baby blue flags are waving in the cars and on the backs of the citizens in the streets, and the absurdity of the daily grind is taking second place to the dreams of an entire nation aligned on a single goal. As the game begins, a microcosm of the surrounding economy takes the form of Visa advertisements on its sidelines and government-funded commercials advertising the creditworthiness of the Argentinian state between periods. Argentina loses, and the nation mourns. But come Monday, the embassy will be once again at work, its citizens tireless in their ambitions. The embassy is looking to stage its grand opening in less than a couple months, and there are still many contracts to hash out, and garbage bags to empty. Diego is down but not out. BitPagos and BitPay are deploying their newest codebase. And a construction worker enjoys his smoke break. Bitcoin is coming, and there’s plenty left to do.

Pictures from July of 2014 by Chris DeRose

The second floor of the embassy

A room for presentations and public hearings

People take to the streets after a semi-final victory on Wednesday night

The lobby for the soon-to-move-in “coinmelon”

Construction Underway on the third floor of the embassy

A view from the roof of the embassy

Another view of the roof atop the embassy

Bitcoin merchandise for sale at a Meetup

Lectures and community outreach is a focus for the Buenos Aires Bitcoin meetup groups

September 15, 2014 at 06:27PM

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Does Bitcoin’s Price Affect Business?

Have you ever wondered if the price of bitcoins affects bitcoin business? Could this be a reason for businesses not to accept a volatile currency? Do sales plunge when the price drops?

I started doing a little investigating into whether it does or it doesn’t, and I was somewhat surprised by the answer.

Transaction volumes have stayed in the $50 million dollar range over the summer for the most. However, it is hard to tell if the transaction volumes are just people moving bitcoins from one wallet to another or if those transactions represent the exchange of goods or services.

Some businesses may suffer from price fluctuations more than others, mainly mining services. Miners make more money if the price is higher, so it makes sense that mining companies would see a decline in sales if bitcoin’s price dropped.

In my case, I use fiverr.com all the time. It’s great; I get transcription services done for articles, logo designs for my startup, even video editing. I do think about the price in the back of my head, but I figure it’s only five bucks. Plus, I prefer to use bitcoin rather than searching for a credit card and typing in a bunch of numbers. You never know if your computer is corrupted with a keyboard logger or if any company is going to have its data breached.

But that’s only five dollars, a trivial amount. What’s the psychology of consumers spending more? I asked the CEO of Bloomnation, an ecommerce platform for local florists, for his insight on consumer spending and price volatility.

“We have not seen much correlation between the price of bitcoin and the usage of bitcoin. Although price fluctuations cause some people to react, we fundamentally believe in bitcoin and its existence and have made no changes to strategy with bitcoin. Regardless of the price, we feel that this cryptic currency is a great solution for a global currency.” – Co-Founder and CEO of BloomNation, Farbod Shoraka

Customers using bitcoin aren’t that worried about price, because they are often encouraged by promotions. In fact, Bloomnation’s bitcoin users tend to spend 50% more on their purchases. Newegg was offering $100 off when you spent $350 or more with bitcoin, which caused a lot of people to spend their bitcoins.

I wanted to get a better perspective of the market at large rather than just one business, so I asked BitPay’s VP of Marketing, Stephanie Wargo, about price fluctuations and their transaction volumes.

She started off by mentioning that BitPay is “still doing well over a million dollars in transaction volume” a day. This is also due to the fact that BitPay has continued adding merchants.

“As more merchants come on board there’s more options. You get into that everything that you need everyday, the things that you buy online all of the time. Now you’ll be able to pay in bitcoin for those things. That’s just going to continue to keep transactions up and eventually turn into the price continuing to go up,” Wargo continued.

Now that it is past Labor Day, the financial markets are picking up; bitcoin will see new interest spurred by the investment community and new merchants accepting the currency.

“A lot of merchants have been working through the process now, in preparation of announcing that September-October timeframe to capitalize on the November-December spending season,” said Wargo.

Many in the community have noted that merchants converting their bitcoins to fiat and miners who sell their bitcoins have pushed the price downward. But, Wargo doesn’t think this will push down the price during the fall. More merchants are holding on to portions of their bitcoin using a 90/10 or 80/20 fiat to bitcoin rule and the acceptance by new major retailers will further legitimize the digital currency and take the price closer to the moon.

All-in-all, bitcoin transaction volumes in exchange for products will pick up no matter no what the price. Many merchants have been passing down their savings in the form of promotions. As bitcoin becomes just as easy to spend as other payment forms with payment processors and bitcoin debit cards, it will be used just as often.

Anyways, “it should be a very fun fall,” Wargo concluded.

September 15, 2014 at 05:46PM

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