Bitcoin: Perhaps the Most Promising Investment Opportunity of Our Age

A technology is called “disruptive” if it creates a new market that first disturbs and then displaces an earlier technology. Bitcoin is potentially such a technology and much more. The fact that it can disrupt the largest and most interconnected marketplace in the world—money, banking, and finance—makes it perhaps the most promising investment opportunity of our age.

Unlike our current increasingly unstable and unpredictable financial system, Bitcoin has 21st century technologies at its very core. The digital currency and clearing network is open source, mobile, peer-to-peer, cryptographically protected, privacy oriented and native to the Internet. The fusion of these technologies allows for a level of security and efficiency unprecedented in the world of finance. These are some of the areas in which Bitcoin-oriented technology can directly compete:

• $2 trillion annual market for electronic payments,


• $1 trillion annual e-commerce market,


• $514 billion annual remittance market,


• $2.3 trillion hedge fund market,


• $7 trillion gold market,


• $4.5 trillion cash market,


• $16.7 trillion offshore deposit market.

Indeed, Bitcoin has been noted in glowing terms by industry moguls such as:

• Microsoft Founder Bill Gates (“A technological tour de force.”)


• SWIFT CEO Gottfried Leibbrandt (“Don’t see why we could not send transactions in Bitcoin as a currency.”)


• Entrepreneur Marc Andreessen (“Personal computers in 1975, the Internet in 1993, and I believe, Bitcoin in 2014.”)


• Legg Mason Portfolio Manager Bill Miller (“If it becomes 10% as popular as gold, you can make 120 times your money.”)


• Fortress Investment Co-CIO Michael Novogratz (“Put a little money in Bitcoin, come back in a few years, and it’s going to be worth a lot.”)

The core value proposition of this network is the fact that, in the words of IBM executive architect Richard Brown, “Bitcoin is a very sophisticated, globally distributed asset ledger.” What Brown and others hint at is that Bitcoin will in the future be able to serve not only as a decentralized currency and payment platform, but also as the backbone for an “Internet of money.”

This entails a decentralized global platform, smartphone- accessible, on which companies and individuals can issue, buy, and sell stocks, bonds, commodities and a myriad of other financial products. The effect will be to remove much of the current bureaucracy and barriers to entry, presenting a huge opportunity for the world’s 2.5 billion unbanked people.

This raises the question: why Bitcoin, and not some other cryptocurrency? The answer may lie in the network effect: of all the cryptocurrencies, Bitcoin is the one with the highest adoption rate and the strongest security. The combined computing power of the Bitcoin mining industry serves as a protective firewall around the payment network, with a replacement cost of at least $1 billion— and it is growing quickly. In short: no other cryptocurrency is as secure as Bitcoin. This attribute in itself attracts more capital, which in turn makes the network even more secure and performant.

Because of its robustness, the Bitcoin network is now the reference protocol for the new paradigm in finance. And just like TCP/IP became the mainstay for the Internet of information, the Bitcoin network will likely become the value anchor for the Internet of money and finance. Speed may be provided by off-chain or side-chain transactions, but for the high-value transactions of tomorrow, Bitcoin could very well become the security-providing reference currency.

So, how much of all this potential is already realized?

Well, since inception of Bitcoin in 2009, its market cap has grown by a minimum of 10 times every year. It now stands at over $8 billion, with an annual turnover of +$50 billion. According to Coinometrics.com, this makes the Bitcoin currency stock more valuable than that of 108 national currencies, including Panama, Macau, Ghana, and Malta. Currently over 80,000 merchants accept Bitcoin as payment.

Enticed by its great potential, venture capital is also warming up to Bitcoin. In 2013, 40 deals were made that raised a total of $74 million, and the 2014 run rate for the year is currently US $250 million. To put this into context, investments in the Internet of 1995 were an inflation-adjusted $387 million— which is why many Bitcoin investors believe we are at a stage similar to the Internet in 1993 or ’94.

Furthermore, the Bitcoin price has been rising at an exponential rate of +1,000% annually. This can be explained mostly by the fact that it is a scarce commodity (maximum supply is 21 million) with a rapidly growing user base. Here are a few possible scenarios for the future value of one bitcoin:

The scenarios projected above are, of course, not cast in stone. Bitcoin faces several risks going forward. These include:

• Compromised security of the major exchanges,


• The emergence of a much better digital currency that steals its market lead,


• An undetected bug in the system,


• A sustained attack by an organization with substantial computational resources,


• A coordinated clampdown on Bitcoin by a multi-national entity such as the G20.

How serious of a risk do these challenges pose? Let us examine them.

A better currency is possible, but experience shows that disruptive protocols—such as SMTP for email and TCP/IP for Internet—have proven to be very resilient once adopted by a critical mass of the population.

An organized attack on the network is possible but expensive, and there are many potential defense mechanisms.

As with any software application, the discovery of bugs may destabilize the system, but the open source nature of Bitcoin allows for many eyeballs to help track problems, and many brains to help figure out a solution.

That leaves government clampdown as the most likely risk to Bitcoin. However, with many regulators implicitly or explicitly already accepting Bitcoin, and the robust, decentralized nature of its network, such a move would have little long-term structural impact and is thus unlikely.

Because of its strong network effect, the outcome of the Bitcoin story is likely to be binary: either it will experience a downfall as it is superseded by a vastly superior technology, or the value of bitcoins will rise dramatically over the coming years as an increasing share of the global population adopts the currency.

In any case, to me it’s exceedingly clear that the technology of the cryptocurrencies is here to stay. Bitcoin does not appear to be a fad or bubble, nor merely a one-off hedge against gold. With a risk-reward proposition this attractive, holding a small percentage of bitcoins in one’s portfolio as a speculation on increased adoption may be one of the wisest investment decisions of our age.

This article originally appeared in yBitcoin magazine.

January 30, 2015 at 10:45PM

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Bitcoin Processor GoCoin Adds Fiat Payout Options

GoCoin has added three new fiat currencies as payout options for merchants – euros, pound sterling and Singapore dollars.

The announcements come amid a string of new details about the company’s business progress. Since raising $550,000 in November 2013, GoCoin has arguably become a big-three payment processor alongside BitPay and Coinbase due to its agnostic approach to digital currencies, accepting litecoin and dogecoin alongside bitcoin.

In statements, CEO Steve Beauregard asserted that the company has “greatly exceeded its growth projections in 2014”, and is well-positioned for success this year.

"We now have a clear vision of how to focus our efforts in order to drive payments innovation in the sectors that will benefit the most,” Beauregard.

The announcement was made during Beauregard’s keynote address at Inside Bitcoins Singapore, a two-day conference taking place 29th to 30th January at the Suntec Singapore Convention and Exhibition Centre.

GoCoin's full payout terms and conditions can be found on its website.

GoCoin

January 29, 2015 at 08:22PM

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FTC Complaints Detail Troubled Past of Bankrupt Bitcoin Miner CoinTerra

“I feel like I [was] cheated.”

The statement is just an excerpt from one of the 39 formal complaints filed with the US Federal Trade Commission (FTC) against now-bankrupt bitcoin mining company CoinTerra and revealed in a new Freedom of Information Act (FOIA) request.

The 39 complaints are a far cry from nearly 300 complaints lodged against competitor Butterfly Labs before it was temporarily shut down by the FTC in September. However, the complaints paint a detailed picture of the frustrations long faced by CoinTerra customers.

The full complaints, which were received with personal information redacted, showcase the breadth of customer accusations that CoinTerra failed to meet advertised shipping dates, build hardware to the desired specifications or issue refunds in a timely manner.

One customer complaint reads:

“On 12/1/2013 I purchased a computing unit for a total of $6,288.35 (including all applicable taxes and shipping). The unit purchased had stated performance numbers. Once the units started shipping, they were not close to meeting the performance numbers promised.”

The customer goes on to state that Cointerra missed suggested refund times, before ceasing communications with the customer, in what was just one of many customer service frustrations detailed in the assembled remarks.

Others showcase the alarm many customers felt at the lack of response from the company.

“Just yesterday, 7th May, I had called the company more than 30 times, and after calling and calling, I finally was able to talk to someone, however, I got disconnected halfway,” another complaint reads.

Escalating issues

The complaints indicate that customer frustrations were heightened in April, when the company continued to delay refunds for TerraMiner IV products.

One filing illustrates the lack of faith among customers at the time that their concerns would be addressed by CoinTerra.

“After repeatedly asking when my funds would be returned, today (22nd April), Cointerra replied with this: ‘We are drawing near to your queue position for your refund, but before we process it I wanted to reach out to you regarding an offer,’ which clearly indicates that they have made no effort to return my funds,” the filing reads.

Pre-order refund updates related to the mining unit would continue through June. During this time, CoinDesk continued to receive complaints about the refund process from customers as well.

Responses suggest international customers also appealed to the FTC for assistance with refunds.

“It's a terrible shopping experience in US. I had believed American company will never do anything against law,” reads another complaint. “It seems I have made a mistake.”

Reimbursement unknown

Though customer complaints indicate many customers may still be owed funds from CoinTerra, it remains unclear when or if buyers will be reimbursed.

Statements from the company as recently as 8th October suggest 70% of customers had been reimbursed as of that time. However, some customers have reported failing to receive refunds as recently as 2nd January.

CoinTerra would later announce that it had defaulted on its secured notes and that payments made to customers would be suspended indefinitely.

CoinTerra filed for a Chapter 7 bankrupcty on 24th January, citing between $10m and $50m in liabilities and including a lengthy list of creditors that included commercial partners like data services provider CenturyLink, US bank Wells Fargo and C7 Data Centers, along with a wide range of private citizens and investors.

Still, CoinTerra CEO Ravi Iyengar has remained steadfast in statements that suggest he believes the company did its best to satisfy its customers, but that it was sometimes hindered by its own success.

“We were probably among the only few who delivered on time and in most cases ahead of time,” Iyengar told CoinDesk on 14th January. “We have no customers who wanted their hardware that didn’t receive it.”

Image via CoinTerra

CoinTerraMining

January 29, 2015 at 07:38PM

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CoinDesk's Regulation Sentiment Survey

Are you for it, or against it?

It's no secret that the bitcoin community can be divided when it comes to the topic of regulation – some believe it's necessary to bring bitcoin to the mainstream and others believe that bitcoin was built specifically to circumvent regulation.

To get a better idea of where the industry stands as a whole, CoinDesk wants to hear directly from our readers about how they view bitcoin regulation around the world.

Please take a minute or so to fill out CoinDesk's regulation sentiment survey below:

Regulationsurveys

January 29, 2015 at 06:44PM

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Spark Capital Leads $2.5 Million Investment in Colored Coins Startup Colu

Crypto 2.0 startup Colu has raised $2.5m as part of a seed funding round that will find it seeking to advance the development of the colored coins concept.

Led by VC firms Aleph and Spark Capital, contributing investors also included VC Barry Silbert’s Bitcoin Opportunity Corp and boutique angel fund Box Group. Notably, Spark Capital’s past investments include now-famous tech startups such as Foursquare, Tumblr and Twitter, as well as fashion startup Warby Parker.

Speaking to CoinDesk, Colu framed its project as one that would strive to find everyday use cases for the more advanced applications of bitcoin’s blockchain as a record-keeping tool for online identity and the Internet of Things.

For example, co-founder and CEO Amos Meiri indicated that Colu’s first application will focus on using bitcoin tokens as a form of two-factor authentication, but that the company will more broadly seek to uncover new use cases for cryptographic tokens.

Meiri further sought to position Colu as a market leader in the crypto 2.0 space owing to the status of its assembled investors, stating:

“This is the first time that blue chip investors have invested in 2.0. That gives a lot of confidence to big companies that want to integrate with the technologies.”

The nine-member team has been focusing on development to date, but aims to use the funds to improve its business prospects. Meiri indicated that Colu will now seek to find partner companies, while growing its team to 12 members.

The investment is also one of the first from major VC firms in foundational crypto 2.0 technology, as similar projects in the ecosystem have to date relied on bitcoin-enabled crowdfunding to secure capital.

From art to ticketing

Crucial to encouraging the wider of use of colored coins, Meiri contends is that Colu’s technology appeals to developers. This means investing in creating simple APIs and software development kits (SDKs) that allow companies to tap into bitcoin’s capabilities.

Overall, Meiri framed Colu as a Chain for colored coins, comparing his startup to the bitcoin API developer that received $9.5m in a funding round this August.

In addition to a bitcoin-based social authentication alternative, Meiri said Colu is already talking with companies that are seeking to build more specific applications of the technology without the need to become experts in the specifics of bitcoin technology.

“One example is an art app that wants to issue tokens to certificate art and have it be tradeable,” Meiri explained. “We want people to use 2.0 technology without even knowing they’re using bitcoin.”

Other examples he cited included using tokens for ticketing and as access mechanisms for connected devices.

Putting tech first

Meiri also sought to position the funding as evidence that the concept of colored coins, while one of the oldest in the crypto 2.0 space, can still compete with newer entrants.

Like a number of projects including the more recently prominent Counterparty and Ethereum, colored coins use the bitcoin blockchain as a transfer mechanism. While projects like Counterparty or Omni have issued new coins on the bitcoin protocol to achieve this end, colored coins is a layer that augments bitcoins to signify specific assets.

Alongside Colu’s lead developer, Meiri is also a leading influence behind the recently relaunched Colored Coins foundation, a membership body representing startups experimenting with the technology including ChromaWallet, CoinPrism and CoinSpark.

Meiri said that while Colu has ambitious mainstream goals, the project’s first priority will be to ensure that the colored coins ecosystem can continue its drive toward interoperability.

“First we want to get colored coins back up on its feet. We want to have a standard for colored coins,” Meiri said.

The Colored Coins foundation expects to publish its standard in the coming months.

Images via Colu

Colored CoinsCrypto 2.0FundingInvestors

January 27, 2015 at 07:40PM

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LazyCoins to Preview The Killer Bitcoin App LazyPay at BitcoinExpo 2015 London

London, January 24, 2015 — LazyCoins demoed their killer Bitcoin app LazyPay at the BitcoinExpo 2015 in London last weekend. The company has spent months carefully and quietly planning to take the app public. Including running the payment and merchant services app through testing with a security firm. And holding Q&As in order to perfect their software and get everything right before debuting to the world.

The free conference ran from January 24–25 at the Central Foundation Boys’ School on Cowper Street, London. LazyCoins Founder and CEO Danial Daychopan calls London, “a great place for bitcoin businesses and entrepreneurs.”

Daychopan began his talk at the conference on the importance of security. He stressed this is the number one focus for both their exchange and their merchant services app, to guarantee “rock solid security” for their users.

LazyCoins announced the beta version of their new exchange six months ago in July, but they chose not to go public right away in order to learn from and avoid the mistakes of other exchanges. They launch in direct competition with similar-service industry leaders BitPay and Coinbase.

The goal with the LazyPay app is to make Bitcoin use a part of everyday life, increasing its volume of use in the in-person merchant market, getting more people to use digital currencies as a form of payment, rather than just as a speculative investment tool.

Their secure mobile wallet and user-friendly merchant app aim to make doing business in digital currencies simple and safe for both merchants and customers. The aim is to “make buying and selling goods as easy with bitcoin as it is with cash and credit cards—only faster, safer and more convenient.”

The average person needs to be able to find more places to spend bitcoin, they don’t know how to obtain it, and transactions seem too complex. Lack of education among retailers and the lack of an easy-to-use, trusted merchant platform are also problems.

LazyCoins and LazyPay are designed to fix such issues, with security at the top of their priorities. Cold storage wallets and two-factor authentication for accounts, fingerprint access for the app, and multi signature keys are just some of the many features. And a policy of crediting a merchant account on the day of their transactions, by the exact amount that the user pays, will eliminate the risk of price fluctuations.

They are on a mission to sign up merchants and educate them on the benefits and ease of accepting Bitcoin. The app is free, offers zero-transaction fees, daily direct payments to bank accounts and no chargebacks. LazyPay will demonstrate how credits cards are slower, riskier and more expensive in comparison. Operating the app will be intuitive for the non-tech person; easier than using a cash register or credit card point-of-sale terminal.

On top of all these features, the app will include a live, automatically updated map showing the locations of local Bitcoin merchants and businesses. It will offer NFC-enabled payments for super fast POS transactions, the ability to buy and sell bitcoin from the app and a direct in-app link to bank accounts. And the merchant will require no hardware and not be asked to sign contracts or make any commitments.

“We’re on a mission,” says Daychopan, “to spread the word and sign up as many merchants as we can. And London is our chosen starting point for this crypto-crusade… Then we can give those Silicon Valley lot a run for their (digital) money,” becoming “a dominant force in crypto.”

For more information:

blog.lazycoins.com

www.lazycoins.com

www.lazypay.co.uk

www.lazynews.tv

January 27, 2015 at 02:32PM

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Is Bitcoin Truly Decentralized? Yes – and Here Is Why It’s Important

Jan 22. 2015 for BitcoinMagazine.com

Those within the industry understand that one of Bitcoin’s most important features—and perhaps its true core innovation—is its decentralized structure.

Bitcoin has no central control: no central repository of information, no central management, and, crucially, no central point of failure. And yet, most of the actual services and businesses built within the Bitcoin ecosystem are centralized. They are run by specific people, in specific locations, with specific computer systems, and they are susceptible to specific legal entanglements.

This situation creates tension and certainly a little irony—we have a decentralized technology, yet most things existing upon it are centralized.

To a casual observer, and even more to a cynical one, it may appear that the claim of Bitcoin’s decentralization is a myth—an overstated feature conjured up as a bullet point in Bitcoin’s marketing brochure, but suspiciously not apparent in the actual product.

Consider the structure of CoinBase, which is arguably the most successful Bitcoin wallet and payment service in existence. There is nothing decentralized about it.

Consider CoinBase’s internal policies—they resemble PayPal’s, not the distributed utopia Bitcoiners imagine. Coinbase wants to know who you are. They want to know what you’re doing with your money, and they’ll block you if they disapprove. They spy on you and control you as much as any traditional financial institution (and to be fair, it’s not really their fault—enforcers with guns will throw them in a cage if they don’t do these things; it occurs under duress).

So the question arises: How can Bitcoiners claim decentralization when the premier Bitcoin service has essentially become a bank itself?

Critics point to centralized exchanges, wallets, and payment processors to condemn Bitcoin’s claims of decentralization. When Mt. Gox exploded, losing half a billion dollars of customer money, critics expressed immense skepticism that Bitcoin was really anything unique at all—to them, it looked like just another new medium by which people are spied on at best, and ripped off, scammed, and defrauded at worst.

So isn’t Bitcoin’s claim of decentralization a lie?

No.

And here’s why: to understand Bitcoin one must understand the difference between coercive centralization and market-based centralization. Bitcoin possesses the latter, but avoids the former, and that is a crucial distinction.

Coercive centralization is what we all experience in the legacy financial industry. The world’s monetary system, based upon national fiat currencies created and managed by government-sponsored central banks, is coercive. It is coercive because the entities with the power over money’s creation, regulation, and transfer have the will and the power to hurt you if you disobey. Not only that, but you are coerced into it in the first place, being forced to pay taxes and settle debts using only your government’s anointed currency.

If you’d like to experience the coercion first-hand, try creating some dollars, and you will find yourself thrown in prison, your property taken from you. Or try transferring dollars in any way that is “unauthorized.” Then you will see what coercion means.

The entire financial system as it exists today rests upon this anti-market model of coercion—money moves only with the permission of those in control, and they’re not in control by mutual contract, but by the privilege of violence. The various poisons such coercion bestows upon society are a topic for another essay, but the only reason people suffer this system is because it’s been the only game in town.

Market-based centralization is fundamentally different. Its key feature is the ability to opt out.

Yes, CoinBase is a centralized entity. But you needn’t use CoinBase to use Bitcoin. Yes, a Bitcoin exchange or web wallet is centralized, but you can always trade coins with a friend directly over the blockchain, or store it in a local wallet, without the permission of any third party.

A user of fiat is always forced to utilize a centralized service. A user of Bitcoin is never forced to utilize a centralized service. This is the key distinction between centralization found in Bitcoin (which is market-based) and centralization found in the traditional banking industry (which is coercive).

And this ability to opt out, while it may seem modest, enables wonderful things to happen, for the discipline of the marketplace can be realized. Consider: since every CoinBase user can opt out and leave the platform, this presents a natural check on CoinBase’s ability to act with impropriety, and makes coercion impossible. Compare this to the model of a bank, which is able to burden its customers to a far more significant degree because it knows that if the customers want to participate in a meaningful way in the financial system, they have to use a bank and its associated fiat currency system.

It should thus be clear that Bitcoin enables users to withdraw into the neutral pasture of decentralized finance at any time, which means that any centralized service within the sphere exists only at the pleasure of its customers.

And thus the forms of market-based centralization found within Bitcoinland needn’t be feared or condemned as one would the coercive centralization of the legacy financial system. What we have is indeed something fundamentally different, which is wholly compatible with the free-market structure and intent of Bitcoin’s genesis. Indeed, a free market will inevitably lead to some points of market-based centralization when economic efficiencies can be found. Every voluntary organization of people or resources is market-based centralization, and by definition, there’s an inability to coerce those who partake.

The key to judging the legitimacy of centralization is always the ability of users to opt out. Bitcoin provides this, while fiat and central banks do not.

That is the difference, and it is one that the world will soon come to appreciate.

January 22, 2015 at 04:52PM

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BTC Media Acquires Bitcoin Magazine

January 21, 2015

FOR IMMEDIATE RELEASE

Contact: Tyler Evans 256-539-6100

BTC Media Acquires Bitcoin Magazine

NASHVILLE, TN—BTC Media LLC, parent company of financial technology magazine yBitcoin and its website www.ybitcoin.com, has as of January 21, 2015 completed the purchase of Bitcoin Magazine from Coin Publishing LLC.

Bitcoin Magazine is the first publication devoted exclusively to Bitcoin, the digital currency that burst onto the international economic scene as open source software in 2009. Magazine founders Mihai Alisie and Vitalik Buterin published their first issue in May, 2012 and later joined forces with Orlando, Florida-based Coin Publishing LLC to produce 22 issues. The magazine is mailed to subscribers worldwide, sold at Barnes & Noble bookstores and published online at http://ift.tt/1BG0mAA.

BTC Media founders Calli S. Bailey and David F. Bailey plan to capitalize on the acquisition by increasing their company’s online news and analysis, among other benefits of the merger.

“This purchase and the enhanced resources it brings into our fold make BTC Media the world’s leading Bitcoin media group,” said CEO David Bailey. “Our readers will now have access not only to the same in-depth feature stories they’ve always found in yBitcoin, but also to breaking news about a cryptocurrency world that is growing exponentially. We aim to be the most trusted source for news in this field by offering relevant information to every reader, regardless of their familiarity with Bitcoin.”

Tony Gallippi, co-owner of Coin Publishing LLC and executive chairman of BitPay, commented, “The BTC Media publication yBitcoin has played an instrumental role in introducing Bitcoin to the world. We knew this would perfectly fit our effort to spread the Bitcoin story to a larger audience. We’re extremely proud of Bitcoin Magazine’s accomplishments, but know that we’ve only scratched the surface. The opportunity to join forces with BTC Media’s extremely capable and visionary team was the strategic move we needed to fully realize our potential.”

BTC Media plans to relaunch Bitcoin Magazine and add a lineup of industry experts as contributors. The company is also expanding its team to manage the expanded joint publishing effort. BTC Media is committed to investing heavily in BCM’s digital offerings and establishing BitcoinMagazine.com as the leading brand in cryptocurrency news and analysis.

yBitcoin will continue its editorial strategy of informing a general readership about Bitcoin.

“Our mission is to educate the world about Bitcoin and expand its reach,” said BTC Media Publisher Calli Bailey. “Bringing yBitcoin and Bitcoin Magazine under one united media group provides us with multiple platforms for doing just that.” The company also plans to begin publication of yBitcoin in other languages which will significantly expand its international presence.

BTC Media has also established a partnership with decentral.tv, a leading video content provider, and is co-hosting a “Bitcoin House” at this year’s SXSW™ music, film and interactive conference in Austin, TX. “Between print, digital, video and events, BTC Media is prepared to engage our audience through every medium and carry cryptocurrency forcefully into the mainstream,” said David Bailey.

The company plans to establish new headquarters in Nashville, Tennessee, where it will avail itself of the vibrant publishing and tech sectors flourishing there.

###

January 21, 2015 at 06:00PM

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IBM Reveals Proof of Concept for Blockchain-Powered Internet of Things

IBM has unveiled its proof of concept for ADEPT, a system developed in partnership with Samsung that uses elements of bitcoin’s underlying design to build a distributed network of devices – a decentralized Internet of Things.

The ADEPT concept, or Autonomous Decentralized Peer-to-Peer Telemetry, taps blockchains to provide the backbone of the system, utilizing a mix of proof-of-work and proof-of-stake to secure transactions.

IBM and Samsung chose three protocols – BitTorrent (file sharing), Ethereum (smart contracts) and TeleHash (peer-to-peer messaging) – to underpin the ADEPT concept. ADEPT was formally unveiled at CES 2015 in Las Vegas.

According to the draft paper, blockchains deployed within the ADEPT system would serve as a ledger of existence for billions of devices that would autonomously broadcast transactions between peers in a three-tier system of peer devices and architecture. By using an implementation of the bitcoin protocol, ADEPT could serve as a bridge between many devices at low cost.

The paper adds:

“Applying the blockchain concept to the world of [Internet of Things] offers fascinating possibilities. Right from the time a product completes final assembly, it can be registered by the manufacturer into a universal blockchain representing its beginning of life. Once sold, a dealer or end customer can register it to a regional blockchain (a community, city or state)."

The draft paper outlines a number of use cases, including several based in domestic settings. When CoinDesk spoke with chief architect Paul Brody in October, he noted that IBM was looking at how, in theory, implementations of the bitcoin protocol could change the way people live, in both big and small ways.

Blockchains in the home

IBM and Samsung envision networks of devices that are capable of autonomously maintaining themselves. In theory, the paper states, appliances in the home would be able to signal operational problems and retrieve software updates on their own. Devices could also use ADEPT to communicate with other nearby devices in order to facilitate power bartering and energy efficiency.

The authors explain:

“We demonstrate how, using ADEPT, a humble washer can become a semi-autonomous device capable of managing its own consumables supply, performing self-service and maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.”

“All this is achieved without a central controller orchestrating or mediating between these devices,” the paper adds.

According to the paper, a Samsung W9000 washing machine reconfigured to work within the ADEPT system uses smart contracts to issue commands to a detergent retailer in order to receive new supplies. These contracts give the device the ability to pay for the order itself and later receive word from the retailer that the detergent has been paid for and shipped.

This information would be broadcast to the smartphone of the washer’s owner, a device that would also be connected to that home’s network.

Challenges remain

Certain issues, including scalability and the nature of cryptocurrency development today, are cited as potential challenges for ADEPT should the concept ever be applied on a grander scale.

The ADEPT team addresses the issue of network scalability within the context of a distributed Internet of Things, and according to the authors, there are no clear paths forward to scale the system as-is to incorporate billions of devices, but that work in this area is promising.

They explain:

“Multiple efforts like sidechains, treechains, and mini-blockchains are ongoing to address this problem. While each approach has its merits and demerits we are yet to see consensus on a common approach across the board. A blockchain to cater to hundreds of billions of devices needs to be scalable.”

The paper notes that challenges associated with Ethereum’s existing design as it relates to ADEPT’s proposed infrastructure could pose problems, saying that those concerns “are being addressed” as Ethereum moves toward its planned launch sometime this year. The authors also cited ongoing developments around anonymizing technology for cryptocurrency as potential areas where ADEPT could be impacted.

The full ADEPT draft paper can be found below:

Image via Shutterstock

IBM ADEPT Practictioner Perspective - Pre Publication Draft - 7 Jan 2015

ADEPTblockchain applicationsIBMInternet of ThingsSamsung

January 17, 2015 at 07:12PM

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11 Top Responses from Andreas Antonopoulos' Reddit AMA

It’s no secret that social networking website Reddit is a hub for many in the bitcoin community.

While some bitcoiners may stick strictly to the r/bitcoin subreddit, though, there’s another part of Reddit that has become famous in its own right: ‘Ask Me Anything’ (AMA) threads.

AMAs are great opportunities for anyone with an interesting story – ranging from Barack Obama to Bill Gates – to field questions from the community of redditors and provide candid responses that often can’t be found in the traditional press release culture of mainstream media.

A number of prominent figures in the bitcoin industry have already done AMAs: Gavin Andresen, Jeff Garzik, Patrick Murck, and now another big name can be added to that list – Andreas Antonopoulos.

Antonopoulos is widely regarded as one of the trusted voices of the industry, and as such he recently authored a new book ‘Mastering Bitcoin,’ which was published last month by O’Reilly Media.

To promote the book, Antonopoulos took to Reddit as the latest influencer in bitcoin to host an AMA. Here are the top 11 responses:

On bitcoin's scalability:

On favoring bitcoin over altcoins:

On the cause of bitcoin's recent price drop:

On why 'average' people should use bitcoin:

On where he sees bitcoin in one year:

On the centralization of mining:

On non-user friendly bitcoin addresses:

On non-reversible charges:

On bitcoin's volatility:

On VC investments in the bitcoin in 2015:

On the first (and last) thing he bought with bitcoin:

Featured image via Tom Sharkey for CoinDesk; Screenshots via Reddit

AMAAndreas AntonopoulosReddit

January 17, 2015 at 06:02PM

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Markets Weekly: Questions for Bitcoin Price After Torrid Week

It has been a torrid week for the bitcoin price. Trading closed on 5th January at $272.95, losing 2.78% over the week to end on 11th January at $265.37, according to the CoinDesk Bitcoin Price Index.

With prices trading below $300 for the first time in a year, Bitstamp revealed that it had lost $5m in coins during a security breach. It pulled the plug on trading for four days as its team scrambled to migrate its systems and introduce new security measures.

During the outage, punters drew comparisons to the suspension of trading at Mt Gox, which signalled the end of that once dominant venue for cryptocurrency trading. While Bitstamp management issued updates on their efforts to get the platform back online, the exchange also missed self-imposed deadlines for the resumption of services, adding to the worried speculation.

Trading volumes rise

Despite last week's weekend price crash and the outage at one of the largest USD/BTC exchanges, total trading volume across exchanges rose. Data from Bitcoinity shows a 10% increase in traded volume, from 2.25 million coins in the week ending 4th Jan to 2.49 million coins for the most recent seven-day period.

Some exchanges appeared to have reaped the rewards of the four-day Bitstamp outage. ANXBTC showed a 75% increase in traded volume, compared to a week earlier with 87,000 coins changing hands there. Bitfinex, which regularly sees more traded volume than Bitstamp, recorded a 30% increase in volume, or 203,652 coins traded. BTC-e also displayed a rise in volume, albeit by a smaller proportion of 18% to 60,000 coins traded.

With even the largest and most reputable exchanges vulnerable to being taken offline by hackers, at least some bitcoiners appear to have reverted to a less centralised way of converting their coins. The second-largest volume gainer in percentage terms however was LocalBitcoins, the peer-to-peer trading platform. LocalBitcoins saw a 46% jump in traded volume in the last week with 18,759 bitcoins changing hands there.

Even with the Bitstamp outage this week, the price shed only about $7 or 2.8% week-on-week. The biggest intra-day swing for the week took place on 7th January while Bitstamp was down. The price achieved a high of $300.30 and a low of $282.06, making gains for the day.

Where does price go from here?

To put this in perspective, devoted bitcoin watcher Martin Tillier at the Nasdaq's trading blog points out that the US dollar has been devalued by the Federal Reserve's quantitative easing measures to the tune of about 10%. Bitcoin meanwhile has only grown in utility since the halcyon days of its storming bull-run at the end of 2013. That run started at around $125, so Tillier suggests that fair-value for a coin should be around $140 today.

Tillier recommends going long if the price holds above $250, but cutting losses if the price falls below that level, because a drop under $200 could well take place.

Similarly Gavin Smith at derivatives offerer First Global Credit recommends watching for the price to cross the psychologically important $250 level. Smith is going long but with plenty of stops placed on the way down to $250 and under.

"I recommend a very disciplined use of stops at the moment as a further slide can't be ruled out," he wrote on his company's blog.

Derivatives exchange BitMEX takes a slightly more bearish view. Its weekly Crypto Trader Digest recommends subscribers take advantage of "lower lows" as the price will head for $250 and then $200. But even as traders short the bitcoin price, they must remain vigilant to a "short squeeze", where the price moves against them and forces them to close their positions at a loss.

"Monitoring the level of short swaps on Bitfinex is a must. A successfully executed short squeeze could send the price screaming above $300," the Digest observed.

Some analysis for a longer time period is offered by leveraged trading platform BTC.sx. Its chief marketing officer Josh Blatchford applies 'Random Walk' theory, popularised by the Princeton economist Burton Malkiel's 1973 best-seller 'A Random Walk Down Wall Street', to cryptocurrencies.

By BTC.sx's analysis, the bitcoin price can be viewed as being part of a bi-annual cycle: a price rally followed by a random walk. This has been the case in 2011 (rally) and 2012 (positive random walk) and then 2013 (two rallies) and 2014 (negative random walk). The analysis stops short of calling a rally in 2015, suggesting only that volatility is expected to increase in late March.

Speculation Image via Shutterstock

BitMEXBitstampBTC.sxFirst Global Credit

January 12, 2015 at 02:52PM

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Overstock Installs Bitcoin ATM at Corporate HQ

US retail giant Overstock has installed a bitcoin ATM in the lobby of its Salt Lake City, Utah, headquarters.

Part of an effort to further encourage digital currency use amongst its staff, the news coincides with the announcement that it is in the process of offering its employees the option to receive their pay in bitcoin. Further, it comes just one year after it first began offering US customers a bitcoin payment option through Coinbase.

Overstock CEO Patrick Byrne, who has been an outspoken advocate of the digital currency, spoke to CoinDesk about the endeavor to give bitcoin a greater part of the global economy by first increasing its mainstream use.

"Right now you mention and bitcoins and for most people it’s like you’re talking about space cash," he said, adding:

“Things like an ATM machine and seeing people standing in line in front of you are what’s going to make it start registering for people.”

The ATM unit (pictured above) was manufactured by North Carolina-based CoinOutlet.

Employee bitcoin bonuses

Byrne said he is “confident” that a year from now Overstock could see its employee bitcoin pay scheme begin implementation, adding that it might even try it this year with employee bonuses, offering a 1% to 2% bonus should the employee choose accept it in bitcoin.

Overstock communications director and general manager of Overstock’s Cryptocurrencies Group Judd Bagley said that since the company has incorporated bitcoin into its business, the internal attitude toward the digital currency has developed significantly.

"I compare how people felt about it one year ago with today – when one year ago most people found it confusing, it was not at all intuitive," he said. "Now, a year after accepting bitcoin on the side and people doing their own research, it’s just part of the parlance; it doesn't surprise anyone here anymore."

He added:

"I thought wed have to send out a company email explaining what this machine is in the lobby … everyone I’ve spoken to is really excited."

Byrne still bullish

Overstock’s continued support for and interest in bitcoin remains despite its missed sales expectations.

In September, Overstock launched internationally, and although earlier in 2014 the company had estimated it could record up to $20m in sales, by December the figures were closer to $3m.

“I was really counting on a big year and nothing came,” he said. “There’s almost no international use of bitcoin.”

Nevertheless, Byrne said he sees bitcoin "as the fruition of a 500-year political movement" and has been especially vocal on the subject as the chief executive of a major retail company, a speaker at the Cato Institute and as a principal reporter of the website DeepCapture.

He said he sees bitcoin as representative of about 15 basis points of economic activity that the community can power to 1% or 2%.

“That’s growing gradually,” he said. “The wallets are growing tremendously but people aren’t using them very much … Like other technologies, it’ll gradually move from 15bp to 20bp to 30bp and then it’ll hit an inflection.”

ATM image via CoinOutlet

ATMsOverstockPatrick Byrne

January 09, 2015 at 10:50PM

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