Digital currency luminaries will testify in New York today, days after a leading NY bitcoin advocate's arrest.
January 28, 2014 at 05:08AM
January 28, 2014 at 05:08AM27 January 2014
Ten People You Meet in Bitcoin
It's not just celebrities and high-flyers, but the everyday people you meet in bitcoin who make the scene tick.
January 27, 2014 at 10:02PM
January 27, 2014 at 10:02PMCharlie Shrem Arrest is Latest Chapter in Silk Road Story
Charlie Shrem's arrest is the latest chapter in the intriguing Silk Road story.
January 27, 2014 at 08:12PM
January 27, 2014 at 08:12PMBank of Russia Issues Warning on Digital Currencies
The Bank of Russia has issued a statement on digital currencies, echoing warnings by regulators across the globe.
January 27, 2014 at 06:04PM
January 27, 2014 at 06:04PMBitInstant CEO Charlie Shrem Arrested in Silk Road Bitcoin Bust
Charges have been filed against exchange owner Charlie Shrem for allegedly selling $1m in bitcoins to Silk Road users.
January 27, 2014 at 05:27PM
January 27, 2014 at 05:27PMMajor UK Banks Face Backlash After Withdrawal Limits and Delays
Customers are reporting difficulty obtaining their cash due to contentious policy changes and service interruptions.
January 27, 2014 at 04:30PM
January 27, 2014 at 04:30PMDerivatives, Futures and Protecting Against Bitcoin’s Risks
As bitcoin's value continues to fluctuate, how will investors reduce risk exposure to the currency's volatility?
January 27, 2014 at 02:40PM
January 27, 2014 at 02:40PMSmart Property’s Promise for the Poor
Renting an apartment or buying a car requires an income and good credit. Getting a legal job generally requires a permanent residence and a vehicle. Millions of Americans are caught up in this chicken/egg dilemma. But what if it were much easier for folks with bad credit to gain access to the bare necessities to work toward entry to the middle-class? And what if it could actually be done with less risk or burden to lenders and rental agencies than under the current system? Enter Smart Property.
Risk is what makes it difficult for people with blemished credit records to rent apartments or buy cars. Renting or lending to someone who’s shown a propensity to not make payments on time is a risk. Even worse, various consumer protection regulations make recouping losses more difficult than necessary. For this reason, leasing offices and car salespeople are forced to either decline high-risk individuals, or charge them extraordinary rents or interest rates. The same is true for lending money. A bad credit score generally means you either don’t get the chance to prove you’ve changed, or you do, but pay dearly for it.
Imperfect credit (scores)
And while credit scores are the best way lenders and their ilk have to determine someone’s risk level, they are far from perfect.
The Electronic Privacy Information Center has a great report on some of the limitations of credit scores. They point to an extensive study conducted by the National Credit Reporting Agency and the Consumer Federal of America, which revealed that 29% of individuals had significant errors in their credit report that translated into a 50-point or more error in their credit score.
In fact, according to a study the Consumer Financial Protection Bureau, one out of five consumers will see a meaningfully different score on their purchased credit report than their lender sees. This is in part due to things like banks withholding positive information about their customers so that competitor banks would not offer them better credit terms. It’s also not helped by the fact that, according to EPIC, “Credit scoring models have long been shrouded in secrecy. Individuals and consumer advocates have found it difficult to ascertain information regarding what factors the models consider, and to what degree.”
Unfortunately as well, correcting those errors is a long and tedious process. Credit reporting agencies do not devote the resources necessary to properly address complaints.
Lastly, there’s evidence that the outright discrimination on the basis of sex and race of the past has simply been replaced with a more subtle form of discrimination. Somehow the way in programmers have chosen which factors to consider, and the amount of weight assigned to these factors, has resulted in little change in who is discriminated against.
Protecting consumers (from opportunities)
Well-meaning consumer protection regulations further increase risk for landlords and lenders. It’s extraordinarily difficult to evict a renter, even for obvious lease violations such as not paying rent. Failing to follow all steps and in the correct order will likely mean your case is thrown out and you will get sued by your renter. Even repossessing a car, already a costly endeavor, is made more difficult through consumer protection laws. The result of all this of course is that it further disincentivizes landlords and lenders renting and lending to “risky” propositions.
Promise of smart property
Now, imagine if we could take someone’s, better yet, anyone’s, risk level down to near-zero? That’s the promise of Smart Property.
Both credit scores and consumer protections exist due to historic and ongoing power imbalances, both real and perceived. A shortage of housing relative to demand, especially in cities, required laws which helped shield renters from racist, abusive and mercurial landlords. Credit scores are how lenders discriminate when using race, sex and other factors is illegal.
But Smart Property obviates the need for trust, and its proxy, discrimination.
Smart Property makes it possible for locks to change automatically the moment a renter violates their lease agreement. And makes it possible for a car to refuse to start the moment a payment is late. Most importantly, it does so on a trustless basis. Because the Bitcoin protocol distributes transactions across the web, it offers transactions in which it’s nearly impossible to falsify who owns what and why.
With smart contracts, the consequences for violating the agreement are implemented automatically, with no need for human judgment. Essentially, it doesn’t matter that the landlord can’t trust a renter to pay. And it doesn’t matter that a renter can’t trust a landlord not to kick her out without good reason. Both parties are fully aware of both the terms of the contract and the immediate consequences of violation. The promise of this innovation should be clear to anyone, but it will impact people who have traditionally suffered from a paucity of trust the most.
Barriers to entry
Computer Scientist Philihp Busby describes some of the obstacles Smart Property will need to overcome for mass adoption. “There are two big barriers in the way of this going mainstream,” Busby said.
He describes a social barrier. Like with most things, the Americans with the most sway, the early adopters, aren’t particularly plagued by the limitations of the current system. Even though “It’s hard to find a notary on a weekend, handwritten signatures can be forged, lawyers are needed to draw up contracts and even better lawyers can be paid to find holes within contracts to circumvent them,” Busby explains, these aren’t exactly issues clearly dying for innovation.
Busby goes on, “This is somewhat a marketing problem too, since most people have been promoting Bitcoin as either a Ponzi scheme or as electronic gold. Instead of what it really is, which is a decentralized payments and contracts network whose unit of currency happens to be a bitcoin.”
He also refers to the shrinking technological barrier. “There aren’t any “Smart” cars that talk to your smartphone to ask it if you’re the owner,” Busby said. “We have RFID key fobs that do this, but what if my key fob is lost or stolen? The dealership would be happy to mint a new set of keys for a few hundred dollars. With a “Smart” car, I could just transfer ownership to a new Bitcoin address. For free. While sitting at home in my underpants.”
When imagining what Smart Property could do for a generation of Americans currently shut out of the rental, job and car market, it’s difficult to not get excited. This could represent waves of people finally offered the opportunity to succeed. Indeed, separating the ability to obtain property from one’s birth or social station is the very foundation of the American Dream. Smart Property may just make that Dream more possible for more people than ever before.
The post Smart Property’s Promise for the Poor appeared first on Bitcoin Magazine.
January 27, 2014 at 01:48PMApp.net Debuts Crowdfunding Platform for Bitcoin
App.net has announced a new crowdfunding platform, Backer, that accepts bitcoin for software projects.
January 27, 2014 at 12:32PM
January 27, 2014 at 12:32PM26 January 2014
About Inscrypto
Who is Ryan Galt, Idiots?
Yesterday, I wrote about my exciting partnership with CoinDesk, which was supposed to start on Monday. However, it looks like you’ll get your first taste of “Ryan Galt” even sooner. My first CoinDesk articles may hit this weekend, as I made the last minute decision to head down to Miami for the North American Bitcoin conference. The editors and I agreed that it would be better for me to write under the new name for pieces on CoinDesk’s site so readers aren’t immediately skeptical when they open one of my posts. (I’ll remain a two-bit idiot on twitter and for this newsletter.) The new pseudonym scratches my libertarian itch, helps provide cover when I inevitably sign emails “Ryan” instead of TBI, and looks like I’m not trying to hide anything.
Speaking of not hiding anything…today, I’d like to tell you why my team at Inscrypto is working on the cure for Bitcoin’s volatility. Many of you have asked about the startup, some have even signed up for our beta (thank you!), and after this week’s write up in American Banker, I wanted to provide more color. Before you skip to the Tid Bits, keep in mind that I’m only focusing on why we formed Inscrypto. This Bit is more market thesis than product pitch.
For starters, I wake up every day unreasonably excited about Inscrypto because I believe that it can be the first company that effectively separates bitcoin the currency from bitcoin the speculative investment. In short, our product could securitize the holding risks of bitcoin. We plan to work with wallet services like Blockchain, Circle, Coinbase, etc. to guarantee the underlying purchasing power of “Inscrypted” bitcoins sitting in consumer and merchant wallets. Ideally, depositors won’t even know it, but they will be using our tech to offload price volatility onto professional investors. Simple idea, complex solution, and a potentially lucrative payout. We know that someone is going to solve this tricky problem eventually, and we hope it will be us.
I’m not going to elaborate on product specifics yet (obviously), but I will outline the problem we are solving, the failure of existing financial product alternatives, and why volatility is so difficult to contain.
As most of you know, Bitcoin’s price swings stem from the fact that it is simultaneously “e-cash” (currency) and “e-gold” (investment). This is problematic because combining the two usually means that one isn’t acting as it should. An investment with a 0% return is a crappy investment, and a currency that can swing 10%+ or more in a day is a crappy currency. Yet the ratio of bitcoin held for those vastly different purposes changes constantly and unpredictably. Expectations of good news underpin investors’ rationale for treating bitcoin as a speculative investment that could skyrocket in value, and yet the good news itself depends on consumers and merchants who use bitcoin as a stable unit of account. It’s a circular reference.
Bitcoin may go to $100k or it may go to $0, but one thing is all but certain—it will not trade at a constant level. In that respect, critics are correct to say that it sucks as a currency today. But will it always?
Many believe the fix is a stronger derivatives market, but Coinbase’s Fred Ehrsam told Wired last week that the current “derivatives, futures, and options market is largely underdeveloped”, making today’s “counter-party risk unacceptable”. In other words, today’s derivatives are garbage. Furthermore, they could be for some time. Speaking from Munich at the DLD Conference, Circle’s Jeremy Allaire suggested that hedging products wouldn’t improve until central governments provided better regulatory clarity. Only then will large, well-capitalized financial institutions from financial Meccas like New York and London build their own market-making platforms.
I’m skeptical, however, that even a healthy, liquid derivatives market could help individuals and smaller companies properly hedge against volatility. It’s unlikely that small depositors would be buying their own bitcoin futures, and even if they did, it would be expensive enough to offset any value gained from using Bitcoin as a payment system in the first place. Besides, we as consumers (speaking from the U.S.) are used to low inflation, “sticky” prices and stagnant wages. We simply aren’t conditioned to anticipate a need to protect the purchasing power of our savings.
What will really drive down bitcoin volatility are better methods for connecting bitcoin “banks” with the capital at their Wall Street counterparts. I’m sure that in an environment where some bitcoin-related startups struggle to open checking accounts, Inscrypto won’t face any shortage of hurdles (or critics from within the Bitcoin community), but we intend to build the pipes that connect Wall Street assets and bitcoin wallets. I know for a fact that algorithmic trading platforms will be introduced this year that improve liquidity and mop up some of bitcoin’s excess volatility. We’re going one step further — co-opting Wall Street to securitize all bitcoin volatility. We know there is a way to effectively separate the currency and the volatile investment. We know that there is an institutional market hungry to absorb the risks and soak up the rewards of bitcoin. And we know how to build the product. If we nail it, it could truly change the way ordinary people interact with the underlying Bitcoin technology.
Still, there is an obvious caveat: Inscrypto’s success depends entirely on execution, and that requires an exceptional team capable of building a strong foundational product and navigating murky regulatory waters. (We’re recruiting for our team in Boston and SF so drop me a line!) If the stars align, we’ll build a special company that provides an extremely valuable service to individuals, merchants, investors, and the entire Bitcoin ecosystem.
Someone will devise a method for containing bitcoin volatility. We think it will be us, but if we’re wrong, we’ll still be happy.
Because at the end of the day, we’re still holding some un-Inscrypted bitcoin, too.
Now for Today’s Tid Bits:
CoinSeed Announces $5m Investment in BitFury Mining Gear
http://ow.ly/sV4ee
Pinterest Competitor Fancy Adds #Bitcoin Payments
http://ow.ly/sV47Y
Naughty America Joins Porn.com In Bitcoin Acceptance
http://ow.ly/sV42W
Ethereum Launches ‘Cryptocurrency 2.0’ Network
http://ow.ly/sV4bw
Pirate Party Prompts Successful Campaign Finance Ruling for Bitcoin
http://ow.ly/sV4h9
Would JPM’s Dimon ever accept bitcoin? (via CNBC)
http://ow.ly/sV4km
Bitcoin-themed banner to be waved during Super Bowl in MetLife Stadium.
http://ow.ly/sV4tZ
Looking forward to seeing some of you in Miami! For those who can’t make it, just a reminder that I will be tweeting about it all weekend under the @twobitidiot twitter handle.
Cheers,
TBI
January 26, 2014 at 11:57PM
KryptoKit Partners With BitPay for Two-Click Shopping
KryptoKit, the secure bitcoin wallet and encrypted message plugin for Chrome browsers, has partnered with BitPay to integrate a ‘two-click’ solution to pay bitcoin merchants.
The Canadian company unveiled its new feature at the first North American Bitcoin Conference in Miami on 24-26th January. It includes KryptoDirectory, a one-stop shopping directory incorporating BitPay data on business accepting bitcoin payments.
BitPay allowed access to its database of merchants as part of the deal.
The directory will appear as a tab within the KryptoKit Chrome wallet window. Once users surf to the site they’d like to shop at, the extension automatically sniffs out bitcoin addresses for each item from the site and inserts them into the wallet window, creating a list of payment options.
Users simply click on the address corresponding to the item they want to purchase, and then click ‘send’ (hence the term ‘two-click solution’).
Auto-fill
One of KryptoKit’s key features is its ability to detect bitcoin addresses on any site and display them for easy selection. There’s no need to scan QR codes or even copy-paste address strings.
“As Bitcoin becomes more universally known and accepted as currency, we saw a clear need to have a single, clean and easy to use resource for finding businesses that welcome cryptocurrency,” said Anthony Di Iorio, the company’s co-founder along with Steve Dakh.
“KryptoKit will roll out more BitPay merchant sites in the upcoming weeks.”
KryptoKit is free, open-source and has a five-star rating on Google’s Chrome Web Store. It also features an encrypted message service where users can create new PGP keys or import existing ones.
Users do not need to register, set up accounts, or enter any personal information to use it. And your data will not be stored ‘in the cloud’ – all private keys and bitcoin addresses are kept locally on a users’ machine.
Co-founder Di Iorio also happens to be Executive Director of the Bitcoin Alliance of Canada, and founder of the Toronto Bitcoin Meetup group and bitcoin startup co-working space Bitcoin Decentral.
Disclaimer: CoinDesk founder Shakil Khan is an investor in BitPay.
Wallet image via Shutterstock
January 26, 2014 at 10:19PM
