EXCLUSIVE: Charlie Shrem Speaks Out About Mt. Gox, His Arrest and the Bitcoin Bromance
Emily Spaven (@emilyspaven) | Published on February 27, 2014 at 19:09 GMT | BitInstant, Companies, News, Silk Road News, US & Canada
Charlie Shrem
“I’ve known Mark Karpeles for a very long time. Mark is a very sweet guy. Very non-confrontational, but has he made bad business decisions? Yes. Has he failed to do everything he should have? Yes.”
So says Charlie Shrem, the troubled bitcoin entrepreneur, speaking to me from his parents’ house in New York, where he’s currently under house arrest.
He tells me he classes Karpeles, CEO of the disastrous bitcoin exchange Mt. Gox, as a good friend, but disagrees with a hell of a lot of the decisions the Frenchman has made.
Mt. Gox has been dying a slow and painful death for some months, but now appears to be taking its final breaths after documents came to light suggesting insolvency and the loss of more than 744,400 bitcoins (around $426m).
Shrem believes a number of factors are responsible for the exchange’s current issues, from a lack of PR presence to poor management structure, but first and foremost is the inadequacy of the technology Mt. Gox is built upon. He explained:
“The whole exchange is built on layer upon layer of patchy scrap work – the whole thing is flawed because of the way it was built.”
As for the company’s management structure, Shrem said Karpeles may call himself CEO, but he “doesn’t make any of the business decisions”. Gonzague Gay-Bouchery “pretty much runs the company”, despite his official job title as marketing director.
The company has also hired a lot of developers, but any developer code that’s created has to be looked over and checked by Karpeles, creating a bottleneck that has severely hampered progress.
Shrem believes the company should have, long ago, hired an agency to handle its PR, but it didn’t, because Karpeles didn’t want anyone to know Mt. Gox’s inner workings (read: didn’t want anyone to know what a dire mess it was in).
Mt. Gox bitcoin protest Mark Karpeles
He acknowledges that Karpeles and Mt. Gox have done a massive disservice to bitcoin, but said, in a strange way, they’ve also done everyone a big favour – Gox’s competitors will learn from the mistakes that have been made and will progress with more robust and technologically sound models.
The 24-year-old admitted he has some bitcoins in Mt. Gox and didn’t sound particularly hopeful that he would ever see them again.
However, he’s trying his best to be a good friend to Karpeles at a time when he’s (understandably) being hounded from all angles.
And Shrem certainly knows all about that, having been headline fodder for a good few weeks earlier in the year, following his arrest on money laundering charges.
Shrem’s arrest
“I didn’t know what was going on. One minute I was getting off my flight, the next I was being arrested.”
“The way they did it – arresting me at the airport in front of a ton of people – the whole thing was set up to make me look like a criminal,” he said.
Shrem believes his arrest was carefully planned by the federal government to damage the public’s perception of bitcoin. He thinks the media hasn’t helped matters, either, by “making assumptions” and publishing articles “without knowing the full story”.
He is alleged to have been involved in a scheme to “sell and launder over $1m in bitcoins” through the now defunct online black market Silk Road.
A document published by the Manhattan US Attorney alleged Shrem knew 52-year-old Florida native Robert M Faiella was “operating a bitcoin exchange service for Silk Road users” and that the authorities have email correspondence to prove this.
The entrepreneur said the emails have been taken out of context and that the government and media seem to think his company, BitInstant, where he was CEO until recently, was selling bitcoins to Faiella. He stressed:
“That’s not how the business worked – we didn’t actually sell any bitcoins.”
BitInstant was designed to enable people to quickly transfer money to their bitcoin exchange accounts. The way Shrem sees it, Faiella allegedly advertised his services on Silk Road, and would send his customers on to BitInstant.
These customers would conduct the transactions themselves, then send the money to their own Mt. Gox accounts. Once on this site, they would buy bitcoins, transfer the bitcoin to their Silk Road account and buy illicit goods.
“Now how many times am I removed from that already?” he added.
The case
Having recently resigned from board of the Bitcoin Foundation, Shrem said he is now spending the vast majority of his time focusing on his case and “trying to hang on to my sanity”.
He’s working with his lawyer, Marc Agnifilo of Brafman & Associates, to meticulously comb through the 30-something-page complaint against him and try to work out what exactly the charges against him are.
“Bitcoin is a brotherhood. That’s what keeps me involved, you’re changing the world and you know that other people are doing it with you.”
Agnifilo defended former managing director of the International Monetary Fund Dominique Strauss-Kahn after he was arrested in Manhattan on charges of sexual assault.
Agnifilo’s colleague Benjamin Brafman famously worked with O.J Simpson’s defence lawyer Johnnie Cochran as co-defendant of Sean Combs (Puff Daddy) when he faced illegal weapons and bribery charges.
He was also hired to represent NFL star Plaxico Burress who was indicted on two counts of criminal possession of a weapon and one count of reckless endangerment.
Shrem said he’s currently not allowed to go anywhere – not even his lawyer’s office – without first getting permission from the court, 48 hours in advance. “I can’t go anywhere. It sucks.”
Staying sane
Shrem told me he’s maintaining his sanity by spending his time indoors speaking to his friends and picking up new skills. He explained:
“My friends are here a lot and I’m getting a lot of free stuff. People are sending me a lot of alcohol gifts, which is good. I’m trying to make the best of it – I’m learning some new languages, I’m working out a lot every day and watching Netflix – a lot. Just trying to keeping my spirits up,”
He hasn’t completely put the breaks on his business activities, though. He said he’s working on a “secret project” that involves bitcoin.
When pushed for more details, all he would reveal, rather cryptically, is: “It’s something that I’ve wanted to do for ages, but haven’t had the time. It requires a bunch of licensing and bringing it over from the EU before I can do it.”
He’s trying his best to spread the bitcoin entrepreneurial spirit by giving away the many bitcoin domain names he owns to people looking to start projects within the ecosystem.
“I’m just trying to encourage entrepreneurship and innovation in the space. My brain is here for the picking and a lot of people are calling me to see what I think about their business and I’m brutally honest with them,” Shrem explained, adding:
“Just bring me a six-pack and I’m yours for an hour.”
BitInstant relaunch
Shrem said that, at the time of his arrest, BitInstant was about to close a large investment round. He stepped down from the company so this could continue.
BitInstant plans to relaunch with a service enabling people to buy bitcoin with cash in stores in more than five countries, paying less than 1% in charges.
“Unlike the other American bitcoin companies, we actually have all the licences and the compliance that we need to have, which makes things a lot easier,” he said.
The service BitInstant has planned sounds a lot like that recently launched in the UK by ZipZap – customers order bitcoins online, then head to their nearest ZipZap payment location (there are over 28,000 across the UK), pay cash and see the bitcoins appear in their wallets.
“We worked with ZipZap for a long time in the US. I was the one that introduced Alan Safahi [ZipZap's CEO] to bitcoin in the first place and we became really good friends. He’s a big supporter of us,” said Shrem.
He’s made quite a few “good friends” over his past few years working in the bitcoin ecosystem, in fact, he jokes that he knows “everyone in this frickin’ space”.
The bitcoin brotherhood
“Bitcoin is a brotherhood. That’s the best part about it,” said Shrem.
“It’s such a beautiful thing to be a part of. That’s what keeps me involved in bitcoin. You know that you’re changing the world and you know that other people are involved in doing it with you.”
He challenges me to find a more open and accepting community than bitcoin and likens its close-knit nature to that of his Jewish community.
“We are the most non-discriminatory group of people the world has ever seen. We’re ripping the guts out of the whole financial infrastructure,” he concluded.
Topic: BITCOIN NEWS EVRYDAY! From multiple sources. - page 21. (Read 51244 times)
Singapore Firm Tembusu Launches Customizable Bitcoin ATM
Nermin Hajdarbegovic | Published on February 27, 2014 at 21:40 GMT | Asia, Bitcoin ATM, News, Regulation, Technology
Boat Quay district, Singapore
There is a new player in the world of bitcoin ATMs, Singapore-based Tembusu Terminals. The company has just installed Singapore’s first permanent bitcoin ATM at a bar in the Boat Quay district.
Tembusu says it is talking to other merchants who would like to install the company’s ATMs, too.
Earlier this month, Bitcoiniac announced it would install Robocoin ATMs in London and Singapore by mid-March. It appears that Tembusu has beaten the Vancouver-based outfit to the punch.
Flexible design
The Tembusu ATM was designed and built in Singapore. It features several security and anti-theft measures, including biometric security features like thumbprint scanning and elaborate know-your-customer (KYC) features.
It can scan user ID cards and it also has integrated anti-money laundering (AML) features, that can be fine-tuned to meet legal requirements in different jurisdictions.
“It has been an exciting, and some would even say trying, past few weeks for bitcoin users worldwide,” said Andras Kristof, Chief Technical Officer, Tembusu Terminals.
“Through this entire rollercoaster ride, I can’t help but think back to the main guiding principle behind designing the Tembusu: flexibility is key.”
Tembusu says its ATM differs from competing solutions, thanks to its customisability and an intuitive full-touch screen interface.
The ATM can be outfitted with a “myriad of options”, the company says, and the fact that its anti-money laundering features can be adapted to meet different requirements might also be attractive to buyers.
Incidentally, the device can also be used to dispense fiat cash.
Regulation likely
There are a few more down-to-earth reasons for the Tembusu ATM’s flexibility. Since it has plenty of KYC and AML features, it can be customized to meet regulatory requirements in different markets.
Earlier this year, the Monetary Authority of Singapore (MAS) said that it does not regulate bitcoins, and it has been advising the public to be cautious with virtual currencies.
Last week, Singapore’s Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said bitcoin does not fall under the regulatory purview of either his ministry or the MAS.
The Inland Revenue Authority of Singapore (IRAS) issued an advisory on bitcoin taxation earlier this year.
Uncertain future
The regulatory climate is not currently very positive and it is relatively vague, so the ability to customize the Tembusu ATM simply had to be built in.
“When it comes to bitcoin ATMs, it is vital to have future-proof hardware”
The same is true of Robocoin ATMs, which also feature plenty of superfluous features that may be required by regulators in different jurisdictions or at different times.
When it comes to bitcoin ATMs, it is vital to have future-proof hardware – not for fear of going obsolete, but due to regulatory issues that may arise in the future.
Interestingly, the company says it is willing to deploy Tembusu ATMs with no down payment. Tembusu says the same flexibility extends to pricing and financing options.
CoinDesk was not given pricing details, however – the company encourages those who are interested in a quote to get in touch directly.
Nermin Hajdarbegovic | Published on February 27, 2014 at 21:40 GMT | Asia, Bitcoin ATM, News, Regulation, Technology
Boat Quay district, Singapore
There is a new player in the world of bitcoin ATMs, Singapore-based Tembusu Terminals. The company has just installed Singapore’s first permanent bitcoin ATM at a bar in the Boat Quay district.
Tembusu says it is talking to other merchants who would like to install the company’s ATMs, too.
Earlier this month, Bitcoiniac announced it would install Robocoin ATMs in London and Singapore by mid-March. It appears that Tembusu has beaten the Vancouver-based outfit to the punch.
Flexible design
The Tembusu ATM was designed and built in Singapore. It features several security and anti-theft measures, including biometric security features like thumbprint scanning and elaborate know-your-customer (KYC) features.
It can scan user ID cards and it also has integrated anti-money laundering (AML) features, that can be fine-tuned to meet legal requirements in different jurisdictions.
“It has been an exciting, and some would even say trying, past few weeks for bitcoin users worldwide,” said Andras Kristof, Chief Technical Officer, Tembusu Terminals.
“Through this entire rollercoaster ride, I can’t help but think back to the main guiding principle behind designing the Tembusu: flexibility is key.”
Tembusu says its ATM differs from competing solutions, thanks to its customisability and an intuitive full-touch screen interface.
The ATM can be outfitted with a “myriad of options”, the company says, and the fact that its anti-money laundering features can be adapted to meet different requirements might also be attractive to buyers.
Incidentally, the device can also be used to dispense fiat cash.
Regulation likely
There are a few more down-to-earth reasons for the Tembusu ATM’s flexibility. Since it has plenty of KYC and AML features, it can be customized to meet regulatory requirements in different markets.
Earlier this year, the Monetary Authority of Singapore (MAS) said that it does not regulate bitcoins, and it has been advising the public to be cautious with virtual currencies.
Last week, Singapore’s Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said bitcoin does not fall under the regulatory purview of either his ministry or the MAS.
The Inland Revenue Authority of Singapore (IRAS) issued an advisory on bitcoin taxation earlier this year.
Uncertain future
The regulatory climate is not currently very positive and it is relatively vague, so the ability to customize the Tembusu ATM simply had to be built in.
“When it comes to bitcoin ATMs, it is vital to have future-proof hardware”
The same is true of Robocoin ATMs, which also feature plenty of superfluous features that may be required by regulators in different jurisdictions or at different times.
When it comes to bitcoin ATMs, it is vital to have future-proof hardware – not for fear of going obsolete, but due to regulatory issues that may arise in the future.
Interestingly, the company says it is willing to deploy Tembusu ATMs with no down payment. Tembusu says the same flexibility extends to pricing and financing options.
CoinDesk was not given pricing details, however – the company encourages those who are interested in a quote to get in touch directly.
Japan Pushes for International Effort on Bitcoin Regulation
Pete Rizzo (@pete_rizzo_) | Published on February 27, 2014 at 19:59 GMT | Asia, Exchanges, Mt. Gox, Regulation
Japanese Diet upper house
Despite recent suggestions that its top financial bodies would not take any action against troubled bitcoin exchange Mt. Gox, Japan’s senior regulators are now saying they would seek to regulate bitcoin, but only as part of an international effort.
Speaking at a press conference on 27th February, Senior Vice Finance Minister Jiro Aichi addressed the topic, stating: “If we regulate [bitcoin], international collaboration would be necessary.”
Aichi suggested that this type of large-scale coordination is needed to prevent criminals from exploiting loopholes or weak points in international law.
“If we regulate [bitcoin], international collaboration would be necessary.”
Further, Japan stepped up its rhetoric on Thursday regarding Mt. Gox, suggesting that it would intervene “if necessary” to determine what wrongdoing occurred. Japanese law enforcement officials were earlier reported to be looking into the developing Mt. Gox case, along with US regulators.
The news follows the release of more documents detailing the exchange’s long-term business plans, and mounting evidence that internal financial mismanagement was a core issue that plagued the once-prominent company.
‘Not a currency’
Aichi released a few additional details about the actions that could take space, and indicated that more government agencies could become involved in the investigation.
He also stated that bitcoin does not meet the definition of currency under Japanese law, but did not say how this could affect any future developments. Aichi added:
“As for its legal position, a currency (under Japan’s jurisdiction) would be coins or notes issued by the Bank of Japan. At the very least, we can say bitcoin is not a currency.”
The Bank of Japan had earlier indicated that it was researching digital currencies, but stopped short of making any statements about their use.
Media take notice
Tokyo meetup with media crewDespite its penchant for high-tech toys, Japan has been oddly silent on bitcoin, though that could soon change.
Sources in Tokyo suggest news from Mt. Gox has filtered through to the mainstream, and that bitcoin is starting to receive attention from the general public, with newspaper articles appearing nearly every week.
Invading TV crews have begun to so annoy the manager of the Tokyo Bitcoin Meetup group’s favourite restaurant that, on Thursday, at least two networks were forced to wait outside and conduct one-by-one interviews.
Whether or not the increased coverage will be positive or not remains to be seen. Japanese media tend to play up the ‘dangerous hacker’ angle on any story involving bitcoin or even peer-to-peer (P2P) technology, sources say, and a recent special report on bitcoin by NHK, the national broadcaster, dedicated 15 minutes of the programme’s half-hour timeslot to discussion of Silk Road.
Pete Rizzo (@pete_rizzo_) | Published on February 27, 2014 at 19:59 GMT | Asia, Exchanges, Mt. Gox, Regulation
Japanese Diet upper house
Despite recent suggestions that its top financial bodies would not take any action against troubled bitcoin exchange Mt. Gox, Japan’s senior regulators are now saying they would seek to regulate bitcoin, but only as part of an international effort.
Speaking at a press conference on 27th February, Senior Vice Finance Minister Jiro Aichi addressed the topic, stating: “If we regulate [bitcoin], international collaboration would be necessary.”
Aichi suggested that this type of large-scale coordination is needed to prevent criminals from exploiting loopholes or weak points in international law.
“If we regulate [bitcoin], international collaboration would be necessary.”
Further, Japan stepped up its rhetoric on Thursday regarding Mt. Gox, suggesting that it would intervene “if necessary” to determine what wrongdoing occurred. Japanese law enforcement officials were earlier reported to be looking into the developing Mt. Gox case, along with US regulators.
The news follows the release of more documents detailing the exchange’s long-term business plans, and mounting evidence that internal financial mismanagement was a core issue that plagued the once-prominent company.
‘Not a currency’
Aichi released a few additional details about the actions that could take space, and indicated that more government agencies could become involved in the investigation.
He also stated that bitcoin does not meet the definition of currency under Japanese law, but did not say how this could affect any future developments. Aichi added:
“As for its legal position, a currency (under Japan’s jurisdiction) would be coins or notes issued by the Bank of Japan. At the very least, we can say bitcoin is not a currency.”
The Bank of Japan had earlier indicated that it was researching digital currencies, but stopped short of making any statements about their use.
Media take notice
Tokyo meetup with media crewDespite its penchant for high-tech toys, Japan has been oddly silent on bitcoin, though that could soon change.
Sources in Tokyo suggest news from Mt. Gox has filtered through to the mainstream, and that bitcoin is starting to receive attention from the general public, with newspaper articles appearing nearly every week.
Invading TV crews have begun to so annoy the manager of the Tokyo Bitcoin Meetup group’s favourite restaurant that, on Thursday, at least two networks were forced to wait outside and conduct one-by-one interviews.
Whether or not the increased coverage will be positive or not remains to be seen. Japanese media tend to play up the ‘dangerous hacker’ angle on any story involving bitcoin or even peer-to-peer (P2P) technology, sources say, and a recent special report on bitcoin by NHK, the national broadcaster, dedicated 15 minutes of the programme’s half-hour timeslot to discussion of Silk Road.
Federal Reserve Chair: US Central Bank Can’t Regulate Bitcoin
Pete Rizzo (@pete_rizzo_) | Published on February 27, 2014 at 18:16 GMT | News, Regulation, US & Canada
After months of silence on the matter, Federal Reserve chairwoman Janet Yellen has stated that the US central bank does not have the authority to regulate bitcoin.
Yellen was appointed as chair of the Federal Reserve last October after she was nominated to replace Ben Bernanke.
During an address to the Senate Banking Committee on 27th February, the top US banking official, said:
“The Fed doesn’t have authority to supervise or regulate bitcoin in any way.”
In her response, Yellen commented broadly on a score of issues including the impact of recent weather on US economic output, ongoing turmoil in the Ukraine and the new technologies that are more broadly impacting payments.
It was on the latter subject that the topic of bitcoin was introduced, with Yellen noting that such developments are “taking place outside the banking industry”.
Notably, the remarks came in response to a question about bitcoin regulation by US Senator Joe Manchin, a noted critic of bitcoin.
The news follows Manchin’s 26th February letter to the Federal Reserve chairwoman, which called for her to take aggressive action against bitcoin due to its involvement in criminal activity. The Bitcoin Foundation has also since responded to the letter.
Additional remarks
Yellen continued, saying that FinCEN has indicated that current money laundering statutes are “adequate to meet enforcement needs”.
Manchin later asked whether Yellen believed the US to be “behind the curve” in regards to regulation, a nod to his previously stated belief that the US should follow the lead of countries like China and Thailand in banning bitcoin.
Yellen said:
“Certainly it would be appropriate for Congress to ask questions about what the right legal structure would be for digital currencies […] My understanding is Bitcoin doesn’t touch [US] banks.”
She ended her response by stating that the Federal Reserve is looking into the matter.
The statement notably comes at a time when many US state regulators are looking for guidance on how to put controls or safeguards on the bitcoin industry.
Though the most notable example would be New York, which held detailed hearings on the matter in January, Alabama and Texas have joined the conversation following the ongoing troubles at major Japan-based bitcoin exchange Mt. Gox.
Pete Rizzo (@pete_rizzo_) | Published on February 27, 2014 at 18:16 GMT | News, Regulation, US & Canada
After months of silence on the matter, Federal Reserve chairwoman Janet Yellen has stated that the US central bank does not have the authority to regulate bitcoin.
Yellen was appointed as chair of the Federal Reserve last October after she was nominated to replace Ben Bernanke.
During an address to the Senate Banking Committee on 27th February, the top US banking official, said:
“The Fed doesn’t have authority to supervise or regulate bitcoin in any way.”
In her response, Yellen commented broadly on a score of issues including the impact of recent weather on US economic output, ongoing turmoil in the Ukraine and the new technologies that are more broadly impacting payments.
It was on the latter subject that the topic of bitcoin was introduced, with Yellen noting that such developments are “taking place outside the banking industry”.
Notably, the remarks came in response to a question about bitcoin regulation by US Senator Joe Manchin, a noted critic of bitcoin.
The news follows Manchin’s 26th February letter to the Federal Reserve chairwoman, which called for her to take aggressive action against bitcoin due to its involvement in criminal activity. The Bitcoin Foundation has also since responded to the letter.
Additional remarks
Yellen continued, saying that FinCEN has indicated that current money laundering statutes are “adequate to meet enforcement needs”.
Manchin later asked whether Yellen believed the US to be “behind the curve” in regards to regulation, a nod to his previously stated belief that the US should follow the lead of countries like China and Thailand in banning bitcoin.
Yellen said:
“Certainly it would be appropriate for Congress to ask questions about what the right legal structure would be for digital currencies […] My understanding is Bitcoin doesn’t touch [US] banks.”
She ended her response by stating that the Federal Reserve is looking into the matter.
The statement notably comes at a time when many US state regulators are looking for guidance on how to put controls or safeguards on the bitcoin industry.
Though the most notable example would be New York, which held detailed hearings on the matter in January, Alabama and Texas have joined the conversation following the ongoing troubles at major Japan-based bitcoin exchange Mt. Gox.
Bitcoin Foundation to Senator: US Shouldn’t Turn Away from Innovation
Pete Rizzo (@pete_rizzo_) | Published on February 27, 2014 at 17:24 GMT | Analysis, Bitcoin Foundation, News, Regulation, US & Canada
The outcry over US Senator Joe Manchin’s 26th February letter calling for an outright federal ban on bitcoin came vicious and swift, with the bitcoin community taking to message boards and blogs en masse to deride the West Virginia democrat as out of touch and biased in his motives.
On 27th February, they got some additional support.
The Bitcoin Foundation has formally issued a response to Manchin’s letter that aims to inform him of the benefits digital currency could provide to the financial system and to consumers around the world, provided the technology is allowed to grow and develop.
Penned by general counsel Patrick Murck, the message took an understanding approach to Manchin’s concern for recent events, but cautioned him that the risks are “not as dire” as suggested.
Murck moved to mitigate growing concern that Mt. Gox’s issues were indicative of business practices across the industry, saying:
“We believe that the failure of one foreign-based exchange should not darken the prospects for Bitcoin businesses.”
Furthermore, he discussed the work the Bitcoin Foundation has done to speak with top regulators as part of an effort to ease their concerns, detailed the as-yet-untapped proof of ownership benefits of the protocol and cited the demise of Silk Road as a positive step for the community.
The letter also addressed the economic impact of a potential bitcoin ban:
“We do not believe that this is the right time in U.S. economic history to turn away from innovations that offer improvements in the jobs picture and the economy.”
The full response stopped short of pointing out inaccuracies in the letter, though other responses from the community were eager to provide this analysis.
To view Murck’s complete response, read the full text below:
Dear Senator Manchin:
We read with interest your recent letter to federal regulators regarding Bitcoin. Your interest in protecting Americans is genuine, of course, and laudable. We believe the consensus in Washington, D.C., is the right one for protecting consumers and growing the American economy: the U.S. should foster the benefits of Bitcoin while mitigating the risks.
To that end, we offer the following information to help improve your and others’ consideration of the Bitcoin protocol, its many potential benefits, and the risks. We hope to be a valuable resource to you and your office, as we have been to many others in Congress and in relevant U.S. federal agencies.
The Bitcoin Foundation is a member-driven non-profit organization dedicated to serving the business, technology, government relations, and public affairs needs of the Bitcoin community. The foundation works to protect and standardize the Bitcoin protocol and software, to broaden the use of Bitcoin through public education and by fostering a safe and sane legal and regulatory environment, and to support local Bitcoin efforts by connecting a network of Bitcoin communities worldwide.
In the past several months, we have been invited to testify and present in a variety of settings, formal and informal, helping to educate congressional staff and government agencies about Bitcoin. Most notably, we participated in the first congressional hearing on Bitcoin hosted by Senator Carper, Chairman of the Senate Committee on Homeland Security and Governmental Affairs, on November 18, 2013. I testified about Bitcoin’s potential for increasing global financial inclusion, expanding human liberty, strengthening privacy protections for the law-abiding, and providing a stable money supply for those in countries where the local currency is poorly managed. As you know, the Senate Committee on Banking, Housing and Urban Affairs, also held a hearing on virtual currencies on November 19, 2013.
These hearings included witnesses from the Financial Crimes Enforcement Network in the Department of the Treasury, from the Department of Justice, the Department of Homeland Security, and the Secret Service. The hearings also included representatives of U.S.-based Bitcoin businesses, academics, a state banking regulator, and other interested parties. The federal regulators testifying at these hearings have examined Bitcoin carefully, and they produced careful, thoughtful testimonies. They seem relatively sanguine about the risks Bitcoin creates and open to capturing its benefits for Americans, including the jobs and economic growth that will come from U.S.-led financial services innovation.
The benefits of Bitcoin go beyond its role as an alternative currency. The Bitcoin protocol, essentially a universal public ledger, may help establish property ownership in third-world countries, allow people to create computer-automated contracts, aid in the management of public resources like the Internet, and much more. The Bitcoin protocol is a revolutionary invention whose potential is only beginning to be discovered.
There are risks, but we are confident that they are not as dire as your letter suggests. Because Bitcoin is a public ledger, records of transaction are published and available online for all time. This is a far more transparent system than conventional financial services and payments, in which the vast majority of transactions are concealed. Indeed, a challenge for Bitcoin adoption is making sure that law-abiding people’s transactions do not expose their private financial information. We believe the law enforcement challenge with respect to Bitcoin is different but not harder. As you probably know, at the Homeland Security and Governmental Affairs Committee hearing on Bitcoin, FinCEN Director Jennifer Shasky Calvery said, “Cash is probably still the best medium for laundering money.”
The demise of Silk Road illustrates well that Bitcoin is not a magic cloak for crime. Though breathless press reports portrayed Bitcoin as a tool of criminality early on, law enforcement has caught up. The Silk Road collapsed, and successor sites have collapsed. We anticipate studying more carefully privacy, anonymity, pseudonymity, and the needs of law enforcement with respect to Bitcoin.
Some countries’ central banks have warned consumers about the risks around Bitcoin. I have done the same. Consumers should not invest any money they aren’t prepared to lose, and the volatility of Bitcoin’s price against the dollar is high, though it will fall over time. Many countries around the world are embracing Bitcoin, though, as a digital currency that offers their people improved financial services and greater economic freedom. Germany, Finland, Singapore, and Canada, for example, are among the U.S. allies that have sent favorable signals by issuing tax guidance on Bitcoin. Ireland, Israel, and Slovenia appear to have plans to do so. News reports about bans on Bitcoin in China, Thailand, and South Korea may be a product of misunderstanding local conditions.
The Bitcoin ecosystem is still very much in its infancy, and the first wave of Bitcoin businesses is now beginning to give way to a second, more sophisticated group of investors and businesspeople. We believe that the failure of one foreign-based exchange should not darken the prospects for Bitcoin businesses in New York, California, Washington state, and all over the country, including a restaurant in West Virginia that announced late last year that it is accepting payments in Bitcoin.
Small businesses all over the country like Artisan Pizza & Pasta in Charleston are signing up to accept Bitcoin payments. With credit card payments costing two to three percent, the narrow profit-margins of retail businesses get even smaller. The competition that Bitcoin may bring to the $50-billion per year credit card payment business may push lower fees and better service for small businesses and consumers alike. Meanwhile, Bitcoin-based financial innovation may help control data breaches, of which we have seen massive examples in the recent past. Payment services designed for the Internet need not put Americans’ personal information at risk.
We do not believe that this is the right time in U.S. economic history to turn away from innovations that offer improvements in the jobs picture and the economy. If Bitcoin does not flourish in the United States, it will flourish elsewhere, and the United States will cede leadership to the countries with the more foresighted approach to innovation and economic progress.
There is a lot to learn about Bitcoin, how it works, and what its effects on U.S. society will be. There is no need to fear Bitcoin or overreact to the challenges that accompany its huge potential benefits. We would be happy to meet with you and your staff at your convenience, as we have done with dozens of others congressional offices and government agencies. I can be reached at [email protected].
Respectfully,
Patrick Murck
General Counsel
Pete Rizzo (@pete_rizzo_) | Published on February 27, 2014 at 17:24 GMT | Analysis, Bitcoin Foundation, News, Regulation, US & Canada
The outcry over US Senator Joe Manchin’s 26th February letter calling for an outright federal ban on bitcoin came vicious and swift, with the bitcoin community taking to message boards and blogs en masse to deride the West Virginia democrat as out of touch and biased in his motives.
On 27th February, they got some additional support.
The Bitcoin Foundation has formally issued a response to Manchin’s letter that aims to inform him of the benefits digital currency could provide to the financial system and to consumers around the world, provided the technology is allowed to grow and develop.
Penned by general counsel Patrick Murck, the message took an understanding approach to Manchin’s concern for recent events, but cautioned him that the risks are “not as dire” as suggested.
Murck moved to mitigate growing concern that Mt. Gox’s issues were indicative of business practices across the industry, saying:
“We believe that the failure of one foreign-based exchange should not darken the prospects for Bitcoin businesses.”
Furthermore, he discussed the work the Bitcoin Foundation has done to speak with top regulators as part of an effort to ease their concerns, detailed the as-yet-untapped proof of ownership benefits of the protocol and cited the demise of Silk Road as a positive step for the community.
The letter also addressed the economic impact of a potential bitcoin ban:
“We do not believe that this is the right time in U.S. economic history to turn away from innovations that offer improvements in the jobs picture and the economy.”
The full response stopped short of pointing out inaccuracies in the letter, though other responses from the community were eager to provide this analysis.
To view Murck’s complete response, read the full text below:
Dear Senator Manchin:
We read with interest your recent letter to federal regulators regarding Bitcoin. Your interest in protecting Americans is genuine, of course, and laudable. We believe the consensus in Washington, D.C., is the right one for protecting consumers and growing the American economy: the U.S. should foster the benefits of Bitcoin while mitigating the risks.
To that end, we offer the following information to help improve your and others’ consideration of the Bitcoin protocol, its many potential benefits, and the risks. We hope to be a valuable resource to you and your office, as we have been to many others in Congress and in relevant U.S. federal agencies.
The Bitcoin Foundation is a member-driven non-profit organization dedicated to serving the business, technology, government relations, and public affairs needs of the Bitcoin community. The foundation works to protect and standardize the Bitcoin protocol and software, to broaden the use of Bitcoin through public education and by fostering a safe and sane legal and regulatory environment, and to support local Bitcoin efforts by connecting a network of Bitcoin communities worldwide.
In the past several months, we have been invited to testify and present in a variety of settings, formal and informal, helping to educate congressional staff and government agencies about Bitcoin. Most notably, we participated in the first congressional hearing on Bitcoin hosted by Senator Carper, Chairman of the Senate Committee on Homeland Security and Governmental Affairs, on November 18, 2013. I testified about Bitcoin’s potential for increasing global financial inclusion, expanding human liberty, strengthening privacy protections for the law-abiding, and providing a stable money supply for those in countries where the local currency is poorly managed. As you know, the Senate Committee on Banking, Housing and Urban Affairs, also held a hearing on virtual currencies on November 19, 2013.
These hearings included witnesses from the Financial Crimes Enforcement Network in the Department of the Treasury, from the Department of Justice, the Department of Homeland Security, and the Secret Service. The hearings also included representatives of U.S.-based Bitcoin businesses, academics, a state banking regulator, and other interested parties. The federal regulators testifying at these hearings have examined Bitcoin carefully, and they produced careful, thoughtful testimonies. They seem relatively sanguine about the risks Bitcoin creates and open to capturing its benefits for Americans, including the jobs and economic growth that will come from U.S.-led financial services innovation.
The benefits of Bitcoin go beyond its role as an alternative currency. The Bitcoin protocol, essentially a universal public ledger, may help establish property ownership in third-world countries, allow people to create computer-automated contracts, aid in the management of public resources like the Internet, and much more. The Bitcoin protocol is a revolutionary invention whose potential is only beginning to be discovered.
There are risks, but we are confident that they are not as dire as your letter suggests. Because Bitcoin is a public ledger, records of transaction are published and available online for all time. This is a far more transparent system than conventional financial services and payments, in which the vast majority of transactions are concealed. Indeed, a challenge for Bitcoin adoption is making sure that law-abiding people’s transactions do not expose their private financial information. We believe the law enforcement challenge with respect to Bitcoin is different but not harder. As you probably know, at the Homeland Security and Governmental Affairs Committee hearing on Bitcoin, FinCEN Director Jennifer Shasky Calvery said, “Cash is probably still the best medium for laundering money.”
The demise of Silk Road illustrates well that Bitcoin is not a magic cloak for crime. Though breathless press reports portrayed Bitcoin as a tool of criminality early on, law enforcement has caught up. The Silk Road collapsed, and successor sites have collapsed. We anticipate studying more carefully privacy, anonymity, pseudonymity, and the needs of law enforcement with respect to Bitcoin.
Some countries’ central banks have warned consumers about the risks around Bitcoin. I have done the same. Consumers should not invest any money they aren’t prepared to lose, and the volatility of Bitcoin’s price against the dollar is high, though it will fall over time. Many countries around the world are embracing Bitcoin, though, as a digital currency that offers their people improved financial services and greater economic freedom. Germany, Finland, Singapore, and Canada, for example, are among the U.S. allies that have sent favorable signals by issuing tax guidance on Bitcoin. Ireland, Israel, and Slovenia appear to have plans to do so. News reports about bans on Bitcoin in China, Thailand, and South Korea may be a product of misunderstanding local conditions.
The Bitcoin ecosystem is still very much in its infancy, and the first wave of Bitcoin businesses is now beginning to give way to a second, more sophisticated group of investors and businesspeople. We believe that the failure of one foreign-based exchange should not darken the prospects for Bitcoin businesses in New York, California, Washington state, and all over the country, including a restaurant in West Virginia that announced late last year that it is accepting payments in Bitcoin.
Small businesses all over the country like Artisan Pizza & Pasta in Charleston are signing up to accept Bitcoin payments. With credit card payments costing two to three percent, the narrow profit-margins of retail businesses get even smaller. The competition that Bitcoin may bring to the $50-billion per year credit card payment business may push lower fees and better service for small businesses and consumers alike. Meanwhile, Bitcoin-based financial innovation may help control data breaches, of which we have seen massive examples in the recent past. Payment services designed for the Internet need not put Americans’ personal information at risk.
We do not believe that this is the right time in U.S. economic history to turn away from innovations that offer improvements in the jobs picture and the economy. If Bitcoin does not flourish in the United States, it will flourish elsewhere, and the United States will cede leadership to the countries with the more foresighted approach to innovation and economic progress.
There is a lot to learn about Bitcoin, how it works, and what its effects on U.S. society will be. There is no need to fear Bitcoin or overreact to the challenges that accompany its huge potential benefits. We would be happy to meet with you and your staff at your convenience, as we have done with dozens of others congressional offices and government agencies. I can be reached at [email protected].
Respectfully,
Patrick Murck
General Counsel
Nearly 150 Strains of Malware Are After Your Bitcoins
Nermin Hajdarbegovic | Published on February 27, 2014 at 15:42 GMT | Crime, Wallets
Malware warning
Computer security firm Dell SecureWorks has managed to identify 146 types of bitcoin malware in the wild.
The company’s researchers found the distinct breeds of malware had been specifically designed to steal bitcoins – a number of them presenting quite a danger to owners with coins stored either online or on their computers.
The firm concluded that the number of Windows-compatible cryptocurrency stealing malware (CCSM) strains has gone up in line with bitcoin’s increase in value.
The total of 146 strains is up from 45 a year ago, and 13 two years ago, the researchers say. The biggest spike came after bitcoin briefly broke the $1,000 mark late last year.
Cyber criminals tend to pursue high-growth markets. There has been a lot of focus on smartphones lately, and bitcoin is an obvious target on more than one level.
While most smartphone malware will steal personal info and cause various problems, bitcoin-targeted strains offer the added benefit to the criminals of stealing money with relative ease, and it appears that many can’t resist the allure of bitcoiners’ digital wallets.
Wallets in their sights
The most common type of CCSM is designed to go after digital wallets, for obvious reasons. The malware searches infected computers for wallet software – either by looking in specific locations or by searching all drives found on the system.
Once a wallet is located, the malware uploads it to a remote server, allowing the attacker all the time they need to crack the keys and steal the coins.
Many strains also log the victim’s key strokes, so the attacker does not even have to bother with any cracking. The keylogger provides all the passwords and credentials they will need to pull off a successful heist.
Some malware strains even trick people into sending bitcoins to the attacker.
These types detect when a bitcoin address is copied to the clipboard and put a different one in its place. When the user tries to paste the original during a bitcoin transaction, the substitute address is inserted and the funds are sent to the attacker.
This is also the most sophisticated angle of attack employed by the malware creators, as it does not require data to be sent to a remote server and can operate autonomously, making it much more challenging to detect.
Just recently, the Pony botnet managed to steal $220,000 worth of bitcoins from 30 different types of digital wallets.
Authentication risks
Although two-factor authentication is proving very popular in the bitcoin world, it is still vulnerable to attack. It does offer an added level of security, but advanced malware can successfully fool it.
Several exchanges are using two-factor authentication using one-time PINs, but some malware developers are one step ahead, with CCSM strains that can detect such systems and intercept the PIN as it is used. They then open a hidden browser window and simply log in from the victim’s computer.
Another issue of concern is that Dell SecureWorks found that standard antivirus scanners were incapable of detecting roughly 50% of the CCSMs in circulation.
Windows targeted
Unsurprisingly, Windows is by far the most popular platform for CCSM developers.
Researchers found that 99% of active bitcoin malware is targeted at Windows users, so those running Mac OS X or Linux are in a much more secure position.
Mac owners shouldn’t relax completely, however – most of the efforts to protect users from malware are aimed at Windows systems too, and the arrival of a serious malware threat could be bad news.
There is no word from the researchers on how Android and other mobile operating systems are affected by malware.
Many users overlook security on their mobile devices, but it should be pointed out that Android is by far the most popular platform for mobile malware developers.
Along with the facts that Apple does not allow bitcoin apps, and that many bitcoin users who need a mobile wallet are turning to Android, this sounds like a huge threat in the making for those using that platform.
With all this in mind, Dell SecureWorks is advising bitcoin users to switch to alternative wallets like Electrum and Armory, which use a split arrangement for key storage and appear to be the most secure option at the moment.
Of course, don’t forget that there are plenty of cold storage solutions out there too. Or you could even use the CoinDesk guide to make a paper wallet for your bitcoins.
Nermin Hajdarbegovic | Published on February 27, 2014 at 15:42 GMT | Crime, Wallets
Malware warning
Computer security firm Dell SecureWorks has managed to identify 146 types of bitcoin malware in the wild.
The company’s researchers found the distinct breeds of malware had been specifically designed to steal bitcoins – a number of them presenting quite a danger to owners with coins stored either online or on their computers.
The firm concluded that the number of Windows-compatible cryptocurrency stealing malware (CCSM) strains has gone up in line with bitcoin’s increase in value.
The total of 146 strains is up from 45 a year ago, and 13 two years ago, the researchers say. The biggest spike came after bitcoin briefly broke the $1,000 mark late last year.
Cyber criminals tend to pursue high-growth markets. There has been a lot of focus on smartphones lately, and bitcoin is an obvious target on more than one level.
While most smartphone malware will steal personal info and cause various problems, bitcoin-targeted strains offer the added benefit to the criminals of stealing money with relative ease, and it appears that many can’t resist the allure of bitcoiners’ digital wallets.
Wallets in their sights
The most common type of CCSM is designed to go after digital wallets, for obvious reasons. The malware searches infected computers for wallet software – either by looking in specific locations or by searching all drives found on the system.
Once a wallet is located, the malware uploads it to a remote server, allowing the attacker all the time they need to crack the keys and steal the coins.
Many strains also log the victim’s key strokes, so the attacker does not even have to bother with any cracking. The keylogger provides all the passwords and credentials they will need to pull off a successful heist.
Some malware strains even trick people into sending bitcoins to the attacker.
These types detect when a bitcoin address is copied to the clipboard and put a different one in its place. When the user tries to paste the original during a bitcoin transaction, the substitute address is inserted and the funds are sent to the attacker.
This is also the most sophisticated angle of attack employed by the malware creators, as it does not require data to be sent to a remote server and can operate autonomously, making it much more challenging to detect.
Just recently, the Pony botnet managed to steal $220,000 worth of bitcoins from 30 different types of digital wallets.
Authentication risks
Although two-factor authentication is proving very popular in the bitcoin world, it is still vulnerable to attack. It does offer an added level of security, but advanced malware can successfully fool it.
Several exchanges are using two-factor authentication using one-time PINs, but some malware developers are one step ahead, with CCSM strains that can detect such systems and intercept the PIN as it is used. They then open a hidden browser window and simply log in from the victim’s computer.
Another issue of concern is that Dell SecureWorks found that standard antivirus scanners were incapable of detecting roughly 50% of the CCSMs in circulation.
Windows targeted
Unsurprisingly, Windows is by far the most popular platform for CCSM developers.
Researchers found that 99% of active bitcoin malware is targeted at Windows users, so those running Mac OS X or Linux are in a much more secure position.
Mac owners shouldn’t relax completely, however – most of the efforts to protect users from malware are aimed at Windows systems too, and the arrival of a serious malware threat could be bad news.
There is no word from the researchers on how Android and other mobile operating systems are affected by malware.
Many users overlook security on their mobile devices, but it should be pointed out that Android is by far the most popular platform for mobile malware developers.
Along with the facts that Apple does not allow bitcoin apps, and that many bitcoin users who need a mobile wallet are turning to Android, this sounds like a huge threat in the making for those using that platform.
With all this in mind, Dell SecureWorks is advising bitcoin users to switch to alternative wallets like Electrum and Armory, which use a split arrangement for key storage and appear to be the most secure option at the moment.
Of course, don’t forget that there are plenty of cold storage solutions out there too. Or you could even use the CoinDesk guide to make a paper wallet for your bitcoins.
London Theatre Ticket Agency First in World to Accept Bitcoin
Nermin Hajdarbegovic | Published on February 27, 2014 at 13:37 GMT | Merchants, News
Earlier today, leading theatre ticket agency London Theatre Direct announced that it is accepting bitcoin payments – making it the world’s first.
The agency has tapped BitPay for its processing solution and hopes to accept more alternative currencies in the future. The agency says it is “leading the way” in supporting bitcoin and it is providing some of the best theatre London has to offer in exchange for your hard earned Satoshis.
“Bitcoin is an exciting, experimental, decentralized digital currency that enables instant payments to anyone, anywhere in the world. We want to embrace new methods of accepting payments online,” managing director Francis Hellyer said.
“Although Theatreland is typically a little slower on the uptake of newer technologies, we have been pushing very hard over the past few years to set an example to the industry by experimenting with new technologies.”
Hellyer added that the costs saved by more advanced payment methods like bitcoin can be passed down to consumers, resulting in cheaper and more secure transactions that are mobile-friendly.
The company says it is among the first major UK websites to accept bitcoin as payment and that it is proud to do its part in promoting bitcoin, by allowing Londoners to enjoy their favourite shows for bitcoins.
While London Theatre Direct is a big player in its niche, it is by no means the only bitcoin-friendly merchant in London.
The city currently boasts a bitcoin voucher shop, various bitcoin pubs and a number of companies are acting as middlemen by offering consumers the chance to buy bitcoins and use them to buy tangible goods in thousands of stores that don’t ordinarily accept the currency.
However, the city still does not yet have a bitcoin ATM, but two firms are planning to install a few machines soon.
Nermin Hajdarbegovic | Published on February 27, 2014 at 13:37 GMT | Merchants, News
Earlier today, leading theatre ticket agency London Theatre Direct announced that it is accepting bitcoin payments – making it the world’s first.
The agency has tapped BitPay for its processing solution and hopes to accept more alternative currencies in the future. The agency says it is “leading the way” in supporting bitcoin and it is providing some of the best theatre London has to offer in exchange for your hard earned Satoshis.
“Bitcoin is an exciting, experimental, decentralized digital currency that enables instant payments to anyone, anywhere in the world. We want to embrace new methods of accepting payments online,” managing director Francis Hellyer said.
“Although Theatreland is typically a little slower on the uptake of newer technologies, we have been pushing very hard over the past few years to set an example to the industry by experimenting with new technologies.”
Hellyer added that the costs saved by more advanced payment methods like bitcoin can be passed down to consumers, resulting in cheaper and more secure transactions that are mobile-friendly.
The company says it is among the first major UK websites to accept bitcoin as payment and that it is proud to do its part in promoting bitcoin, by allowing Londoners to enjoy their favourite shows for bitcoins.
While London Theatre Direct is a big player in its niche, it is by no means the only bitcoin-friendly merchant in London.
The city currently boasts a bitcoin voucher shop, various bitcoin pubs and a number of companies are acting as middlemen by offering consumers the chance to buy bitcoins and use them to buy tangible goods in thousands of stores that don’t ordinarily accept the currency.
However, the city still does not yet have a bitcoin ATM, but two firms are planning to install a few machines soon.
Ukraine Protestors Turn to Bitcoin to Ease Cash Crisis
Jon Southurst (@southtopia) | Published on February 27, 2014 at 12:32 GMT | Lifestyle, News
The dust is yet to settle on the recent, often violent protests in Ukraine that began last November and saw at least 82 people killed and hundreds injured, many seriously. President Viktor Yanukovych was removed from office and has gone into hiding.
On the ground in the capital, Kiev, particularly around the protests’ focal point, the central square known as Maidan Nezalezhnosti or simply ‘Maidan’, there are thousands of people volunteering to deal with the aftermath as winter drags on.
Field surgeries and hospitals treat the wounded, kitchens feed the crowds, blankets and clothing are distributed to those who need them, and people with vehicles shuttle everything around.
Not only is this a major logistical and people-management feat to co-ordinate, but it must all be paid for somehow. So, expatriate Ukrainians around the world have joined the fight to campaign and raise funds to assist the struggle back home.
IMG_7138 copy
Sending the funds home is another matter. PayPal only allows money to be sent out of Ukraine, while international bank transfers can take days to complete. Much of the time, transfers happen through friends and trust networks.
This week sees a new campaign to raise funds directly via bitcoin. Photos are beginning to appear online with protestors holding up QR code signs, as part of a co-ordinated effort to collect donations from anywhere in the world, in any amount, in an instant.
On the ground (and the Web)
Organizing the campaign at the Kiev end is Nastasia Pustova, part of a network of 900 volunteers. Having worked as a manager in the advertising industry for 10 years and more recently as a strategist, she knows all about social media marketing and image management, as well as dealing with tough deadlines and team management.
She recently – “and by accident”, she says – provoked the creation of an activist group on Facebook that collected donations for the protestors and supporters, and now spends 12 to 16 hours a day at the keyboard co-ordinating her team.
Jake Smith, a bitcoin entrepreneur, now based in Beijing, contacted Pustova after seeing a posting on Listserve about the situation, to see if she would be interested in building bitcoin into the campaign.
“I’d heard a lot about bitcoin – many of my friends are geeky guys working abroad. Bitcoin was often joked about, but I didn’t get into much detail until Jake contacted me,” she said.
Does she think bitcoin could be useful as a day-to-day tool for transactions between locals as well as to remit money from overseas?
”The way I see it, the main obstacle for bitcoin here is that it’s only possible to use online currencies and e-money (such as bitcoin and PayPal) for online purchases outside Ukraine. So the problem here is not in technical infrastructure, but in the legal and financial one.”
The majority of Ukrainians prefer to do their social networing via Russia-based social network Vkontakte, with Facebook as a secondary option.
Pustova says her statistics revealed Internet penetration for over 14-year-olds in Ukraine is 42%, with about 17.2m people being regular users. Fourteen per cent of its 44.6m population have smartphones.
These figures will probably increase, she says, “because gadgets are getting cheaper, as well as mobile Internet, and they become affordable to more and more people”.
The expat connection
Assisting Pustova from the Czech Republic is Viktor Kiyashko, one of those Ukrainian expats living abroad and helping collect funds and channel them to local coordinators.
Working as an IT Manager for DHL Information Services in Prague, Kiyashko says he has transferred the equivalent of over $15,000 so far, sometimes needing to convert currencies multiple times and using his own money to pay a fee for each one.
“At the beginning via PayPal it was around 7-8%, as I was doing four conversions. Now it’s less, as I do it via friends who give their money now and will wait for me to give it back to them later,” he said.
”The benefit I have is living in the EU, where banking and financial systems are a bit more advanced than in Ukraine. [Since the downfall of Yanukovych] it’s better, as there’s no such hurry, but still people need help and can’t wait for official banking transfer dates, which can take weeks.”
The fees themselves don’t bother him so much: “If you have wounded people, and need money now, the same day, you don’t care about that.”
To get around the financial system’s roadblocks, he has been using a kind of hawala system, holding the funds himself and promising to pay friends in Ukraine back at a future date.
Kiyashko said he wasn’t familiar with bitcoin until Jake Smith explained it to him as well.
IMG_7135 copy
Bitcoins to hryvnia
There is still one more problem: Since there is no widespread local bitcoin community yet, once the bitcoins are in Ukrainian hands they need to be converted back into the local currency, hryvnia.
The only bitcoin exchange readily available to Ukrainians in their home country is BTC-e, and the remaining option is to use local face-to-face traders, such as those using LocalBitcoins.
“There’s no Ukrainian e-commerce or other service working with bitcoin,” Pustova said.
Ukraine resident Roman Skaskiw, an American who lives and runs a bitcoin group in the city of Lviv, says the revolution will mean people are looking for new ideas. That, and a 20% plunge in the hryvnia’s value over the past couple of days could raise interest in alternatives.
“The biggest obstacle is a paucity of local businesses accepting bitcoin. I’m trying to change that too. But for now, most people see difficulty in changing it into cash and grow sceptical,” he said.
Culture shift
Unfortunately, there may also be issues with government regulation. Just a couple of weeks ago, the National Bank of Ukraine issued one of those ‘central bank warnings’ about bitcoin risks and indicated local bitcoin businesses must register with local financial regulatory agencies.
Neighbouring Russia has recently banned bitcoin use altogether.
That said, financial regulations are unlikely to be a priority in the chaos of Ukraine’s current political environment. Police and security forces are widely mistrusted following the brutal violence they meted out to protestors over the past few months, and exactly who the authorities even are at this stage remains unknown.
An interim government is being set up this week, with prominent activists likely to be in the new cabinet.
The revolution continues, in many ways.
Jon Southurst (@southtopia) | Published on February 27, 2014 at 12:32 GMT | Lifestyle, News
The dust is yet to settle on the recent, often violent protests in Ukraine that began last November and saw at least 82 people killed and hundreds injured, many seriously. President Viktor Yanukovych was removed from office and has gone into hiding.
On the ground in the capital, Kiev, particularly around the protests’ focal point, the central square known as Maidan Nezalezhnosti or simply ‘Maidan’, there are thousands of people volunteering to deal with the aftermath as winter drags on.
Field surgeries and hospitals treat the wounded, kitchens feed the crowds, blankets and clothing are distributed to those who need them, and people with vehicles shuttle everything around.
Not only is this a major logistical and people-management feat to co-ordinate, but it must all be paid for somehow. So, expatriate Ukrainians around the world have joined the fight to campaign and raise funds to assist the struggle back home.
IMG_7138 copy
Sending the funds home is another matter. PayPal only allows money to be sent out of Ukraine, while international bank transfers can take days to complete. Much of the time, transfers happen through friends and trust networks.
This week sees a new campaign to raise funds directly via bitcoin. Photos are beginning to appear online with protestors holding up QR code signs, as part of a co-ordinated effort to collect donations from anywhere in the world, in any amount, in an instant.
On the ground (and the Web)
Organizing the campaign at the Kiev end is Nastasia Pustova, part of a network of 900 volunteers. Having worked as a manager in the advertising industry for 10 years and more recently as a strategist, she knows all about social media marketing and image management, as well as dealing with tough deadlines and team management.
She recently – “and by accident”, she says – provoked the creation of an activist group on Facebook that collected donations for the protestors and supporters, and now spends 12 to 16 hours a day at the keyboard co-ordinating her team.
Jake Smith, a bitcoin entrepreneur, now based in Beijing, contacted Pustova after seeing a posting on Listserve about the situation, to see if she would be interested in building bitcoin into the campaign.
“I’d heard a lot about bitcoin – many of my friends are geeky guys working abroad. Bitcoin was often joked about, but I didn’t get into much detail until Jake contacted me,” she said.
Does she think bitcoin could be useful as a day-to-day tool for transactions between locals as well as to remit money from overseas?
”The way I see it, the main obstacle for bitcoin here is that it’s only possible to use online currencies and e-money (such as bitcoin and PayPal) for online purchases outside Ukraine. So the problem here is not in technical infrastructure, but in the legal and financial one.”
The majority of Ukrainians prefer to do their social networing via Russia-based social network Vkontakte, with Facebook as a secondary option.
Pustova says her statistics revealed Internet penetration for over 14-year-olds in Ukraine is 42%, with about 17.2m people being regular users. Fourteen per cent of its 44.6m population have smartphones.
These figures will probably increase, she says, “because gadgets are getting cheaper, as well as mobile Internet, and they become affordable to more and more people”.
The expat connection
Assisting Pustova from the Czech Republic is Viktor Kiyashko, one of those Ukrainian expats living abroad and helping collect funds and channel them to local coordinators.
Working as an IT Manager for DHL Information Services in Prague, Kiyashko says he has transferred the equivalent of over $15,000 so far, sometimes needing to convert currencies multiple times and using his own money to pay a fee for each one.
“At the beginning via PayPal it was around 7-8%, as I was doing four conversions. Now it’s less, as I do it via friends who give their money now and will wait for me to give it back to them later,” he said.
”The benefit I have is living in the EU, where banking and financial systems are a bit more advanced than in Ukraine. [Since the downfall of Yanukovych] it’s better, as there’s no such hurry, but still people need help and can’t wait for official banking transfer dates, which can take weeks.”
The fees themselves don’t bother him so much: “If you have wounded people, and need money now, the same day, you don’t care about that.”
To get around the financial system’s roadblocks, he has been using a kind of hawala system, holding the funds himself and promising to pay friends in Ukraine back at a future date.
Kiyashko said he wasn’t familiar with bitcoin until Jake Smith explained it to him as well.
IMG_7135 copy
Bitcoins to hryvnia
There is still one more problem: Since there is no widespread local bitcoin community yet, once the bitcoins are in Ukrainian hands they need to be converted back into the local currency, hryvnia.
The only bitcoin exchange readily available to Ukrainians in their home country is BTC-e, and the remaining option is to use local face-to-face traders, such as those using LocalBitcoins.
“There’s no Ukrainian e-commerce or other service working with bitcoin,” Pustova said.
Ukraine resident Roman Skaskiw, an American who lives and runs a bitcoin group in the city of Lviv, says the revolution will mean people are looking for new ideas. That, and a 20% plunge in the hryvnia’s value over the past couple of days could raise interest in alternatives.
“The biggest obstacle is a paucity of local businesses accepting bitcoin. I’m trying to change that too. But for now, most people see difficulty in changing it into cash and grow sceptical,” he said.
Culture shift
Unfortunately, there may also be issues with government regulation. Just a couple of weeks ago, the National Bank of Ukraine issued one of those ‘central bank warnings’ about bitcoin risks and indicated local bitcoin businesses must register with local financial regulatory agencies.
Neighbouring Russia has recently banned bitcoin use altogether.
That said, financial regulations are unlikely to be a priority in the chaos of Ukraine’s current political environment. Police and security forces are widely mistrusted following the brutal violence they meted out to protestors over the past few months, and exactly who the authorities even are at this stage remains unknown.
An interim government is being set up this week, with prominent activists likely to be in the new cabinet.
The revolution continues, in many ways.
Leaked Mt. Gox Document Linked to Consulting Firm Mandalah
Ryan Galt (@twobitidiot) | Published on February 27, 2014 at 11:00 GMT | Companies, Exchanges, Mt. Gox, News
Earlier this week, I published a document I received from a reliable source entitled “Crisis Strategy Draft”, which was allegedly a roadmap to show how Mt. Gox could recover from insolvency despite the mind-blowing loss of nearly 750,000 customer bitcoins.
Since that initial leak, I have had a number of conversations with industry insiders who have spoken about the situation both on and off the record.
They have confirmed the best news possible for Bitcoin given the damning evidence documented in the leaked presentation: Mt. Gox acted alone in its deceit, and ultimately failed in its desperation, to find an investor willing to bail them out.
Although Mt. Gox CEO Mark Karpeles would only admit that the leaked document was “more or less authentic” during a chatlog obtained by Fox Business, I have confirmed that it was, in fact, prepared by Mt. Gox representatives.
Mandalah’s role
The presentation was created (at least in part) by employees at global consulting firm Mandalah.
The actual author(s) of Mt. Gox’s 27-page business plan (another leaked Mt. Gox document – seen below) may be ambiguous, but the final publisher of this latest file was revealed to be one of Mandalah’s junior employees in Tokyo.
Representatives from Mandalah declined to elaborate on any specifics regarding its relationship with Mt. Gox, citing confidentiality agreements, but they did claim to have never been contracted by Mt. Gox to do “strategic planning” and say they lacked access to sensitive financial information or customer data. A representative clarified:
“Our mission with MtGox has always been to help them create better products and services…our main interest is in bitcoin and creating amazing experiences with it, and MtGox’s customers are the #1 thing on our minds these days.”
A source claims that the same junior staffer who published the business plan document also attended an alleged emergency investor meeting just one day after the “Crisis Strategy Draft” was created.
According to that source, it was at this meeting in which Karpeles and colleague Gonzague Gay-Bouchery first outlined the extent of Mt. Gox’s losses.
The fallout
The chain reaction that followed was rapid. The solicited investors rebuffed Karpeles and his colleagues’ pleas for a bailout, demanded the company come clean to customers and stakeholders immediately, and then notified other industry executives, including those at the Bitcoin Foundation, of the catastrophic losses at Mt. Gox.
These executives promptly reached out to regulatory authorities and began crafting a joint statement condemning Mt. Gox.
Sources also tell me that multiple investors who were approached restricted their own employees from buying or selling bitcoin themselves as soon as they realized the extent of the damage at Mt. Gox.
Further allegations
Mt. Gox has allegedly never conducted a single audit of its customer deposits, and it is believed that Karpeles may have been the only one within the company to have knowledge of how to actually tap the exchange’s cold storage.
It remains unclear exactly how this type of storage leak could have happened over a multi-year period without any knowledge on the part of the executives at Mt. Gox.
As a result of Karpeles’ apparent “Wizard of Oz” status within the organization, it also appears unlikely that the true technical cause of the leak will be fully understood until the embattled CEO speaks. Whether that will happen during an interview or a possible criminal case is unclear.
The latter seems likely, however, as one source believes that Karpeles knew about the pervasive damage of the transaction malleability attacks for several weeks and was engaging in an arbitrage scheme that leveraged the depressed Mt. Gox price to reap gains on other exchanges.
This was allegedly happening well before the exchange’s breaking point this past weekend.
Going forward
Mark Karpeles and Mt. Gox representatives were unreachable for comment, despite repeated attempts.
However, three major industry players that were initially tied to Mt. Gox “acquisition” rumours have either released statements or confirmed (via backchannels) unequivocal denials of any improper ties to Mt. Gox.
The Bitcoin Foundation, Blockchain.info and SecondMarket have by all accounts acted ethically and professionally in the face of a serious scandal. Their speedy clarifications and apparent cooperation with authorities is commendable and suggests that Mt. Gox was a mere bad apple in an otherwise good bunch.
Mt. Gox lived among the Bitcoin community for several years as an early pioneer. Luckily for the industry, it appears to have died alone.
Business Plan MtGox 2014-2017 by twobitidiot
Link: http://www.scribd.com/document_downloads/209535200?extension=pdf&from=embed&source=embed
Ryan Galt is a blogger, entrepreneur and freelance opinion writer for CoinDesk. His opinions do not necessarily reflect CoinDesk’s. You may email him at [email protected], or follow him on twitter @twobitidiot.
Ryan Galt (@twobitidiot) | Published on February 27, 2014 at 11:00 GMT | Companies, Exchanges, Mt. Gox, News
Earlier this week, I published a document I received from a reliable source entitled “Crisis Strategy Draft”, which was allegedly a roadmap to show how Mt. Gox could recover from insolvency despite the mind-blowing loss of nearly 750,000 customer bitcoins.
Since that initial leak, I have had a number of conversations with industry insiders who have spoken about the situation both on and off the record.
They have confirmed the best news possible for Bitcoin given the damning evidence documented in the leaked presentation: Mt. Gox acted alone in its deceit, and ultimately failed in its desperation, to find an investor willing to bail them out.
Although Mt. Gox CEO Mark Karpeles would only admit that the leaked document was “more or less authentic” during a chatlog obtained by Fox Business, I have confirmed that it was, in fact, prepared by Mt. Gox representatives.
Mandalah’s role
The presentation was created (at least in part) by employees at global consulting firm Mandalah.
The actual author(s) of Mt. Gox’s 27-page business plan (another leaked Mt. Gox document – seen below) may be ambiguous, but the final publisher of this latest file was revealed to be one of Mandalah’s junior employees in Tokyo.
Representatives from Mandalah declined to elaborate on any specifics regarding its relationship with Mt. Gox, citing confidentiality agreements, but they did claim to have never been contracted by Mt. Gox to do “strategic planning” and say they lacked access to sensitive financial information or customer data. A representative clarified:
“Our mission with MtGox has always been to help them create better products and services…our main interest is in bitcoin and creating amazing experiences with it, and MtGox’s customers are the #1 thing on our minds these days.”
A source claims that the same junior staffer who published the business plan document also attended an alleged emergency investor meeting just one day after the “Crisis Strategy Draft” was created.
According to that source, it was at this meeting in which Karpeles and colleague Gonzague Gay-Bouchery first outlined the extent of Mt. Gox’s losses.
The fallout
The chain reaction that followed was rapid. The solicited investors rebuffed Karpeles and his colleagues’ pleas for a bailout, demanded the company come clean to customers and stakeholders immediately, and then notified other industry executives, including those at the Bitcoin Foundation, of the catastrophic losses at Mt. Gox.
These executives promptly reached out to regulatory authorities and began crafting a joint statement condemning Mt. Gox.
Sources also tell me that multiple investors who were approached restricted their own employees from buying or selling bitcoin themselves as soon as they realized the extent of the damage at Mt. Gox.
Further allegations
Mt. Gox has allegedly never conducted a single audit of its customer deposits, and it is believed that Karpeles may have been the only one within the company to have knowledge of how to actually tap the exchange’s cold storage.
It remains unclear exactly how this type of storage leak could have happened over a multi-year period without any knowledge on the part of the executives at Mt. Gox.
As a result of Karpeles’ apparent “Wizard of Oz” status within the organization, it also appears unlikely that the true technical cause of the leak will be fully understood until the embattled CEO speaks. Whether that will happen during an interview or a possible criminal case is unclear.
The latter seems likely, however, as one source believes that Karpeles knew about the pervasive damage of the transaction malleability attacks for several weeks and was engaging in an arbitrage scheme that leveraged the depressed Mt. Gox price to reap gains on other exchanges.
This was allegedly happening well before the exchange’s breaking point this past weekend.
Going forward
Mark Karpeles and Mt. Gox representatives were unreachable for comment, despite repeated attempts.
However, three major industry players that were initially tied to Mt. Gox “acquisition” rumours have either released statements or confirmed (via backchannels) unequivocal denials of any improper ties to Mt. Gox.
The Bitcoin Foundation, Blockchain.info and SecondMarket have by all accounts acted ethically and professionally in the face of a serious scandal. Their speedy clarifications and apparent cooperation with authorities is commendable and suggests that Mt. Gox was a mere bad apple in an otherwise good bunch.
Mt. Gox lived among the Bitcoin community for several years as an early pioneer. Luckily for the industry, it appears to have died alone.
Business Plan MtGox 2014-2017 by twobitidiot
Link: http://www.scribd.com/document_downloads/209535200?extension=pdf&from=embed&source=embed
Ryan Galt is a blogger, entrepreneur and freelance opinion writer for CoinDesk. His opinions do not necessarily reflect CoinDesk’s. You may email him at [email protected], or follow him on twitter @twobitidiot.
How Bitcoin Smashes Mobile Payments Barriers
Jon Matonis (@jonmatonis) | Published on February 27, 2014 at 08:00 GMT | Analysis
Open Letter to the Mobile World Congress, Barcelona 2014, from Jon Matonis, Executive Director, Bitcoin Foundation
I have worked in the currency, payments, and cryptography business for over 20 years, at businesses including Visa, Sumitomo Bank, VeriSign, and Hushmail.
The technological developments now occurring in peer-to-peer payments and online distributed trust ledgers will shake the current financial system to its core. Ultimately, this will be a good thing for society and, therefore, it should not be feared or resisted.
Of course, I am speaking about the bitcoin network and the bitcoin monetary unit which runs over that network.
If I had to describe bitcoin in just three words, I would say it is: Money Without Government.
Alternatively, I could say bitcoin is Survivable Digital Scarcity. In just five short years, bitcoin has unequivocally demonstrated that we don’t need kings to coin our money and we don’t need central banks issuing debt-based paper notes and deciding what our money should be. Money is anything we collectively determine it to be.
Ladies and gentlemen, the fiat emperor has no clothes. The illusion of legal tender has been exposed.
Just like the untainted child in the Hans Christian Andersen fairy tale, some of us are beginning to notice. It’s not the illusion itself that so offends our sensibilities, but more the notion that a competitive illusion is not to be permitted. If a free market illusion voluntarily agreed to from the bottom up is so desperately feared, then the protectors of the state-sanctioned illusion must not have the most benevolent of motives in store for us.
At some level, all money is an illusion that we share and as such we must be free to determine that shared illusion from the bottom up, rather than have it dictated to us from the top down. Even with gold, the most tangible of all monies, it is estimated that 95% of its value is attributed to its illusory monetary exchange properties.
With a bitcoin monetary unit, seigniorage becomes a thing of the past. And, as users of the monetary unit, we are not insulted by the insidious practice of having zeros added to the left of the decimal point. Bitcoin is infinitely sub-dividable to the right of the decimal point, as it should be.
Governments are not opposed to a shared illusion, they only want it to be their shared illusion.
Just as the copyright world is being radically transformed by distributed file-sharing protocols like BitTorrent, the legal tender facade will be transformed by decentralized survivable cryptocurrency because, in the end, legal tender is simply an unearned copyright privilege over money.
Additionally, most governments are sorely mistaken when it comes to bitcoin because, in order to thrive, bitcoin requires only market-based legitimacy – not government-sanctioned legitimacy. This is enormously frustrating for them and it is something not witnessed on this scale before.
OK, now that we have placed bitcoin in that proper monetary context, we can turn our attention directly to mobile.
For some in the mobile payments space, the following will be difficult to hear.
Traditionally plagued by a variety of barriers, mobile payments have seen lacklustre adoption around the world. This is particularly true in the developed economies, where a trio of competing interests breeds perpetual infighting and stagnation.
The holy trifecta in mobile payments includes governments, banks, and operators – each trying desperately to secure their own piece of the coveted payments pie, exerting maximum influence along the way. This, in my opinion, has strangled mobile payments progress and adoption.
Fortunately, bitcoin and its decentralized network bypass these three quarreling constituencies.
First, the bitcoin monetary unit is nonpolitical in nature and it doesn’t require an intermediary for issuance, authorization, clearing, and settlement functions. Those are performed via the public block chain.
Second, bank accounts and card networks are not required for clearing bitcoin transactions, eliminating the need for those silly dongles and awkward squares.
Third, since bitcoin wallets can run as standalone apps on smartphones utilizing QR codes, specialized accounts with operators become unnecessary, as does specialized hardware at the point of sale.
Guess what? These point-to-point bitcoin-powered mobile payments are already happening today. Furthermore, they are happening over your networks or at the very least over optional Wi-Fi.
Bitcoin is the quintessential disruptor, for not only does it disrupt established primary-level players in the field of payments, like Visa, MasterCard, and PayPal, but it elegantly disrupts the very nature of monetary authority. Bitcoin is disruption within disruption.
Money naturally operates like a virus and that makes bitcoin potently viral. It is viral cubed, in fact – money on the Internet with a network effect. A monetary unit does not stop expanding until it runs into artificially delineated boundaries or achieves widespread dominance.
An undisputed early advantage will be bestowed upon those that recognize and harness bitcoin’s transformative role in mobile.
It is my sincere hope that we will never again have to sit through a “disruption in payments” conference without hearing the phrase bitcoin.
Thank you.
Jon Matonis
Jon Matonis (@jonmatonis) | Published on February 27, 2014 at 08:00 GMT | Analysis
Open Letter to the Mobile World Congress, Barcelona 2014, from Jon Matonis, Executive Director, Bitcoin Foundation
I have worked in the currency, payments, and cryptography business for over 20 years, at businesses including Visa, Sumitomo Bank, VeriSign, and Hushmail.
The technological developments now occurring in peer-to-peer payments and online distributed trust ledgers will shake the current financial system to its core. Ultimately, this will be a good thing for society and, therefore, it should not be feared or resisted.
Of course, I am speaking about the bitcoin network and the bitcoin monetary unit which runs over that network.
If I had to describe bitcoin in just three words, I would say it is: Money Without Government.
Alternatively, I could say bitcoin is Survivable Digital Scarcity. In just five short years, bitcoin has unequivocally demonstrated that we don’t need kings to coin our money and we don’t need central banks issuing debt-based paper notes and deciding what our money should be. Money is anything we collectively determine it to be.
Ladies and gentlemen, the fiat emperor has no clothes. The illusion of legal tender has been exposed.
Just like the untainted child in the Hans Christian Andersen fairy tale, some of us are beginning to notice. It’s not the illusion itself that so offends our sensibilities, but more the notion that a competitive illusion is not to be permitted. If a free market illusion voluntarily agreed to from the bottom up is so desperately feared, then the protectors of the state-sanctioned illusion must not have the most benevolent of motives in store for us.
At some level, all money is an illusion that we share and as such we must be free to determine that shared illusion from the bottom up, rather than have it dictated to us from the top down. Even with gold, the most tangible of all monies, it is estimated that 95% of its value is attributed to its illusory monetary exchange properties.
With a bitcoin monetary unit, seigniorage becomes a thing of the past. And, as users of the monetary unit, we are not insulted by the insidious practice of having zeros added to the left of the decimal point. Bitcoin is infinitely sub-dividable to the right of the decimal point, as it should be.
Governments are not opposed to a shared illusion, they only want it to be their shared illusion.
Just as the copyright world is being radically transformed by distributed file-sharing protocols like BitTorrent, the legal tender facade will be transformed by decentralized survivable cryptocurrency because, in the end, legal tender is simply an unearned copyright privilege over money.
Additionally, most governments are sorely mistaken when it comes to bitcoin because, in order to thrive, bitcoin requires only market-based legitimacy – not government-sanctioned legitimacy. This is enormously frustrating for them and it is something not witnessed on this scale before.
OK, now that we have placed bitcoin in that proper monetary context, we can turn our attention directly to mobile.
For some in the mobile payments space, the following will be difficult to hear.
Traditionally plagued by a variety of barriers, mobile payments have seen lacklustre adoption around the world. This is particularly true in the developed economies, where a trio of competing interests breeds perpetual infighting and stagnation.
The holy trifecta in mobile payments includes governments, banks, and operators – each trying desperately to secure their own piece of the coveted payments pie, exerting maximum influence along the way. This, in my opinion, has strangled mobile payments progress and adoption.
Fortunately, bitcoin and its decentralized network bypass these three quarreling constituencies.
First, the bitcoin monetary unit is nonpolitical in nature and it doesn’t require an intermediary for issuance, authorization, clearing, and settlement functions. Those are performed via the public block chain.
Second, bank accounts and card networks are not required for clearing bitcoin transactions, eliminating the need for those silly dongles and awkward squares.
Third, since bitcoin wallets can run as standalone apps on smartphones utilizing QR codes, specialized accounts with operators become unnecessary, as does specialized hardware at the point of sale.
Guess what? These point-to-point bitcoin-powered mobile payments are already happening today. Furthermore, they are happening over your networks or at the very least over optional Wi-Fi.
Bitcoin is the quintessential disruptor, for not only does it disrupt established primary-level players in the field of payments, like Visa, MasterCard, and PayPal, but it elegantly disrupts the very nature of monetary authority. Bitcoin is disruption within disruption.
Money naturally operates like a virus and that makes bitcoin potently viral. It is viral cubed, in fact – money on the Internet with a network effect. A monetary unit does not stop expanding until it runs into artificially delineated boundaries or achieves widespread dominance.
An undisputed early advantage will be bestowed upon those that recognize and harness bitcoin’s transformative role in mobile.
It is my sincere hope that we will never again have to sit through a “disruption in payments” conference without hearing the phrase bitcoin.
Thank you.
Jon Matonis
How To Prove That Exchanges Really Have Your Money
Danny Bradbury (@dannybradbury) | Published on February 27, 2014 at 05:19 GMT | Analysis
From all the news surrounding Gox’s demise, it seems pretty certain at this point that it was operating with a fractional reserve, trading with only a small proportion of the money that it was supposed to have. The question now is, how can we be sure that others aren’t doing it, too?
Whether you’re a straightforward bitcoin wallet or an exchange, the hope is that you’ll have enough bitcoins to cover everyone’s accounts, should they all decide to empty their funds at once. This week, large bitcoin companies seemed eager to persuade people that they did.
In their joint statement condemning Gox, five major exchanges explained that they would be “coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner”. How do they do that, exactly?
“I imagine that would be handled by the MTL regulators as they require permissible funds and when they come onsite to do the audit it would be apparent,” said Megan Burton, the CEO of exchange CoinX, which is taking a state-by-state approach to getting its money transmission license in the US.
“Most companies will perform self-audits in the near term and potentially hire an outside auditing firm when appropriate,” said Jaron Lukasiewicz, the founder of New York-based exchange Coinsetter. “We are also discussing creative ways we can give customers greater transparency, and we will announce them once those plans are finalized.”
Neither Coinsetter or CoinX were cosignatories of the joint statement released this week. Coinbase came closer to an audit than anyone. It blogged, already discussed here, in which Andreas Antonopoulos, the CSO at Blockchain.info, visited the office to check things over.
He published a short, six-paragraph report describing how he checked the firm’s cold storage addresses in the block chain. He also made Coinbase conduct a transaction on a random address in its block chain to ensure ownership.
Is this enough?
Financial audits can be extensive affairs, in which beancounters nose their way through reams of paperwork relating to accounting practices and financial controls. There is generally an audit committee which oversees the whole process. By the time that the audit is done, the likes of EY and PwC have gone over things with a fine toothcomb.
Barry Silbert, the head of the Bitcoin Investment Trust, who is now said to be preparing an exchange. Silbert has said that many auditors aren’t well-equipped to deal with bitcoin, not least because bitcoin addresses are anonymous.
“Access does not equal ownership, so you cannot prove title,” he told CoinDesk late last year. Nevertheless, he has enlisted one, so it can be done, apparently.
Blockchain transparency
Coinkite is doing its best to provide customer accountability. The Canadian company, which operates wallets for its users, released a link to what it calls an audit, although this isn’t verified by a third party. Instead, it’s a listing of the individual inputs and outputs contained within the user’s own wallet, and it’s drawn from the block chain.
Rodolfo Novak, co-founder of the firm, says that it’s able to do that because it relies on the block chain for its data. All transactions are conducted on the block chain, he explains, which makes it easy for users to see what’s going on. “We don’t have any off-chain transactions. Even the fees you pay to us are block chain transactions.”
Novak wonders why anyone would want to resort to a centralized audit at all. After all, his argument goes, wasn’t bitcoin supposed to be about decentralized trust?
“We decided to do this in a way that there is no need for an old system,” Novak says. “You are the owner of your money, and you can check it. I could call PwC or whatever, and they could sign off that they saw it. But we don’t need that.”
CoinDesk asked Coinbase about the access and ownership question, but it directed us to its blog post and refused further comment.
Coinkite’s block chain-based transparency is one of the things that sets it apart from the co-signatories to the joint statement. These companies don’t seem to run their operations in the same way.
In particular, it can be difficult for exchanges to achieve block chain transparency. “The main thing is that the order book can’t be block chained. It needs to be fast. The actual settlement of that order book could be block chained, but it takes a phenomenal amount of technology to be written and to achieve that,” Novak muses.
Decentralized audits
Is there a way, then, to create decentralized means of proving a non-fractional reserve? The brouhaha around Gox has rekindled interest in a proposal by Gregory Maxwell, one of the core developers.
In a traditional exchange, it may be difficult to publicly state how much the exchange should have, and then publicly prove that they have it, without listing all of the account balances for proof. That’s a privacy nightmare, of course.
Maxwell’s proposal uses a node – think of it as a leaf on a tree – with two things in it: a hash indicating the specific account, and a value of bitcoins in that account. All the nodes connect back to a central node (call it the trunk of the tree, which knows about all of the leaves).
The exchange or wallet publishes the central node, which gives the entire value of all the nodes in the exchange, and then it gives the owner of a ‘leaf’ its value, while also confirming that it has also checked all of the leaves between it and the trunk.
The user wouldn’t know anything about the other accounts, but it could compare its own value with the exchange’s total reserves, to make sure that it had enough to cover at least that account’s value.
As Maxwell says: “It doesn’t prevent fractional reserve — but if used well, it prevents dishonest fractional reserve.”
Bitcoinity, which monitors various exchanges, likes the idea so much that it wants to promote the first exchange to use it, on its site.
Any takers?
Danny Bradbury (@dannybradbury) | Published on February 27, 2014 at 05:19 GMT | Analysis
From all the news surrounding Gox’s demise, it seems pretty certain at this point that it was operating with a fractional reserve, trading with only a small proportion of the money that it was supposed to have. The question now is, how can we be sure that others aren’t doing it, too?
Whether you’re a straightforward bitcoin wallet or an exchange, the hope is that you’ll have enough bitcoins to cover everyone’s accounts, should they all decide to empty their funds at once. This week, large bitcoin companies seemed eager to persuade people that they did.
In their joint statement condemning Gox, five major exchanges explained that they would be “coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner”. How do they do that, exactly?
“I imagine that would be handled by the MTL regulators as they require permissible funds and when they come onsite to do the audit it would be apparent,” said Megan Burton, the CEO of exchange CoinX, which is taking a state-by-state approach to getting its money transmission license in the US.
“Most companies will perform self-audits in the near term and potentially hire an outside auditing firm when appropriate,” said Jaron Lukasiewicz, the founder of New York-based exchange Coinsetter. “We are also discussing creative ways we can give customers greater transparency, and we will announce them once those plans are finalized.”
Neither Coinsetter or CoinX were cosignatories of the joint statement released this week. Coinbase came closer to an audit than anyone. It blogged, already discussed here, in which Andreas Antonopoulos, the CSO at Blockchain.info, visited the office to check things over.
He published a short, six-paragraph report describing how he checked the firm’s cold storage addresses in the block chain. He also made Coinbase conduct a transaction on a random address in its block chain to ensure ownership.
Is this enough?
Financial audits can be extensive affairs, in which beancounters nose their way through reams of paperwork relating to accounting practices and financial controls. There is generally an audit committee which oversees the whole process. By the time that the audit is done, the likes of EY and PwC have gone over things with a fine toothcomb.
Barry Silbert, the head of the Bitcoin Investment Trust, who is now said to be preparing an exchange. Silbert has said that many auditors aren’t well-equipped to deal with bitcoin, not least because bitcoin addresses are anonymous.
“Access does not equal ownership, so you cannot prove title,” he told CoinDesk late last year. Nevertheless, he has enlisted one, so it can be done, apparently.
Blockchain transparency
Coinkite is doing its best to provide customer accountability. The Canadian company, which operates wallets for its users, released a link to what it calls an audit, although this isn’t verified by a third party. Instead, it’s a listing of the individual inputs and outputs contained within the user’s own wallet, and it’s drawn from the block chain.
Rodolfo Novak, co-founder of the firm, says that it’s able to do that because it relies on the block chain for its data. All transactions are conducted on the block chain, he explains, which makes it easy for users to see what’s going on. “We don’t have any off-chain transactions. Even the fees you pay to us are block chain transactions.”
Novak wonders why anyone would want to resort to a centralized audit at all. After all, his argument goes, wasn’t bitcoin supposed to be about decentralized trust?
“We decided to do this in a way that there is no need for an old system,” Novak says. “You are the owner of your money, and you can check it. I could call PwC or whatever, and they could sign off that they saw it. But we don’t need that.”
CoinDesk asked Coinbase about the access and ownership question, but it directed us to its blog post and refused further comment.
Coinkite’s block chain-based transparency is one of the things that sets it apart from the co-signatories to the joint statement. These companies don’t seem to run their operations in the same way.
In particular, it can be difficult for exchanges to achieve block chain transparency. “The main thing is that the order book can’t be block chained. It needs to be fast. The actual settlement of that order book could be block chained, but it takes a phenomenal amount of technology to be written and to achieve that,” Novak muses.
Decentralized audits
Is there a way, then, to create decentralized means of proving a non-fractional reserve? The brouhaha around Gox has rekindled interest in a proposal by Gregory Maxwell, one of the core developers.
In a traditional exchange, it may be difficult to publicly state how much the exchange should have, and then publicly prove that they have it, without listing all of the account balances for proof. That’s a privacy nightmare, of course.
Maxwell’s proposal uses a node – think of it as a leaf on a tree – with two things in it: a hash indicating the specific account, and a value of bitcoins in that account. All the nodes connect back to a central node (call it the trunk of the tree, which knows about all of the leaves).
The exchange or wallet publishes the central node, which gives the entire value of all the nodes in the exchange, and then it gives the owner of a ‘leaf’ its value, while also confirming that it has also checked all of the leaves between it and the trunk.
The user wouldn’t know anything about the other accounts, but it could compare its own value with the exchange’s total reserves, to make sure that it had enough to cover at least that account’s value.
As Maxwell says: “It doesn’t prevent fractional reserve — but if used well, it prevents dishonest fractional reserve.”
Bitcoinity, which monitors various exchanges, likes the idea so much that it wants to promote the first exchange to use it, on its site.
Any takers?
Unilateral Statement Regarding Mt. Gox from an Insider
(Jesse is CEO of Kraken.com and Payward.com - largest BTC / EURO exchange http://bitcoincharts.com/markets/currency/EUR.html)
I am deeply saddened to hear of the tremendous loss suffered by the Bitcoin community today. Undoubtedly, thousands of lives have been destroyed and innocent people have been left in financial ruin. I’m not often short on imagination but how the damage got to be so severe without anyone noticing is unfathomable. I can’t help but be angry, and frustrated and depressed. All the hard work we’ve done to bring Bitcoin in to the mainstream and now this, and the people. Fuck.
read more:
http://jesse.forthewin.com/blog/2014/02/unilateral-statement-regarding-fucked-up-shit-and-the-greater-good.html
(Jesse is CEO of Kraken.com and Payward.com - largest BTC / EURO exchange http://bitcoincharts.com/markets/currency/EUR.html)
I am deeply saddened to hear of the tremendous loss suffered by the Bitcoin community today. Undoubtedly, thousands of lives have been destroyed and innocent people have been left in financial ruin. I’m not often short on imagination but how the damage got to be so severe without anyone noticing is unfathomable. I can’t help but be angry, and frustrated and depressed. All the hard work we’ve done to bring Bitcoin in to the mainstream and now this, and the people. Fuck.
read more:
http://jesse.forthewin.com/blog/2014/02/unilateral-statement-regarding-fucked-up-shit-and-the-greater-good.html
under bitcoin discussion there is a separate press section in this forum to post news about crypto currencies you can post your news there !!
I know. We talked about it here. But looks like people love more to have all news in one thread. And nicely organized , nice timeline. For me that press board is just a mess. You can take look at poll. People love this idea. And i will keep doing it.
under bitcoin discussion there is a separate press section in this forum to post news about crypto currencies you can post your news there !!
Bitcoiners Are Unfazed As Senator Manchin Calls For US Treasury To Ban Bitcoin
Caleb Chen 26/02/2014
Those who truly comprehend Bitcoin’s technology are aware of the futility in trying to “ban Bitcoin.” I might be more inclined to believe the possibility of Bitcoin being banned when,if ever, I see BitTorrent banned.
Earlier today, Rob Wile of BI published this article detailing Senator Joe Manchin III (D-WV) and his call for the US Treasury, and a host of other financial regulatory bodies within the United States, to ban Bitcoin. That’s right, Senator Manchin sent a letter to a long list of important names in the US government asking them specifically to ban Bitcoin.
The overzealous call for Bitcoin’s ban obviously comes on the heels of Mt. Gox shuttering its doors. The mainstream media is reeling in self-induced confusion and chaos; Bitcoiners on the other side of the coin, have actually seen a double digit rise in the exchange rate since the news that the damning document leaked from Mt. Gox was actually authentic.
These types of poorly researched publications about Bitcoin is getting very, very, very, very, very, very dated. Even the newest Bitcoiner with but a few satoshi to his name and one Moronic Monday Bitcoin thread under his belt, can spot all the blatant lies in Senator Manchin’s piece of “work.”
Senator Carper, made a more reasoned statement regarding recent events where he asked the government to look into regulation. Even this might be too much political involvement for some Bitcoiners’ tastes; however, the differences between Senator Carper’s understanding of Bitcoin and Senator Manchin’s understanding of Bitcoin are abundantly clear.
If you enjoyed Kyle Torpey’s thorough trouncing of Professor Bitcorn, stay tuned to CCN because I believe he has some words for Senator Manchin forthcoming as well.
Read the full text of Senator Manchin’s letter on his website.
I’ve highlighted a few talking points for us all to discuss.
manchin on Bitcoin
Senator Manchin has revealed just how little he knows about Bitcoin. Photo from AP
“It also means that Bitcoin provides a unique digital fingerprint, which allows for anonymous and irreversible transactions.”
I love Bitcoin’s irreversible transactions, and if you’ve ever paid with cash to save 5% at a brick and mortar location then you also like irreversible transactions. 1% of the worlds GDP is lost on an annual basis due to fraud and chargebacks, Bitcoin would alleviate that problem in ways people like Senator Manchin clearly can’t even understand.
More importantly, “unique” and “anonymous” don’t always mix very well; in fact, they actually contradict each other most of the time. This is exactly why Bitcoin isn’t “anonymous” such that it will forever hinder law enforcement activities; rather, Bitcoin is merely “pseudonymous”. The privacy of individuals are protected in ways that the current financial system cannot provide.
Indeed, it has been banned in two different countries—Thailand and China—and South Korea stated that it will not recognize Bitcoin as a legitimate currency.
Thailand just had a bank run, good thing Bitcoin was clarified as legal there. China only banned third party payment processors to work with Bitcoin, and the major Bitcoin exchanges have long since found a way to service their customers.
“I am most concerned that as Bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.”
Besides the cold hard fact that China and Thailand haven’t banned Bitcoin it any way shape or form, claiming that other countries will ban Bitcoin and Americans would somehow be buying the entire time shows an utter lack of appreciation for the driving factors being Bitcoin adoption (Here’s a hint Senator, money laundering isn’t the primary concern).
Needless to say, Bitcoin won’t be banned in other countries for the same reason it won’t be banned in the United States. Not unless the politicians there are all carbon copies of Senator Manchin. That reason is simply this: Bitcoin is good for the people, Bitcoin is good for every business, and most of all Bitcoin has the potential to break the hegemonic hold that the US has on the world financial system.
“As of December 2013, the Consumer Price Index (CPI) shows 1.3% inflation, while a recent media report indicated Bitcoin CPI has 98% deflation. In other words, spending Bitcoin now will cost you many orders of wealth in the future. This flaw makes Bitcoin’s value to the U.S. economy suspect, if not outright detrimental.”
Let’s take a step back from the whole Bitcoiners vs. unenlightened Bankster paradigm and examine these statements through the lens of logic and the English language. Spending Bitcoins now will only cost you many orders of wealth in the future, if Bitcoin is worth many orders of wealth in the future.
What Senator Manchin has revealed here is a blind adherence to CPI data without even a second thought to how the data is collected or what it must mean for Bitcoin adoption.
If you live in West Virginia, I apologize but it is your civic duty to contact your Senator and tell him to rescind his statements before they damage his credibility… Just this American’s patriotic perspective.
Caleb Chen 26/02/2014
Those who truly comprehend Bitcoin’s technology are aware of the futility in trying to “ban Bitcoin.” I might be more inclined to believe the possibility of Bitcoin being banned when,if ever, I see BitTorrent banned.
Earlier today, Rob Wile of BI published this article detailing Senator Joe Manchin III (D-WV) and his call for the US Treasury, and a host of other financial regulatory bodies within the United States, to ban Bitcoin. That’s right, Senator Manchin sent a letter to a long list of important names in the US government asking them specifically to ban Bitcoin.
The overzealous call for Bitcoin’s ban obviously comes on the heels of Mt. Gox shuttering its doors. The mainstream media is reeling in self-induced confusion and chaos; Bitcoiners on the other side of the coin, have actually seen a double digit rise in the exchange rate since the news that the damning document leaked from Mt. Gox was actually authentic.
These types of poorly researched publications about Bitcoin is getting very, very, very, very, very, very dated. Even the newest Bitcoiner with but a few satoshi to his name and one Moronic Monday Bitcoin thread under his belt, can spot all the blatant lies in Senator Manchin’s piece of “work.”
Senator Carper, made a more reasoned statement regarding recent events where he asked the government to look into regulation. Even this might be too much political involvement for some Bitcoiners’ tastes; however, the differences between Senator Carper’s understanding of Bitcoin and Senator Manchin’s understanding of Bitcoin are abundantly clear.
If you enjoyed Kyle Torpey’s thorough trouncing of Professor Bitcorn, stay tuned to CCN because I believe he has some words for Senator Manchin forthcoming as well.
Read the full text of Senator Manchin’s letter on his website.
I’ve highlighted a few talking points for us all to discuss.
manchin on Bitcoin
Senator Manchin has revealed just how little he knows about Bitcoin. Photo from AP
“It also means that Bitcoin provides a unique digital fingerprint, which allows for anonymous and irreversible transactions.”
I love Bitcoin’s irreversible transactions, and if you’ve ever paid with cash to save 5% at a brick and mortar location then you also like irreversible transactions. 1% of the worlds GDP is lost on an annual basis due to fraud and chargebacks, Bitcoin would alleviate that problem in ways people like Senator Manchin clearly can’t even understand.
More importantly, “unique” and “anonymous” don’t always mix very well; in fact, they actually contradict each other most of the time. This is exactly why Bitcoin isn’t “anonymous” such that it will forever hinder law enforcement activities; rather, Bitcoin is merely “pseudonymous”. The privacy of individuals are protected in ways that the current financial system cannot provide.
Indeed, it has been banned in two different countries—Thailand and China—and South Korea stated that it will not recognize Bitcoin as a legitimate currency.
Thailand just had a bank run, good thing Bitcoin was clarified as legal there. China only banned third party payment processors to work with Bitcoin, and the major Bitcoin exchanges have long since found a way to service their customers.
“I am most concerned that as Bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.”
Besides the cold hard fact that China and Thailand haven’t banned Bitcoin it any way shape or form, claiming that other countries will ban Bitcoin and Americans would somehow be buying the entire time shows an utter lack of appreciation for the driving factors being Bitcoin adoption (Here’s a hint Senator, money laundering isn’t the primary concern).
Needless to say, Bitcoin won’t be banned in other countries for the same reason it won’t be banned in the United States. Not unless the politicians there are all carbon copies of Senator Manchin. That reason is simply this: Bitcoin is good for the people, Bitcoin is good for every business, and most of all Bitcoin has the potential to break the hegemonic hold that the US has on the world financial system.
“As of December 2013, the Consumer Price Index (CPI) shows 1.3% inflation, while a recent media report indicated Bitcoin CPI has 98% deflation. In other words, spending Bitcoin now will cost you many orders of wealth in the future. This flaw makes Bitcoin’s value to the U.S. economy suspect, if not outright detrimental.”
Let’s take a step back from the whole Bitcoiners vs. unenlightened Bankster paradigm and examine these statements through the lens of logic and the English language. Spending Bitcoins now will only cost you many orders of wealth in the future, if Bitcoin is worth many orders of wealth in the future.
What Senator Manchin has revealed here is a blind adherence to CPI data without even a second thought to how the data is collected or what it must mean for Bitcoin adoption.
If you live in West Virginia, I apologize but it is your civic duty to contact your Senator and tell him to rescind his statements before they damage his credibility… Just this American’s patriotic perspective.
Hi friends...
As Bitcoin have big news everyday... in Colombia is more easy to buy BTC online without a credit card... by cash, always a local payment.
BTC's Colombian people! www . wacarecargas . com
As Bitcoin have big news everyday... in Colombia is more easy to buy BTC online without a credit card... by cash, always a local payment.
BTC's Colombian people! www . wacarecargas . com
US Senator Calls for Bitcoin Ban in Letter to Top Federal Regulators
Pete Rizzo (@pete_rizzo_) | Published on February 26, 2014 at 21:01 GMT | Regulation, US & Canada
U.S. Senator Joe Manchin, a democrat from West Virginia, has formally sent a letter to federal regulators calling for an outright ban on bitcoin and suggesting that the failure of immediate action could negatively impact US consumers.
Manchin most recently made headlines for allegedly saying that he would vote to repeal the US Patient Protection and Affordable Care Act (ACA), a hallmark law of the Obama administration aimed at expanding public and private insurance coverage, though he later backtracked on the statements.
The letter, which was sent to Federal Reserve Chairwoman Janet Yellen, among other top regulators, called the digital currency “unregulated and unstable”, and cited increasing warnings from central banks around the globe.
Said Manchin:
“I am most concerned that as bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.”
Notably, this is not the first time the senator has spoken out about bitcoin, having written a lengthy letter on the now-defunct online black marketplace Silk Road last June.
Black market connections
Manchin began the letter by providing a background on bitcoin, before addressing his laundry list of concerns about its use.
The senator suggested that bitcoin’s features make it inherently attractive to criminals, who have used the currency to “steal millions from bitcoins users”, and to buy drugs and weapons illegally. Further, he critiqued the irreversible nature of bitcoin transactions as the primary contributor to such issues.
“Bitcoin’s ability to finalize transactions quickly, makes it very difficult, if not impossible, to reverse fraudulent transactions,” the Senator said.
Consumer protection issues
The senator also suggested that bitcoin’s price volatility adds to its dangers, and he cited recent developments at troubled Japan-based exchange Mt. Gox as an example. Manchin painted a picture of bitcoin as an elaborate scheme in which only early buyers, investors and miners benefit. Said Manchin:
“There is no doubt average American consumers stand to lose by transacting in bitcoin.”
In summation, Manchin again returned to the issue of bitcoin’s deflationary nature, comparing its 98% deflation to the 1.3% inflation shown in the Consumer Pricing Index. Manchin used this data to suggest spending bitcoin now would cost users wealth in the future.
“This flaw makes Bitcoin’s value to the U.S. economy suspect, if not outright detrimental,” said Manchin.
Regulatory impact
Manchin is not the only lawmaker weighing in on bitcoin in the wake of issues at Mt. Gox. The Texas State Securities Board and the Alabama Securities Commission have each published consumer warnings in the recent days.
However, this letter, addressed directly to new Federal Reserve Chairwoman Yellen, is unique as it will likely add fuel to speculation that the US central bank head will issue a comment or statement on digital currencies soon.
My toughs: Go fuck ur sister, or doughtier or something ! Fucking retard.
Pete Rizzo (@pete_rizzo_) | Published on February 26, 2014 at 21:01 GMT | Regulation, US & Canada
U.S. Senator Joe Manchin, a democrat from West Virginia, has formally sent a letter to federal regulators calling for an outright ban on bitcoin and suggesting that the failure of immediate action could negatively impact US consumers.
Manchin most recently made headlines for allegedly saying that he would vote to repeal the US Patient Protection and Affordable Care Act (ACA), a hallmark law of the Obama administration aimed at expanding public and private insurance coverage, though he later backtracked on the statements.
The letter, which was sent to Federal Reserve Chairwoman Janet Yellen, among other top regulators, called the digital currency “unregulated and unstable”, and cited increasing warnings from central banks around the globe.
Said Manchin:
“I am most concerned that as bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.”
Notably, this is not the first time the senator has spoken out about bitcoin, having written a lengthy letter on the now-defunct online black marketplace Silk Road last June.
Black market connections
Manchin began the letter by providing a background on bitcoin, before addressing his laundry list of concerns about its use.
The senator suggested that bitcoin’s features make it inherently attractive to criminals, who have used the currency to “steal millions from bitcoins users”, and to buy drugs and weapons illegally. Further, he critiqued the irreversible nature of bitcoin transactions as the primary contributor to such issues.
“Bitcoin’s ability to finalize transactions quickly, makes it very difficult, if not impossible, to reverse fraudulent transactions,” the Senator said.
Consumer protection issues
The senator also suggested that bitcoin’s price volatility adds to its dangers, and he cited recent developments at troubled Japan-based exchange Mt. Gox as an example. Manchin painted a picture of bitcoin as an elaborate scheme in which only early buyers, investors and miners benefit. Said Manchin:
“There is no doubt average American consumers stand to lose by transacting in bitcoin.”
In summation, Manchin again returned to the issue of bitcoin’s deflationary nature, comparing its 98% deflation to the 1.3% inflation shown in the Consumer Pricing Index. Manchin used this data to suggest spending bitcoin now would cost users wealth in the future.
“This flaw makes Bitcoin’s value to the U.S. economy suspect, if not outright detrimental,” said Manchin.
Regulatory impact
Manchin is not the only lawmaker weighing in on bitcoin in the wake of issues at Mt. Gox. The Texas State Securities Board and the Alabama Securities Commission have each published consumer warnings in the recent days.
However, this letter, addressed directly to new Federal Reserve Chairwoman Yellen, is unique as it will likely add fuel to speculation that the US central bank head will issue a comment or statement on digital currencies soon.
My toughs: Go fuck ur sister, or doughtier or something ! Fucking retard.
Reminder: Bitcoin Doesn’t Need Centralized Exchanges or Online Wallets
Kyle Torpey 26/02/2014 ,Posted 7 hours ago
Bitcoin Holy Grail
Decentralized exchanges and hardware wallets will make Bitcoin practical and secure.
Although the current situation at MtGox does not reveal any real issues with the Bitcoin protocol, it’s important to realize that, at this moment, centralized exchanges and online wallets are still necessary for someone to experience this new technology in a user-friendly manner. While many Bitcoin proponents will talk about cold storage and paper wallets all day long, the reality is using those forms of storage aren’t that practical for real world situations. When you move your bitcoins to your phone, you then have to deal with with the fact that your private keys are being stored on a device that is compromised by default. The Bitcoin protocol is all about avoiding third parties and allowing users to transact with each other directly, but the technologies to actually make this work in an easy-to-use fashion are still missing. Having said that, decentralized exchanges and practical hardware wallets are on the way.
No More Goxxing
Decentralized exchanges have been talked about in the Bitcoin space for years, and the reality that they are needed for the Bitcoin ecosystem to turn into a success has never been more obvious. Both NXT and Mastercoin are releasing their versions of decentralized exchanges over the next month or two, and there are a countless number of other projects, most notably Open Transactions, that will also provide solutions for people who wish to buy or sell bitcoins in a decentralized manner. Whether it’s Open Transactions, Mastercoin, Ethereum, Colored Coins, Invictus Innovations, or any other project that gets the job done doesn’t really matter. The point is that we are going to be able to exchange bitcoins for other assets in a P2P manner, just like Bitcoin, in the near future.
The main issue with buying and selling bitcoins on a liquid exchange right now is that you need to trust a centralized third party. This goes against the entire point of Satoshi’s invention of the Bitcoin network. Bitcoin has allowed people to sent funds directly to each other in a P2P manner, so there is no reason that the same concept cannot be applied when it comes to trading any other kind of asset. If we can trade bitcoins in a P2P manner, then there is no reason that we cannot trade some other type of crypto-asset in the same way. Anyone in the world will soon be able to trade bitcoins for euros, dollars, gold, Google stock, or anything else on a decentralized exchange. There will be no reason to use MtGox. In fact, there wouldn’t really be a reason to use any other centralized exchange either. While most of the other exchanges are run by seemingly trustworthy individuals, there’s no reason to trust someone when that trust is not necessary in the first place. Even if you feel like you could trust another individual with your life, not having to trust them at all is still a much better option.
A Secure Bitcoin Wallet You Can Hold in Your Hands
Although decentralized exchanges are an incredible option for people who want to hold their bitcoins on their own computer, there are still many security concerns with that proposal. The reality is that most people don’t know how to secure their own personal computers, and the revelations from Edward Snowden have continued to show that the NSA is working day and night to make truly secure and private data an impossibility. This is where the hardware wallets come into play.
With a hardware wallet, such as TREZOR or Pitbull, you don’t have to worry about anyone gaining access to your private keys. All transactions are sent to a secondary hardware device connected to your computer that does nothing but sign transactions with your private keys. This means that we will eventually have a situation where people are able to use Bitcoin with the convenience of Kryptokit or blockchain.info and the security of cold storage. This holy grail is what will make Bitcoin a practical option for the masses, and it will finally allow us to use this currency and payment system in the way that Satoshi intended.
Bitcoin’s Upper Layer of Failure
With these two technologies, many of the businesses built on top of the Bitcoin protocol will no longer be necessary. The points of failure built on top of the Bitcoin network have always been the main thing holding back mass Bitcoin adoption. Many people have talked about creating trustworthy, reputable replacements for those current, centralized structures, but the real solution is to make the base layer of Bitcoin practical and secure for everyone to use on their own. Let’s not forget the original intentions of the Bitcoin protocol. The Bitcoin experiment will only be a success if we can remove all the middlemen and put the control over currency and finance in the hands of the individual.
Kyle Torpey 26/02/2014 ,Posted 7 hours ago
Bitcoin Holy Grail
Decentralized exchanges and hardware wallets will make Bitcoin practical and secure.
Although the current situation at MtGox does not reveal any real issues with the Bitcoin protocol, it’s important to realize that, at this moment, centralized exchanges and online wallets are still necessary for someone to experience this new technology in a user-friendly manner. While many Bitcoin proponents will talk about cold storage and paper wallets all day long, the reality is using those forms of storage aren’t that practical for real world situations. When you move your bitcoins to your phone, you then have to deal with with the fact that your private keys are being stored on a device that is compromised by default. The Bitcoin protocol is all about avoiding third parties and allowing users to transact with each other directly, but the technologies to actually make this work in an easy-to-use fashion are still missing. Having said that, decentralized exchanges and practical hardware wallets are on the way.
No More Goxxing
Decentralized exchanges have been talked about in the Bitcoin space for years, and the reality that they are needed for the Bitcoin ecosystem to turn into a success has never been more obvious. Both NXT and Mastercoin are releasing their versions of decentralized exchanges over the next month or two, and there are a countless number of other projects, most notably Open Transactions, that will also provide solutions for people who wish to buy or sell bitcoins in a decentralized manner. Whether it’s Open Transactions, Mastercoin, Ethereum, Colored Coins, Invictus Innovations, or any other project that gets the job done doesn’t really matter. The point is that we are going to be able to exchange bitcoins for other assets in a P2P manner, just like Bitcoin, in the near future.
The main issue with buying and selling bitcoins on a liquid exchange right now is that you need to trust a centralized third party. This goes against the entire point of Satoshi’s invention of the Bitcoin network. Bitcoin has allowed people to sent funds directly to each other in a P2P manner, so there is no reason that the same concept cannot be applied when it comes to trading any other kind of asset. If we can trade bitcoins in a P2P manner, then there is no reason that we cannot trade some other type of crypto-asset in the same way. Anyone in the world will soon be able to trade bitcoins for euros, dollars, gold, Google stock, or anything else on a decentralized exchange. There will be no reason to use MtGox. In fact, there wouldn’t really be a reason to use any other centralized exchange either. While most of the other exchanges are run by seemingly trustworthy individuals, there’s no reason to trust someone when that trust is not necessary in the first place. Even if you feel like you could trust another individual with your life, not having to trust them at all is still a much better option.
A Secure Bitcoin Wallet You Can Hold in Your Hands
Although decentralized exchanges are an incredible option for people who want to hold their bitcoins on their own computer, there are still many security concerns with that proposal. The reality is that most people don’t know how to secure their own personal computers, and the revelations from Edward Snowden have continued to show that the NSA is working day and night to make truly secure and private data an impossibility. This is where the hardware wallets come into play.
With a hardware wallet, such as TREZOR or Pitbull, you don’t have to worry about anyone gaining access to your private keys. All transactions are sent to a secondary hardware device connected to your computer that does nothing but sign transactions with your private keys. This means that we will eventually have a situation where people are able to use Bitcoin with the convenience of Kryptokit or blockchain.info and the security of cold storage. This holy grail is what will make Bitcoin a practical option for the masses, and it will finally allow us to use this currency and payment system in the way that Satoshi intended.
Bitcoin’s Upper Layer of Failure
With these two technologies, many of the businesses built on top of the Bitcoin protocol will no longer be necessary. The points of failure built on top of the Bitcoin network have always been the main thing holding back mass Bitcoin adoption. Many people have talked about creating trustworthy, reputable replacements for those current, centralized structures, but the real solution is to make the base layer of Bitcoin practical and secure for everyone to use on their own. Let’s not forget the original intentions of the Bitcoin protocol. The Bitcoin experiment will only be a success if we can remove all the middlemen and put the control over currency and finance in the hands of the individual.
Thanks for the news I love reading them. Definitely will bookmark your thread, and don't disappoint me, because I love reading news about BTC.
Tnx for support.
@ wallert Don't spam pls. U can't invest safely into ponzi. And especially that one that started round 2 and fucked up many people from round 1 . So don't spam pls.
Jump to: