Topic: BITCOIN NEWS EVRYDAY! From multiple sources. - page 23. (Read 51244 times)

Yes they can. But for people who hang out here. This is best way. U can see the poll.

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I wouldn't bother..

People can use google alerts, or simply follow a news aggregator on your preferred social network
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Bitcoin Price Resilient as Antonopoulos, Andreessen Weigh in on Mt. Gox Debacle
Daniel Cawrey (@danielcawrey) | Published on February 25, 2014 at 22:16 GMT | Blockchain, Coinbase, Exchanges, Mt. Gox, News, Wallets

Andreas Antonopoulos, a leading bitcoin developer and current chief security officer at hosted wallet Blockchain.info has released a statement regarding the ongoing issues at once-leading bitcoin exchange Mt. Gox.

The announcement comes less than a day after Mt. Gox halted transactions, and amid growing reports that the once high-profile company may soon close for good.

Wrote Antonopoulos in his official response:

“I fear the worst. Everything I see makes me believe that Gox will never recover and that the funds are most likely lost.

I am devastated by the impact this will have on customers of Gox and I am angry at the irresponsible behavior of Mt. Gox and especially [CEO] Mark Karpeles that will damage the lives of many people.”

The remarks echo the increasing frustration of bitcoin supporters, who have been highly critical of Karpeles and his handling of problems at the exchange for much of the last month, and are notable as Antonopoulos, despite his critical stance to the company, had moved to ease concerns in recent weeks.

Gox’s incompetence

Antonopoulos offered a blow-by-blow account of the issues that have affect Mt. Gox in the past two weeks on his personal blog. He points out the transaction malleability issue Mt. Gox was supposedly experiencing has been a known issue since 2011:

“I publicly excoriated Gox’s incompetent and clownish management and disputed their claim that their problems were due to a ‘bug in bitcoin’.”

During this time, many exchanges were attacked via DDoS, according to Antonopoulos. The goal, he says, was to uncover other bitcoin exchanges that might be vulnerable:

“In response, some exchanges temporarily suspended withdrawals to investigate their implementations and confirm they were robust.”

Gox did develop a fix for the problem on its platform, and Antonopoulos later expressed optimism that the Japan-based exchange might be able to resume normal operations:

“As we started seeing Gox transactions posted on the public blockchain ledger, as reported on reddit and other sites, it appeared to me as if Gox might recover from their latest mess.”

The outage

The statement from Antonopoulos makes clear that he did not know in advance Mt. Gox was headed for massive failure:

“Yesterday afternoon at approximately 3pm PST, Monday February 24th, I heard unconfirmed reports that Gox was in crisis mode and their funds were mostly, if not entirely, gone. This was the first hint I had of any solvency issues.”

It appears that the writing was on the wall for Mt. Gox for some time. But Antonopoulos stated he did not believe that there was any intent of fraud by Mt. Gox CEO, Mark Karpeles.

“I stated that while I had serious misgivings about the competence of Mt.Gox executives and especially Karpeles, I had not seen any indication of bad faith or fraud in the past two years.”

Coinbase Security

As the head of Blockchain.info’s security, Antonopoulos volunteered to examine the measures put in place at Coinbase, and recounted his experience visiting the San Francisco-based hosted wallet the same night of Mt. Gox’s shutdown.

“While Coinbase publicly states that up to 97% of customer funds are in cold storage, at the time of my visit, their internal reporting tool showed that the cold storage system contained 98.8% of customer funds.”

Working into the night, Antonopoulos found that Coinbase had solid processes in place to secure bitcoin for its customers.

“Based on what I observed during my visit and my experience in security, it appears that the Coinbase system contains the expected funds and their cold storage system and process appear to be operating according to security best practices.”

Comparison to MF Global, not the end

While companies like Coinbase have procedures in place to protect bitcoin wallets, the ultimate fate of Mt. Gox is still murky.

Marc Andreessen’s venture capital firm Andreessen Horowitz has invested heavily in bitcoin startups. On CNBC this morning he liked the current situation to that of another financial fraud:


 
Despite a serious systematic failure of a major bitcoin exchange, the price of BTC has been surprisingly resilient.

Source: Bitcoin Charts
Source: Bitcoin Charts
When asked for comment, the Bitcoin Foundation offered the following statement:

“This is certainly not the end of Bitcoin. Perhaps the end of one chapter, but certainly not the end. As our industry matures, we are seeing a second wave of capable, responsible entrepreneurs and investors who are building reliable services for this ecosystem.”

CoinDesk is monitoring this developing story, and will post updates as they become known.

Mt. Gox Only Has Infuriating Announcement Left On Their Website; They Haven’t Yet Announced Their Sale
Caleb Chen  25/02/2014  Posted 6 hours ago

In light of all that was revealed about Mt. Gox last night, people have been eagerly awaiting any form of official communication from the mountain.  Most people have spent too much time looking at this leaked document claiming that Mt. Gox has lost 99% of their funds, several hundred million dollars gone over the course of God knows how long due to a Transaction Malleability leak… The same claim used in the Silk Road 2.0 heist.

Mt. Gox halted trading last night then proceeded to take down their website which up until a little while ago was completely empty.  Throughout all this, the only official word is that which you see below.


mt gox really?

This announcement is so typical Mt. Gox
 

Haven’t Yet Announced Their Sale

That’s right, if you take the leaked document at face value, then it becomes painfully obvious that Mt. Gox is in the middle of a restructuring and takeover.

The long list of complaints that people have against the leaked document include grammar errors, silly icons, and unbelievable data.  The list was very formidable when Two Bit Idiot first leaked the document last night, in fact his original posts received so many downvotes on /r/Bitcoin that I’m beginning to doubt that people even remember where the document came from.  Just as he did with the Fortress Fiasco, Two Bit Idiot again attempted to warn the Bitcoin community and was roundly denounced.  Hopefully, the next time he leaks something for us we will be more receptive.

The document allegedly came from inside Mt. Gox and obviously doesn’t read like an internal memo.  Inside Mt. Gox is where Charlie Shrem has confirmed that he saw outside advisers.  He originally promised Bitcoiners on Reddit a ray of hope by announcing that there was good news “on the horizon.”  He has since publicly apologized for getting peoples’ hopes up and revealed that he thinks what is going on at Mt. Gox is a “bail out.:”

From my personal analysis of the leaked document, and trusting Two Bit Idiot’s source, it is obvious that the document was generated by a non-native English speaker.  Which leads me to believe that Mt. Gox is currently being taken over by an established Asian firm, likely from China or Japan.  The type of firm that knows reputation is as fickle as the mob is.  It is interesting to note that there are several now-giant companies that were in dire straits that were able to completely turn around thanks to being bought out.  Notable from this list are Google, Bain Capital, McDonalds, etc.

My theory is corroborated by Mark Karpeles telling Reuters:

“We should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can’t tell much more for now as this also involves other parties.”

The article broke before Mt. Gox put their half-assed (correct use of the word?) announcement on their vacant website.  I assume that this is just a short announcement to belay the fears of those whom have seen the leaked document.  I truly hope that there is another more official announcement coming “soon-ish.”  Mark owes us that at the very least.

Stay tuned to CCN for more updates on this continuing fiasco.

VC Firm Makes Bid for FBI’s Seized Silk Road Bitcoins
Nermin Hajdarbegovic | Published on February 25, 2014 at 20:22 GMT | Crime, Investors, Law, News, Silk Road News, US & Canada

Investment firm Falcon Global Capital has contacted the US government expressing an interest in buying all of the bitcoins it seized from Silk Road – the online black market that was shut down by the FBI in October of last year.

The US has previously said that the coins will be liquidated, but did not say when or how the process would occur, or to whom they would be sold. The FBI holds 27,000 BTC from the seizure, which are worth around $14m at today’s exchange rates.

Whether the Falcon team is prepared to go the distance on the potentially huge transaction remains to be seen.

Huge stockpile

Falcon Global Capital’s co-founder Brett Stapper told Business Insider that he has not received an official reply from the FBI, so it is still unclear whether the government is willing to make a deal.

Stapper said:

“We have secured backing from a group of private investors to purchase all 27,000 bitcoins for 15% below the daily value.”

It should be noted that the FBI has a lot of bitcoins to sell. In addition to drug-tainted Silk Road coins, the FBI has a much bigger stash: an estimate from Casey Research puts the figure between 5% and 10% of all bitcoins in circulation.

Filling the gap

While it might not be the best time to make such a deal, with troubles at Mt. Gox slashing confidence in bitcoin, Stapper points out that Falcon Global Capital is “not your average investment fund”. He added:

“We are young, hungry, and, eager to fill the gap between Wall Street and bitcoin.”

Falcon Global Capital describes itself as an SEC Regulation D Private Investment Fund that invests “solely in bitcoin markets”. Its mission is simple – the fund wants to allow accredited investors to acquire large amounts of bitcoins, anywhere from $25,000 up to $10m, and to store them safely.

The fund points out that purchasing and storing large amounts of bitcoins is notoriously challenging, so it aims to provide a simple service that can be used by the average investor.

Silk Road gambit

Stapper’s letter to the FBI made it clear that Falcon Global Capital is prepared to offer 15% below market value for the Silk Road forfeiture.

He also offered another option: if the US Government is not interested in selling the bitcoins to the company directly, Stapper is willing to act as consultant to the government, free of charge, to find the best and most profitable way of liquidating the seized bitcoins.

Either way, it would be an ironic end to the Silk Road saga – the government selling the dirty assets below cost to legitimate corporate investors.

If the US Government gives the green light on the deal, Stapper says Falcon Global Capital plans to store the bitcoins in “an insured bitcoin vault”, courtesy of UK-based Elliptic.

Former US Treasury Secretary Calls Bitcoin an “Innovative” Solution
Pete Rizzo (@pete_rizzo_) | Published on February 25, 2014 at 21:42 GMT | Analysis, News

Former US Secretary of the Treasury under President Bill Clinton and past President Emeritus of Harvard University Lawrence Summers has indicated that he believes bitcoin to be a “very, very important development”.

As treasury secretary, Summers is said to have played an integral role in the US handling of several world financial crises, and his prior positions include serving as chief economist at World Bank from 1991 to 1993.

The remarks came after Summers’ speech at the National Association for Business Economics policy conference on 24 February, in which he addressed a wide range of financing topics from the US Federal Reserve’s quantitative easing strategy to virtual currencies such as bitcoin.

Reports indicate that there, Summers stated that he sees bitcoin as part of a broader transition in which information technology is affecting more aspects of American life.

Speaking of the pain points inherent in the current financial system, Summers said:

“It seems bizarre that at this late date, one has to pay as much as one does to use a debit card or to get cash from an ATM or to transfer money to one’s child living abroad.”

The former secretary went on to call bitcoin “an innovative approach” to reducing financial friction, and suggested that it would be only part of a larger concerted effort by the industry to attack these longstanding consumers difficulties.

‘An enormous deal’

Summers also notably compared bitcoin to other innovations that have emerged from California’s famed Silicon Valley, ones that were first written off only to turn out to be “an enormous deal”. Further, he reminded economists that they don’t necessarily have a track record for correctly predicting the outcome of technological advancements.

Said Summers:

“Very serious economists thought that the Internet was going to be no more important than the fax machine, so I’m not willing to dismiss Bitcoin.”

Rare optimism

The news is a rare bright spot in the day’s developments, as following the abrupt shutdown of services at Mt. Gox media outlets and pundits around the globe have begun to criticize bitcoin for its alleged shortcomings as a payments technology.

Supposed financial experts seem to be coming out of the woodwork to capitalize on the news.

For example, Dennis Gartman of the Gartman Letter took to CNBC to decry bitcoin as “nothing more than a scam of the first order”, though an increasing amount of industry experts are leaping to the digital currency’s defense.

BITCOIN PRICE INFO:


BITCOIN PRICE AVERAGE:

Guys time for shot feadback .
Do u guys still reading this ? Don't let me posting like crazy if nobody read it .

SecondMarket’s Barry Silbert to Launch Regulated US Exchange this Summer
Pete Rizzo (@pete_rizzo_) | Published on February 25, 2014 at 18:06 GMT | Companies, Exchanges, Investors, News

Barry Silbert, founder and CEO of New York-based alternative investment marketplace SecondMarket, has confirmed he will be spinning off the entity’s bitcoin businesses into a separate organization dedicated to the exchange of digital currencies, and that this new business aims to be operational by this summer.

Silbert told CoinDesk that he will serve as CEO of the as-yet-unnamed entity, and that the new business will include Bitcoin Investment Trust, its private investment fund for high-wealth investors, and an 11-person trading desk that will support this offering.

The CEO suggests that SecondMarket will be contributing $20m in cash and bitcoin assets to the new endeavor, and that injections from other founding members could potentially increase this total by the time of its 2014 launch. He added:

“The company on day one will be well-capitalized, it will have two fast growing businesses.”

In addition to this big picture vision, Silbert also revealed detailed plans that suggest the process is in motion, and that the exchange has already cleared a number of potential hurdles on its path to market.

A new kind of exchange

The extensive plans represent a drastic shift in how bitcoins have been traditionally bought and sold through exchanges, with the company adopting a “hub-and-spoke” model that will find the exchange only interacting with formal members.

Non-members will not be allowed to facilitate transactions on the exchange, however. Silbert said he doesn’t see this as exclusionary, as such restrictions would inspire the creation of new businesses for the exchange.

Initial members are expected to include Wall Street banks, as well as bitcoin startups such as Circle and Coinbase. Silbert explained:

“If you want to buy and sell bitcoin you have to go through one of the members, and the members are all going to be regulated businesses. They’ll be banks, they’ll be MSBs, they’ll be bitcoin companies, they’ll be broker dealers. The idea is the other exchanges of the world could actually become members of the exchange.”

The result, Silbert said, would be an environment similar to the New York Stock Exchange (NYSE), where individual customers go through brokers such as Fidelity or TD Ameritrade in order to complete transactions. The idea for the market itself is based on the IntercontinentalExchange (ICE) Group.

Founded in 1997, ICE is a 24-hour, Internet-based high capacity trading platforms focused on the global commodity and financial products marketplaces.

By providing a similar environment to existing structures, Silbert hopes money services business (MSBs) and banks will be more open to dealing with bitcoin and bitcoin-related investment services.

How the exchange will work

According to Silbert, the exchange will have three main functions.

Firstly, it will focus on price discovery. Using the gold market as a model, the exchange will attempt to fix the value of bitcoin once or twice a day to allow trading to be pegged at certain values and create a true indicator for the derivatives and mining markets.

“We’re going to attempt to slow things down a bit and create a true indication of bitcon value, once or twice a day, and each of the members though they can trade all day long, or they can tie price to the spot price,” Silbert said.

The new business will also provide clearing services and have a self regulatory organization (SRO), which will ensure that all transactions properly clear with member firms and that exchange activities are governed according to input from regulators and major banks.

A shift in strategy

The news, while not entirely new to observers in the bitcoin industry, does indicate that Silbert has advanced his plans significantly since they were first released. Silbert had not previously suggested that the exchange would be a separate business entity from SecondMarket.

Silbert noted, though, that this change in strategy is not due to regulatory concerns, but is rather a “structural, branding initiative”, one that he saw as intrinsic given that SecondMarket’s core business, which extends beyond bitcoin, has its own customers and brand identity.

Silbert first revealed plans to move SecondMarket toward becoming a licensed, regulated bitcoin exchange on 7th February, when he announced it would begin allowing bitcoin users to sell bitcoins to Bitcoin Investment Trust, though no timeline was given for the proposed launch.

Stemming the Mt. Gox fallout

Silbert suggested that though he has been working on the plans for some time and has even collaborating with unnamed state regulators on the efforts, the apparent failure of Japan-based bitcoin exchange Mt. Gox inspired him to come forward with the news more urgently.

“We did accelerate the announcement with the intention to provide a counterbalance to the news so we could demonstrate to the press at least that there is an effort to fill the void of Gox,” Silbert said.

As for next step, Silbert suggested that with capital secure, the focus would be on finding founding members and formalizing the structure of the new entity’s SRO and clearing business.

Mt. Gox Statement Claims it Made Conscious Decision to Halt Transactions
Nermin Hajdarbegovic | Published on February 25, 2014 at 17:16 GMT | Companies, Exchanges, Mt. Gox, News, US & Canada

The recent revelations regarding Mt. Gox have been attracting a lot of commentary from everyone other than the exchange itself.

However, the troubled exchange has finally issued a brief statement, which is unlikely to reassure its investors.

It is now becoming apparent that Mt. Gox is about to make an announcement, and that it might be rebranded. However, a new brand identity is probably the least of its worries: for all intents and purposes, the exchange appears to be insolvent and defunct. Its latest statement reads:

Dear MtGox Customers,

 

In the event of recent news reports and the potential repercussions on MtGox’s operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

 

Best regards,

MtGox Team

In addition, the statement does not explain why Mt. Gox decided to pull the plug suddenly, at 01:59:06 UTC on Tuesday. In addition, Mt. Gox support is down, too. The support page simply states: “No help desk at support.mtgox.com.”

It is important to bear in mind that Mt. Gox didn’t simply halt trading and issue the statement shortly after its decision – it went completely offline and has not issued any statements until today.

If the aim of the latest statement was to reassure customers, investors and the bitcoin community in general, it falls short of explaining what is actually happening and does not address concerns raised by many publications and bitcoin insiders.

In an email, CEO Mark Karpeles made an unofficial statement to Reuters claiming that bitcoin exchange is “at a turning point”. He added that the Japan-based company “should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can’t tell much more for now as this also involves other parties.” However, these new plans are yet to emerge.

Regulators starting to take notice

The industry reaction to the virtual disappearance of Mt. Gox has been swift. Other exchanges and bitcoin businesses including Blockchain.info and Coinbase did their best to distance themselves from the exchange, issuing a joint statement earlier today.

Regulators are taking notice, too. Homeland Security and Governmental Affairs Committee Chairman Tom Carper has issued a statement on the matter, claiming that US policymakers and regulators can and should learn from the Mt. Gox incident to protect consumers:

“For months, our Committee has been calling on law enforcement, industry, and relevant regulators to come to the table and engage in meaningful dialogue to provide clear rules of the roads for entrepreneurs, investors, and consumers. Without these rules, businesses can’t be successful and consumers can’t be protected. If today’s news is true, it is a sad violation of consumer trust, whether through malicious action or simple incompetence. Regardless, it’s unacceptable.”

The chairman stressed that his staff is working closely with  federal agencies to determine what lessons can be learned from the failure and to make sure that it does not happen in the US. “Our Committee will continue to work closely with relevant U.S. government entities to steer the boat away from nefarious actors – and it’s up to legitimate, law abiding industry partners to row the boat into law abiding waters,” he added.

Fellow US regulator Ben Lawsky, New York’s Superintendent of Financial Services, also waded into the debate.

In a statement via email he maintained that while all the facts are not yet clear “these developments underscore that smart, tailored regulation could play an important role in protecting consumers and the security of the money that they entrust to virtual currency firms.”

Both Carper and Lawsky are clearly throwing the ball to bitcoin industry leaders, if not indirectly passing blame. It seems the lesson learned from the Mt. Gox demise will be a painful one, but will all regulators will reach the same conclusions?

Why Regulating Bitcoin Won’t Work
Ariel Deschapell | Published on February 25, 2014 at 14:00 GMT | Analysis, Law, Regulation, US & Canada

In recent months, bitcoin has skyrocketed in usage and popular attention. With all this increased exposure and rapidly growing business activity, the public sector was bound to get involved sooner or later.

Governments everywhere are increasingly taking steps to regulate bitcoin and other cryptocurrencies, but these responses have been anything but uniform. And, while some countries are taking a ‘hands-off’ approach, these are the exceptions to the general trend.

Canada and New York are both poised to enact new regulatory measures, Russia has been the first developed country to ban bitcoin outright, and China came pretty close to doing so back in December. While countries may be far apart in the way they tackle the issues raised by bitcoin, their fears are the same.

When Russian authorities announced that bitcoin was illegal, they outlined “laundering of money obtained through crime, as well as financing terrorism” as chief concerns, and that sentiment is echoed across many regulatory agencies.

This uniting aspiration to prevent money laundering highlights the inability of various governments to grasp how bitcoin really works, and how far out of their control it is.

Perhaps this ignorance was inevitable, due to the currency’s sudden and meteoric rise, which pressured governments to do something without giving them time to fully understand what was happening.

More harm than good

NetworkIndeed, even now it still seems impossible to predict how bitcoin and its surrounding services will continue to develop.

Nonetheless, this widespread failure to understand the fundamental principles behind the Bitcoin protocol and its implications can lead governments to make decisions that will ultimately harm economic development, while impacting criminal activity very little, if at all. One of the glaringly obvious flaws in the patriotic actions of countries like Russia to protect their citizens from terrorists and money laundering is the simple fact they cannot enforce it.

Bitcoin and all other cryptocurrencies are completely decentralized peer-to-peer systems. There is no central server to shut down, no one to catch and, crucially, no one prosecute – no one that will cause the currencies to crumble, at least.

Put simply, no government on the planet can stop me from downloading a wallet or mining client and connecting to the bitcoin network. Just ask the United States and other developed countries, who have been trying rather unsuccessfully to crack down on illegal P2P torrents over the last decade.

Hence, anyone who is intent on using bitcoin to launder funds overseas, for which it is most apt, can still purchase them from individual dealers, trusted miners, or even purchase their own mining hardware to turn that dirty money into crypto-coins.

Indeed, it’s easy enough to imagine how the bitcoin industry would develop in a permanently illegal context to serve the needs of already illegal organizations, potentially allowing them much more flexibility in both storing and moving funds around the world.

This is what scares governments, but the point they seem to miss, is that for better or worse, they can’t do anything about it.

Bitcoin and the Deep Web

Take Silk Road, the infamous anonymous online marketplace that allowed individuals to purchase just about anything with bitcoin.

Many other such markets exist in the Deep Web, and while there will occasionally be a highly publicised bust, criminal activity still continues on a massive basis. Outlawing bitcoin will not affect these already illegal operations in the slightest.

“Even in areas where bitcoin isn’t considered illegal, any regulatory hurdles will inevitably hamper innovation.”

Increasingly, we are seeing the development of ever more organized Deep Web markets, exchanges, and even private currency systems, as criminals move away from bitcoin to other, more anonymous digital currencies. Guess where most of this development seems to be occurring?

If you guessed the only developed country to fully outlaw all cryptocurrencies, Russia, you would be correct.

Another proposed regulatory measure is a ban on ‘tumblers’ – tools that allow users to confuse the source of their bitcoins. This idea, discussed in New York’s regulatory hearings, further highlights the unwillingness for traditional regulatory institutions to admit that they have no authority over the matter.

Tumblers, like illegal markets and exchanges, can be hosted anonymously from any server in the world. New York’s Department of Financial Services may as well ban the sun from setting, as they’d probably have more leverage there.

Legal trailblazers

The individuals most affected by government regulation are the ones already engaged in legal business activities and ventures – that is, those paving the way for an innovative and competitive financial future, and one with a global reach.

Outlawing bitcoin simply restricts legitimate business and drives the criminals underground, depriving the private sector at large of benefits of the cryptocurrency. Without government approval, legal businesses and users can’t take advantage of bitcoin’s speed, low costs, flexibility, and anonymity.

So, regulation would simply be driving the creation of another black market, while denying the substantial benefits of cryptocurrency to law-abiding citizens everywhere. We can already see in Canada that even naive talk of cracking down on bitcoin has dealt a crushing blow to developing startups.

Even in areas where bitcoin isn’t considered illegal, any regulatory hurdles will inevitably hamper innovation.

Countries with a more laid back approach are the ones likely to benefit most from a bitcoin-fuelled financial revolution – even if it’s still too early to tell what exactly that is going to look like.

Punishing the wrong people

This extrapolates to seemingly conventional regulations, such as requiring exchanges and other services to collect the personal information of customers.

Yes, anonymous exchanges might make it easier for those looking to launder money, but eliminating that avenue by requiring and tracking the personal information of everyone on an exchange does nothing to hinder it, either.

In a world without anonymous exchanges, bitcoin can still be traded privately from person to person, and nothing is stopping fully anonymous Deep Web exchanges and similar services from appearing. The only thing mandatory data collection would ensure is that honest individuals must go through more hurdles and lose even more privacy in the world of Big Data and growing government surveillance.

Level-headed approach

 RegulationsBut is all potential regulation bad? Of course not, there are many steps that can be taken to create more confidence within the mainstream population without severely hampering innovation or the privacy of users.

Somewhere to watch if you are looking for sensible rules in the bitcoin industry seems to be New York, where Ben Lawsky has been noticed for his level-headed approach in bitcoin talks.

One sensible requirement would be to set a standard for security in public businesses that wish to store or facilitate bitcoin conversions or escrow. Another will be to make it illegal for such a business to move, invest, or otherwise use customer funds (essentially fractional reserve banking) without explicitly stating this to customers, who have the right to take their own risks with their investments.

Requiring bitcoin companies to have a good reserve of bitcoin and publicly publish their balance sheets would offer customers some peace of mind.

Naturally all companies operating would be liable for their customers funds, if lost, which would be paid to either them personally, if personal information is recorded, or to an existing offline wallet linked to their account. All of this would help increase legitimacy, confidence, and consumer protection in the industry without negatively affecting innovation, and would also end the “Wild West” era of cryptocurrencies.

Antiquated thinking

While some will argue that all of these standards and services would probably evolve organically from a free market anyway, it at the very least gives regulatory agencies something to do that isn’t just a knee-jerk reaction, with no positive benefits for legitimate businesses and customers.

Currently, most legislators continue to think of bitcoin in antiquated terms, and that’s the problem.

Bitcoin promises to create a whole new paradigm in the game of finance – the biggest technological innovation in the field in many years.

The entire cryptocurrency ecosystem, both legal and otherwise, is evolving so quickly that government regulations can’t even keep up, let alone plan. Legislators are now preparing to make rules for circumstances that have no precedent, that can be hard to understand in their current form, and that will likely not exist tomorrow.

Bitcoin requires a whole new way of thinking, and a much more flexible approach from governments, to allow it to develop legally within the free market and to bestow its benefits on the world’s citizens.

Mt. Gox Allegedly Loses $350m in Bitcoin (744,400 BTC), Rumoured to be Insolvent
Pete Rizzo (@pete_rizzo_) | Published on February 25, 2014 at 07:21 GMT | Companies, Exchanges, Mt. Gox, News

UPDATE (25th February, 09:28 GMT): The source code on Mt. Gox’s website now reads “put announce for mtgox acq here” leading some to speculate on the motives behind the document leak:


A document has surfaced suggesting that troubled Japan-based bitcoin exchange Mt. Gox will close for one month as part of a four-step rebranding plan, and that CEO and former Bitcoin Foundation board member Mark Karpeles will step down from his executive position as part of the process.

The bitcoin price has been tumbling all morning amid the news, hitting a low of $419 so far this morning.

Entitled “Crisis Strategy Draft,” the document suggest the company’s increasingly dire financials are greatly impacting the decision. By Mt. Gox’s own estimates, they say, it has only 2,000 BTC and approximately $22.4m in fiat currencies in its possession.

The document was first reported by Ryan Galt, aka the Two-Bit Idiot, who later confirmed to CoinDesk:

“Several sources familiar with the situation confirmed the legitimacy of the loss claims and the authenticity of the ‘Crisis Strategy’ document.”

The document is branded with the current Mt. Gox logo and a redesigned version, and claims to have detailed inside knowledge of Mt. Gox and its financial affairs, but appears to be written by a team external to Mt. Gox’s current management.

The document is publicly available for viewing here and embedded below this article.

According to the leak, Mt. Gox has lost close to 744,408 BTC or $350m at current prices, and faces an unconfirmed additional $55m in fiat liabilities. The company suggests that theft related to transaction malleability has been ongoing for several years, but was not reported by the company.

We can assume now that withdrawals will not recommence, at least not in the foreseeable future. Customers with Mt. Gox accounts will not be receiving their bitcoins or possibly even other currencies in what is effectively an insolvency, though no-one in an official position is using that word.

At Japan time on the eve of the statements, Japan’s finance and banking regulator the Financial Services Agency (FSA) said it would not be intervening in the issue as it did not view supervision of digital currency exchanges as part of its obligations.

Seeking capital injection

Rumors of the proposal first began circulating on 24th February, when the document was posted on the popular digital currency blog The Two-Bit Idiot. Sources close to the company suggest the document is real, and that it is part of a plan by Mt. Gox to raise investor capital.

The document paints a vivid picture of potential investors who are seeking to raise the necessary capital to continue operations, or at least use whatever remains of Mt. Gox’s brand value to begin a new venture.


coindesk bpi chart

The CoinDesk BPI shows bitcoin’s dramatic price drop following this morning’s revelations.
While admitting Mt. Gox’s image is “broken”, it notes that throughout the recent bad press customers have continued to deposit funds and trade on the exchange.

The document also evokes sweeping rhetoric aimed to tie Mt. Gox’s fate to that of the broader bitcoin community: “The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping MtGox stable and running outweigh the risks. This isn’t about saving MtGox anymore.”

They suggested the demise of its brand could set bitcoin back “five to 10 years”, and that governments should and would react “swiftly and harshly”. “At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public,” the document reads.

Mt. Gox, through intermediary sources, declined to comment on the validity of the reports at press time.

High-profile responses

Coinapult founder and bitcoin entrepreneur Erik Voorhees posted a lengthy and emotional commiseration on Reddit, claiming he had 550 BTC stored with Mt. Gox himself and “will never get any of that back”. He wrote:

“I should have known better, of course. I take responsibility for leaving those funds with an entity that had proven incompetence repeatedly. I chose to ignore even my own warnings, for nothing more than the sake of convenience.”

While laying the blame firmly at the feet of Mt. Gox, he affirmed that bitcoin itself was not at fault and security was not impossible, and implored others to continue “building a new financial order.”

“It won’t be the last calamity endured before the win,” he continued.

Several high-profile bitcoin companies, including Coinbase and Blockchain.info, moved swiftly to distance themselves from Mt. Gox and launch into a strident defense of bitcoin itself in a joint statement:



Rebranding process

The leaked proposal recommends a full rebranding of the company and even a possible relocation to another jurisdiction, like Singapore.

Firstly, it calls for the immediate reduction of liabilities through the injection of new bitcoins and the purchase of coins at depressed prices on its own exchange, in what sources told CoinDesk amounted to a bailout of the embattled exchange.

It paints a wishful picture of brand continuity without promising much to customers, maybe to neutralize any anger bound to arise from a hard shutdown and keep stakeholders’ hopes somewhat alive.

“Customer support will stay operational to deal with people who want to have access to their account/history”, it says, while maintaining that few, if any, staff employed at the current company would remain, particularly CEO Karpeles.

“New branding, means that there are future-forward plans already in the works, and customers will see that MtGox actually has a plan in motion.”

It continues: “The MtGox price is low, making it possible to erase a significant portion of the debt, but it needs to be done quickly.”

Reducing liabilities

The document notes that protecting the image of bitcoin itself is a primary concern, since a failure on Mt. Gox’s scale will be a disaster for digital currency in mainstream eyes.

To reduce this damage, it appears to put out a plea to high profile members of the bitcoin community to inject funds in the order of 200,000 BTC into the exchange, saying “the costs of not doing so are incalculable at this stage.”

“Support from Bitcoin big players and core community – long term, high leverage: Coins for equity, coin donations, and cash injections to buy coins at the cheap MtGox price are some options among many.”

“Bet on future profit to refill the lost coins – Long term, low leverage: Regardless of malleability and regulatory issues, MtGox’s main problems are massive robbery and poor bitcoin accounting. However, the business as an exchange is highly profitable and healthy when run properly.”

Mt. Gox becomes Gox

The document suggests stakeholders would eventually see some kind of return, without saying when or indeed what the return might be. Should the company re-open with a new image, the strategy would be to limit withdrawals both in bitcoin and cash to prevent a bank run.

Note the timeframe (italics are for emphasis):

“With the profit, a meticulous analysis will be made over the coming years to clean the bitcoin balance sheet while running the exchange and generating revenue to pay back stakeholders. New offerings such as additional currencies, low trading fees, etc will give customers a reason to stay with MtGox.”

Management reshuffle

Removing Mt. Gox’s management team seems to be a priority and, ironically, this is an area the Japanese authorities seem willing to regulate: “In Japan, a CEO cannot resign until a new CEO is nominated. In that case customers knows that MtGox is still around and working, but under new management.”

Mark Karpeles

It continues: “Try to reduce the impact and raise stakeholder confidence, and eventually get Mark out.”

One strategy the document puts forward is a “Letter from the CEO”, essentially a mea culpa from Mark Karpeles that admits Mt. Gox’s technology was inadequate to deal with the task of maintaining a bitcoin exchange, both in transaction volumes and response to the the malleability issue.

Mounting evidence

Though doubts remain among certain high-profile sources, at least two of the company’s four listed strategy points seem to have already been confirmed.

For example, Part Three of the four-part plan called for the company to rebrand as Gox.com, a process that it said would require it to “reset all SNS channels for communication”, which is consistent with Mt. Gox deleting its entire history of Twitter posts just yesterday.

Further, a search of the Internet domain registration database WHOIS seems to confirm Mt. Gox’s intention to rebrand as Gox.com. The resource shows that the domain Gox.com has been purchased by Mt. Gox parent company Tibanne Co Ltd, and is currently owned by Karpeles (http://www.whois-search.com/whois/gox.com).

Mt. Gox Trading Halts As Bitcoin Businesses Move to Assure Investors
Daniel Cawrey (@danielcawrey) | Published on February 25, 2014 at 04:14 GMT | Bitstamp, BTC China, Circle, Coinbase, Exchanges, Mt. Gox,

Hours after Japan-based bitcoin exchange Mt. Gox suddenly halted trading activity, the company’s website is now completely offline. Notably, the news follows other troubling signs that all is not right with the exchange, such as its sudden removal of its entire Twitter feed.

Bitcoincharts market section shows the last trade on Mt. Gox occurred at 01:59:06 UTC, which is 8:59 EST.

When users logged into the bitcoin exchange’s website they were experiencing the following error message when trying to buy or sell bitcoins:


tradedisablemtgox

Not long after the suspension in trading activity and subsequent outage, leaders within the digital currency space joined together in a bid to restore confidence in bitcoin and distance themselves from the embattled exchange.

The US-based hosted wallet Coinbase published the statement first, which later appeared on other websites connected with the messaging. The post, titled “Joint Statement Regarding MtGox“, reads:

“The purpose of this document is to summarize a joint statement to the Bitcoin community regarding Mt.Gox.

This tragic violation of the trust of users of Mt.Gox was the result of one company’s actions and does not reflect the resilience or value of bitcoin and the digital currency industry. There are hundreds of trustworthy and responsible companies involved in bitcoin.

We are confident, however, that strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfill the promise that bitcoin offers as the future of payment in the Internet age.

In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds. As part of the effort to re-assure customers, the following services will 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: Coinbase, Kraken, BitStamp, Circle, and BTC China.

We strongly believe in transparent, thoughtful, and comprehensive consumer protection measures. We pledge to lead the way.

Bitcoin operators, whether they be exchanges, wallet services or payment providers, play a critical custodial role over the bitcoin they hold as assets for their customers. Acting as a custodian should require a high-bar, including appropriate security safeguards that are independently audited and tested on a regular basis, adequate balance sheets and reserves as commercial entities, transparent and accountable customer disclosures, and clear policies to not use customer assets for proprietary trading or for margin loans in leveraged trading. It does not appear to any of us that MtGox followed any these essential requirements as a financial services provider.”

The statement also names the following bitcoin industry veterans as supporting this position.

Fred Ehrsam — Co-founder of Coinbase
Jesse Powell — CEO of Kraken
Nejc Kodrič — CEO of Bitstamp.net
Bobby Lee — CEO of BTC China
Nicolas Cary — CEO of Blockchain.info
Jeremy Allaire — CEO of Circle

The outage of Mt. Gox and the subsequent joint release of this statement follows unconfirmed reports about the future of Mt. Gox’s viability as a bitcoin exchnage.

CoinDesk is monitoring this developing story, and will post updates as they become known.

Bitcoin Prices Down As Mt. Gox Concerns Escalate
Pete Rizzo (@pete_rizzo_) | Published on February 25, 2014 at 06:15 GMT | Exchanges, Mt. Gox, News, Prices

Uncertainty about the future of major bitcoin exchange Mt. Gox is growing in light of its recent decision to take down its website amid escalating, as-yet-unconfirmed rumors that it has been the victim of widespread theft and could be nearing a lengthy or even permanent shutdown of its services.

Mt. Gox, through intermediary sources, told CoinDesk that it has no comment on the news at this time.

Now, the market is reacting to the lack of information about the developments.

At press time, prices at major bitcoin exchanges have recorded steep declines in just the last few hours, fueled by consumer uncertainty about the impact of a worst-case scenario at the once-leading bitcoin exchange.

Prices fall

After holding steady at roughly $550 throughout most of the day, the price of bitcoin on BTC-e declined sharply to a low of $480. From 9:00 pm to 12:00 pm EST, the exchange saw prices fall rapidly from $546.

The price of namecoin, novacoin, peercoin and primecoin also declined on the news.

Mt. Gox was likewise a hot discussion point on the exchange’s community chat room, with users debating the future of the exchange and what it will mean for bitcoin prices in the short and long term. Others debated the fate of coins still held in the exchange, though for now, we know only that Japanese regulators are unlikely to step in to mitigate any damage.


Screen Shot 2014-02-25 at 12.26.16 AM

Bitstamp followed a similar trajectory, declining from $505 at 9:00 pm to lows of $452 at 12:00 pm.

Further, data from Bitcoincharts suggests the price of bitcoin was $135 on Mt. Gox at the time it halted services.

Bitcoin businesses brace for worst

Prices were no doubt also affected by a joint announcement from bitcoin business leaders suggesting indirectly that Mt. Gox is no longer trustworthy. Comments on the official releases suggest, however, that wording changes have been made to original statements.

For example, user comments on the posts suggested the original postings contained the word “insolvent”, though current versions do not.

Together, Coinbase, Kraken, Bitstamp, BTC China, Blockchain and Circle discussed how they plan to ensure faith in the bitcoin ecosystem:

“In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds.”

Though the major businesses moved swiftly to distance themselves from Mt. Gox, such actions seem to have done little to stem the damage – at least as far as prices are concerned,.

My toughs: Fucking mtGox i hope they burn to the ground. And stop this maddens so we can have bitcoin at 1000$ again as it should be.

Playboy Plus, a Playboy Brand Website, is Now Accepting Bitcoin
Pete Rizzo (@pete_rizzo_) | Published on February 24, 2014 at 23:49 GMT | Companies, Merchants, News

Screen Shot 2014-02-24 at 1.30.34 PM
Playboy, the iconic media company that publishes Playboy magazine, is now accepting bitcoin payments for its adult entertainment content through at least one of its web properties.

Though not yet formally announced to the public, the payment option is currently live on the Playboy Plus website, and is available to those purchasing one-month, six-month and lifetime memberships through Georgia-based merchant processor BitPay.

Formerly the Playboy Cyber Club, according to its official Twitter account, Playboy Plus is an online component to Playboy magazine that provides original nude picture content.

Playboy’s online branded assets are operated by Montreal-based adult entertainment conglomerate MindGeek, and as such, the bitcoin rollout appears to be part of a broader move toward acceptance from MindGeek, not necessarily Playboy.

The bitcoin payment option appears only accessible through plus.playboy.com, and does not appear when users are prompted for payment via the official Playboy website. iPlayboy, the company’s online magazine archives, is not yet enabled with the payment option either as of press time.


Screen Shot 2014-02-24 at 11.59.17 AM

Why MindGeek matters

While bitcoin’s first association with the Playboy brand may grab the most headlines, the addition of MindGeek (formerly Manwin Group) to the bitcoin ecosystem is undoubtedly more significant.

MindGeek owns a number of major subsidiary brands, including Brazzers and Reality Kings – which themselves operate roughly 30 websites each. Further, MindGeek operates top brands such as YouPorn, PornHub.com and Mofos.

Avi Bitton, CTO of California-based adult movie studio Wicked Pictures, told CoinDesk that Playboy Plus is just the latest in what could become a measured rollout of the payment option across all of MindGeek’s major websites, though he stopped short of confirming such plans.

“It’s a payment option. Think of a large company that owns domains rolling out a payment option. You think that’s going to probably percolate to multiple sites? That’d be a good framework for working things, right?”

Bitton describes himself as a bitcoin advocate and enthusiast working to facilitate adoption in the industry as a whole, though he is not affiliated with MindGeek or Playboy.

Trials begin

News of the MindGeek trial first serviced earlier this February via reddit user Bowiestar, who broke the news that IKnowThatGirl.com, a subsidiary of Mofos and MindGeek, was accepting bitcoin payments for membership plans. The Brazzers brand has been rumored to integrate bitcoin payments, but indications are it has not formally done so.

Speculation began after a reddit Ask Me Anything session in January, in which Brazzers responded cryptically to user questions about whether it would soon accept the digital currency.


Screen Shot 2014-02-14 at 9.55.43 AM

Reddit user Bowiestar, who told CoinDesk he spoke with the Brazzers press team, indicated that if successful, the trial could roll out to more, or possibly all, of MindGeek’s websites.

The IKnowThatGirl trial is also being facilitated by BitPay, adding evidence to the idea the company is conducting a measured rollout. Notably, both Porn.com and Naughty America, the two most recent additions to the list of bitcoin merchants in the adult industry, also accept bitcoin via BitPay.


Screen Shot 2014-02-24 at 11.56.25 AM

Adding to confusion is that the Manwin brand is still displayed on the company’s bitcoin payment prompts on Playboy Plus, despite the fact that the company recently rebranded as MindGeek.

Neither MindGeek nor Playboy responded to requests for further comment, though Bitton suggested that so far reception has been positive internally at MindGeek.

Purchasing

Users who want to purchase membership plans via IKnowThatGirl.com or Playboy Plus can do so by visiting the website and clicking to sign up for a subscription.

At this stage, users will be prompted to create an account and choose their payment method – credit card, check or bitcoin. The following was taken from IKnowThatGirl, though the Playboy Plus checkout is similar.


Screen Shot 2014-02-13 at 5.08.34 PM

Bitcoin users will then need to enter their email address and select their membership plan. Options at IKnowThatGirl include a one-month membership for $39.95 or a year-long membership for $119.95. The lifetime membership on Playboy Plus is the most expensive package at $499.99.


Screen Shot 2014-02-14 at 10.41.27 AM

Finally, users will be prompted with a QR code from BitPay to complete the transaction.

Impact

Adult entertainment websites seem increasingly inclined to test the waters with bitcoin payments, despite noted limitations with subscription payments. Coinbase offers periodic push payments, but these don’t provide regular, automatic billing.

In recent weeks, Porn.com and Naughty America both began taking bitcoin, with Porn.com even increasing its sales by 10% with the payment option. Naughty America has declined to release exact figures, but has been enthusiastic about the results.

But, in terms of global web traffic, the addition of MindGeek’s websites to the list of bitcoin merchants in the adult entertainment world would be significant.

According to lifestyle blog TheRichest:

“They are among the top three bandwidth consumption companies on Earth, operating more than 73 websites in all – free, paid and webcam. It has been reported that the company brings in over $200m annually.”

Pornhub.com ranks #84 in the world in terms of web traffic and is #53 in the United States. Similarly, YouPorn.com ranks #105 globally and #117 in the United States in overall site visitation.

In addition, the Playboy brand is likely to add validity to the movement given its leadership position in the industry.

My toughs: Now this is some wonderful news

Pony Botnet Virus Steals $220,000 from 30 Types of Digital Wallets
Pete Rizzo (@pete_rizzo_) | Published on February 24, 2014 at 23:03 GMT | Crime, News, Wallets

In what is being called one of the most ambitious cyberattacks affecting virtual currency to date, Chicago-based IT security services provider Trustwave has revealed that a crybercrime ring known as Pony botnet is using a Trojan virus to steal from 30 types of digital currency wallets.

Trustwave researchers found that credentials for approximately 700,000 digital wallet, email and desktop  accounts have been compromised, and that roughly $220,000 had been confirmed stolen from 85 digital currency wallets as of the time of writing.

Ziv Mador, director of security research at Trustwave, told CoinDesk that consumer and merchant wallets were both affected by the breach, and that bitcoins, litecoins, primecoins and feathercoins had been stolen in the attack.

But, what makes the Pony botnet unique, Mador said, is the breadth of its assault:

“The new thing about this complaint is that it was widely spread. The pony malware affected hundreds of thousands of machines and scanned for digital wallets from 30 virtual currencies on those computers.”

Trustwave indicates that while the attack has been persisting for months, it stopped suddenly on 24th February. However, in talks with other media outlets, Trustwave suggested it believes the cybercriminal network is still operating.

Initial data

Mador indicates that Trustwave has been following Pony botnet since September 2013. The official company blog post on the findings revealed that virtual currencies weren’t the only digital assets attacked, as 600,000 website login credentials have been stolen by the group to date.

The total confirmed theft so far includes 335 bitcoins, 280 litecoins, 33 primecoins and 46 feathercoins. Trustwave provides a full list of the affected currencies, as well as charts that detail the coordinated efforts of Pony botnet’s attacks in its blog post.


Screen Shot 2014-02-24 at 5.41.45 PM

Stolen passwords across all affected digital assets – not just digital currency wallets – were most commonly retrieved from consumers in Germany, Poland and Italy, with roughly 50% of stolen passwords originating in these locations.

Protecting your wallet from attacks

Trustwave noted that Pony botnet likely found virtual wallets attractive, given their inherent qualities that provide for irreversible transactions, and the ease with which they can be exchanged for fiat. Further, once it has obtained a user’s wallet.dat file, Trustwave noted that the true owner is impossible to reveal.

Still, relatively simple protections can stop the Pony botnet. Said Mador:

“If they use that option and encrypt their wallets with a strong key, then they should be fine, even if the malware were to infect the digital wallet, the botnet would not be able to generate transactions from that wallet.”

Those who believe their wallet may have been compromised by the attack can use a free tool provided by Trustwave that searches for affected wallets by public keys.



LINK: https://www3.trustwave.com/support/labs/check-compromised-bitcoin.asp

My toughs: THIS IS IMPORTANT ONE!!! READ IT !

Japan’s Top Regulators Suggest Mt. Gox Intervention Unlikely
Pete Rizzo (@pete_rizzo_) | Published on February 24, 2014 at 20:54 GMT | Asia, Companies, Exchanges, Mt. Gox, News, Regulation

With no timeline issued yet from Mt. Gox as to when it will once again allow the transfer of funds to third-party services – and signs of communication from the notoriously tight-lipped Japan-based company appearing less likely, the exchange’s global customers began to turn to Japanese financial authorities on Monday for potential recourse.

However, the country’s financial authorities are reportedly distancing themselves from any potential responsibility, should the troubled exchange default on its service obligations.

The Wall Street Journal reported 24th February that Japan’s Financial Services Agency (FSA), which oversees the country’s banking, insurance, securities and exchange sectors, does not view the supervision of digital currency exchanges as part of its obligations.

Speaking to the Journal, representatives from the FSA said:

“Bitcoin isn’t a currency; it works as an alternative to currencies, like gold. The FSA is in charge of currency-based services. Therefore, bitcoin exchanges are not a subject to our regulatory oversight.”

The news comes just hours after CEO Mark Karpeles resigned from the board of directors at Bitcoin Foundation, a move that caused a modest price recovery occurring on the network to stutter, and amid increasingly vocal protests from users.

Major financial agencies follow

While the news from the FSA is undoubtedly disheartening for exchange users, other government and private entities could still step in to provided relief if and when it’s needed. Though, many of these organisations are currently taking a similar position as the FSA.

The Journal revealed that Bank of Japan, Japan’s central bank, has stated it is “not in a position” to regulate bitcoin exchanges. Likewise, Japan’s Ministry of Finance, a cabinet-level government financial entity, adopted a similar sentiment in correspondences with the media outlet.

The Ministry of Internal Affairs and Communications, which has jurisdiction over IT issues, was less clear in its stance, saying.

“We are not in a position to make any judgments on this matter.”

The future of Mt. Gox

Despite the fact that Mt. Gox had previously suggested a relationship with the FSA, the agency told the report it has not issued the troubled exchange any operational advice in recent weeks, suggesting that intervention in the event of its potential failure is unlikely.

Still, despite the fact that fear of a Mt. Gox default is spreading, sources close to Mt. Gox suggest that the exchange may be near a solution.

Former BitInstant CEO Charlie Shrem indicated on reddit today that “good news [is] on the horizon for people who have funds stuck in MtGox”, though he did not elaborate on the announcement.

New JPMorgan Report Weighs in on Bitcoin’s Mt. Gox Problem
Pete Rizzo (@pete_rizzo_) | Published on February 24, 2014 at 17:53 GMT | Exchanges, Mt. Gox, News

Just weeks after JPMorgan released its first report on bitcoin, the US-based multinational financial services company has weighed in on ongoing issues related to major bitcoin exchange Mt. Gox.

Authored by the company’s head of global FX strategy, John Normand, the new one-page report – available publicly to JPMorgan’s clients – draws comparisons between bitcoin exchanges and traditional central banks.

Perhaps, most notably, Norman addressed the inability of Mt. Gox customers to transfer funds to third parties, writing:

“If such a restriction sounds a bit like the exchange controls that pop up intermittently with fiat currencies (Cyprus in 2013, Argentina this year), that’s because there are some parallels.”

He added: “From a corporate or investor perspective, an exchange control is any restriction which limits financial transfers or imposes a different exchange rate for certain transactions.”

Normand’s original report concluded that though bitcoin had some benefits, certain issues – including its price volatility and the lack of a central authority – would limit its usefulness for merchants, investors and consumers.

The latest report, while also critical of bitcoin, indicates interest in digital currencies remains at JPMorgan and that Normand’s report is not simply a one-off project.

The Mt. Gox saga

The report did pay particular attention to the ongoing Mt. Gox “saga”, ultimately concluding that recent events show virtual currencies can give rise to two-tier markets and convertibility risks.

JPMorgan spoke broadly about the challenges experienced by Bitstamp, BTC-e and Mt. Gox, and suggested that the DDoS attacks faced by the companies amounted to a “security breach”, though no bitcoins or customer personal information has been compromised by the attack.

“Due to a security breach affecting all three of the major platforms for swapping bitcoins and fiat currencies (it has been termed transaction malleability), all platforms halted customer withdrawals for some period of time.”

It correctly noted that two exchanges have restarted transfers, and that Mt. Gox plans to do so.

Price volatility

Norman indicated that the current data shows prices are depressed across all exchanges because of the ongoing issues with Mt. Gox, and that this has lead to below-average trading volumes. Furthermore, he added that prices are likely down due to the belief Mt. Gox bitcoins will be later sold on other exchanges, potentially impacting the market.

The author credited this decline as “reflecting some discomfort with broader market architecture”, a claim that is given credence by the many reddit threads devoted to speculating on the company’s future as well as the future of the bitcoins still in its exchange.

Such speculation was likely heightened by CEO Mark Karpeles’ decision to step down from the Bitcoin Foundation board.

An optimistic conclusion?

Though Normand suggests his opinion differs, he did indicate it was possible to view the events at Mt. Gox in a positive light for bitcoin, saying:

“The optimistic view of these events is that a two-tier market in a virtual currency is more benign than one in fiat currencies because it reflects operational risks around a particular exchange rather than those surrounding an entire sovereign and its financial system.”

Still, Normand suggested that he believes the events are proof virtual currencies will require intermediaries, and therefore not be able to deliver the sweeping cost savings they currently provide in the absence of such financial networks in the future.

“From that perspective, it will be difficult to ensure than virtual currencies deliver frictionless exchange as they evolve over time,” he concluded.

Harvard Student Uses 14,000-Core Supercomputer to Mine Dogecoin
 
Neil Sardesai  24/02/2014  Bitcoin, Dogecoin, Mining, News, Research


Supercomputers are pretty amazing. They’re mostly used for research since they specialise in processing, analysing, and doing computations on ridiculous amounts of data at high speeds. Supercomputer simulations have been used to understand earthquakes, model pandemics, predict the weather, and more. Harvard University has its own supercomputing cluster called Odyssey, which boasts a 14,000 core Intel Xeon architecture with over 10 TB of RAM. But unlike most researchers, one student at Harvard decided to use the school’s massive computing power…to mine Dogecoin.
http://www.cryptocoinsnews.com/wp-content/uploads/2014/02/ody1-300x146.png

Unfortunately for the student (who remains unknown at the moment), mining uses a lot of processor power, and this type of nonstop activity was soon noticed by system administrators. Harvard’s assistant dean for research computing, James Cuff, sent out an email (included at the bottom of this post) acknowledging the misuse and warning others of the consequences of abusing University resources. In short, the student has been permanently banned from using all research computing facilities at Harvard.

Of course, you might be wondering exactly how profitable this was. As it turns out, the Odyssey can only mine at a maximum of ~20MH/s, since any mining operations would be using the CPUs. This is still a lot, but it’s not at all insanely fast. In fact, just 13 AMD 7990 GPUs can get similar results. Harvard’s college newspaper, “The Harvard Crimson,” reported that if mining had continued for days, the student could have generated “hundreds, and perhaps thousands” of dollars in DOGE. It’s unknown exactly how many Dogecoins the student mined, and whether or not he/she kept his/her earnings.

Such bad shibe.

(Email from James Cuff, Harvard’s assistant dean for research computing)

Subject: [Hptc-users-list] Policy statement on crypto currency mining and personal for profit campaigns.
Date: Fri, 14 Feb 2014 13:22:06 -0500
From: FAS Research Computing Users Group <[email protected]>
Reply-To: [email protected]
To: [email protected] <[email protected]>

Dear all,

I really hate having to send notes like this to our community -
especially one as smart, gifted and talented as you all are, but
anyway here goes…
Yesterday we were alerted to an unfortunate situation by one of our
community members using the Odyssey cluster who spotted an anomaly
with a set of compute nodes.

Long story short, a “dogecoin” (bitcoin derivative) mining operation
had been set up on the Odyssey cluster consuming significant resources
in order to participate in a mining contest.

I do want to also quickly state that Research Computing does not
inspect, examine or look at algorithms and codes that are executing on
the cluster, we respect your science and assume we are all good
citizens. However, in the course of business, or as happened
yesterday, if we are alerted to unexpected behavior we always
investigate the cause of any issue.

So, to put this simply:

Odyssey and Research Computing resources can not be used for any
personal or private gain or any non research related activity.

Accordingly, any participation in “Klondike” style digital mining
operations or contests for profit requiring Harvard owned assets to
examine digital currency key strength and length are strictly
prohibited for fairly obvious reasons. In fact, any activities using
our shared resources for any non scientific purpose that results or
does not actually result in personal gain are also clearly and
explicitly denied.

As a result, and as guidance and as warning to you all, I do need to
say that the individual involved in this particular operation no
longer has access to any and all research computing facilities on a
fully permanent basis.

Don’t let this happen to you.

Best,