Cryptocurrency Payment Processor GoCoin Gets $1.5m in Funding
Daniel Cawrey (@danielcawrey) | Published on March 26, 2014 at 13:27 GMT | Companies, Investors, Merchants, News, Startups
GoCoin has announced it has raised $1.5m in funding in order to expand its operations as an international payments platform for cryptocurrencies.
The round was led by the Bitcoin Shop, which is a publicly traded company on the over-the-counter market.
“Our investment in GoCoin reflects our confidence in their product and their team,” Charles Allen, CEO of Bitcoin Shop, said in a statement.
Former Facebook COO Owen Van Natta and investment firm Crypto Currency Partners also participated in the round.
“User demand continues to grow for alternative payments,” said Van Natta, adding:
“I’m excited to deepen my involvement with GoCoin and their best-in-class payments solution for merchants and game publishers.”
Expansion and competition
GoCoin plans to use the funding to expand its sales and technology teams as demand for cryptocurrency payments grows.
“In our case, it’s expanding the sales staff in terms of direct sales and channel sales. And we’ll probably augment the technology team slightly,” said company co-founder Brock Pierce.
The company was started in July 2013 and its platform went live in December.
GoCoin competes with Coinbase and BitPay in the bitcoin payment processor market. Pierce believes that GoCoin is the number three cryptocurrency payment processor in the world today. The industry will see a lot more competition in the future, he says:
“My view is that there is probably room in this market for 15 of these companies. If you look historically in payments world, you normally see room for 15 of these types of companies.”
International focus
A favorable regulatory environment in Singapore led GoCoin to incorporate its business there. And it is focused on markets outside of the US.
“I think we’re the only payments company that’s focused on international markets,” said Pierce.
The demand for alternative cryptocurrencies as a form of payment outside bitcoin is also something that makes GoCoin stand out as a payment process. Said Pierce:
“We’re agnostic when it comes to currencies. If there’s mutual demand from merchants and consumers to either spend or accept it, we’ll add the currency.”
GoCoin started to accept litecoin back in January. It recently added support for dogecoin as well.
“We’ve had an international multi-currency focus since day one, and this round will help extend our global footprint and take our services to the next level,” Steve Beauregard, CEO of GoCoin, said in a release announcing this latest round of funding.
Last November, GoCoin raised $550,000 in an early seed round.
Topic: BITCOIN NEWS EVRYDAY! From multiple sources. - page 6. (Read 51272 times)
Agora Commodities Reports $10m in Bitcoin Sales
Nermin Hajdarbegovic | Published on March 26, 2014 at 12:35 GMT | Investors, Merchants, News, Wallets
Agora Commodities has managed to sell more than $10m-worth of gold and silver for bitcoin since it started accepting the cryptocurrency last year.
The firm points out that bitcoin gained more than 4000% in value last year, although that’s not the company’s primary focus, which is more on shiny, tangible commodities rather than digital currencies.
The biggest rush came in late 2013, as the price of bitcoin skyrocketed. Clearly, there were many speculators who decided to trade in their bitcoins for precious metals.
Just getting started
Agora Commodities is a relatively young company, but it is already the biggest dealer of precious metals for bitcoin on the planet. In addition to gold and silver, the company also sells platinum, palladium and rhodium.
The company sells a wide range of products, ranging from 1 kg gold bars priced at $43,000, to one-ounce silver coins priced at $21.
Bitcoin lovers can even combine their love of cryptocurrencies and precious metals with Agora’s Silver Bitcoin Specie, a quarter-bitcoin piece priced at $23.50. No bitcoin included, of course. It features a handy QR code on the back and the design is rather nice, especially the binary string on the margin.
The only problem is that international shipping is quite costly, increasing the price of the purchase significantly. So, unless you plan to make a substantial investment in precious metals, it may not be worthwhile – especially if you were thinking about picking up a single coin as a gift, or a geeky conversation piece.
Coins as BTC wallets
If all this talk of physical coins sounds familiar, don’t worry, it should. Mike Caldwell, the entrepreneur behind Casascius has been minting physical bitcoins for a while. However, his efforts were curtailed last year, when the US Financial Crimes Enforcement Network (FinCEN) ruled that his activities were essentially ‘money transmitting’ and that he did not have a permit to carry out such services.
Caldwell then turned to minting unfunded coins, which feature private keys and can be stocked with BTC by the buyer. Caldwell describes them as “paper bitcoin wallets inside a coin container”.
While physical coins aren’t very practical, and they are essentially the opposite of what a digital currency was intended to be, they do look quite a bit more appealing (and durable) than your average paper wallet.
Nermin Hajdarbegovic | Published on March 26, 2014 at 12:35 GMT | Investors, Merchants, News, Wallets
Agora Commodities has managed to sell more than $10m-worth of gold and silver for bitcoin since it started accepting the cryptocurrency last year.
The firm points out that bitcoin gained more than 4000% in value last year, although that’s not the company’s primary focus, which is more on shiny, tangible commodities rather than digital currencies.
The biggest rush came in late 2013, as the price of bitcoin skyrocketed. Clearly, there were many speculators who decided to trade in their bitcoins for precious metals.
Just getting started
Agora Commodities is a relatively young company, but it is already the biggest dealer of precious metals for bitcoin on the planet. In addition to gold and silver, the company also sells platinum, palladium and rhodium.
The company sells a wide range of products, ranging from 1 kg gold bars priced at $43,000, to one-ounce silver coins priced at $21.
Bitcoin lovers can even combine their love of cryptocurrencies and precious metals with Agora’s Silver Bitcoin Specie, a quarter-bitcoin piece priced at $23.50. No bitcoin included, of course. It features a handy QR code on the back and the design is rather nice, especially the binary string on the margin.
The only problem is that international shipping is quite costly, increasing the price of the purchase significantly. So, unless you plan to make a substantial investment in precious metals, it may not be worthwhile – especially if you were thinking about picking up a single coin as a gift, or a geeky conversation piece.
Coins as BTC wallets
If all this talk of physical coins sounds familiar, don’t worry, it should. Mike Caldwell, the entrepreneur behind Casascius has been minting physical bitcoins for a while. However, his efforts were curtailed last year, when the US Financial Crimes Enforcement Network (FinCEN) ruled that his activities were essentially ‘money transmitting’ and that he did not have a permit to carry out such services.
Caldwell then turned to minting unfunded coins, which feature private keys and can be stocked with BTC by the buyer. Caldwell describes them as “paper bitcoin wallets inside a coin container”.
While physical coins aren’t very practical, and they are essentially the opposite of what a digital currency was intended to be, they do look quite a bit more appealing (and durable) than your average paper wallet.
New Polish Bitcoin Exchange Bitmarket.pl is Launched
Jaroslaw Adamowski | Published on March 26, 2014 at 11:55 GMT | Exchanges, News, Startups
With digital currencies becoming increasingly popular among Poles, a new bitcoin exchange, Bitmarket.pl, was launched this month in the country.
The company said the exchange aims to lure traders with high levels of security and a fast turnover of transactions.
Said Michał Pleban, co-owner of the exchange:
“What is important, only our own funds are allocated in the hot wallet, while our clients’ funds are safe in the cold wallet. We merge the rapidness of a currency exchange with the elasticity of a stock exchange.”
Pleban presented the exchange and its business model at a seminar on bitcoin, held on 24th March at the Warsaw School of Economics (Szkoła Główna Handlowa).
From domains to bitcoins
“The exchange was launched this month, but we represent a company which has been active on the Polish market for eight years,” Pleban said. “We are an offshoot of AfterMarket.pl – the largest domain aftermarket website in Poland, with more than 250,000 .pl domains in its portfolio.”
Pleban is the main architect of the website’s code, and said that the security measures employed by Bitmarket.pl are multilayered and based on two-step authentication, but do not negatively impact the speed of transactions.
Said Pleban:
“In addition to this, we decided not to impose any fees on users’ transactions on the exchange.”
That said, the company does collects fees for withdrawals of funds from user accounts. These are currently PLN 1 ($0.33) and PLN 5 ($1.65) for electronic fund transfers and regular bank transfers, respectively, and 0.0001 BTC and 0.001 LTC for digital currency transfers, according to data from Bitmarket.pl.
Trust-building essential
With Pleban’s statements clearly aimed to garner the trust of the local digital currency scene, which has seen several bitcoin-related incidents over the past few months, local observers say that market entry is increasingly difficult for new Polish exchanges.
As part of its trust-building efforts, Bitmarket.pl has tried to emphasize its financial foundations. The exchange is owned by Luxembourg-based EuroDNS, which has a share capital of some €540,000, according to figures released by company representatives.
Recent examples of turbulence in Poland’s bitcoin market include Bitcurex, the country’s leading bitcoin exchange, temporarily shutting down its site on 14th March following a hack that targeted funds in its users’ bitcoin wallets. The site resumed service on 18th March after stating that the perpetrators did not manage to break its security measures and gain full access to its operational hot wallet.
Late last year, though, another Poland-based bitcoin exchange reportedly fell victim to a hack and its owners were forced to shut down the site. Bidextreme.pl was hacked in November 2013 and its customers’ bitcoin and litecoin wallets were emptied.
Jaroslaw Adamowski | Published on March 26, 2014 at 11:55 GMT | Exchanges, News, Startups
With digital currencies becoming increasingly popular among Poles, a new bitcoin exchange, Bitmarket.pl, was launched this month in the country.
The company said the exchange aims to lure traders with high levels of security and a fast turnover of transactions.
Said Michał Pleban, co-owner of the exchange:
“What is important, only our own funds are allocated in the hot wallet, while our clients’ funds are safe in the cold wallet. We merge the rapidness of a currency exchange with the elasticity of a stock exchange.”
Pleban presented the exchange and its business model at a seminar on bitcoin, held on 24th March at the Warsaw School of Economics (Szkoła Główna Handlowa).
From domains to bitcoins
“The exchange was launched this month, but we represent a company which has been active on the Polish market for eight years,” Pleban said. “We are an offshoot of AfterMarket.pl – the largest domain aftermarket website in Poland, with more than 250,000 .pl domains in its portfolio.”
Pleban is the main architect of the website’s code, and said that the security measures employed by Bitmarket.pl are multilayered and based on two-step authentication, but do not negatively impact the speed of transactions.
Said Pleban:
“In addition to this, we decided not to impose any fees on users’ transactions on the exchange.”
That said, the company does collects fees for withdrawals of funds from user accounts. These are currently PLN 1 ($0.33) and PLN 5 ($1.65) for electronic fund transfers and regular bank transfers, respectively, and 0.0001 BTC and 0.001 LTC for digital currency transfers, according to data from Bitmarket.pl.
Trust-building essential
With Pleban’s statements clearly aimed to garner the trust of the local digital currency scene, which has seen several bitcoin-related incidents over the past few months, local observers say that market entry is increasingly difficult for new Polish exchanges.
As part of its trust-building efforts, Bitmarket.pl has tried to emphasize its financial foundations. The exchange is owned by Luxembourg-based EuroDNS, which has a share capital of some €540,000, according to figures released by company representatives.
Recent examples of turbulence in Poland’s bitcoin market include Bitcurex, the country’s leading bitcoin exchange, temporarily shutting down its site on 14th March following a hack that targeted funds in its users’ bitcoin wallets. The site resumed service on 18th March after stating that the perpetrators did not manage to break its security measures and gain full access to its operational hot wallet.
Late last year, though, another Poland-based bitcoin exchange reportedly fell victim to a hack and its owners were forced to shut down the site. Bidextreme.pl was hacked in November 2013 and its customers’ bitcoin and litecoin wallets were emptied.
Rumours, Panic and a DDoS Attack: Huobi’s Wild Week
Jon Southurst (@southtopia) | Published on March 26, 2014 at 10:30 GMT | Altcoins, Companies, Exchanges, Litecoin, News
While everyone was preoccupied with bitcoin price drops after last Friday’s ‘fake Chinese bitcoin ban‘ news incident, something even more dramatic was happening at China’s largest exchange, Huobi, and its new litecoin trading system.
A ‘flash crash’ on the exchange saw the price plunge to just 1 RMB (Chinese yuan) a short time after a hoax news report of a complete government ban on digital currencies was posted on microblogging site Sina Weibo and reported by Sina’s financial news service.
The number of trades executed at that price is unknown, as is the total amount of money lost – either by the company or by traders who lost due to margin calls. However, soon after the incident, Huobi agreed to make its customers whole again at 70 RMB ($11.29) per LTC for anyone who sold below that level.
Furthermore, the company said, negative balances would be reset to zero – even those still in the red after the 70 RMB redress.
Huobi CEO Leon Li said litecoin volumes had recovered by about 80% since, and users seemed to be satisfied with Huobi’s resolution, but predicted that the full 100% recovery would more time.
This incident was very similar to the bitcoin flash crash at BTC-e on 10th February, supposedly induced by panic in the aftermath of Mt. Gox’s suspension of all withdrawals. The price of 1 BTC dropped to $100 for just under two minutes, but that was long enough to do damage.
DDoS attack
That wasn’t the end of Huobi’s wild week, however. On Sunday 23rd March, the exchange suffered a crippling distributed denial of service (DDoS) attack that took its site offline for the whole day.
News outside China has been almost non-existent, causing internet sleuths to speculate over whether, if at all, these incidents were related and who might be behind them. Prankers? Blackmailers? Business rivals? Huobi itself? Even Huobi management says it doesn’t know for sure, but it insists, as did BTC-e in February, that it did not engineer the crash or profit from it.
Huobi had officially started litecoin trading just two days prior to the crash, and prices had not been spectacular over that time. While LTC had crept higher against BTC and USD in anticipation, actual figures after the launch were underwhelming.
Since the crash, the price has not risen above its pre-Huobi launch level and, on BTC-e, one litecoin is currently trading for around 0.027 BTC, $15.80, and 98.4 RMB, which is almost exactly the same rate.
Blackmail trend
There have been some other high-profile DDoS attacks in recent weeks, said to be the result of blackmail attempts. Project management site Basecamp (formerly named 37signals) went down just yesterday in what its owners said was an extortion attempt, while Meetup was also taken down a couple of weeks ago after receiving an email saying:
“A competitor asked me to perform a DDoS attack on your website. I can stop the attack for $300 USD. Let me know if you are interested in my offer.”
Even if these DDoS incidents are completely unrelated, they point to a recent trend in computer crime: extortion of both businesses and individuals has lately increased, either via overt threats like the one Meetup received or malware like CryptoLocker, which demanded similar amounts from its victims.
Response to the crisis
Comparing its fate to that of BTC-e, Huobi has published an official response (in Chinese) to the fake news and subsequent crash on its site.
“The system was told to sell at market price, but there were not enough LTC buyers, and transactions could not be completed, so finally the inventory was liquidated at below market prices. When the liquidated LTC was not sufficient to cover borrowings, some small portion of customers experienced a negative asset balance.”
“Huobi only opened up LTC trading two days before the 21st March incident, and so there was not enough depth in the market. In the midst of a market panic, there were not many orders that varied greatly from the market price, and so the system could not close positions using normal prices, and it was only when that the price went down to 1 RMB that the position could be closed.”
Engineering the crash itself would make no sense for the company, the statement continued, since both buyers and sellers were Huobi customers, and the crash did great damage to the company’s brand new LTC trading platform and its reputation in general.
When asked who might have been behind the fake government ban announcement, Li told CoinDesk:
“The fake news was most likely a result of an individual/group maliciously manipulating the price and causing a drop on purpose. They were able to get away with it because people are concerned about the uncertainty in policy.”
“To prevent such things from happening in the future, three things need to happen: 1) established media should not publish unverified news about policy; 2) investors need to have basic judgment; 3) the industry should have an authoritative channel for posting news.”
Getting traders to act rationally would be an achievement, and is something markets have probably desired for hundreds of years. Controlling media statements on government policy, though, could be easier in China with its vast state-connected media networks.
Taking further action
Huobi is calling for Sina Weibo (a similar service to Twitter) to reveal the owner and Chinese ID number of the ‘Caitongshe’ account that started the fake rumor in the first place, in the hope it can file a lawsuit.
It is also requesting that any users who bought litecoin for 1 RMB to post pictures of their trades on Weibo (as some have done already). The trades were legal and within the rules, but Huobi wants to demonstrate publicly that the company did not trade at the low price or profit from the crash.
Huobi also insisted that its bitcoin platform remained robust, and did not suffer large setbacks even after the official Chinese government announcement of 5th December, or the fake one of last Friday.
Admitting its risk management strategy for the new litecoin system could have been better, however, Huobi promised improvements to prevent wild fluctuations in future.
To be properly responsible to its customers, the company concluded, after a meeting with all stockholders, Huobi has agreed to use a portion of its loan loss provision funds to cover losses suffered by the exchange’s users.
Jon Southurst (@southtopia) | Published on March 26, 2014 at 10:30 GMT | Altcoins, Companies, Exchanges, Litecoin, News
While everyone was preoccupied with bitcoin price drops after last Friday’s ‘fake Chinese bitcoin ban‘ news incident, something even more dramatic was happening at China’s largest exchange, Huobi, and its new litecoin trading system.
A ‘flash crash’ on the exchange saw the price plunge to just 1 RMB (Chinese yuan) a short time after a hoax news report of a complete government ban on digital currencies was posted on microblogging site Sina Weibo and reported by Sina’s financial news service.
The number of trades executed at that price is unknown, as is the total amount of money lost – either by the company or by traders who lost due to margin calls. However, soon after the incident, Huobi agreed to make its customers whole again at 70 RMB ($11.29) per LTC for anyone who sold below that level.
Furthermore, the company said, negative balances would be reset to zero – even those still in the red after the 70 RMB redress.
Huobi CEO Leon Li said litecoin volumes had recovered by about 80% since, and users seemed to be satisfied with Huobi’s resolution, but predicted that the full 100% recovery would more time.
This incident was very similar to the bitcoin flash crash at BTC-e on 10th February, supposedly induced by panic in the aftermath of Mt. Gox’s suspension of all withdrawals. The price of 1 BTC dropped to $100 for just under two minutes, but that was long enough to do damage.
DDoS attack
That wasn’t the end of Huobi’s wild week, however. On Sunday 23rd March, the exchange suffered a crippling distributed denial of service (DDoS) attack that took its site offline for the whole day.
News outside China has been almost non-existent, causing internet sleuths to speculate over whether, if at all, these incidents were related and who might be behind them. Prankers? Blackmailers? Business rivals? Huobi itself? Even Huobi management says it doesn’t know for sure, but it insists, as did BTC-e in February, that it did not engineer the crash or profit from it.
Huobi had officially started litecoin trading just two days prior to the crash, and prices had not been spectacular over that time. While LTC had crept higher against BTC and USD in anticipation, actual figures after the launch were underwhelming.
Since the crash, the price has not risen above its pre-Huobi launch level and, on BTC-e, one litecoin is currently trading for around 0.027 BTC, $15.80, and 98.4 RMB, which is almost exactly the same rate.
Blackmail trend
There have been some other high-profile DDoS attacks in recent weeks, said to be the result of blackmail attempts. Project management site Basecamp (formerly named 37signals) went down just yesterday in what its owners said was an extortion attempt, while Meetup was also taken down a couple of weeks ago after receiving an email saying:
“A competitor asked me to perform a DDoS attack on your website. I can stop the attack for $300 USD. Let me know if you are interested in my offer.”
Even if these DDoS incidents are completely unrelated, they point to a recent trend in computer crime: extortion of both businesses and individuals has lately increased, either via overt threats like the one Meetup received or malware like CryptoLocker, which demanded similar amounts from its victims.
Response to the crisis
Comparing its fate to that of BTC-e, Huobi has published an official response (in Chinese) to the fake news and subsequent crash on its site.
“The system was told to sell at market price, but there were not enough LTC buyers, and transactions could not be completed, so finally the inventory was liquidated at below market prices. When the liquidated LTC was not sufficient to cover borrowings, some small portion of customers experienced a negative asset balance.”
“Huobi only opened up LTC trading two days before the 21st March incident, and so there was not enough depth in the market. In the midst of a market panic, there were not many orders that varied greatly from the market price, and so the system could not close positions using normal prices, and it was only when that the price went down to 1 RMB that the position could be closed.”
Engineering the crash itself would make no sense for the company, the statement continued, since both buyers and sellers were Huobi customers, and the crash did great damage to the company’s brand new LTC trading platform and its reputation in general.
When asked who might have been behind the fake government ban announcement, Li told CoinDesk:
“The fake news was most likely a result of an individual/group maliciously manipulating the price and causing a drop on purpose. They were able to get away with it because people are concerned about the uncertainty in policy.”
“To prevent such things from happening in the future, three things need to happen: 1) established media should not publish unverified news about policy; 2) investors need to have basic judgment; 3) the industry should have an authoritative channel for posting news.”
Getting traders to act rationally would be an achievement, and is something markets have probably desired for hundreds of years. Controlling media statements on government policy, though, could be easier in China with its vast state-connected media networks.
Taking further action
Huobi is calling for Sina Weibo (a similar service to Twitter) to reveal the owner and Chinese ID number of the ‘Caitongshe’ account that started the fake rumor in the first place, in the hope it can file a lawsuit.
It is also requesting that any users who bought litecoin for 1 RMB to post pictures of their trades on Weibo (as some have done already). The trades were legal and within the rules, but Huobi wants to demonstrate publicly that the company did not trade at the low price or profit from the crash.
Huobi also insisted that its bitcoin platform remained robust, and did not suffer large setbacks even after the official Chinese government announcement of 5th December, or the fake one of last Friday.
Admitting its risk management strategy for the new litecoin system could have been better, however, Huobi promised improvements to prevent wild fluctuations in future.
To be properly responsible to its customers, the company concluded, after a meeting with all stockholders, Huobi has agreed to use a portion of its loan loss provision funds to cover losses suffered by the exchange’s users.
Today in Gox: Police on the Case, More Coin Rumors
Jon Southurst (@southtopia) | Published on March 26, 2014 at 09:40 GMT | Exchanges, Mt. Gox, News
Mt. Gox rose again today to announce it is now working with Japanese police to investigate what happened to the bitcoins it lost, misplaced, or had stolen by hackers.
The statement, posted on the homepage on letterhead bearing CEO Mark Karpeles’ name, said:
Following its application for commencement of civil rehabilitation, MtGox Co., Ltd. consulted with the metropolitan police department with regard to the disappearance of bitcoins which is one of the causes for said application. MtGox Co., Ltd. hereby announces that it has submitted necessary electronic records and other related documents.
MtGox Co., Ltd. intends to fully cooperate with each competent authority. Further, MtGox Co., Ltd. continues to make efforts to clarify facts as quickly as possible and to recover from damages.
The announcement is carefully worded, not mentioning whether Mt. Gox chose to consult with the police, whether the police came to Mt. Gox, or if it was just a routine matter as part of the civil rehabilitation process. According to a report by Reuters, the police do not intend to make any further statement on the matter.
Other than knowing the authorities are involved somehow, and the words “recover from damages” at the end, the update probably does little to comfort those who lost large sums of money when Mt. Gox declared bankruptcy nearly a month ago.
Rumor file
Another tiny ray of hope today came in the form of a tweet by Eren Canarslan, an investment banker from Turkey:
The one-off tweet, followed by nearly a whole day of radio silence (that as of press time still hadn’t been broken) probably would have been written off as trolling or wishful thinking had it not been for these two other cryptic tweets he’d posted on 4th and 5th March:
Within two weeks, Mt. Gox announced it had discovered 200,000 BTC in an ‘old format’ wallet. In the world of lost bitcoins, this has bestowed a kind of prophetic status on Eren Canarslan, whose bitcoin-associated follower count increased markedly over the day.
It has not yet been established what his connection is to Mark Karpeles, Blockchain, or any insider information. The 4th March post drew a bemused response from ZeroBlock, Blockchain’s subsidiary.
It has also raised interest in the company he was supposedly tweeting to, Hong Kong’s Patrona Partners. That company responded by tweeting “Only thing I know he is not trolling,” with a link to an image of Canarslan’s earlier post.
We await, like a flock of seagulls around a small child, the next morsel either Mt. Gox or its claimed ‘insiders’ toss in our direction.
Jon Southurst (@southtopia) | Published on March 26, 2014 at 09:40 GMT | Exchanges, Mt. Gox, News
Mt. Gox rose again today to announce it is now working with Japanese police to investigate what happened to the bitcoins it lost, misplaced, or had stolen by hackers.
The statement, posted on the homepage on letterhead bearing CEO Mark Karpeles’ name, said:
Following its application for commencement of civil rehabilitation, MtGox Co., Ltd. consulted with the metropolitan police department with regard to the disappearance of bitcoins which is one of the causes for said application. MtGox Co., Ltd. hereby announces that it has submitted necessary electronic records and other related documents.
MtGox Co., Ltd. intends to fully cooperate with each competent authority. Further, MtGox Co., Ltd. continues to make efforts to clarify facts as quickly as possible and to recover from damages.
The announcement is carefully worded, not mentioning whether Mt. Gox chose to consult with the police, whether the police came to Mt. Gox, or if it was just a routine matter as part of the civil rehabilitation process. According to a report by Reuters, the police do not intend to make any further statement on the matter.
Other than knowing the authorities are involved somehow, and the words “recover from damages” at the end, the update probably does little to comfort those who lost large sums of money when Mt. Gox declared bankruptcy nearly a month ago.
Rumor file
Another tiny ray of hope today came in the form of a tweet by Eren Canarslan, an investment banker from Turkey:
The one-off tweet, followed by nearly a whole day of radio silence (that as of press time still hadn’t been broken) probably would have been written off as trolling or wishful thinking had it not been for these two other cryptic tweets he’d posted on 4th and 5th March:
Within two weeks, Mt. Gox announced it had discovered 200,000 BTC in an ‘old format’ wallet. In the world of lost bitcoins, this has bestowed a kind of prophetic status on Eren Canarslan, whose bitcoin-associated follower count increased markedly over the day.
It has not yet been established what his connection is to Mark Karpeles, Blockchain, or any insider information. The 4th March post drew a bemused response from ZeroBlock, Blockchain’s subsidiary.
It has also raised interest in the company he was supposedly tweeting to, Hong Kong’s Patrona Partners. That company responded by tweeting “Only thing I know he is not trolling,” with a link to an image of Canarslan’s earlier post.
We await, like a flock of seagulls around a small child, the next morsel either Mt. Gox or its claimed ‘insiders’ toss in our direction.
What the IRS Bitcoin Tax Guidelines Mean For You
Danny Bradbury (@dannybradbury) | Published on March 26, 2014 at 07:33 GMT | Analysis
The US Internal Revenue Service finally announced its guidance for virtual currencies yesterday, explicitly referring to bitcoin (see the announcement here and notice here). The increased clarity – provided three weeks before the end of the US tax year - will come as a relief to many who were scared to get involved in bitcoin, commercially. But what does it mean for different members of the bitcoin community?
US businesses wanting to get involved in bitcoin have been waiting for this for a while. As recently as January, US Taxpayer Advocate Nina Olson pressured the IRS in her annual report to Congress, telling it that it needed to publish guidance. The lack of rules was a serious problem, she said, and many businesses would be surprised to hear that capital gains could be imposed on bitcoins.
Well, now, that’s official: in its guidance, the IRS has said that bitcoin should be treated as property, making it subject to capital gains tax. That has significant ramifications for different kinds of businesses and individuals dealing in bitcoin.
Miners
Miners that produce their own bitcoins are now subject to two different tax charges. They must include the fair market value of the virtual currency on the day that it is mined into their gross income.
Another stipulation in the IRS guidance is that capital gains are due on the sale of bitcoins viewed as a capital asset. The taxpayer must take this fair market value on the date of acquisition as the basis price for the coins. Capital gains will be due on the difference between that basis price and the eventual sale price.
This means that if and when they sell the bitcoins that they have mined, they will have to pay capital gains tax on any profit that they have made while owning them. Furthermore, if an individual mines bitcoin as a business, the net earnings from that business will be treated as self-employment income, and will be subject to self-employment tax.
Dave Carlson, a US entrepreneur who runs a mining operation that earned almost $8m a month in revenue when bitcoin was at its peak, says that this could spell trouble for miners.
“The implications of the new IRS tax guidance will be a major factor for those US miners who didn’t anticipate it and are already on the edge of profit. A capital gains tax on all coins mined could drive mining revenue below cost of power for many, forcing them to shut down,” he says. ”Pool operators will have to issue 1099s to all their US contributors, which will drive pool fees higher.
The exception here is if bit coins aren’t viewed as capital assets, but are instead viewed as inventory. This would be the case if a miner (or any other business) made the selling of bit coins their core business. In that case, any gains on the bitcoins would be taxed as an ordinary gain or loss.
“The test depends on the facts and circumstances and there’s not a simple bright line rule,” says Tyson Cross, a San Diego tax attorney who runs Bitcoin Tax Solutions, an advisory site about bitcoin taxation. “Asking yourself if you’re a miner, how you fall into that test, will be kind of murky.”
At least one miner has a strategy to get around the taxing of bitcoin when mined, though. Yana Kesler, a certified public accountant from Philadelphia, purchased a $7,200 mining rig last year, and had it hosted in Europe.
“When you mine yourself you are the producer. When you ask someone else to mine for you, that’s your investment,” Kesler says. She calculates the basis value of her coins as zero, but says that she does declare capital gains when she sells the coins.
Investors
The same basic concepts for capital gains realizations apply to investors who obtain their bitcoins through exchanges. They must measure the fair market value on that day as the basis for capital gains realization when they eventually sell the coins.
This is a good thing for investors though, argue tax experts. The alternative would be to impose foreign currency gains on most profits, which are taxable at a higher rate. Instead, investors who hold their bitcoins for more than a year and a day will be charged at the long-term capital gains rate, which currently rests at 15%.
This is what serious investors have been rooting for all along. “Winklevoss called it,” says Jacob Farber, an attorney in the virtual currency group at legal firm Perkins Coie, referring to the SEC filing for the Winklevoss Bitcoin Trust. “They said that it should be treated as subject to capital gains. As investors that would be the right outcome.”
There’s another upside for investors, says Cross: certainty. “That’s a huge issue for investors, especially institutional investors,” he says, adding that he spoke to several institutional investors who were on the fence because of a lack of IRS guidance.
Exchanges
The exchanges themselves may have a tougher time of it, though. Farber’s colleague Richard Peterson, chair of Perkins Coie’s tax practice, says that now bitcoin is being classed as property, this will impose a reporting overhead. The key here is the 1099-B federal tax form, used to report the proceeds of a broker or barter exchange.
“If I sell my shares through Merrill Lynch, they send me a 1099 on which they have to list the property sold, the date it was sold, the price, and then if they have the information they would have to report my tax basis and my gain or loss,” he says. “They would need to do that for every transaction I do for the entire year, and send me one statement.”
He suggests that exchanges may now have to file such a form describing every transaction made by a client. For some high-volume clients, this could run into hundreds of trades each year. Are bitcoin exchanges, which haven’t been legally bound to do this, ready for the administrative burden?
Jaron Lukasiewicz, CEO of New York-based exchange Coinsetter, couldn’t comment on whether the firm was set up to do that today, or whether its systems would need to be altered to accommodate the change.
“Companies in the space will now have to determine how to help customers report taxable gains properly, which won’t be easy,” Lukasiewicz says. “However, I don’t think this tax treatment is a huge surprise to most people who have bitcoin gains.”
Consumers
Tracking capital gains represents a sticky problem when it comes to bitcoin owners paying for goods and services using the digital currency.
If you convert your bitcoins to fiat currency and then make everyday purchases using dollars, it will be relatively easy to report the short or long-term capital gains that single transaction.
But if you use the bitcoins in your wallet to purchase goods directly, then theoretically, the IRS should be informed of the capital gains incurred on the bitcoin at the time of the purchase, pointed out various tax attorneys that CoinDesk quizzed yesterday.
If you bought $25 in bit coins, and they went up to $75 in value, and then you went to Overstock and bought a sweater using bitcoins, then technically speaking, you should account for the $75 in capital gains when you spend those coins, says Peterson.
“That’s the gain that the service is going to want to track when retailers accept bitcoin. That’s where the true administrative nightmare comes in. There would have to be some town hall meeting with the [IRS] to resolve that.”
This rule imposes an unrealistic burden on bitcoin users. At best, if they rule was enforced then they would have to rely on a merchant providing the current US dollar value for a bitcoin purchase for their records, attorneys said. They would then have to compare this dollar value with the basis price (that is, the fair market value of the bitcoins on the day that they acquired them).
The consumer would have to do this for every bitcoin-based purchase that they made throughout the year, and add it all up at the end. If the merchant accepting bitcoin for payment didn’t provide a current US dollar value, then the person spending the bitcoin would have to do the math themselves, making it doubly hard to keep track.
None of this makes bitcoin attractive as an everyday unit of exchange, argue attorneys.
In practice, though, it seems unlikely that anyone would do this. Greg Broiles, an attorney specializing in estate planning, trust and probate, who spoke on bitcoin and taxation at Bitcoin 2013, argues that accountants have a concept called “materiality“. This essentially argues that transactions should only be included for accounting purposes when they’re significant enough. An $8 sandwich paid for in bit coins probably doesn’t count. A $30,000 Harley probably would, though.
In theory, then, the IRS rules seem to bring advantages to those who invest in bitcoin as a long-term property-class financial asset, while discouraging those that want to use it as a form of digital currency. In practice, Boiles argues that the latter group probably won’t care, and won’t report it.
Merchants and payment processors
There are two other types of business that might be affected by the new IRS guidance: merchants, and the payment processors that support them.
The payment processors – known as third party settlement organizations (TPSOs) in tax-speak – are now required to file 1099-K reports for their merchants if the number of transactions settled for the merchant exceeds 200, and the gross amount of payments made to the merchant exceeds $20,000.
Coinbase didn’t return our request for comment, but BitPay, the other large processor in the bitcoin space, said that it does file 1099-K forms for merchants.
For many merchants, these tax rules shouldn’t change much. Many, such as Overstock, take payments in bitcoin via payment processors but have them immediately converted to fiat currency, meaning that they don’t hold a position in the digital currency, and therefore won’t be exposed to capital gains taxes. It will be up to the payment processors to simply send them a 1099-K form at the end of the year.
Companies, contractors, and employees
Contractors getting paid in bitcoin must declare its fair market value on the day of payment as part of their gross income. Companies paying salaries in bitcoin must withhold tax in the same way as they would if paying in regular fiat currency. There don’t seem to be many of the latter, though.
So, the burning question is – what do you do with those bit coins that you mined or bought two years ago and let languish on your hard drive? Don’t be naughty, advises Broiles: report them.
“I think that IRS is going to want you to amend past-year returns,” he says. Let’s say that someone mined a lot of bitcoin two years ago and then forgot about it. My suggestion would be to amend the tax return for the year when they mined it. The growth between long ago and today will be taxed at the long-term capital gain rate.”
None of this is set in stone. Tax attorneys and other experts will no doubt file commentary on the IRS notice, which is subject to change, and which should eventually be replaced by regulation that could differ in its approach. For now, though, at least the bitcoin community in America has something to go on.
Statements in this article should not be considered tax advice, which is best sought directly from a qualified professional.
Danny Bradbury (@dannybradbury) | Published on March 26, 2014 at 07:33 GMT | Analysis
The US Internal Revenue Service finally announced its guidance for virtual currencies yesterday, explicitly referring to bitcoin (see the announcement here and notice here). The increased clarity – provided three weeks before the end of the US tax year - will come as a relief to many who were scared to get involved in bitcoin, commercially. But what does it mean for different members of the bitcoin community?
US businesses wanting to get involved in bitcoin have been waiting for this for a while. As recently as January, US Taxpayer Advocate Nina Olson pressured the IRS in her annual report to Congress, telling it that it needed to publish guidance. The lack of rules was a serious problem, she said, and many businesses would be surprised to hear that capital gains could be imposed on bitcoins.
Well, now, that’s official: in its guidance, the IRS has said that bitcoin should be treated as property, making it subject to capital gains tax. That has significant ramifications for different kinds of businesses and individuals dealing in bitcoin.
Miners
Miners that produce their own bitcoins are now subject to two different tax charges. They must include the fair market value of the virtual currency on the day that it is mined into their gross income.
Another stipulation in the IRS guidance is that capital gains are due on the sale of bitcoins viewed as a capital asset. The taxpayer must take this fair market value on the date of acquisition as the basis price for the coins. Capital gains will be due on the difference between that basis price and the eventual sale price.
This means that if and when they sell the bitcoins that they have mined, they will have to pay capital gains tax on any profit that they have made while owning them. Furthermore, if an individual mines bitcoin as a business, the net earnings from that business will be treated as self-employment income, and will be subject to self-employment tax.
Dave Carlson, a US entrepreneur who runs a mining operation that earned almost $8m a month in revenue when bitcoin was at its peak, says that this could spell trouble for miners.
“The implications of the new IRS tax guidance will be a major factor for those US miners who didn’t anticipate it and are already on the edge of profit. A capital gains tax on all coins mined could drive mining revenue below cost of power for many, forcing them to shut down,” he says. ”Pool operators will have to issue 1099s to all their US contributors, which will drive pool fees higher.
The exception here is if bit coins aren’t viewed as capital assets, but are instead viewed as inventory. This would be the case if a miner (or any other business) made the selling of bit coins their core business. In that case, any gains on the bitcoins would be taxed as an ordinary gain or loss.
“The test depends on the facts and circumstances and there’s not a simple bright line rule,” says Tyson Cross, a San Diego tax attorney who runs Bitcoin Tax Solutions, an advisory site about bitcoin taxation. “Asking yourself if you’re a miner, how you fall into that test, will be kind of murky.”
At least one miner has a strategy to get around the taxing of bitcoin when mined, though. Yana Kesler, a certified public accountant from Philadelphia, purchased a $7,200 mining rig last year, and had it hosted in Europe.
“When you mine yourself you are the producer. When you ask someone else to mine for you, that’s your investment,” Kesler says. She calculates the basis value of her coins as zero, but says that she does declare capital gains when she sells the coins.
Investors
The same basic concepts for capital gains realizations apply to investors who obtain their bitcoins through exchanges. They must measure the fair market value on that day as the basis for capital gains realization when they eventually sell the coins.
This is a good thing for investors though, argue tax experts. The alternative would be to impose foreign currency gains on most profits, which are taxable at a higher rate. Instead, investors who hold their bitcoins for more than a year and a day will be charged at the long-term capital gains rate, which currently rests at 15%.
This is what serious investors have been rooting for all along. “Winklevoss called it,” says Jacob Farber, an attorney in the virtual currency group at legal firm Perkins Coie, referring to the SEC filing for the Winklevoss Bitcoin Trust. “They said that it should be treated as subject to capital gains. As investors that would be the right outcome.”
There’s another upside for investors, says Cross: certainty. “That’s a huge issue for investors, especially institutional investors,” he says, adding that he spoke to several institutional investors who were on the fence because of a lack of IRS guidance.
Exchanges
The exchanges themselves may have a tougher time of it, though. Farber’s colleague Richard Peterson, chair of Perkins Coie’s tax practice, says that now bitcoin is being classed as property, this will impose a reporting overhead. The key here is the 1099-B federal tax form, used to report the proceeds of a broker or barter exchange.
“If I sell my shares through Merrill Lynch, they send me a 1099 on which they have to list the property sold, the date it was sold, the price, and then if they have the information they would have to report my tax basis and my gain or loss,” he says. “They would need to do that for every transaction I do for the entire year, and send me one statement.”
He suggests that exchanges may now have to file such a form describing every transaction made by a client. For some high-volume clients, this could run into hundreds of trades each year. Are bitcoin exchanges, which haven’t been legally bound to do this, ready for the administrative burden?
Jaron Lukasiewicz, CEO of New York-based exchange Coinsetter, couldn’t comment on whether the firm was set up to do that today, or whether its systems would need to be altered to accommodate the change.
“Companies in the space will now have to determine how to help customers report taxable gains properly, which won’t be easy,” Lukasiewicz says. “However, I don’t think this tax treatment is a huge surprise to most people who have bitcoin gains.”
Consumers
Tracking capital gains represents a sticky problem when it comes to bitcoin owners paying for goods and services using the digital currency.
If you convert your bitcoins to fiat currency and then make everyday purchases using dollars, it will be relatively easy to report the short or long-term capital gains that single transaction.
But if you use the bitcoins in your wallet to purchase goods directly, then theoretically, the IRS should be informed of the capital gains incurred on the bitcoin at the time of the purchase, pointed out various tax attorneys that CoinDesk quizzed yesterday.
If you bought $25 in bit coins, and they went up to $75 in value, and then you went to Overstock and bought a sweater using bitcoins, then technically speaking, you should account for the $75 in capital gains when you spend those coins, says Peterson.
“That’s the gain that the service is going to want to track when retailers accept bitcoin. That’s where the true administrative nightmare comes in. There would have to be some town hall meeting with the [IRS] to resolve that.”
This rule imposes an unrealistic burden on bitcoin users. At best, if they rule was enforced then they would have to rely on a merchant providing the current US dollar value for a bitcoin purchase for their records, attorneys said. They would then have to compare this dollar value with the basis price (that is, the fair market value of the bitcoins on the day that they acquired them).
The consumer would have to do this for every bitcoin-based purchase that they made throughout the year, and add it all up at the end. If the merchant accepting bitcoin for payment didn’t provide a current US dollar value, then the person spending the bitcoin would have to do the math themselves, making it doubly hard to keep track.
None of this makes bitcoin attractive as an everyday unit of exchange, argue attorneys.
In practice, though, it seems unlikely that anyone would do this. Greg Broiles, an attorney specializing in estate planning, trust and probate, who spoke on bitcoin and taxation at Bitcoin 2013, argues that accountants have a concept called “materiality“. This essentially argues that transactions should only be included for accounting purposes when they’re significant enough. An $8 sandwich paid for in bit coins probably doesn’t count. A $30,000 Harley probably would, though.
In theory, then, the IRS rules seem to bring advantages to those who invest in bitcoin as a long-term property-class financial asset, while discouraging those that want to use it as a form of digital currency. In practice, Boiles argues that the latter group probably won’t care, and won’t report it.
Merchants and payment processors
There are two other types of business that might be affected by the new IRS guidance: merchants, and the payment processors that support them.
The payment processors – known as third party settlement organizations (TPSOs) in tax-speak – are now required to file 1099-K reports for their merchants if the number of transactions settled for the merchant exceeds 200, and the gross amount of payments made to the merchant exceeds $20,000.
Coinbase didn’t return our request for comment, but BitPay, the other large processor in the bitcoin space, said that it does file 1099-K forms for merchants.
For many merchants, these tax rules shouldn’t change much. Many, such as Overstock, take payments in bitcoin via payment processors but have them immediately converted to fiat currency, meaning that they don’t hold a position in the digital currency, and therefore won’t be exposed to capital gains taxes. It will be up to the payment processors to simply send them a 1099-K form at the end of the year.
Companies, contractors, and employees
Contractors getting paid in bitcoin must declare its fair market value on the day of payment as part of their gross income. Companies paying salaries in bitcoin must withhold tax in the same way as they would if paying in regular fiat currency. There don’t seem to be many of the latter, though.
So, the burning question is – what do you do with those bit coins that you mined or bought two years ago and let languish on your hard drive? Don’t be naughty, advises Broiles: report them.
“I think that IRS is going to want you to amend past-year returns,” he says. Let’s say that someone mined a lot of bitcoin two years ago and then forgot about it. My suggestion would be to amend the tax return for the year when they mined it. The growth between long ago and today will be taxed at the long-term capital gain rate.”
None of this is set in stone. Tax attorneys and other experts will no doubt file commentary on the IRS notice, which is subject to change, and which should eventually be replaced by regulation that could differ in its approach. For now, though, at least the bitcoin community in America has something to go on.
Statements in this article should not be considered tax advice, which is best sought directly from a qualified professional.
Vault of Satoshi Gets Full Money Services License for Canada
Jon Southurst (@southtopia) | Published on March 26, 2014 at 03:40 GMT | Companies, Exchanges, News, Regulation, US & Canada
Canadian bitcoin exchange Vault of Satoshi announced today it had gained a full Money Services Business license in its native country, after spending “some time” in a probationary period. Announcing the license on Reddit, Director of Marketing Adam Cochran wrote:
“Vault of Satoshi has always gone the extra mile to be a ‘by the books’ exchange. We’ve always been a registered corporation, let users know who we are, always reported to FinTrac, we follow all the same regulations as a currency exchange, and we operate inside all Canadian regulations on financial services.”
The license is national, allowing the company to operate in every province of Canada as it serves clients located in most countries around the world. “We are also currently streamlining our bank end financial systems to open ourselves to additional currencies so that in the future we can better serve clients in their local currency,” Cochran said. He added that, while the legal costs of compliance were probably higher in Canada than some places, it was preferable to operating in a grey area and taking risks with clients’ money.
“The decision was no contest. It’s the same reason why others continue to operate in the US from overseas, they are taking a gamble with your money, whereas we at Vault of Satoshi will only operate in methods and jurisdictions in which we can be a fully compliant financial entity,” he continued. “We don’t want your bitcoins magically disappearing and so legal decisions like this are absolutely paramount to making sure we can continue to operate properly.”
The company is also applying for a license with the Investment Industry Regulatory Organization of Canada (IIROC), saying it wants to be a “legal, transparent and reliable exchange [...] to be a positive part of the ever evolving cryptocurrency legal landscape here in Canada.”
Looking positive
It’s a dash of good news for Vault of Satoshi, which at the beginning of March announced “a temporary and voluntary withdrawal from the United States, due to the challenging legal/political landscape for a foreign entity operating in the cryptocurrency space.” It also added that it was working day to day with legal experts and striving towards re-entry into the US market in a secure, legal and reliable manner. Vault of Satoshi was critical of the US Financial Crimes Enforcement Network (FinCEN), which it claimed had been opaque about compliance requirements. It also cited the recent Charlie Shrem arrest as proof of an increasingly hostile regulatory environment, and said the need to undergo separate compliance procedures in nearly all US states was prohibitively expensive.
Client protection
Client safety and protection of client assets remained paramount, Cochran added.
“Maybe it’s a Canadian thing, we like our peace of mind and that security and reliability is something we strongly feel a responsibility to bring to our clients. We’ll never take a risk with the trust they have invest in us,” he said.
Vault of Satoshi otherwise exchanges USD and CAD for digital currencies in any country other than those on its blacklist, which contains the usual financial world suspects plus the US, Thailand and Iceland.
Jon Southurst (@southtopia) | Published on March 26, 2014 at 03:40 GMT | Companies, Exchanges, News, Regulation, US & Canada
Canadian bitcoin exchange Vault of Satoshi announced today it had gained a full Money Services Business license in its native country, after spending “some time” in a probationary period. Announcing the license on Reddit, Director of Marketing Adam Cochran wrote:
“Vault of Satoshi has always gone the extra mile to be a ‘by the books’ exchange. We’ve always been a registered corporation, let users know who we are, always reported to FinTrac, we follow all the same regulations as a currency exchange, and we operate inside all Canadian regulations on financial services.”
The license is national, allowing the company to operate in every province of Canada as it serves clients located in most countries around the world. “We are also currently streamlining our bank end financial systems to open ourselves to additional currencies so that in the future we can better serve clients in their local currency,” Cochran said. He added that, while the legal costs of compliance were probably higher in Canada than some places, it was preferable to operating in a grey area and taking risks with clients’ money.
“The decision was no contest. It’s the same reason why others continue to operate in the US from overseas, they are taking a gamble with your money, whereas we at Vault of Satoshi will only operate in methods and jurisdictions in which we can be a fully compliant financial entity,” he continued. “We don’t want your bitcoins magically disappearing and so legal decisions like this are absolutely paramount to making sure we can continue to operate properly.”
The company is also applying for a license with the Investment Industry Regulatory Organization of Canada (IIROC), saying it wants to be a “legal, transparent and reliable exchange [...] to be a positive part of the ever evolving cryptocurrency legal landscape here in Canada.”
Looking positive
It’s a dash of good news for Vault of Satoshi, which at the beginning of March announced “a temporary and voluntary withdrawal from the United States, due to the challenging legal/political landscape for a foreign entity operating in the cryptocurrency space.” It also added that it was working day to day with legal experts and striving towards re-entry into the US market in a secure, legal and reliable manner. Vault of Satoshi was critical of the US Financial Crimes Enforcement Network (FinCEN), which it claimed had been opaque about compliance requirements. It also cited the recent Charlie Shrem arrest as proof of an increasingly hostile regulatory environment, and said the need to undergo separate compliance procedures in nearly all US states was prohibitively expensive.
Client protection
Client safety and protection of client assets remained paramount, Cochran added.
“Maybe it’s a Canadian thing, we like our peace of mind and that security and reliability is something we strongly feel a responsibility to bring to our clients. We’ll never take a risk with the trust they have invest in us,” he said.
Vault of Satoshi otherwise exchanges USD and CAD for digital currencies in any country other than those on its blacklist, which contains the usual financial world suspects plus the US, Thailand and Iceland.
Decentralized Applications to Offer More Than Just Bitcoin Transactions
Daniel Cawrey (@danielcawrey) | Published on March 25, 2014 at 22:32 GMT | Events, News
The future of digital currencies and the question of whether that future involves decentralized applications took center stage at CoinSummit San Francisco on 25th March in a talk that included Ethereum‘s Vitalik Buterin; Mastercoin Foundation’s David Johnston; and NXT‘s Brian Snyder.
The panel was moderated by Adam Levine of popular online podcast Let’s talk Bitcoin.
________________________________________________________________
The purpose of distributed applications is to better economize digital resources.
The concept of bitcoin was the impetus for this, but Vitalik Buterin of Ethereum, David Johnson of Mastercoin and Brian Snyder of NXT believe that there are many use cases for cryptographic systems outside of just money systems, the use case that bitcoin has popularized.
Ethereum’s Vitalik Buterin told the CoinSummit crowd that cloud storage is one example of decentralization disrupting software:
“Dropbox has a markup of 100x. But, what if you could reduce that to 10x? What if you could sell space on your hard drive?”
Such forward-thinking ideas were on full display in a talk that discussed how bitcoin could have ramifications beyond the world of finance, and how today’s entrepreneurs are working toward this goal.
Next-generation projects
The panelists talked at great length about distributed uses beyond bitcoin, and how soon these ideas will come to life.
Mastercoin’s David Johnston, whose organisation provides a protocol that uses bitcoin to enable embeddable records such as smart contracts, said:
“In 5-6 years I think you’ll see a billion people using bitcoin, but they won’t even see that they are using.”
The proof-of-stake cyrptocurrency NXT is focused on fraud prevention via the use of tokens, Brian Snyder told the audience. The idea is to build something distributed but also provable and secure.
“I’ve seen credit cards get hacked, I’ve seen IDs hacked,” Snyder said.
Ethereum is building distributed autonomous corporations, or DACs, to offer more complex functions to enforce the advanced functions of money.
Said Buterin, the core developer of Ethereum:
“We want to reinvent the wheel. And make it better.”
He said that Ethereum is focused on building a more scalable bitcoin that can do much more than just spend.
Added Buterin: “I think the reason to do this independently [of bitcoin] is all about scalability.”
Distributed software interest
(L-R) Synder, Johnston, Buterin, Levine
(L-R) Synder, Johnston, Buterin, Levine
The panelists agreed that Bitcoin’s rising price and hashing power are major problems, ones that they say squeezs out the mainstream’s interest in building out its infrastructure.
Said Buterin:
“Bitcoin itself isn’t really all that egalitarian.”
Alternatives such as NXT, Mastercoin and Ethereum are next-generation software concepts that can inject new ideas into the cryptocurrency community. Mining is important for today’s cryptocurrencies, but new ways to offer incentives to the community are going to be important.
Said David Johnston:
“If you’re not doing something that requires hashing power, you need to find ways to incentivize other groups.”
The talk concluded with what David Johnston called ‘Johnston’s Law’:
“Everything that can be decentralized, will be decentralized,” he said.
Daniel Cawrey (@danielcawrey) | Published on March 25, 2014 at 22:32 GMT | Events, News
The future of digital currencies and the question of whether that future involves decentralized applications took center stage at CoinSummit San Francisco on 25th March in a talk that included Ethereum‘s Vitalik Buterin; Mastercoin Foundation’s David Johnston; and NXT‘s Brian Snyder.
The panel was moderated by Adam Levine of popular online podcast Let’s talk Bitcoin.
________________________________________________________________
The purpose of distributed applications is to better economize digital resources.
The concept of bitcoin was the impetus for this, but Vitalik Buterin of Ethereum, David Johnson of Mastercoin and Brian Snyder of NXT believe that there are many use cases for cryptographic systems outside of just money systems, the use case that bitcoin has popularized.
Ethereum’s Vitalik Buterin told the CoinSummit crowd that cloud storage is one example of decentralization disrupting software:
“Dropbox has a markup of 100x. But, what if you could reduce that to 10x? What if you could sell space on your hard drive?”
Such forward-thinking ideas were on full display in a talk that discussed how bitcoin could have ramifications beyond the world of finance, and how today’s entrepreneurs are working toward this goal.
Next-generation projects
The panelists talked at great length about distributed uses beyond bitcoin, and how soon these ideas will come to life.
Mastercoin’s David Johnston, whose organisation provides a protocol that uses bitcoin to enable embeddable records such as smart contracts, said:
“In 5-6 years I think you’ll see a billion people using bitcoin, but they won’t even see that they are using.”
The proof-of-stake cyrptocurrency NXT is focused on fraud prevention via the use of tokens, Brian Snyder told the audience. The idea is to build something distributed but also provable and secure.
“I’ve seen credit cards get hacked, I’ve seen IDs hacked,” Snyder said.
Ethereum is building distributed autonomous corporations, or DACs, to offer more complex functions to enforce the advanced functions of money.
Said Buterin, the core developer of Ethereum:
“We want to reinvent the wheel. And make it better.”
He said that Ethereum is focused on building a more scalable bitcoin that can do much more than just spend.
Added Buterin: “I think the reason to do this independently [of bitcoin] is all about scalability.”
Distributed software interest
(L-R) Synder, Johnston, Buterin, Levine
(L-R) Synder, Johnston, Buterin, Levine
The panelists agreed that Bitcoin’s rising price and hashing power are major problems, ones that they say squeezs out the mainstream’s interest in building out its infrastructure.
Said Buterin:
“Bitcoin itself isn’t really all that egalitarian.”
Alternatives such as NXT, Mastercoin and Ethereum are next-generation software concepts that can inject new ideas into the cryptocurrency community. Mining is important for today’s cryptocurrencies, but new ways to offer incentives to the community are going to be important.
Said David Johnston:
“If you’re not doing something that requires hashing power, you need to find ways to incentivize other groups.”
The talk concluded with what David Johnston called ‘Johnston’s Law’:
“Everything that can be decentralized, will be decentralized,” he said.
Denmark Declares Bitcoin Trades are Tax-Free
Tom Sharkey | Published on March 25, 2014 at 22:28 GMT | Europe, News, Regulation
It seems like the United States is not the only country making important decisions about bitcoin in the middle of its tax season.
Shortly after the US Internal Revenue Service declared that they will treat digital currencies like property for tax purposes this afternoon, the Tax Board in Denmark has ruled that gains and losses from casual bitcoin trading are not subject to taxation.
Politiken reports that Denmark’s top tax authority met today to discuss digital currencies and how to approach their taxation, and the Tax Board concluded that any gains made from bitcoin trading are exempt from being taxed by the Danish government, and similarly any losses from trading are not deductible.
A long-awaited decision
The Danish government has been under pressure to decide the fate of digital currency taxation for months, according to Michael Popp-Madsen, a member of Denmark’s bitcoin community.
The increasing popularity of bitcoin and other digital currencies combined with uncertainty about their tax status in Denmark has brought a lot of attention on the Tax Board to decide one way or another whether bitcoin will be taxed.
Said Popp-Madsen:
“They have postponed this decision since December and were originally supposed to come to a conclusion in January. Today is the first time they have made a decision, and I think that’s a sign that the Tax Board was unsure how to approach bitcoin.”
Popp-Madsen says that he ultimately thinks the Tax Board made the best decision, and that they may have had a hard time trying to tax digital currencies anyway, given their cryptographic nature.
Bitcoin transactions considered “purely private”
Part of the reasoning behind the Tax Board’s decision to keep bitcoin gains and losses exempt from taxation is that because digital currencies don’t exist in a physical form, they can’t be considered “real” money to be taxed by the government.
Hanne Søgaard Hansen, the chairman of the Tax Board, explained the organisation’s decision:
“We see the outcome of bitcoin transactions as a result of something purely private. Therefore, any gains on bitcoin are tax-exempt, and losses are not deductible.”
The exception to this new ruling is for businesses whose primary focus is in digital currencies. Businesses who directly trade with bitcoin as their primary function must declare their winnings and losses to the government.
Community reaction
Denmark’s decision to make bitcoin winnings tax exempt (and losses non-deductible) strikes a contrast against the US’s decision to classify bitcoin as property for tax purposes.
Members of the bitcoin community quickly voiced their opinions on Reddit, comparing the decisions made today by the US and Danish governments:
Denmark Bitcoin tax free
Denmark Bitcoin tax free
As more countries around the world start to take notice of digital currencies, different regulatory approaches are being seen.
While governments may disagree about how much regulation is necessary, one government official in Japan recently called for an international effort in approaching bitcoin regulation.
Tom Sharkey | Published on March 25, 2014 at 22:28 GMT | Europe, News, Regulation
It seems like the United States is not the only country making important decisions about bitcoin in the middle of its tax season.
Shortly after the US Internal Revenue Service declared that they will treat digital currencies like property for tax purposes this afternoon, the Tax Board in Denmark has ruled that gains and losses from casual bitcoin trading are not subject to taxation.
Politiken reports that Denmark’s top tax authority met today to discuss digital currencies and how to approach their taxation, and the Tax Board concluded that any gains made from bitcoin trading are exempt from being taxed by the Danish government, and similarly any losses from trading are not deductible.
A long-awaited decision
The Danish government has been under pressure to decide the fate of digital currency taxation for months, according to Michael Popp-Madsen, a member of Denmark’s bitcoin community.
The increasing popularity of bitcoin and other digital currencies combined with uncertainty about their tax status in Denmark has brought a lot of attention on the Tax Board to decide one way or another whether bitcoin will be taxed.
Said Popp-Madsen:
“They have postponed this decision since December and were originally supposed to come to a conclusion in January. Today is the first time they have made a decision, and I think that’s a sign that the Tax Board was unsure how to approach bitcoin.”
Popp-Madsen says that he ultimately thinks the Tax Board made the best decision, and that they may have had a hard time trying to tax digital currencies anyway, given their cryptographic nature.
Bitcoin transactions considered “purely private”
Part of the reasoning behind the Tax Board’s decision to keep bitcoin gains and losses exempt from taxation is that because digital currencies don’t exist in a physical form, they can’t be considered “real” money to be taxed by the government.
Hanne Søgaard Hansen, the chairman of the Tax Board, explained the organisation’s decision:
“We see the outcome of bitcoin transactions as a result of something purely private. Therefore, any gains on bitcoin are tax-exempt, and losses are not deductible.”
The exception to this new ruling is for businesses whose primary focus is in digital currencies. Businesses who directly trade with bitcoin as their primary function must declare their winnings and losses to the government.
Community reaction
Denmark’s decision to make bitcoin winnings tax exempt (and losses non-deductible) strikes a contrast against the US’s decision to classify bitcoin as property for tax purposes.
Members of the bitcoin community quickly voiced their opinions on Reddit, comparing the decisions made today by the US and Danish governments:
Denmark Bitcoin tax free
Denmark Bitcoin tax free
As more countries around the world start to take notice of digital currencies, different regulatory approaches are being seen.
While governments may disagree about how much regulation is necessary, one government official in Japan recently called for an international effort in approaching bitcoin regulation.
Bitcoin Exchange Kraken Raises $5m in Latest Funding Round
Stan Higgins | Published on March 25, 2014 at 20:53 GMT | Exchanges, Investors, News
Payward, Inc., the owner of US-based digital currency exchange Kraken, announced on 25th March that it has raised $5m in new capital as part of a Series A fundraising round.
Kraken, first launched in September 2013, allows users to buy and sell bitcoin, namecoin, dogecoin and Ripple, among other digital currencies.
The round was led by Hummingbird Ventures, an early-phase venture capital firm that has invested in digital properties like Dubai-based price comparison platform Souqalmal.com and object-based software defined storage service provider Amplidata in recent months.
The funding will be used by Payward to strengthen Kraken’s position in the global digital currency market.
Conservative approach
Jesse Powell, CEO at Kraken, told CoinDesk that the company plans to deploy its new funding to meet key development and regulatory needs.
“We’re taking a very conservative approach to [regulation and compliance], and this funding allows us to continue to be conservative and to be compliant to the law, and we think this is just the best approach in the long term.”
The news comes as the US government issued new guidance on digital currencies. The Internal Revenue Service announced on 25th March that it would treat them like property, making them subject to capital gains tax treatment.
Given the increased burden of compliance requirements, Kraken is taking its approach to these matters seriously.
“We’re really excited, we’ve been putting the round together for a long time, the funding is going to go to development, regulatory stuff, getting all the licenses in the United States and around the world. A lot of it is going to go into legal.”
Pressure on exchanges
Earlier this week, Kraken announced that it had passed a verifiable proof of reserves audit. The test was carried out in order to bolster confidence in the exchange’s ability to meet customer balance demands.
During the interview, Powell went on to speculate that some exchanges may face greater scrutiny in the months ahead.
“This has been more of an issue lately with exchanges like Gox going down. We may see an increasingly greater heat on these unlicensed money transmitters and these exchanges that are a little more shady.”
In the wake of the collapse of Mt. Gox, exchanges have faced financial difficulties. China-based Vircurex froze withdrawals this week, in just the latest in a string of high-profile bitcoin exchange issues.
Stan Higgins | Published on March 25, 2014 at 20:53 GMT | Exchanges, Investors, News
Payward, Inc., the owner of US-based digital currency exchange Kraken, announced on 25th March that it has raised $5m in new capital as part of a Series A fundraising round.
Kraken, first launched in September 2013, allows users to buy and sell bitcoin, namecoin, dogecoin and Ripple, among other digital currencies.
The round was led by Hummingbird Ventures, an early-phase venture capital firm that has invested in digital properties like Dubai-based price comparison platform Souqalmal.com and object-based software defined storage service provider Amplidata in recent months.
The funding will be used by Payward to strengthen Kraken’s position in the global digital currency market.
Conservative approach
Jesse Powell, CEO at Kraken, told CoinDesk that the company plans to deploy its new funding to meet key development and regulatory needs.
“We’re taking a very conservative approach to [regulation and compliance], and this funding allows us to continue to be conservative and to be compliant to the law, and we think this is just the best approach in the long term.”
The news comes as the US government issued new guidance on digital currencies. The Internal Revenue Service announced on 25th March that it would treat them like property, making them subject to capital gains tax treatment.
Given the increased burden of compliance requirements, Kraken is taking its approach to these matters seriously.
“We’re really excited, we’ve been putting the round together for a long time, the funding is going to go to development, regulatory stuff, getting all the licenses in the United States and around the world. A lot of it is going to go into legal.”
Pressure on exchanges
Earlier this week, Kraken announced that it had passed a verifiable proof of reserves audit. The test was carried out in order to bolster confidence in the exchange’s ability to meet customer balance demands.
During the interview, Powell went on to speculate that some exchanges may face greater scrutiny in the months ahead.
“This has been more of an issue lately with exchanges like Gox going down. We may see an increasingly greater heat on these unlicensed money transmitters and these exchanges that are a little more shady.”
In the wake of the collapse of Mt. Gox, exchanges have faced financial difficulties. China-based Vircurex froze withdrawals this week, in just the latest in a string of high-profile bitcoin exchange issues.
Andreessen at CoinSummit: Bitcoin Today is the Internet in 1994
Carrie Kirby (@carriekirby) | Published on March 25, 2014 at 20:21 GMT | Events, News
Marc Andreessen, Balaji Srinivasan, Kashmir Hill
Marc Andreessen helped start the Internet revolution when he co-wrote early web browser Mosaic and co-founded Netscape. Now he views bitcoin as the next technological revolution on the scale of the Internet. Andreessen Horowitz, the venture capital firm Andreessen runs with longtime collaborator Ben Horowitz, has invested about $50 million in Coinbase and other bitcoin companies, and Andreessen recently vowed to invest hundreds of millions more in the space.
Balaji S. Srinivasan is a general partner at Andreessen Horowitz and is a vocal bitcoin proponent. Srinivasan co-founded Counsyl, a genetic screening company.
Andreessen and Srinivasan kicked off CoinSummit San Francisco with a ‘fireside chat’, moderated by Forbes reporter Kashmir Hill.
Like the Internet in 1994, bitcoin today is seen by the mainstream as “weird and scary,” Marc Andreessen said in the opening session of CoinSummit San Francisco on Tuesday 25th March.
Like bitcoin, he said, the Internet “arrived as a fringe technology. It arrived with fringe politics and it arrived with fringe characters. [...] I don’t know how you get fringe technology without fringe characters and fringe politics.”
But, just as he saw it happen with the Internet, Andreessen now sees a crop of high-quality entrepreneurs stepping forward to prove bitcoin’s usefulness to the mainstream. Somewhere along that journey to the mainstream, he predicted, these “fringe characters” common to the bitcoin community will feel alienated and move on.
Andreessen’s investment plans
With that comparison in mind, Andreessen Horowitz is looking to invest in a whole ecosystem of digital currency technology.
Said Andreessen:
“In 1994, as a venture capital firm, it would have been a good idea to take the Internet seriously and it would have been a good idea to invest in a cross section of [Internet] companies [...] the venture firms that did do that did extremely well.”
Andreessen Horowitz is looking to fund two specific kinds of companies, Srinivasan said.
One is a company that would do for the Bitcoin protocol what Red Hat did for Linux, he said, professionalizing work on the open-source code. The other is a sort of Underwriters Laboratories for bitcoin, to verify the security and quality of bitcoin implementations.
Once these types of infrastructure companies are established, the opportunities for bitcoin to enable technological applications is almost limitless, Andreessen said.
He offered an example of an app that would allow drivers in San Francisco to find available garage spots and buy them from their mobile devices, maybe even through a real-time auction. Another idea would be to stop spam by imposing tiny fees on each email address sent, an application of bitcoin’s usefulness in micropayments.
Explained Andreessen:
“Twenty years ago, we were talking about this idea, and we just had no way to work out the payments.”
Bitcoin emerges from the shadows
After four years of obscurity and perceived ignobility, bitcoin is finally emerging as the game-changing technology it was all along, the pair said.
The technology community needed “four years of bashing on it in different ways” to prove that the code is reliable, in part because of the protocol’s possibly pseudonymous origin, Srinivasan said.
Bitcoin has finally moved beyond being associated with the Silk Road drug marketplace in every single article, an association that was “overblown” to begin with, Andreessen said.
“The exact same thing happened in the early ’90s with the Internet. It was just this horror show, for God’s sake, you would not want your teenager to go on this crazy Internet thing. By ’95, ’96, everybody went, ‘Oh, this is actually pretty cool’.”
Hill wrapped up the session by asking Andreessen and Srinivasan for a response to Berkshire-Hathaway chairman Warren Buffett’s famous dismissal of bitcoin as a “mirage”.
“The historical track record of old white men who don’t understand technology crapping on new technology is 100%,” Andreessen quipped, and received an appreciative chuckle from the bitcoin-friendly crowd.
Replied Srinivasan:
“Bitcoin has outperformed Berkshire-Hathaway by a lot in the last year.”
Carrie Kirby (@carriekirby) | Published on March 25, 2014 at 20:21 GMT | Events, News
Marc Andreessen, Balaji Srinivasan, Kashmir Hill
Marc Andreessen helped start the Internet revolution when he co-wrote early web browser Mosaic and co-founded Netscape. Now he views bitcoin as the next technological revolution on the scale of the Internet. Andreessen Horowitz, the venture capital firm Andreessen runs with longtime collaborator Ben Horowitz, has invested about $50 million in Coinbase and other bitcoin companies, and Andreessen recently vowed to invest hundreds of millions more in the space.
Balaji S. Srinivasan is a general partner at Andreessen Horowitz and is a vocal bitcoin proponent. Srinivasan co-founded Counsyl, a genetic screening company.
Andreessen and Srinivasan kicked off CoinSummit San Francisco with a ‘fireside chat’, moderated by Forbes reporter Kashmir Hill.
Like the Internet in 1994, bitcoin today is seen by the mainstream as “weird and scary,” Marc Andreessen said in the opening session of CoinSummit San Francisco on Tuesday 25th March.
Like bitcoin, he said, the Internet “arrived as a fringe technology. It arrived with fringe politics and it arrived with fringe characters. [...] I don’t know how you get fringe technology without fringe characters and fringe politics.”
But, just as he saw it happen with the Internet, Andreessen now sees a crop of high-quality entrepreneurs stepping forward to prove bitcoin’s usefulness to the mainstream. Somewhere along that journey to the mainstream, he predicted, these “fringe characters” common to the bitcoin community will feel alienated and move on.
Andreessen’s investment plans
With that comparison in mind, Andreessen Horowitz is looking to invest in a whole ecosystem of digital currency technology.
Said Andreessen:
“In 1994, as a venture capital firm, it would have been a good idea to take the Internet seriously and it would have been a good idea to invest in a cross section of [Internet] companies [...] the venture firms that did do that did extremely well.”
Andreessen Horowitz is looking to fund two specific kinds of companies, Srinivasan said.
One is a company that would do for the Bitcoin protocol what Red Hat did for Linux, he said, professionalizing work on the open-source code. The other is a sort of Underwriters Laboratories for bitcoin, to verify the security and quality of bitcoin implementations.
Once these types of infrastructure companies are established, the opportunities for bitcoin to enable technological applications is almost limitless, Andreessen said.
He offered an example of an app that would allow drivers in San Francisco to find available garage spots and buy them from their mobile devices, maybe even through a real-time auction. Another idea would be to stop spam by imposing tiny fees on each email address sent, an application of bitcoin’s usefulness in micropayments.
Explained Andreessen:
“Twenty years ago, we were talking about this idea, and we just had no way to work out the payments.”
Bitcoin emerges from the shadows
After four years of obscurity and perceived ignobility, bitcoin is finally emerging as the game-changing technology it was all along, the pair said.
The technology community needed “four years of bashing on it in different ways” to prove that the code is reliable, in part because of the protocol’s possibly pseudonymous origin, Srinivasan said.
Bitcoin has finally moved beyond being associated with the Silk Road drug marketplace in every single article, an association that was “overblown” to begin with, Andreessen said.
“The exact same thing happened in the early ’90s with the Internet. It was just this horror show, for God’s sake, you would not want your teenager to go on this crazy Internet thing. By ’95, ’96, everybody went, ‘Oh, this is actually pretty cool’.”
Hill wrapped up the session by asking Andreessen and Srinivasan for a response to Berkshire-Hathaway chairman Warren Buffett’s famous dismissal of bitcoin as a “mirage”.
“The historical track record of old white men who don’t understand technology crapping on new technology is 100%,” Andreessen quipped, and received an appreciative chuckle from the bitcoin-friendly crowd.
Replied Srinivasan:
“Bitcoin has outperformed Berkshire-Hathaway by a lot in the last year.”
Tera Group Hopes to Offer First Bitcoin Swap
Nermin Hajdarbegovic | Published on March 25, 2014 at 16:41 GMT | Investors, News, Prices, Regulation, US & Canada
The world’s first bitcoin swap could be just days away, provided Tera Group Inc has its way.
The start-up derivatives exchange claims to have created the first bitcoin swap and hopes the new derivative will allow financial institutions to hedge the volatility of bitcoin.
Tera says it has already constructed the terms for a multi-million dollar swap between two US institutions which would hedge the value of bitcoin against the US dollar.
In layman’s terms, if betting on derivatives does not get your adrenaline pumping, betting on bitcoin volatility probably should.
Standard swap framework with bitcoin on top
Tera says the legal framework behind its bitcoin swap is more or less standard. Institutions can make transactions at a specified bitcoin exchange rate against any currency and hedge the exchange rate for a specified period of time. The initial transaction agreement is a 25-day affair.
However, it also points out that this type of transaction is not regulated, hence its availability will be privately arranged and over the counter. Tera is seeking permission from the Commodity Futures Trading Commission (CFTC) to offer a similar swap instrument on a regulated marketplace.
Said Tera President and co-founder Leonard T. Nuara:
“The infrastructure and regulatory protocols already exist in the conventional OTC swaps markets to support these hedging instruments. [...] Regulatory approval is crucial to the long-term growth of the market utilizing bitcoin.”
If Tera gets the green light, it plans to offer bitcoin swaps on TeraExchange, which is a CFTC regulated swap execution facility.
More questions than answers
The problem with Tera’s plans is that regulatory approval might not be forthcoming. For the time being, it is not clear whether the CFTC even has authority over digital currencies and fancy financial products built on top of them.
Tera says it has provided the CFTC with information about its swap framework and that it is actively seeking approval, but won’t make much of a difference if the CFTC concludes it has nothing to do with digital currencies. If, on the other hand, it decides to treat bitcoin and other digital currencies like commodities, Tera might get regulatory approval after all.
Tera CEO and co-founder Christian Martin argues bitcoin swaps could be an “inflection point” in the evolution of cryptocurrencies.
“There is incredible momentum and support behind this alternative global currency. But even with all this excitement it is critical that the market participants have tools at their disposal to hedge their price risk.”
In theory, a bitcoin swap would make a lot of sense, as it would allow reluctant investors to employ an effective hedge when dealing with bitcoin.
For example, merchants could protect their interests against a sudden drop in bitcoin value, allowing them to accept bitcoin payments and hold bitcoins without many of the risks associated with volatility.
A swap would allow them to take volatility out of the equation, while speculators could effectively buy the risk and reap the potential windfall, or take a hit of the price goes down.
Nermin Hajdarbegovic | Published on March 25, 2014 at 16:41 GMT | Investors, News, Prices, Regulation, US & Canada
The world’s first bitcoin swap could be just days away, provided Tera Group Inc has its way.
The start-up derivatives exchange claims to have created the first bitcoin swap and hopes the new derivative will allow financial institutions to hedge the volatility of bitcoin.
Tera says it has already constructed the terms for a multi-million dollar swap between two US institutions which would hedge the value of bitcoin against the US dollar.
In layman’s terms, if betting on derivatives does not get your adrenaline pumping, betting on bitcoin volatility probably should.
Standard swap framework with bitcoin on top
Tera says the legal framework behind its bitcoin swap is more or less standard. Institutions can make transactions at a specified bitcoin exchange rate against any currency and hedge the exchange rate for a specified period of time. The initial transaction agreement is a 25-day affair.
However, it also points out that this type of transaction is not regulated, hence its availability will be privately arranged and over the counter. Tera is seeking permission from the Commodity Futures Trading Commission (CFTC) to offer a similar swap instrument on a regulated marketplace.
Said Tera President and co-founder Leonard T. Nuara:
“The infrastructure and regulatory protocols already exist in the conventional OTC swaps markets to support these hedging instruments. [...] Regulatory approval is crucial to the long-term growth of the market utilizing bitcoin.”
If Tera gets the green light, it plans to offer bitcoin swaps on TeraExchange, which is a CFTC regulated swap execution facility.
More questions than answers
The problem with Tera’s plans is that regulatory approval might not be forthcoming. For the time being, it is not clear whether the CFTC even has authority over digital currencies and fancy financial products built on top of them.
Tera says it has provided the CFTC with information about its swap framework and that it is actively seeking approval, but won’t make much of a difference if the CFTC concludes it has nothing to do with digital currencies. If, on the other hand, it decides to treat bitcoin and other digital currencies like commodities, Tera might get regulatory approval after all.
Tera CEO and co-founder Christian Martin argues bitcoin swaps could be an “inflection point” in the evolution of cryptocurrencies.
“There is incredible momentum and support behind this alternative global currency. But even with all this excitement it is critical that the market participants have tools at their disposal to hedge their price risk.”
In theory, a bitcoin swap would make a lot of sense, as it would allow reluctant investors to employ an effective hedge when dealing with bitcoin.
For example, merchants could protect their interests against a sudden drop in bitcoin value, allowing them to accept bitcoin payments and hold bitcoins without many of the risks associated with volatility.
A swap would allow them to take volatility out of the equation, while speculators could effectively buy the risk and reap the potential windfall, or take a hit of the price goes down.
Internal Revenue Service to Treat Digital Currencies as Property
Pete Rizzo (@pete_rizzo_) | Published on March 25, 2014 at 18:32 GMT | News, Regulation, US & Canada
The Internal Revenue Service (IRS) issued a new notice meant to clarify the tax treatment of digital currencies on 25th March.
The US tax body indicated that it plans to treat digital currencies like property, not currency, a change that means that:
Wages paid to employees in digital currencies are taxable and must be reported
Payments made to independent contractors must be reported via Form 1099
Profits and losses from the sale of digital currencies are subject to capital gains when used as investments.
In total, the IRS released answers to 16 frequently asked questions including how the fair market value of digital currency assets will be evaluated; whether miners are subject to business or self-employment taxes; and whether penalties would be imposed on taxpayers who did not abide by these rules prior to the release.
Said the IRS:
“In some environments, virtual currency operates like ‘real’ currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.”
For more information read the release in full below.
WASHINGTON – The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as Bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.
In some environments, virtual currency operates like “real” currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.
Among other things, this means that:
Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
And here is a full Q&A:
SECTION 4. FREQUENTLY ASKED QUESTIONS
Q-1: How is virtual currency treated for federal tax purposes?
A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.
Q-2: Is virtual currency treated as currency for purposes of determining whether a transaction results in foreign currency gain or loss under U.S. federal tax laws?
A-2: No. Under currently applicable law, virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.
Q-3: Must a taxpayer who receives virtual currency as payment for goods or services include in computing gross income the fair market value of the virtual currency?
A-3: Yes. A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received. See Publication 525, Taxable and Nontaxable Income, for more information on miscellaneous income from exchanges involving property or services.
Q-4: What is the basis of virtual currency received as payment for goods or services in Q&A-3?
A-4: The basis of virtual currency that a taxpayer receives as payment for goods or servicesin Q&A-3 is the fair market value of the virtual currency in U.S. dollars as of the date of receipt. See Publication 551, Basis of Assets, for more information on the computation of basis when property is received for goods or services.
Q-5: How is the fair market value of virtual currency determined?
A-5: For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt.
If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied.
Q-6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property?
A-6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain.
The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency. See Publication 544, Sales and Other Dispositions of Assets, for information about the tax treatment of sales and exchanges, such as whether a loss is deductible.
Q-7: What type of gain or loss does a taxpayer realize on the sale or exchange of virtual currency?
A-7: The character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A taxpayer generally realizes capital gain or loss on the sale or exchange of virtual currency that is a capital asset in the hands of the taxpayer. For example, stocks, bonds, and other investment property are generally capital assets.
A taxpayer generally realizes ordinary gain or loss on the sale or exchange of virtual currency that is not a capital asset in the hands of the taxpayer. Inventory and other property held mainly for sale to customers in a trade or business are examples of property that is not a capital asset. See Publication 544 for more information about capital assets and the character of gain or loss.
Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?
A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.
Q-9: Is an individual who “mines” virtual currency as a trade or business subject to self-employment tax on the income derived from those activities?
A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute self-employment income and are subject to the self-employment tax. See Chapter 10 of Publication 334, Tax Guide for Small Business, for more information on self-employment tax and Publication 535, Business Expenses, for more information on determining whether expenses are from a business activity carried on to make a profit.
Q-10: Does virtual currency received by an independent contractor for performing services constitute self‑employment income?
A-10: Yes. Generally, self‑employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee. Consequently, the fair market value of virtual currency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt, constitutes self‑employment income and is subject to the self-employment tax. See FS-2007-18, April 2007, Business or Hobby? Answer Has Implications for Deductions, for information on determining whether an activity is a business or a hobby.
Q-11: Does virtual currency paid by an employer as remuneration for services constitute wages for employment tax purposes?
A-11: Yes. Generally, the medium in which remuneration for services is paid is immaterial to the determination of whether the remuneration constitutes wages for employment tax purposes. Consequently, the fair market value of virtual currency paid as wages is subject to federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement. See Publication 15 (Circular E), Employer’s Tax Guide, for information on the withholding, depositing, reporting, and paying of employment taxes.
Q-12: Is a payment made using virtual currency subject to information reporting?
A-12: A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
For example, a person who in the course of a trade or business makes a payment of fixed and determinable income using virtual currency with a value of $600 or more to a U.S. non-exempt recipient in a taxable year is required to report the payment to the IRS and to the payee. Examples of payments of fixed and determinable income include rent, salaries, wages, premiums, annuities, and compensation.
Q-13: Is a person who in the course of a trade or business makes a payment using virtual currency worth $600 or more to an independent contractor for performing services required to file an information return with the IRS?
A-13: Generally, a person who in the course of a trade or business makes a payment of $600 or more in a taxable year to an independent contractor for the performance of services is required to report that payment to the IRS and to the payee on Form 1099-MISC, Miscellaneous Income. Payments of virtual currency required to be reported on Form 1099-MISC should be reported using the fair market value of the virtual currency in U.S. dollars as of the date of payment.
The payment recipient may have income even if the recipient does not receive a Form 1099-MISC. See the Instructions to Form 1099-MISC and the General Instructions for Certain Information Returns for more information. For payments to non-U.S. persons, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
Q-14: Are payments made using virtual currency subject to backup withholding?
A-14: Payments made using virtual currency are subject to backup withholding to the same extent as other payments made in property. Therefore, payors making reportable payments using virtual currency must solicit a taxpayer identification number (TIN) from the payee.
The payor must backup withhold from the payment if a TIN is not obtained prior to payment or if the payor receives notification from the IRS that backup withholding is required. See Publication 1281, Backup Withholding for Missing and Incorrect Name/TINs, for more information.
Q-15: Are there IRS information reporting requirements for a person who settles payments made in virtual currency on behalf of merchants that accept virtual currency from their customers?
A-15: Yes, if certain requirements are met. In general, a third party that contracts with a substantial number of unrelated merchants to settle payments between the merchants and their customers is a third party settlement organization (TPSO).
A TPSO is required to report payments made to a merchant on a Form 1099-K, Payment Card and Third Party Network Transactions, if, for the calendar year, both (1) the number of transactions settled for the merchant exceeds 200, and (2) the gross amount of payments made to the merchant exceeds $20,000.
When completing Boxes 1, 3, and 5a-1 on the Form 1099-K, transactions where the TPSO settles payments made with virtual currency are aggregated with transactions where the TPSO settles payments made with real currency to determine the total amounts to be reported in those boxes. When determining whether the transactions are reportable, the value of the virtual currency is the fair market value of the virtual currency in U.S. dollars on the date of payment.
See The Third Party Information Reporting Center, http://www.irs.gov/Tax-Professionals/Third-Party-Reporting-Information-Center, for more information on reporting transactions on Form 1099-K.
Q-16: Will taxpayers be subject to penalties for having treated a virtual currency transaction in a manner that is inconsistent with this notice prior to March 25, 2014?
A-16: Taxpayers may be subject to penalties for failure to comply with tax laws. For example, underpayments attributable to virtual currency transactions may be subject to penalties, such as accuracy-related penalties under section 6662.
In addition, failure to timely or correctly report virtual currency transactions when required to do so may be subject to information reporting penalties under section 6721 and 6722. However, penalty relief may be available to taxpayers and persons required to file an information return who are able to establish that the underpayment or failure to properly file information returns is due to reasonable cause.
Pete Rizzo (@pete_rizzo_) | Published on March 25, 2014 at 18:32 GMT | News, Regulation, US & Canada
The Internal Revenue Service (IRS) issued a new notice meant to clarify the tax treatment of digital currencies on 25th March.
The US tax body indicated that it plans to treat digital currencies like property, not currency, a change that means that:
Wages paid to employees in digital currencies are taxable and must be reported
Payments made to independent contractors must be reported via Form 1099
Profits and losses from the sale of digital currencies are subject to capital gains when used as investments.
In total, the IRS released answers to 16 frequently asked questions including how the fair market value of digital currency assets will be evaluated; whether miners are subject to business or self-employment taxes; and whether penalties would be imposed on taxpayers who did not abide by these rules prior to the release.
Said the IRS:
“In some environments, virtual currency operates like ‘real’ currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.”
For more information read the release in full below.
WASHINGTON – The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as Bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.
In some environments, virtual currency operates like “real” currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.
Among other things, this means that:
Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
And here is a full Q&A:
SECTION 4. FREQUENTLY ASKED QUESTIONS
Q-1: How is virtual currency treated for federal tax purposes?
A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.
Q-2: Is virtual currency treated as currency for purposes of determining whether a transaction results in foreign currency gain or loss under U.S. federal tax laws?
A-2: No. Under currently applicable law, virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.
Q-3: Must a taxpayer who receives virtual currency as payment for goods or services include in computing gross income the fair market value of the virtual currency?
A-3: Yes. A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received. See Publication 525, Taxable and Nontaxable Income, for more information on miscellaneous income from exchanges involving property or services.
Q-4: What is the basis of virtual currency received as payment for goods or services in Q&A-3?
A-4: The basis of virtual currency that a taxpayer receives as payment for goods or servicesin Q&A-3 is the fair market value of the virtual currency in U.S. dollars as of the date of receipt. See Publication 551, Basis of Assets, for more information on the computation of basis when property is received for goods or services.
Q-5: How is the fair market value of virtual currency determined?
A-5: For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt.
If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied.
Q-6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property?
A-6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain.
The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency. See Publication 544, Sales and Other Dispositions of Assets, for information about the tax treatment of sales and exchanges, such as whether a loss is deductible.
Q-7: What type of gain or loss does a taxpayer realize on the sale or exchange of virtual currency?
A-7: The character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A taxpayer generally realizes capital gain or loss on the sale or exchange of virtual currency that is a capital asset in the hands of the taxpayer. For example, stocks, bonds, and other investment property are generally capital assets.
A taxpayer generally realizes ordinary gain or loss on the sale or exchange of virtual currency that is not a capital asset in the hands of the taxpayer. Inventory and other property held mainly for sale to customers in a trade or business are examples of property that is not a capital asset. See Publication 544 for more information about capital assets and the character of gain or loss.
Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?
A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.
Q-9: Is an individual who “mines” virtual currency as a trade or business subject to self-employment tax on the income derived from those activities?
A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute self-employment income and are subject to the self-employment tax. See Chapter 10 of Publication 334, Tax Guide for Small Business, for more information on self-employment tax and Publication 535, Business Expenses, for more information on determining whether expenses are from a business activity carried on to make a profit.
Q-10: Does virtual currency received by an independent contractor for performing services constitute self‑employment income?
A-10: Yes. Generally, self‑employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee. Consequently, the fair market value of virtual currency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt, constitutes self‑employment income and is subject to the self-employment tax. See FS-2007-18, April 2007, Business or Hobby? Answer Has Implications for Deductions, for information on determining whether an activity is a business or a hobby.
Q-11: Does virtual currency paid by an employer as remuneration for services constitute wages for employment tax purposes?
A-11: Yes. Generally, the medium in which remuneration for services is paid is immaterial to the determination of whether the remuneration constitutes wages for employment tax purposes. Consequently, the fair market value of virtual currency paid as wages is subject to federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement. See Publication 15 (Circular E), Employer’s Tax Guide, for information on the withholding, depositing, reporting, and paying of employment taxes.
Q-12: Is a payment made using virtual currency subject to information reporting?
A-12: A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
For example, a person who in the course of a trade or business makes a payment of fixed and determinable income using virtual currency with a value of $600 or more to a U.S. non-exempt recipient in a taxable year is required to report the payment to the IRS and to the payee. Examples of payments of fixed and determinable income include rent, salaries, wages, premiums, annuities, and compensation.
Q-13: Is a person who in the course of a trade or business makes a payment using virtual currency worth $600 or more to an independent contractor for performing services required to file an information return with the IRS?
A-13: Generally, a person who in the course of a trade or business makes a payment of $600 or more in a taxable year to an independent contractor for the performance of services is required to report that payment to the IRS and to the payee on Form 1099-MISC, Miscellaneous Income. Payments of virtual currency required to be reported on Form 1099-MISC should be reported using the fair market value of the virtual currency in U.S. dollars as of the date of payment.
The payment recipient may have income even if the recipient does not receive a Form 1099-MISC. See the Instructions to Form 1099-MISC and the General Instructions for Certain Information Returns for more information. For payments to non-U.S. persons, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
Q-14: Are payments made using virtual currency subject to backup withholding?
A-14: Payments made using virtual currency are subject to backup withholding to the same extent as other payments made in property. Therefore, payors making reportable payments using virtual currency must solicit a taxpayer identification number (TIN) from the payee.
The payor must backup withhold from the payment if a TIN is not obtained prior to payment or if the payor receives notification from the IRS that backup withholding is required. See Publication 1281, Backup Withholding for Missing and Incorrect Name/TINs, for more information.
Q-15: Are there IRS information reporting requirements for a person who settles payments made in virtual currency on behalf of merchants that accept virtual currency from their customers?
A-15: Yes, if certain requirements are met. In general, a third party that contracts with a substantial number of unrelated merchants to settle payments between the merchants and their customers is a third party settlement organization (TPSO).
A TPSO is required to report payments made to a merchant on a Form 1099-K, Payment Card and Third Party Network Transactions, if, for the calendar year, both (1) the number of transactions settled for the merchant exceeds 200, and (2) the gross amount of payments made to the merchant exceeds $20,000.
When completing Boxes 1, 3, and 5a-1 on the Form 1099-K, transactions where the TPSO settles payments made with virtual currency are aggregated with transactions where the TPSO settles payments made with real currency to determine the total amounts to be reported in those boxes. When determining whether the transactions are reportable, the value of the virtual currency is the fair market value of the virtual currency in U.S. dollars on the date of payment.
See The Third Party Information Reporting Center, http://www.irs.gov/Tax-Professionals/Third-Party-Reporting-Information-Center, for more information on reporting transactions on Form 1099-K.
Q-16: Will taxpayers be subject to penalties for having treated a virtual currency transaction in a manner that is inconsistent with this notice prior to March 25, 2014?
A-16: Taxpayers may be subject to penalties for failure to comply with tax laws. For example, underpayments attributable to virtual currency transactions may be subject to penalties, such as accuracy-related penalties under section 6662.
In addition, failure to timely or correctly report virtual currency transactions when required to do so may be subject to information reporting penalties under section 6721 and 6722. However, penalty relief may be available to taxpayers and persons required to file an information return who are able to establish that the underpayment or failure to properly file information returns is due to reasonable cause.
Money2020 Conference Announces Winklevoss Brothers as Keynote Speakers
Pete Rizzo (@pete_rizzo_) | Published on March 25, 2014 at 14:46 GMT | Events, News
Money2020 2014, a five-day conference dedicated to innovations in money to be held this November, has announced Winklevoss Bitcoin Trust principles Cameron and Tyler Winklevoss as keynote speakers.
Running from 2nd-6th November, Money2020, which this year features the (Bit)coinWorld track, will provide the digital currency community with a platform to raise awareness about distributed payment protocols, showcase the ecosystem’s newest innovators and hold networking events.
Last year’s event featured more than 440 speakers from across the financial industry, including such notable names from the digital currency community as Fred Ehrsam, co-founder of Coinbase; angel investor Roger Ver; Ripple CEO Chris Larsen; BitPay CEO Tony Gallippi; and Tradehill CEO Jered Kenna.
Money2020 indicated that the Winklevoss brothers were selected for the speaking slot due to their demonstrated commitment to the future of distributed payment technologies and industry involvement.
Said Simran Rekhi Aggarwal, co-founder and president of Money2020:
“Cameron and Tyler are high-profile industry executives who have been thorough and thoughtful in their involvement with bitcoin. As stakeholders and visionaries in this space, we feel they offer a unique perspective to engage and inspire our large, diverse and senior audience.”
Sponsors for this year’s event include American Express, PayPal, BitPay and Google Wallet, among others.
Money2020 bolsters digital currency coverage
Aggarwal told CoinDesk that Money2020 will be expanding its coverage this year to focus more broadly on distributed payment protocols and digital currencies, not simply bitcoin.
Said Aggarwal:
“We believe they’re important new technologies that hold the potential for disruptive innovation in payments and financial services.”
The event exec went on to say that Money2020 would serve to “cross-pollinate” innovators in the digital currency space with like-minded individuals taking similar approaches to the mainstream evolution of money.
Added Aggarwal: “That’s one of the key benefits of being at Money2020, and something we feel the entire ecosystem of innovators in money need to do more.”
Winklevoss brothers take the stage
Given that the Winklevoss brothers are the largest single investors in bitcoin, they have become a staple presence at bitcoin events, taking prominent roles at Bitcoin 2013 and at this January’s New York bitcoin hearings
In addition to their industry expertise, Money2020 noted that the Winklevosses’ recent high-profile endeavors such as their bitcoin pricing index Winklevoss Index or Winkdex, and the yet-to-be-approved exchange-traded fund, Winklevoss Bitcoin Trust, bolstered their qualifications for the headlining position.
About Money2020
One of the largest financial conferences on the annual calendar, Money2020 expects to draw more than 6,000 attendees from 50 countries, including more than 500 industry-leading CEOs in 2014.
This year’s conference will be held at the Aria in Las Vegas. Discounted tickets are still available.
Pete Rizzo (@pete_rizzo_) | Published on March 25, 2014 at 14:46 GMT | Events, News
Money2020 2014, a five-day conference dedicated to innovations in money to be held this November, has announced Winklevoss Bitcoin Trust principles Cameron and Tyler Winklevoss as keynote speakers.
Running from 2nd-6th November, Money2020, which this year features the (Bit)coinWorld track, will provide the digital currency community with a platform to raise awareness about distributed payment protocols, showcase the ecosystem’s newest innovators and hold networking events.
Last year’s event featured more than 440 speakers from across the financial industry, including such notable names from the digital currency community as Fred Ehrsam, co-founder of Coinbase; angel investor Roger Ver; Ripple CEO Chris Larsen; BitPay CEO Tony Gallippi; and Tradehill CEO Jered Kenna.
Money2020 indicated that the Winklevoss brothers were selected for the speaking slot due to their demonstrated commitment to the future of distributed payment technologies and industry involvement.
Said Simran Rekhi Aggarwal, co-founder and president of Money2020:
“Cameron and Tyler are high-profile industry executives who have been thorough and thoughtful in their involvement with bitcoin. As stakeholders and visionaries in this space, we feel they offer a unique perspective to engage and inspire our large, diverse and senior audience.”
Sponsors for this year’s event include American Express, PayPal, BitPay and Google Wallet, among others.
Money2020 bolsters digital currency coverage
Aggarwal told CoinDesk that Money2020 will be expanding its coverage this year to focus more broadly on distributed payment protocols and digital currencies, not simply bitcoin.
Said Aggarwal:
“We believe they’re important new technologies that hold the potential for disruptive innovation in payments and financial services.”
The event exec went on to say that Money2020 would serve to “cross-pollinate” innovators in the digital currency space with like-minded individuals taking similar approaches to the mainstream evolution of money.
Added Aggarwal: “That’s one of the key benefits of being at Money2020, and something we feel the entire ecosystem of innovators in money need to do more.”
Winklevoss brothers take the stage
Given that the Winklevoss brothers are the largest single investors in bitcoin, they have become a staple presence at bitcoin events, taking prominent roles at Bitcoin 2013 and at this January’s New York bitcoin hearings
In addition to their industry expertise, Money2020 noted that the Winklevosses’ recent high-profile endeavors such as their bitcoin pricing index Winklevoss Index or Winkdex, and the yet-to-be-approved exchange-traded fund, Winklevoss Bitcoin Trust, bolstered their qualifications for the headlining position.
About Money2020
One of the largest financial conferences on the annual calendar, Money2020 expects to draw more than 6,000 attendees from 50 countries, including more than 500 industry-leading CEOs in 2014.
This year’s conference will be held at the Aria in Las Vegas. Discounted tickets are still available.
European Central Bank: Bitcoin Shouldn’t be Ignored or Dismissed
Nermin Hajdarbegovic | Published on March 25, 2014 at 12:16 GMT | Europe, News, Regulation
The European Central Bank (ECB) has reiterated its position on digital currencies.
In a speech delivered at the at the ECB/Banca d’Italia Workshop on Interchange Fees, Yves Mersch, Member of the Executive Board of the ECB, said digital currencies are still too small to have an impact on retail payments and central banks.
Mersch reiterated what the ECB said two years ago in its Virtual Currency Schemes report, published in October 2012.
In the meantime digital currencies have gained quite a following, although they are still not even close to what could be described as ‘mainstream’. In any case they are gaining popularity and as a result regulators around the world are starting to take notice.
Last December the European Banking Authority (EBA) issued a warning on potential risks related to virtual currencies, focusing on fraud and theft.
For its part, the ECB has remained silent on the matter since its 2012 report.
Phenomenon that shouldn’t be ignored
However, this time around Mersch stressed that digital currencies should not be ignored despite their relatively small impact on the economy. Keep in mind that Mersch was talking about retail payments and interchange fees, hence the limited focus on other cryptocurrency-related issues.
“Many media commentators have been wondering what impact these currencies will have on retail payments and even on central banks. I agree that virtual currency schemes are an interesting phenomenon and should not be ignored or dismissed,” he said.
“The ECB was one of the first public authorities to see their potential and their risks and published a detailed analysis in 2012. Despite the overall rise in the value of bitcoin since the publication of the report and the media attention it is getting, our conclusions still seem to be valid, namely, that such currencies are not (at least yet) economically important.”
He went on to conclude that cryptocurrencies do not pose a serious risk to price stability or financial stability in Europe, but they do pose a risk for users, which is what European central banks and the EBA have been saying for months.
Interestingly, Mersch made a clear distinction between speculative investments in bitcoin and the use of bitcoin for payments.
“However, this user risk is more related to speculative investments and consumer protection, and not necessarily to payments. Nevertheless, we are closely following developments and keeping in touch with other authorities,” he said.
A risk for retail?
Mersch said novel and unconventional challenges are facing regulators, but he did not offer any thoughts on digital currency regulation. The fact that he clearly singled out payments as a safer niche for bitcoin is encouraging, especially given the tone of his address and the focus on retail.
Consumer protection remains an issue in many situations, but in theory it could be addressed by bitcoin payment processors and merchants to some extent, although many argue that nothing short of real regulation will solve the problem.
Protection offers and buyer recourse are important for merchants and consumers alike. Merchants aren’t exposed to financial risk if there is no protection in place, but they do stand to lose credibility or risk their reputation if something goes wrong.
At the same time, consumers cannot be expected to pay for big-ticket items using a payment method that effectively strips them of consumer protection. Both parties stand to gain from lower transaction fees: merchants can increase margins, while at the same time passing part of the savings down to consumers.
Sadly though, regulatory ambiguity and uncertainty are two sizeable hurdles that won’t be overcome anytime soon.
Nermin Hajdarbegovic | Published on March 25, 2014 at 12:16 GMT | Europe, News, Regulation
The European Central Bank (ECB) has reiterated its position on digital currencies.
In a speech delivered at the at the ECB/Banca d’Italia Workshop on Interchange Fees, Yves Mersch, Member of the Executive Board of the ECB, said digital currencies are still too small to have an impact on retail payments and central banks.
Mersch reiterated what the ECB said two years ago in its Virtual Currency Schemes report, published in October 2012.
In the meantime digital currencies have gained quite a following, although they are still not even close to what could be described as ‘mainstream’. In any case they are gaining popularity and as a result regulators around the world are starting to take notice.
Last December the European Banking Authority (EBA) issued a warning on potential risks related to virtual currencies, focusing on fraud and theft.
For its part, the ECB has remained silent on the matter since its 2012 report.
Phenomenon that shouldn’t be ignored
However, this time around Mersch stressed that digital currencies should not be ignored despite their relatively small impact on the economy. Keep in mind that Mersch was talking about retail payments and interchange fees, hence the limited focus on other cryptocurrency-related issues.
“Many media commentators have been wondering what impact these currencies will have on retail payments and even on central banks. I agree that virtual currency schemes are an interesting phenomenon and should not be ignored or dismissed,” he said.
“The ECB was one of the first public authorities to see their potential and their risks and published a detailed analysis in 2012. Despite the overall rise in the value of bitcoin since the publication of the report and the media attention it is getting, our conclusions still seem to be valid, namely, that such currencies are not (at least yet) economically important.”
He went on to conclude that cryptocurrencies do not pose a serious risk to price stability or financial stability in Europe, but they do pose a risk for users, which is what European central banks and the EBA have been saying for months.
Interestingly, Mersch made a clear distinction between speculative investments in bitcoin and the use of bitcoin for payments.
“However, this user risk is more related to speculative investments and consumer protection, and not necessarily to payments. Nevertheless, we are closely following developments and keeping in touch with other authorities,” he said.
A risk for retail?
Mersch said novel and unconventional challenges are facing regulators, but he did not offer any thoughts on digital currency regulation. The fact that he clearly singled out payments as a safer niche for bitcoin is encouraging, especially given the tone of his address and the focus on retail.
Consumer protection remains an issue in many situations, but in theory it could be addressed by bitcoin payment processors and merchants to some extent, although many argue that nothing short of real regulation will solve the problem.
Protection offers and buyer recourse are important for merchants and consumers alike. Merchants aren’t exposed to financial risk if there is no protection in place, but they do stand to lose credibility or risk their reputation if something goes wrong.
At the same time, consumers cannot be expected to pay for big-ticket items using a payment method that effectively strips them of consumer protection. Both parties stand to gain from lower transaction fees: merchants can increase margins, while at the same time passing part of the savings down to consumers.
Sadly though, regulatory ambiguity and uncertainty are two sizeable hurdles that won’t be overcome anytime soon.
UK Cash-for-Bitcoin Service ZipZap Suspends BTC Transactions
Jon Southurst (@southtopia) | Published on March 25, 2014 at 09:47 GMT | Companies, News, Startups
Global cash payment network ZipZap has temporarily halted digital currency transactions, after partner and non-bitcoin payment processor PayPoint said it needed more clarification on surrounding regulations.
ZipZap CEO Alan Safahi told CoinDesk the company had not ended its relationship with PayPoint, adding that it was still working with them for non-digital currency clients, and to add more payment locations. He said such issues were a fact of life for bitcoin businesses who needed to operate within the traditional fiat world. He added:
“They only halted digital currency processing until they have better legal clarification from government which we hope to have within weeks. Meanwhile, we are pursuing other options as well.”
Cash for bitcoins
ZipZap had allowed customers to buy bitcoins with cash by first registering at its site and verifying ID, printing out a barcode on a payment slip and then taking it to a cashier at a physical location to hand over the money.
The service operated in five countries and customers could also login via existing accounts with Bittylicious, BuyBitcoin.sg and BIPS Market, using exchanges ANXBTC and ANXPRO. ZipZap had plans to also include Kraken, CoinMKT and BTCX.se.
There were 28,000 physical stores for customers to pay – all of them PayPoint clients.
Processor stopped deposits
PayPoint had reportedly halted deposits to ZipZap until the UK government and the financial conduct authority provide legal clarity on digital currencies.
Though the process of printing slips and visiting a store might seem a cumbersome way to acquire such currency, it remained simpler and much less risky then dealing with online bitcoin exchanges.
Identity and address verification requirements for exchanges have increased markedly in the past year and even seasoned bitcoin users have become reluctant to trust them with large amounts of money or customers’ personal banking details.
ZipZap allowed customers to transact within their own country, as long as it was one of the five, and with registered businesses.
Banks OK, others still wary
The company had apparently had no problems with its partners in the traditional banking world, but payment processors like PayPoint and PayPal have been treading far more cautiously with digital currency related activities.
If a solution cannot be found with PayPoint, there may still be other payment processing options for ZipZap in the UK. There hasn’t been any overt pressure from the UK’s authorities for either financial institutions or the public to avoid bitcoin transactions.
Despite hints about eliminating sales tax, there is also no legislation related to bitcoin in the UK as yet, which appears to leave businesses free to try new models but which can actually stifle innovation, as entrepreneurs and investors become reluctant to enter the unknown territory.
ZipZap, still a relatively new business, has been trying to grow across the UK and other European markets. However, it may now focus on other overseas markets (like the US) after finding Europe’s environment too challenging.
The company’s site lists its headquarters in San Francisco, and it also has operations in India and Argentina.
Jon Southurst (@southtopia) | Published on March 25, 2014 at 09:47 GMT | Companies, News, Startups
Global cash payment network ZipZap has temporarily halted digital currency transactions, after partner and non-bitcoin payment processor PayPoint said it needed more clarification on surrounding regulations.
ZipZap CEO Alan Safahi told CoinDesk the company had not ended its relationship with PayPoint, adding that it was still working with them for non-digital currency clients, and to add more payment locations. He said such issues were a fact of life for bitcoin businesses who needed to operate within the traditional fiat world. He added:
“They only halted digital currency processing until they have better legal clarification from government which we hope to have within weeks. Meanwhile, we are pursuing other options as well.”
Cash for bitcoins
ZipZap had allowed customers to buy bitcoins with cash by first registering at its site and verifying ID, printing out a barcode on a payment slip and then taking it to a cashier at a physical location to hand over the money.
The service operated in five countries and customers could also login via existing accounts with Bittylicious, BuyBitcoin.sg and BIPS Market, using exchanges ANXBTC and ANXPRO. ZipZap had plans to also include Kraken, CoinMKT and BTCX.se.
There were 28,000 physical stores for customers to pay – all of them PayPoint clients.
Processor stopped deposits
PayPoint had reportedly halted deposits to ZipZap until the UK government and the financial conduct authority provide legal clarity on digital currencies.
Though the process of printing slips and visiting a store might seem a cumbersome way to acquire such currency, it remained simpler and much less risky then dealing with online bitcoin exchanges.
Identity and address verification requirements for exchanges have increased markedly in the past year and even seasoned bitcoin users have become reluctant to trust them with large amounts of money or customers’ personal banking details.
ZipZap allowed customers to transact within their own country, as long as it was one of the five, and with registered businesses.
Banks OK, others still wary
The company had apparently had no problems with its partners in the traditional banking world, but payment processors like PayPoint and PayPal have been treading far more cautiously with digital currency related activities.
If a solution cannot be found with PayPoint, there may still be other payment processing options for ZipZap in the UK. There hasn’t been any overt pressure from the UK’s authorities for either financial institutions or the public to avoid bitcoin transactions.
Despite hints about eliminating sales tax, there is also no legislation related to bitcoin in the UK as yet, which appears to leave businesses free to try new models but which can actually stifle innovation, as entrepreneurs and investors become reluctant to enter the unknown territory.
ZipZap, still a relatively new business, has been trying to grow across the UK and other European markets. However, it may now focus on other overseas markets (like the US) after finding Europe’s environment too challenging.
The company’s site lists its headquarters in San Francisco, and it also has operations in India and Argentina.
Developers Battle Over Bitcoin Block Chain
Danny Bradbury (@dannybradbury) | Published on March 25, 2014 at 08:05 GMT | Analysis, Bitcoin protocol, Technology
It’s surprising what worm-filled cans a new version of the bitcoin protocol will open. The core developers released a much-anticipated update to the core software – version 0.9.0 – last week. Now, a third party developer group is already lobbying for change.
Counterparty, a financial trading platform built on the bitcoin block chain, issued an open letter to the Bitcoin protocol’s core developers last week, urging them to reconsider a key component of the protocol’s latest release. That component is called OP_RETURN, and it is a new feature, designed to allow people to store extra data in the block chain.
OP_RETURN was originally meant to store 80 bytes of extra data in a bitcoin transaction, but the core developers slashed it to 40 bytes. This upset CounterParty, because as a financial trading platform that allows people to create new asset classes and financial derivatives to be traded on the bitcoin block chain, it says that it needed those 80 bytes to store its data.
“A 40 byte limit (in place of the 80 bytes originally planned) makes OP_RETURN unusable for Counterparty’s purposes,” said the letter.
The other option is to use another feature of the Bitcoin protocol, called multi-signature outputs. These involve more than one signature for a particular bitcoin transaction, and are designed for features such as escrow payments. But that second signature can be used to store data instead.
“If the data cap is left at 40 bytes, we will be forced to use such awkward constructions to accomplish our goals,” the Counterparty letter said. Instead, the organization wants the core devs to play ball, and restore the original 80-byte cap.
In a discussion on the Bitcoin Talk forum, core developer Jeff Garzik makes an argument for why they shouldn’t. He warns that when a transaction is processed on the bitcoin network, everyone processes it, which means that the data you’re storing has to be stored by everyone.
“It is called a free ride. Given that the overwhelming majority — >90% — application for the bitcoin blockchain is currency use, using full nodes as dumb data storage terminals is simply abusing an all-volunteer network resource,” he argues.
He accuses Counterparty and Mastercoin – another service that also uses the block chain for its own purposes – of having “simply flipped an ‘on’ switch and started using bitcoin P2P nodes as unwanted data stores.” And they didn’t engage the community before doing it either, he complains.
Get off of my block
Is it really the core developers’ job to make it possible for others to build extra services on top of the block chain? It had better, if it wants to stay relevant, says ‘PhantomPhreak’, a core developer for Counterparty.
PhantomPhreak argues that both parties get something from this kind of relationship. By piggybacking on the bitcoin block chain, Counterparty and other new services get pre-baked services including trusted timestamping, proof of publication,peer discovery, and anti-DOS measures.
Bitcoin, in turn, gets to stay relevant, (s)he argues: “Bitcoin can be very conservative with the kinds of functionality that it directly supports, while still rapidly acquiring the new features that it needs to stay relevant and useful.”
So now, Counterparty (which hasn’t contributed to the bitcoin core’s open source effort), and the bitcoin core (which has stated that it needs people using the protocol to pitch in) are stuck with each other, and neither is happy. Phantomphreak says that “a few of the Bitcoin developers are trying to prevent us from using the protocol as it stands, with all of the flexibility that it naturally provides.”
Core developer Mike Hearn has an idea to cut through the whole tangled mess. In fact, he had it in 2012, before Counterparty or Mastercoin even existed. Instead of trying to store lots of data in a special field in the block chain, why not simply store a pointer to a third party, P2P data storage pool, he asks? This could be achieved using something called a distributed hash table (DHT).
“That way it doesn’t matter how much data you want to store, the impact to the block chain is always the same,” Hearn says. “Nobody is against that – it’s why OP_RETURN is sized to allow for hashes. DHTs come in conveniently reusable libraries so it’s hardly a big engineering challenge. Instead they turned it into some kind of stupid political fight.”
Talking of fights, more tensions emerged among the core devs last week, and they’re indirectly related to this question of who gets to use the block chain for what, and why.
0.9.0 reduced the transaction fees – the money paid to get a message processed by the network – tenfold. This is a good way to encourage micro transactions on the network by keeping the costs of a single transaction low, so that you could, say, pay pennies for downloading a single story.
Peter Todd, a contributor to the bitcoin code, told CoinDesk that he was worried that this would open the network up to spam and denial of service attacks, because people could use the cheap transaction fees to flood the network.
“They turned it into some kind of stupid political fight.”
Gavin Andresen, the Bitcoin Foundation’s chief scientist and lead developer of Bitcoin Core, says that there are plenty of ways to slow down bitcoin transactions with DoS attacks – but he argues that they generally don’t happen, primarily because the attackers would have little to gain.
“I have never said that bitcoin is directly suitable for transactions less than a dollar; I think the jury is still out on how low we can go,” he says.
Vitalik Buterin, developer of the soon-to-be-launched Ethereum project, argues that the concepts of transaction fees and storing messages on the block chain are connected. Transactions are badly thought out in the bitcoin protocol, he says. Some core developers have admitted this to CoinDesk, which is why they’re working to change it using ‘smart’ fees.
If transactions were better managed, then people could just pay for what they wanted to store, Buterin says. Then, there would be no ‘free rides’.
“it’s the protocol’s fault the OPRETURN battle is such an issue. In an ideal world, the concept of “abuse” would not even exist; fees would be mandatory, and carefully structured to closely match the actual cost that a given transaction imposes on the network,” he says. “If you can pay the fees for what you’re doing then you should be able to do it, no questions asked.”
It doesn’t seem as though the core developers are about to change the OP_RETURN parameters to allow more data to be stored in the network. If they don’t, then Counterparty has some options.
It can hack together an inelegant use of the multi-signature protocol to store its data. It can explore Hearn’s idea of using pointers and distributed hash tables. Or it can simply jump ship and either build its own block chain, or use someone else’s service. Perhaps Ethereum’s for example.
But PhantomPhreak isn’t ready for that. “Ethereum is not really an alternative to Bitcoin for our purposes,” PhantomPhreak told CoinDesk. It isn’t tried and tested yet, the anonymous developer contends.
For now then, at least, some forward-thinking initaitives that want to expand beyond bitcoin’s core services still feel as though they need the bitcoin protocol to do it. And it looks as though that’s going to generate tensions, workarounds and in-fighting for some time to come.
Danny Bradbury (@dannybradbury) | Published on March 25, 2014 at 08:05 GMT | Analysis, Bitcoin protocol, Technology
It’s surprising what worm-filled cans a new version of the bitcoin protocol will open. The core developers released a much-anticipated update to the core software – version 0.9.0 – last week. Now, a third party developer group is already lobbying for change.
Counterparty, a financial trading platform built on the bitcoin block chain, issued an open letter to the Bitcoin protocol’s core developers last week, urging them to reconsider a key component of the protocol’s latest release. That component is called OP_RETURN, and it is a new feature, designed to allow people to store extra data in the block chain.
OP_RETURN was originally meant to store 80 bytes of extra data in a bitcoin transaction, but the core developers slashed it to 40 bytes. This upset CounterParty, because as a financial trading platform that allows people to create new asset classes and financial derivatives to be traded on the bitcoin block chain, it says that it needed those 80 bytes to store its data.
“A 40 byte limit (in place of the 80 bytes originally planned) makes OP_RETURN unusable for Counterparty’s purposes,” said the letter.
The other option is to use another feature of the Bitcoin protocol, called multi-signature outputs. These involve more than one signature for a particular bitcoin transaction, and are designed for features such as escrow payments. But that second signature can be used to store data instead.
“If the data cap is left at 40 bytes, we will be forced to use such awkward constructions to accomplish our goals,” the Counterparty letter said. Instead, the organization wants the core devs to play ball, and restore the original 80-byte cap.
In a discussion on the Bitcoin Talk forum, core developer Jeff Garzik makes an argument for why they shouldn’t. He warns that when a transaction is processed on the bitcoin network, everyone processes it, which means that the data you’re storing has to be stored by everyone.
“It is called a free ride. Given that the overwhelming majority — >90% — application for the bitcoin blockchain is currency use, using full nodes as dumb data storage terminals is simply abusing an all-volunteer network resource,” he argues.
He accuses Counterparty and Mastercoin – another service that also uses the block chain for its own purposes – of having “simply flipped an ‘on’ switch and started using bitcoin P2P nodes as unwanted data stores.” And they didn’t engage the community before doing it either, he complains.
Get off of my block
Is it really the core developers’ job to make it possible for others to build extra services on top of the block chain? It had better, if it wants to stay relevant, says ‘PhantomPhreak’, a core developer for Counterparty.
PhantomPhreak argues that both parties get something from this kind of relationship. By piggybacking on the bitcoin block chain, Counterparty and other new services get pre-baked services including trusted timestamping, proof of publication,peer discovery, and anti-DOS measures.
Bitcoin, in turn, gets to stay relevant, (s)he argues: “Bitcoin can be very conservative with the kinds of functionality that it directly supports, while still rapidly acquiring the new features that it needs to stay relevant and useful.”
So now, Counterparty (which hasn’t contributed to the bitcoin core’s open source effort), and the bitcoin core (which has stated that it needs people using the protocol to pitch in) are stuck with each other, and neither is happy. Phantomphreak says that “a few of the Bitcoin developers are trying to prevent us from using the protocol as it stands, with all of the flexibility that it naturally provides.”
Core developer Mike Hearn has an idea to cut through the whole tangled mess. In fact, he had it in 2012, before Counterparty or Mastercoin even existed. Instead of trying to store lots of data in a special field in the block chain, why not simply store a pointer to a third party, P2P data storage pool, he asks? This could be achieved using something called a distributed hash table (DHT).
“That way it doesn’t matter how much data you want to store, the impact to the block chain is always the same,” Hearn says. “Nobody is against that – it’s why OP_RETURN is sized to allow for hashes. DHTs come in conveniently reusable libraries so it’s hardly a big engineering challenge. Instead they turned it into some kind of stupid political fight.”
Talking of fights, more tensions emerged among the core devs last week, and they’re indirectly related to this question of who gets to use the block chain for what, and why.
0.9.0 reduced the transaction fees – the money paid to get a message processed by the network – tenfold. This is a good way to encourage micro transactions on the network by keeping the costs of a single transaction low, so that you could, say, pay pennies for downloading a single story.
Peter Todd, a contributor to the bitcoin code, told CoinDesk that he was worried that this would open the network up to spam and denial of service attacks, because people could use the cheap transaction fees to flood the network.
“They turned it into some kind of stupid political fight.”
Gavin Andresen, the Bitcoin Foundation’s chief scientist and lead developer of Bitcoin Core, says that there are plenty of ways to slow down bitcoin transactions with DoS attacks – but he argues that they generally don’t happen, primarily because the attackers would have little to gain.
“I have never said that bitcoin is directly suitable for transactions less than a dollar; I think the jury is still out on how low we can go,” he says.
Vitalik Buterin, developer of the soon-to-be-launched Ethereum project, argues that the concepts of transaction fees and storing messages on the block chain are connected. Transactions are badly thought out in the bitcoin protocol, he says. Some core developers have admitted this to CoinDesk, which is why they’re working to change it using ‘smart’ fees.
If transactions were better managed, then people could just pay for what they wanted to store, Buterin says. Then, there would be no ‘free rides’.
“it’s the protocol’s fault the OPRETURN battle is such an issue. In an ideal world, the concept of “abuse” would not even exist; fees would be mandatory, and carefully structured to closely match the actual cost that a given transaction imposes on the network,” he says. “If you can pay the fees for what you’re doing then you should be able to do it, no questions asked.”
It doesn’t seem as though the core developers are about to change the OP_RETURN parameters to allow more data to be stored in the network. If they don’t, then Counterparty has some options.
It can hack together an inelegant use of the multi-signature protocol to store its data. It can explore Hearn’s idea of using pointers and distributed hash tables. Or it can simply jump ship and either build its own block chain, or use someone else’s service. Perhaps Ethereum’s for example.
But PhantomPhreak isn’t ready for that. “Ethereum is not really an alternative to Bitcoin for our purposes,” PhantomPhreak told CoinDesk. It isn’t tried and tested yet, the anonymous developer contends.
For now then, at least, some forward-thinking initaitives that want to expand beyond bitcoin’s core services still feel as though they need the bitcoin protocol to do it. And it looks as though that’s going to generate tensions, workarounds and in-fighting for some time to come.
Sure i would read. To keep it intresting why not publish once a week
Gyft Adds Retail Giant Walmart to its Bitcoin Gift Card Network
Pete Rizzo (@pete_rizzo_) | Published on March 24, 2014 at 21:07 GMT | Merchants, News
Update 23:00 GMT - Updated with commentary from Gyft CEO Vinny Lingham
San Francisco-based mobile gift card app provider Gyft officially added US retail giant Walmart to its merchant network on 24th March.
The company took to Twitter to release the news that the largest physical retailer in the US, which earned more than $325bn from its US retail stores in 2012, and garnered more than $460bn in sales worldwide that year, had been added to its service.
Speaking to CoinDesk about the news, Gyft CEO Vinny Lingham indicated that he believes Walmart’s decision reflects the strong brand his roughly two-year-old company has already successfully built:
“I think it’s pretty clear that we’ve built a great interface, we have great customers and we offer a great user experience. [...] We’ve built a brand, and retailers see that we have a very valuable position as an alternative to the plastic gift card on the rack model.”
Walmart Gyft cards can be purchased in denominations of $25, $50, $100, $250 and $500. Gyft provides 3% cashback on all bitcoin purchases using its cards.
Notably, Walmart’s Gyft cards are also available for use at popular membership-only discount retail outlet Sam’s Club.
Private ways to pay
In an interview, Lingham stressed that he sees the success of bitcoin and mobile gift cards as reflective to how retailers are responding to the desire consumers have for increased privacy.
Lingham notes, for example, that gift cards are gaining popularity with parents who don’t want to share important financial information with their children, or risk that information in the hands of a companies that may be susceptible to data breaches.
Said Lingham:
“Privacy is important, and the gift card market is a way to offer that. If you want privacy, you can use bitcoin and PayPal with us.”
Why Walmart matters
Walmart has more than 11,000 locations in 27 countries, including upwards of 3,000 Walmart Supercenters with full-service supermarkets and gas stations, meaning Walmart’s Gyft cards will allow bitcoiners to redeem their bitcoins for a number of attractive new items.
Unsurprisingly, given Walmart’s size and the extent of its offerings, it was among the most requested retailers by Gyft users.
The largest merchant previously on the network was the Minnesota-based retailer Target, which boasts 1,790 locations in the US and more than 100 stores in Canada.
Community reaction
The announcement ends more than four months of calls from the community for Gyft to strike a deal with the Arkansas-based megastore. Bitcoin users were particularly active posting to reddit about the issue in the wake of Target’s November decision to join the Gyft network.
Lingham indicated that his company is always particularly proud after a big launch like this, saying: ”It’s great that the community is behind us and engaged.” But, he remains focused on the next major merchants coming down the pipeline, hinting that more big announcements for the bitcoin community are “in the hopper”.
So far, the outpouring has been highly visible on Twitter and reddit.
Gyft has been equally supportive of the bitcoin community, with CEO Vinny Lingham penning an open note to the community in November. That announcement indicated that Gyft would continue to invest heavily in adding merchants to its network that fit the needs of its growing bitcoin user base.
So far, it would seem, the company is showing it can get results.
Pete Rizzo (@pete_rizzo_) | Published on March 24, 2014 at 21:07 GMT | Merchants, News
Update 23:00 GMT - Updated with commentary from Gyft CEO Vinny Lingham
San Francisco-based mobile gift card app provider Gyft officially added US retail giant Walmart to its merchant network on 24th March.
The company took to Twitter to release the news that the largest physical retailer in the US, which earned more than $325bn from its US retail stores in 2012, and garnered more than $460bn in sales worldwide that year, had been added to its service.
Speaking to CoinDesk about the news, Gyft CEO Vinny Lingham indicated that he believes Walmart’s decision reflects the strong brand his roughly two-year-old company has already successfully built:
“I think it’s pretty clear that we’ve built a great interface, we have great customers and we offer a great user experience. [...] We’ve built a brand, and retailers see that we have a very valuable position as an alternative to the plastic gift card on the rack model.”
Walmart Gyft cards can be purchased in denominations of $25, $50, $100, $250 and $500. Gyft provides 3% cashback on all bitcoin purchases using its cards.
Notably, Walmart’s Gyft cards are also available for use at popular membership-only discount retail outlet Sam’s Club.
Private ways to pay
In an interview, Lingham stressed that he sees the success of bitcoin and mobile gift cards as reflective to how retailers are responding to the desire consumers have for increased privacy.
Lingham notes, for example, that gift cards are gaining popularity with parents who don’t want to share important financial information with their children, or risk that information in the hands of a companies that may be susceptible to data breaches.
Said Lingham:
“Privacy is important, and the gift card market is a way to offer that. If you want privacy, you can use bitcoin and PayPal with us.”
Why Walmart matters
Walmart has more than 11,000 locations in 27 countries, including upwards of 3,000 Walmart Supercenters with full-service supermarkets and gas stations, meaning Walmart’s Gyft cards will allow bitcoiners to redeem their bitcoins for a number of attractive new items.
Unsurprisingly, given Walmart’s size and the extent of its offerings, it was among the most requested retailers by Gyft users.
The largest merchant previously on the network was the Minnesota-based retailer Target, which boasts 1,790 locations in the US and more than 100 stores in Canada.
Community reaction
The announcement ends more than four months of calls from the community for Gyft to strike a deal with the Arkansas-based megastore. Bitcoin users were particularly active posting to reddit about the issue in the wake of Target’s November decision to join the Gyft network.
Lingham indicated that his company is always particularly proud after a big launch like this, saying: ”It’s great that the community is behind us and engaged.” But, he remains focused on the next major merchants coming down the pipeline, hinting that more big announcements for the bitcoin community are “in the hopper”.
So far, the outpouring has been highly visible on Twitter and reddit.
Gyft has been equally supportive of the bitcoin community, with CEO Vinny Lingham penning an open note to the community in November. That announcement indicated that Gyft would continue to invest heavily in adding merchants to its network that fit the needs of its growing bitcoin user base.
So far, it would seem, the company is showing it can get results.
Hip Hop Group First to Test FrostWire’s Bitcoin Integration
Tom Sharkey | Published on March 24, 2014 at 22:11 GMT | Lifestyle, Merchants, News
Global merchants have embraced bitcoin as a payment option for products and services, and now the music industry seems to have taken notice of the digital currency’s utility.
Electro-hip hop group Ain’t No Love released its second EP Tears Of Joy last week, and the Toronto musicians teamed up with FrostWire to make history with the launch.
Ain’t No Love’s decision to provide Tears Of Joy as a torrent download with integrated bitcoin donations came naturally to the group, according to their manager Mark Cwajna.
The group offered its first, self-titled EP as a free torrent download through FrostWire, and were already planning on doing the same with Tears Of Joy when FrostWire approached them about bitcoin.
Said Cwajna:
“FrostWire came back to us and approached us about a new feature they were offering, to integrate bitcoin donations for the torrents that are downloaded through the program. They asked if we would be the guinea pig for them and offer Tears Of Joy as a free download with bitcoin donations enabled.”
Reaching a new audience
Cwajna says the response to Tears Of Joy has been positive for Ain’t No Love. The EP has been downloaded more than 5,000 times in less than one week after its release, and the group has received close to 50 separate bitcoin donations, ranging from 0.001 BTC all the way up to 0.06 BTC (around $35 USD at the time of publication).
Speaking to CoinDesk about the reception of Tears Of Joy, Cwajna said:
“The response that we have received is really a testament to how tight knit the bitcoin community really is. We’ve reached more people with this release who otherwise may not have listened to Ain’t No Love, and we’re happy to bring awareness about bitcoin to the music industry.”
Cwajna went on to explain that while Ain’t No Love’s new EP is also available on iTunes, accepting bitcoin payments has allowed the group to “skip the middleman” and avoid the percentage of revenues that platforms like iTunes take from music sales.
Bitcoin in the music industry
The music industry has evolved significantly with the emergence of the Internet. Many consumers illegally pirate music online, putting a dent in record sales across the industry. Further, platforms like YouTube and various social media outlets have allowed artists to build their fame without the help of a major record label.
While Cwajna doesn’t think pirating will ever disappear, he believes bitcoin has the potential to shake up the music industry by allowing artists to sell their music to fans directly, keeping all of the profit instead of giving a chunk of it to Apple through iTunes.
Beanz, a rapper and one-third of the Ain’t No Love trio, added that bitcoin has the potential to impact the industry on a large scale:
“I think other musicians are definitely going to jump on the opportunity to accept bitcoin for their music. At the end of the day, it’s additional revenue stream for artists and it really does have the potential to change the game.”
To promote their new EP, Ain’t No Love has released a music video for their single Blinded (below), and the Tears Of Joy EP can be downloaded on FrostWire for free, with the ability to make bitcoin donations to the group.
Tom Sharkey | Published on March 24, 2014 at 22:11 GMT | Lifestyle, Merchants, News
Global merchants have embraced bitcoin as a payment option for products and services, and now the music industry seems to have taken notice of the digital currency’s utility.
Electro-hip hop group Ain’t No Love released its second EP Tears Of Joy last week, and the Toronto musicians teamed up with FrostWire to make history with the launch.
Ain’t No Love’s decision to provide Tears Of Joy as a torrent download with integrated bitcoin donations came naturally to the group, according to their manager Mark Cwajna.
The group offered its first, self-titled EP as a free torrent download through FrostWire, and were already planning on doing the same with Tears Of Joy when FrostWire approached them about bitcoin.
Said Cwajna:
“FrostWire came back to us and approached us about a new feature they were offering, to integrate bitcoin donations for the torrents that are downloaded through the program. They asked if we would be the guinea pig for them and offer Tears Of Joy as a free download with bitcoin donations enabled.”
Reaching a new audience
Cwajna says the response to Tears Of Joy has been positive for Ain’t No Love. The EP has been downloaded more than 5,000 times in less than one week after its release, and the group has received close to 50 separate bitcoin donations, ranging from 0.001 BTC all the way up to 0.06 BTC (around $35 USD at the time of publication).
Speaking to CoinDesk about the reception of Tears Of Joy, Cwajna said:
“The response that we have received is really a testament to how tight knit the bitcoin community really is. We’ve reached more people with this release who otherwise may not have listened to Ain’t No Love, and we’re happy to bring awareness about bitcoin to the music industry.”
Cwajna went on to explain that while Ain’t No Love’s new EP is also available on iTunes, accepting bitcoin payments has allowed the group to “skip the middleman” and avoid the percentage of revenues that platforms like iTunes take from music sales.
Bitcoin in the music industry
The music industry has evolved significantly with the emergence of the Internet. Many consumers illegally pirate music online, putting a dent in record sales across the industry. Further, platforms like YouTube and various social media outlets have allowed artists to build their fame without the help of a major record label.
While Cwajna doesn’t think pirating will ever disappear, he believes bitcoin has the potential to shake up the music industry by allowing artists to sell their music to fans directly, keeping all of the profit instead of giving a chunk of it to Apple through iTunes.
Beanz, a rapper and one-third of the Ain’t No Love trio, added that bitcoin has the potential to impact the industry on a large scale:
“I think other musicians are definitely going to jump on the opportunity to accept bitcoin for their music. At the end of the day, it’s additional revenue stream for artists and it really does have the potential to change the game.”
To promote their new EP, Ain’t No Love has released a music video for their single Blinded (below), and the Tears Of Joy EP can be downloaded on FrostWire for free, with the ability to make bitcoin donations to the group.
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