Month: November 2013

As a vocalist and a former member of several a cappella groups, I could not be more delighted to learn that supportacapella.org is now accepting donations in Bitcoin! The A Cappella Education Initiative recently received attention in the Huffington Post. The A Cappella Education Initiative aims to bringing music education to everyone. Support A Cappella specifically emphasizes,”everyone learns everything, and everything is free.”

A Cappella, similar to Bitcoin, is based on ingenuity and freedom of expression. Additionally, in most a cappella groups, many individuals take leadership roles and there may not even be one conductor. Bitcoin is similar in that it is fully decentralized without a single point of control of failure. A cappella music is also not dependent on a piano and accompaniment as Bitcoin is not dependent on a centralized bank. With many parallels, it is great to see a lead a cappella supporting non-profit now accepting Bitcoin.

By and large, Bitcoin is presenting more benefits than not to nonprofit and charitable organizations. What a better way to bring in donations than with Bitcoin: the most expedient payment method. Additionally, Bitcoin provides an opportunity for organizations to experience automatic growth in value as the price of Bitcoin continues to rise. Think about it… a donation made in May of this year … say of 1 BTC, would be valued at 1,000USD today, whereas it was first valued at 100USD. What an asset to charitable organizations!

Other organizations that are taking the lead in the charitable space are Sean’s Outpost and additionally the BitGive Foundation. Sean’s Outpost, created by Jason King, seeks to collect donations to feed the homeless in Pensacola, FL and additionally provide awareness of the needs of individuals around the world. BitGive, similarly, seeks to help the vulnerable and just yesterday participated in Bitcoin Black Friday to seek donations for Philippines Typhoon Haiyan Children’s Relief Fund.

If an organization is looking to incentivize individuals to donate to worthy causes and also provide convenience of transaction when donating, Bitcoin is certainly the solution. My hope is that in the coming days and year, an increased number of charitable organizations will accept Bitcoin as a form of payment and even send relief to those in need via the Bitcoin currency. Through Bitcoin, an organization can send funds ANYWHERE in the world to ANYONE with internet connection simply via the scan of a QR code or click of a mouse.

The year 2014 has not even started, and already many Bitcoin conferences, including events in Miami, Toronto, Manila (Philippines) and a Bitcoin Foundation event in Amsterdam, have been announced. Now, the Bitcoin Expo 2014 is adding to the list another event, planned to take place in September 2014 in China.

The conference’s official description reads:

BitcoinExpo China 2014 is a three day conference and expo that will take place in Shanghai in September 2014. It aims to provide the bridge for many start-ups, service providers, and established traders to cross the Asia-gap. Presence of general public, prominent media, local delegates, and local market key players, makes this Bitcoin conference a valuable opportunity for your business entering the local market, or Asian supply chains.

The Chinese community has been rushing into Bitcoin at breakneck speed since the first signs of adoption started appearing in April this year, with an online store accepting the currency and a charity taking BTC in a one-time flood relief effort and receiving over $30000 worth of Bitcoin donations in two days. Since then, Chinese downloads of Bitcoin software have overtaken the United States, a subsidiary of the “Chinese Google” Baidu has started accepting it, and Chinese regulatory agencies have even come out to say that they will not be regulating Bitcoin for the time being.

With this in mind, the conference’s organizers are very optimistic, aiming to attract 5000 attendees. At this point, very little is set in stone; sponsorship offers are wide open for anyone who wants to take them. Anyone interested in speaking should contact the conference organizers at [email protected]. Enjoy another great Bitcoin conference!

Let’s state the obvious; writers have to write. They have to write something, anything, in order to be called writers and to be paid as writers. That’s what they do. And with today’s technology, what we end up with is a lot of noise. We’re used to it. Nevertheless, Henry Blodget’s recent column in Business Insider, while easily falling into the useless noise category, does merit some comment.

Blodget is CEO and Editor of Business Insider, which is “dedicated to aggregating, reporting, and analyzing the top news stories across the web and delivering them to you at rapid-fire pace.” Ok, fine; it’s about speed, not quality content. So the provocative headline “Bitcoin is Heading Toward a New High — and It Could Go to $1 Million” is meant to be just that; provocative. It turns your head like a fast speedboat but doesn’t carry a lot of valuable cargo.

Blodget says in his column (in which he actually claims profundity) that “$400 is a perfectly reasonable target for Bitcoin. As is $1,000. As is $10,000 or $100,000 or $1 million. And as is $0.01. This is because Bitcoin has no intrinsic or determinable value.” He makes this claim while ignoring the underlying utility of the BTC protocol, which he himself readily admits in an accompanying video interview.

But in print, Blodget cannot bring himself to recognize that the intrinsic value of BTC is in the protocol as a utility. At a fundamental level, Bitcoin is a process, not a thing. He is right about the difficulty of determining value, not because it has no intrinsic worth, but because we do not know what that intrinsic value is worth in relation to existing currencies. Its value in real life can be enormous. It is like trying to determine the value of a new ability.

Obviously, almost no one, including the most skeptical, would say that the protocol has no value. It clearly does as a verifiable frictionless transactional method for any agreement, monetary or otherwise. We just can’t tell what the exchange rate of BTC should be at this point because its deployment is just beginning and it is being traded against fiat currencies whose deployment is long established, currencies which are also backed by nothing except military force.

In print, Blodget seems to want to address BTC as if it were a commodity only, which clearly it is not. As such, he remains planted among those who proclaim no difference between Bitcoin and tulips. He ranks BTC alongside bubble assets like tulips, pogs, and beanie babies. Of course he does this to be disparaging. He does not rank it alongside our latest bubble asset, real estate, which like Bitcoin does have some obvious utilitarian value.

Yet if you dig far enough down in Blodget’s writing, he says “I do think the world is ready for a simple, global, electronic currency, and that Bitcoin has a shot at becoming that. But this success is the farthest thing from guaranteed.” Wait… a moment ago you were comparing BTC to tulip bulbs and beanie babies. If we’re talking about a “simple, global, electronic currency”, clearly Bitcoin is not 100% guaranteed, but it is also not “the farthest thing from guaranteed” either. I would think that beanie babies would be a lot less likely to succeed with that.

Blodget conveys his confusion by repeatedly emphasizing that (to him) it is impossible to determine BTC real value. “There is no theoretical difference between a price of $1 per Bitcoin and $1 million per Bitcoin. The only thing that will determine Bitcoin prices is what people are willing to pay for Bitcoins.” That’s called a free market. What is difficult (but not impossible) to arrive at is a stable exchange rate vis-a-vis traditional fiat currencies. People used to use whiskey as a medium of exchange when cash was not available or was worthless. At the time, the utility of whiskey was well understood. We are not yet at the point of understanding the full utility of Bitcoin, but it keeps increasing as we get to know it better.

Blodget does makes some good points in that he rightly says that until Bitcoin makes more progress in adoption as a currency, it will remain mostly in the province of speculators. I agree, but the protocol is designed to be traded in small, peer-to-peer transactions and those are increasing daily. I also agree that it is impossible to know the upper limit of BTC exchange rates, and there probably will be volatility. But could it go to zero as easily as $1 million USD, as Blodget asserts? I don’t think so. That depends on what BTC does and what USD does.

But this kind of speculation is just so much noise among people who write a lot of words for a living.

Throughout all of 2013, gambling sites have been perhaps the single most prominent industry in the entire Bitcoin space. One of the key advantages of Bitcoin is that it makes it very easy to set up a site that handles payments, and gambling sites, which are centered entirely around sending and receiving money, are the first industry to snatch on to this massive improvement in ease of development. In 2012, we saw SatoshiDice grow from nothing to become one of the largest companies in the Bitcoin space, and in 2013 it was sold for the highest price that a Bitcoin company has ever been sold for: $12.4 million. More recently, we have seen SatoshiCircle with its in-browser roulette game, JustDice allowing users to invest in the site in the interface, and a rapidly growing number of other, smaller alternatives.

However, even while we continue to play and be impressed by the rapidly growing number of options that the Bitcoin gambling scene provides, we do not often recognize the unsung heroes behind it all: the companies that actually make the underlying gambling software. Certainly, many sites are fully independent one-man operations creating a website from nothing more than a few dozen lines of code and a web server package. The more professional sites, however, such as SatoshiPoker, get their website design, layout and content from established players that have successfully been making gambling sites years before Bitcoin was born. Here, we have an interview with Ivan Montik from Softswiss, a company set up in 2009 that is responsible for the software behind several Bitcoin gambling sites. Softswiss has also, arguably unfairly, come under fire recently due to allegations that its gambling software copied that of another gambling company, VIADEN; these two pictures are perhaps the most cited evidence in this regard; in this interview, Montik also takes the time to clear up the misconceptions around this issue. More recently, Softswiss has also started to expand its involvement in the Bitcoin economy, offering its own Bitcoin payment solution, which will also be discussed in detail.

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Vitalik Buterin: Could you introduce Softswiss to our readers? Who are the company’s founders, and what are some of the products that it offers?

Ivan Montik: SoftSwiss is an IT company based in Austria. It was founded in 2008 by Ivan Montik, an entrepreneur with varied experience in economics, programming and business management. The company now employs over 30 specialists in design, mathematics and information technologies and provides high-end software products and consulting support to companies starting their way in the world of eCommerce and iGaming. The product line of SoftSwiss includes online casino platform and games, online auction software, Bitcoin payment processing solution and an online marketplace.

VB: When did Softswiss get into developing gambling software targeting Bitcoin? What made you see the Bitcoin gambling industry as a business opportunity for your company?

IM:The interest in Bitcoin appeared two years ago when the currency was just invented and Satoshi Dice became popular. SoftSwiss owners thoroughly followed the development and growth of the crypto-currency and were looking for the right moment to implement it in one of the projects. When SoftSwiss online casino platform was first introduced in February 2013 at ICE Totally Gaming in London, we started getting numerous requests from potential clients asking whether our software could work with Bitcoin. It was a technical challenge and at the same time a perfect business opportunity as we strongly believed in the future of Bitcoin. So we put together all our knowledge and skills and came up with a Bitcoin processing solution. We also adapted our platform and games to make them Bitcoin-compliant.

VB: What is Softswiss’s relationship with Betcoin.tm?

IM: When Betcoin.tm first contacted SoftSwiss and asked for a possibility to launch an online casino with Bitcoin processing functionality, they already had Betcoin Circle and Betcoin Dice. They wanted to add casino to their portfolio in the shortest time frame possible and although it first sounded like a great challenge, we managed to set up the software with unique design and integrate Bitcoin payment module in just 10 days. Betcoin.tm casino was launched successfully.

VB: Some observers have noticed that Softswiss’s gaming software has some very similar graphics and sound effects to those used by VIADEN Gaming, and have conjectured that you are copying their work. Could you share your side of the story? What is your actual relationship with VIADEN, and how would you explain the similarity?

IM: Here is a bit of history to help the readers better understand the whole issue. VIADEN is a Belarusian company which was acquired by Playtech in 2011. SoftSwiss development office is also located in Belarus and we know VIADEN founder and former owner in person. After the acquisition many team members left the company and joined SoftSwiss: 3D model developer, 2 flash developers, designer. The lead designer of VIADEN became co-founder of SoftSwiss online casino project. As a result, SoftSwiss games resemble the ones from VIADEN which is quite natural as the team have used their expertise and created SoftSwiss games in their own style. However, nothing has been copied, all games where developed from scratch and we created a completely new code based on AS3 (to my best knowledge, VIADEN’s was AS2).

The software source code was written by SoftSwiss programmers in Ruby-on-Rails (VIADEN was using Php and C++). Mathematics is calculated by our CTO and is 100% unique. Our RNG is certified by ItechLabs.

VB: Is there any specific evidence you can point to to assure our readers that there is no outright copying going on?

IM: The main evidence is the unique source code. Sounds for our games were recorded by a well-known Belarusian radio host Olga Alvarado. We have the agreements with the record studio as proof that all sounds are absolutely authentic. Good personal relationship with VIADEN founder also show that there are no claims on their part.

VB: Do you have any prominent customers in the Bitcoin gambling space aside from Betcoin?

IM: We launched Bitcoincasino24.com among our first clients. We are launching at least 3 more Bitcoin gaming sites until the end of the year. With the growth of Bitcoin, the demand for such casinos has jumped.

VB: I saw that SoftSwiss is coming out with a Bitcoin payment processing solution. What kinds of use cases are you targeting with this? How would you distinguish your own offering from existing Bitcoin payment processors?

IM: Our Bitcoin payment processing solution can be used in any type of online business which accepts and makes payments to the users: online auctions, shops, ecommerce sites, even in an online hospital (we are currently working on a custom project in this area). Another curious idea suggested by a client of ours and which we would like to bring to life: Bitcoin payment solution can be used for charity! Many people are reluctant to participate in charity just because they are not sure their money goes to the desired recipient. The idea of Bitcoin payment solution solves this problem: the system allows for easy tracking of the final destination of the payment, so the person making a donation always knows where the money lands. That’s a good alternative to a wire transfer.

What distinguishes our solution from other providers is the increased security achieved by not using any third-party services. Storing your Bitcoin at an exchange is always risky as you are never sure the exchange doesn’t close the next day. With our solution, all transactions are made to and from the operator’s wallet and are immediately reflected in the balance. It is fully protected from any type of fraud.

VB: What do you see as the future of your company? Do you intend to participate more in the Bitcoin gambling space, focus more on developing other offerings such as merchant solutions, or some of both?

IM: While online gaming and ecommerce will definitely remain our primary focus, we would like to expand into the world of Bitcoin, improve our current solution and explore the unlimited possibilities of using it in various business areas. SoftSwiss will take part in the upcoming gaming exhibitions: RGW Minsk (http://minsk.rgweek.ru/program?language=en 15:30 I will speak about Bitcoin in Gambling), IMA in Düsseldorf and ICE Totally Gaming in London and present our solution as well as tell about Bitcoin advantages to the iGaming world. We would like to contribute to the popularity of this promising crypto-currency and become pioneers in Bitcoin-enabled online gaming.

Earlier this week, ZeroBlock announced that their Bitcoin App is now available on Android devices. The ZeroBlock App has already been a success for iOS devices. As the price of Bitcoin continues to rise, individuals can now find real time market data and news on iOS and Android devices. ZeroBlock displays real time price quotes from BitStamp, Mt.Gox, Btc-e, btcchina, and Coinbase. ZeroBlock was founded by Dan Held and Kevin Johnson in May 2013 and has become the highest rated and most reviewed Bitcoin-related app in the Apple app store.

ZeroBlock issued the following press release detailing the Android launch:

ZeroBlock Bitcoin App Now Available on Android Devices

The popular iOS app that integrates real time market data and news for serious Bitcoiners is now available on Android.

SAN FRANCISCO,CA, November 25, 2013 – ZeroBlock today announced the launch of their Android app, which was previously exclusive to iOS devices. ZeroBlock, which combines real time Bitcoin market data with an aggregated news feed, gives users a platform for instant access to everything happening on the Bitcoin market in real time. Since the company’s launch in May 2013, ZeroBlock has become the highest rated and most reviewed Bitcoin-related app in Apple’s app store.

ZeroBlock recently broke 1,000,000 total app sessions and in recent weeks has been opened 30,000 – 50,000 times daily by users. ZeroBlock’s news aggregator scrapes from over 130 sources including reddit, bitcointalk forums, company blogs, mainstream news, and exchange blogs. Real time price quotes are provided from BitStamp, Mt.Gox, Btc-e, btcchina, and Coinbase. Blockchain information is provided from the popular wallet service, blockchain.info.  Other features provided on the app include a personal holdings calculator, Clark Moody charts, and the ability to share news feed articles via Facebook, Twitter, and e-mail.

ZeroBlock’s co-founders, Dan Held and Kevin Johnson, built the app out of their frustration in keeping up with the Bitcoin markets on their mobile devices. During the April price spike, they had difficulty finding mobile apps that would display the live price and relevant news feeds. So they decided to create exactly what they wanted. They built an app from scratch that would emphasize simplicity, usability, and aesthetics. Read a few reviews and you’ll see the type of dedicated fan base they have. “I wanted to keep a strong focus on bringing simplicity to complexity, maximizing the data to pixel ratio” said Held, on his thought process when designing the app. “I implemented the first x/y spatial layout for a mobile app. Utilizing the x/y screen layout, the user can swipe up, down, left and right from the main landing screen. The screen layout is similar to a plus sign. No hidden menus or unnecessary swipes. An intuitive design for an intuitive currency.” They were able to iterate quickly due to Johnson’s strong mobile development background. Johnson is also the head of mobile development at Ripple Labs.  

The ZeroBlock team takes the Bitcoin mobile experience to the next level as they constantly iterate, keeping the app relevant and accurate. The company’s next goal is to add more charts, data analytics, and article feeds. And in the horizon, they hope to build a tablet version for their most dedicated Bitcoiner fans. ZeroBlock continues to strive to be the only app Bitcoin users need to keep up with the Bitcoin markets.

***

To learn more about ZeroBlock, please visit:

Mobile page:  http://mobile.zeroblock.com/

Main landing Page: http://www.zeroblock.com/

To download ZeroBlock on iOS: https://itunes.apple.com/us/app/zeroblock/id643184018?mt=8

To download ZeroBlock on Android: https://play.google.com/store/apps/details?id=com.phlint.android.zeroblock&hl=en

Contact

Dan Held

Co-Founder, ZeroBlock

[email protected]

(214) 223-2055

 

On November 25, Lunlun Zou Guzheng Studio sent out a press release to announce their acceptance of Bitcoin. Lunlun Zou Guzheng Studio is the first business in Hong Kong to accept Bitcoin and hopefully will serve as a catalyst for many surrounding businesses to begin accepting Bitcoin. Guzheng is a 2,000 year old musical instrument from China with 21 strings and serves as the predecessor to the Japanese koto, Korean kayagum and Vietnamese dan tranh. Lead teacher, Lulun Zou, has performed around the world and through her new decision to accept Bitcoin will certainly have a positive impact on the Bitcoin ecosystem. Classes range from beginner to advanced.

Lunlun Zou Guzheng Studio sent the following press release:

FOR IMMEDIATE RELEASE

Lunlun Zou Guzheng Studio – First Hong Kong Business to Accept Bitcoin

Hong Kong, 25 November 2013 – One of the most pre-eminent organisations promoting, teaching and performing traditional Chinese stringed instruments, the Lunlun Zou Guzheng Studio, has decided to embrace a radically new digital payment technology for those students and patrons who wish to use it. The Studio has announced that it welcomes payment in Bitcoin, the controversial digital currency. The founder and Director of the Studio, Lunlun Zou, said she was open to any new technologies that will help promote the music and make it easier for students. ‘We represent a very old tradition but it does not mean we cannot use the most modern technology. We intend to use whatever legal means is available to us to spread the word and the music’, she said.

Bitcoin began a few years ago as a way of getting round high fees from credit card companies and banks. It is completely digital and some governments are concerned it could be used for criminal purposes, although it has not yet been banned. Ms Zou is not worried so long as it remains legal. ‘Many things in the world can be good or bad – including music – it depends on how we use it.’ She is confident the technology specialists will work things out. ‘Our interest is simply in giving our students and customers another way to pay that may makes it easier for them.’

The Studio is well known for teaching and performing on traditional Chinese instruments such as the guzheng, erhu and pipa. Lunlun Zou is a world renowned musician and performs internationally.

Bitcoin has created quite a stir over the past year with famous investors putting millions of dollars into the business.

More information about Lunlun Zou Guzheng Studio is available at www.guzhengmaster.com.

Contact:

Peter Kahl

[email protected]

Phone: (+852) 5199-5989

Lunlun Zou Guzheng Studio

1/F, Block A, Wah Sing Building

61-63 Java Road

North Point, Hong Kong

Written by: BigChubbyCat (8BTC)

Translated by: James Choi (8BTC)

Edited by: Elizabeth T. Ploshay (Bitcoin Magazine)

1. Tulip

In 1635, the price of a certain kind of tulip reached 1615 Florins. At the same time, the prices of four bulls and 1,000 pounds of cheese were only 480 Florins and 120 Florins respectively. The price of a tulip, however, kept soaring to a level the next year that one tulip of a rare species was sold at 4600 Florins. Additionally, the specific buyer also gave the seller a brand new carriage, two grey horses, and a whole set of harnesses.

Eventually someone woke up, and the bubble burst. At some point when someone tried to sell or even short sell his tulip, others followed. The mania to sell was soon as much as the mania to buy. The price then crashed and hundreds of thousands of people went bankrupt.

2. Bitcoin

On Nov 1 2008, someone who called himself (or herself) Satoshi Nakamoto published a paper in a private cryptography mailing list. The paper explained his or her new idea about this new e-money. On Jan 3 2009, the first fifty Bitcoins were created.

Unlike traditional currencies, Bitcoin does not rely on the support and endorsement from central banks, governments or enterprises, but rather on the network agreement reached by those nodes which are equal to each other. The decentralized self-improving mechanism theoretically ensures that no individual, entity or government can control the total amount of Bitcoin or create inflation. Its total amount gradually increases in a preset speed which becomes slower and slower, reaching its peak at 21 million by 2140.

On Nov 9 2013, the price of Bitcoin soared again, recording its new high in its exchange rate against RMB. As quoted by BTCChina, the rate reached 6989 RMB, with an increase of 53.6 percent. The rate against USD also recorded a historic high of 900.89 with a 31.6 percent increase.

Many people worry about the surging market and the soaring price discomfort, believing that Bitcoin might be another tulip mania.

3. Things in Common Between Tulip and Bitcoin

a. Neither tulip nor Bitcoin have a universal value in use.

b. The prices of both soared suddenly.

c. Both have a lot of participants and discussion in the media.

d. Neither of them is a product compulsorily made by governments.

4. Differences

Although the tulip bubble bursted, people didn’t know the reason behind the burst. The essence of the collapse was not because of high prices, but because there was not enough intrinsic value within a tulip.

The tulip failed on its way to becoming a currency. Its attribute of commodity could not meet the requirements of being a medium of exchange or a store of value, just like seashells, horns and stones which were defeated by gold and silver.

Given the commodity attribute of money, the physical attribute of a tulip is not satisfactory: perishable, dis-uniform, undividable… One could barely find any function of a tulip to become a currency.

As a normal commodity, the use value of a tulip is limited, as it can only be viewed or planted. In other words, even if an enterprise is established to produce and sell tulips, its profit and cash flow are very limited. Not all people appreciate tulips. When the price of tulips highly exceeded the balance of supply and demand, a plummet was inevitable.

Money is some common commodity which originated from the barter stage of market trade. Horns, seashells and feathers had played roles of money in different places at a different time, in order to meet the two indispensable demands of the market: The store of value, and the medium of exchange.

To meet these two demands, the attribute of the money itself should meanwhile be:

• Easy to divide;

• Imperishable;

• Transportable;

• The amount can not be controlled by anyone

The two traits of money are being indispensable and being unique to the market. Take diamonds for example. Diamonds have value as an adornment and they also function as a store of value, given their potential to rise in price. Yet, since diamonds cannot be divided, they do not meet the demand for the medium of exchange.

One must have the four attributes of money to meet the two demands of the market. The fatal defect of any monetary attribute would eventually lead to the collapse of the whole system.

The role Bitcoin plays is a virtual currency. Unless the price of Bitcoin highly exceeds its intrinsic value of real purchasing power, the price will keep increasing. Suppose that the total amount of oil on the earth is 21 million tons. If Bitcoin can be considered money, the price of oil is 1 ton per Bitcoin. If someone gives a quote of 36 tons per Bitcoin, the purchasing power of Bitcoin is then overestimated and the price of oil is underestimated. The market can self-adjust via price discovery. The so-called liquidity shortage won’t actually happen, as the market price is wrong, rather than a currency shortage. So there is no need for a central bank or a flexible currency. Before supply and demand can reach an equilibrium, Bitcoin can be unstable, and thus any soaring or plummet of price is possible.

In other words, if the demand of Bitcoin quickly decreases or even disappears, the price would plummet just like that of the tulip. This is when Bitcoin cannot meet the four attributes mentioned above. Bitcoin is waiting for the test and approval of the market. If the market accepts it eventually, the theoretical unit price of Bitcoin would be equal to 1/21,000,000 of the total value of Bitcoin-denominated commodities. And if the price of Bitcoin is higher than that price, it is a purchasing power bubble, which could be adjusted by the market itself.

 

On Saturday, December 4 and 7, Node5 will host lectures on Bitcoin in the Czech Republic. Node 5 serves as a startup community and coworking center in Prague, Czech Republic.

The main purpose of the December 4 and 7 events are to conduct a Bitcoin educational event, consisting of two parts. Both segments aim to teach the audience how to get the best experience when using Bitcoins. The first event, from 7PM till 9:30PM, is a free lecture, aimed at providing general insight into Bitcoins for beginners. You can find the programme in Czech and in English here. The second event, on December 7 from from 11 to 3PM, is a workshop aimed at those who who already have previous experience with Bitcoin. Tickets are priced at 5000, -Kc (approx. $247). You can register here.

Node5 provided the following description for the December 4 free lecture:

We are pretty sure that most of you have heard of Bitcoins at least once so far. Actually, there are so much rumors around now, that the topic is undoubtedly worth to keep an eye on.

Now we are proud to invite you to the Bitcoin event at Node5, aimed to give you an insight. It’s going to consist of two parts: intro lecture for those who had never had anything to do with Bitcoins, and a workshop for those who are more advanced.

We offer amazing speakers and guests to chat with!

The Intro event is completely free to participate and will be held in Czech.

Agenda:

1. Cryptocurrency, general terms, why is it needed. How to make money from it.

2. Registration in Bitcoins network. Principles of trading. Getting started. Bitcoins arbitrage.

3. Introduction into mining.

Node5 was created with the mission to educate, accelerate and promote tech and innovative entrepreneurship in the Czech Republic. Node5 brings together entrepreneurs, programmers, business angels and designers to share ideas and work together. Some of the innovative start ups already members of the Node5 community can be found here. Partners of Node5 include Google, Samson, Phillips and many more companies have expressed interest in Node5 projects. Node5 also has a strong team of mentors to assist startups and entrepreneurs.

Node5’s lecture on Bitcoin will ideally spark conversation between entrepreneurs and tech professionals as to how to integrate this fascinating currency into current business models and additionally create new businesses. Bitcoin automatically permits businesses to operate without borders as the currency can be sent between any two individuals with an internet connection.

c

If you have been following the last year of progress in Bitcoin wallet development, you will have likely already heard of one of the latest trends in backend designbe: deterministic wallets. Unlike old-style Bitcoin wallets, which generate new Bitcoin addresses and private keys randomly as needed, in a deterministic wallet all of the data is generated using a specific algorithm from a single seed. That is to say, if you write down the seed to your deterministic wallet, and then after six months your hard drive gets corrupted and the wallet unrecoverable, you can simply create a new wallet using the same seed and all of the addresses and private keys from your old wallet will come back again exactly as they were before. This trend in wallet development has received near-universal praise, and nearly every Bitcoin client that intends to handle multiple addresses either already has a deterministic wallet implemented or is planning to create one.

However, deterministic wallets in Bitcoin do not stop there. In fact, the latest deterministic wallets go beyond the simple design described above and have two key properties that are heavily advertised by their developers. The first of these properties is the concept of a “master public key“. A master public key is a key that can be generated from the wallet’s master private key (either the same thing as the “seed” or a derivative of it) that has the power to generate all of the addresses in a Bitcoin wallet, but none of the private keys. Thus, someone with access to a master public key can look at the balance of a deterministic wallet, but cannot actually spend the balance because they have no way of generating the private key corresponding to each address. The second property is hierarchy: the private keys that you generate from a master private key are themselves master private keys and can in turn be treated as deterministic wallets in their own right.

How do Deterministic Wallets Work?

As it turns out, there are two major types of deterministic wallets currently in use: Electrum wallets and BIP32 wallets; they use a very similar algorithm, allowing them both to have the master public key property, although the BIP32 wallets go further by also including the hierarchy property – Electrum wallets are designed to only go down one level, although one certainly could extend the Electrum protocol to make it hierarchical as well.

The master public key property is perhaps the more surprising feature of deterministic wallets, and will be explored in detail first. The reason why it works is that Bitcoin public keys – not quite the same thing as Bitcoin addresses but a closely related form – can be added and subtracted just like normal integers can (although, notably, you cannot multiply two public keys together), and thus the same arithmetic operations can be done on two “levels” – to generate private keys, the arithmetic is done on the level of integers, and to generate public keys it is done on the level of public keys.

The precise algorithm used by all deterministic wallet systems is this. To calculate the private key at index i (say i = 5), calculate an “offset” parameter using a function (technically, a hash) of the index and the master public key. Then, simply add the master private key and the offset together. To calculate the public key at index i, calculate the offset in the same way, convert the offset to a public key, and add the master public key and the offset public key together.

Here are a few examples using Electrum wallets, done with my own pybitcointools library. First, we generate a master private key and master public key from the seed:

> seed = random_electrum_seed()
'afc3eef71d96c468ca52b437c385a621'
> mprivkey = electrum_stretch(seed)
'5df10c922a1c7888b5c3a5a7106e72576f09c17f0993f4f2ce0ef5ccdb2f53c5'
> mpubkey = '04'+electrum_mpk(mprivkey)
'04fd6d91db1bdfc231116fd7d44c61a02e032b38b90aad419ecf75acf501eebdc7a0b7818e16a97a6c87693c723106e6fe17d4da743fae991139b05e6d1fe5c8a8'

Now, we generate private key index zero:

> offset = dbl_sha256('0:0:'+mpubkey[2:].decode('hex'))
'429251ad9607fd39040072d23f53d54fc3b1ea526310fa45ca2a2df0629e2db2'
> priv0 = add_privkeys(mprivkey,offset)
'a0835e3fc02475c1b9c418794fc247a732bbabd16ca4ef38983923bd3dcd8177'

Now, the public key:

> pub0 = add_pubkeys(mpubkey,privkey_to_pubkey(offset))
'04d96f3a8ebb0de48a98a5d77003c1d3ed5a36aae3eb20ee138a233e0c644becf77263c6e56cca6cfe064eb87582dcf92e9066d567ae0ffa67b0a5a4fda2bd7d68'
> addr = pubkey_to_address(pub0)
'14EkQ9qsKxWKiBJm5f7mT7ozSKKZbQoZGS'

And, just to show you that the math checks out:

> privkey_to_pubkey(priv0)
'04d96f3a8ebb0de48a98a5d77003c1d3ed5a36aae3eb20ee138a233e0c644becf77263c6e56cca6cfe064eb87582dcf92e9066d567ae0ffa67b0a5a4fda2bd7d68'

We can repeat this with index 1, index 2, etc; you can try it yourself with your own Electrum wallet if you have one. The takeaway is this: you can safely give put your master public key in an insecure place, or even give it out to third parties like auditors, if it makes life more convenient for you; just keep the master private key (and the seed) to yourself.

Hierarchy

Now, on to the hierarchical wallet property. This one is, once again, best described by simply showing it in action:

> w = bip32_master_key('qweqweqweqweqwe')
'xprv9s21ZrQH143K2KhRQVuMqhz798mvW89J1aJMWEKNfZzv3BPAgBc4TH59K8ZcLt8RrNJvbUzA72A92Grm3MorG2FnFaoZ7B8SDTYXgUBALoi'
> w0 = bip32_ckd(w,0)
'xprv9uyTuGongdyZAMxZ2euUBbpsAdtE2nxFBmcQn89UT4ZyzrMg5TXD7azCnsnpH9Q7yrYgG7nVakE6BTxJUarLrDA28VxS3ZWDsgYWZUxtNiH'
> w000 = bip32_ckd(bip32_ckd(bip32_ckd(w,0),0),0)
'xprv9zL8JVf2Us8VKFYoi3A8F3LSFuHnxNhAdVyrWuECgcbW13WcSrAZt9QxbbMvrFZsvUtrktVpNJ5iN1JhgUYDZoeXC5qtGfLuLw3reVWSRir'

The main use case for which this feature is advertised is in hierarchical organizations: the treasurer of a company might have control over the root private key of a BIP0032 wallet, and then hand off a “child” seed to each of the company’s departments who will then use that seed to operate their own wallet. The treasurer will have the master key to everything, but each department will only have the key to their own part of the funds.

And, of course, BIP32 has that same master public key property as Electrum, but even stronger:

> wp = bip32_privtopub(w)
'xpub661MyMwAqRbcEomtWXSNCqvqhAcQuas9NoDxJcizDuXtuyiKDivK15PdAPVkPwVXT9rFbjAnE9P3sLh6xnDawXF1uUXrruH1UvALHF89qdP'
> wp000 = bip32_ckd(bip32_ckd(bip32_ckd(wp,0),0),0)
'xpub6DKUi1BvKEgnXjdGp4h8cBHAow8HMqR1ziuTKHdpEx8UsqqkzPUpRwjSStDzFc5ALo93wyYXmRr9rvXWcrfw5MPFKCET11KFg3kNrESyWZ6'
> wp000_2 = bip32_privtopub(w000)
'xpub6DKUi1BvKEgnXjdGp4h8cBHAow8HMqR1ziuTKHdpEx8UsqqkzPUpRwjSStDzFc5ALo93wyYXmRr9rvXWcrfw5MPFKCET11KFg3kNrESyWZ6'

Thus, a BIP32 master private key can be thought of being at the top of an infinitely descending tree, capable of recovering every private key below it. And a BIP32 master public key is just the same, except it can only recover public keys and addresses. Another metaphorical way to think about it is in terms of the private keys sitting at the canopy level of a rainforest, and the public keys on the ground below them. You can navigate the same path on the private key and public key level, and no matter where you jump down your destination will be the same, but once you’re on the ground you can’t get back up (tree-climbing monkeys that can go up from the public key ground level to the private key canopy are, at least for now, purely theoretical).

An Understated Problem

From the descriptions we saw above, you likely understand that deterministic wallets have two properties. First, you can go from a parent key to a child key, but not in reverse. Second, you can give out your master public key with no risk to your funds – only your privacy. And this is how nearly all people, at least those technically skilled enough to know what a deterministic wallet is, view BIP0032 wallets today. The model of a company, which hands out child private keys to departments and master public keys to accountants and auditors, has come to take a central place in the mythology around the promise that BIP0032 wallets potentially hold. However, as we will see below, this description of hierarchical wallets is fatally flawed.

The problem is this: although you certainly can securely hand out child keys with no risk to the parent key, and you can hand out master public keys with no risk to the master private key, you cannot do both at the same time. The exploit for when that situation does arise is actually quite simple, and can be done with two lines of pybitcointools code. I will use Electrum in this example, since Electrum wallets are more transparent. These are the same master public key and child private key I created above:

> mpubkey
'04fd6d91db1bdfc231116fd7d44c61a02e032b38b90aad419ecf75acf501eebdc7a0b7818e16a97a6c87693c723106e6fe17d4da743fae991139b05e6d1fe5c8a8'
> priv0
'a0835e3fc02475c1b9c418794fc247a732bbabd16ca4ef38983923bd3dcd8177'

As we saw above, the first private key is calculated by a formula which can be summarized as mprivkey + calc_offset(mpubkey,index). So, what do we do? If you look for it closely, the answer is surprisingly obvious:

> offset = dbl_sha256('0:0:'+mpubkey[2:].decode('hex'))
'429251ad9607fd39040072d23f53d54fc3b1ea526310fa45ca2a2df0629e2db2'
> mprivkey_2 = subtract_privkeys(priv0,offset)
'5df10c922a1c7888b5c3a5a7106e72576f09c17f0993f4f2ce0ef5ccdb2f53c5'

And tada, we get the master private key back. Now, we can go ahead and pilfer all of the other addresses in the wallet, even those which the wallet’s owner never intended to touch. I even included a command in pybitcointools to make this more convenient for you:

> crack_electrum_wallet(mpubkey,priv0,0)
'5df10c922a1c7888b5c3a5a7106e72576f09c17f0993f4f2ce0ef5ccdb2f53c5'

BIP32 has the same vulnerability:

> wp = bip32_privtopub(w)
> w0 = bip32_ckd(w,0)
> crack_bip32_privkey(wp,w0)
'xprv9s21ZrQH143K2KhRQVuMqhz798mvW89J1aJMWEKNfZzv3BPAgBc4TH59K8ZcLt8RrNJvbUzA72A92Grm3MorG2FnFaoZ7B8SDTYXgUBALoi'

In the interests of fairness, it is important to note that this is not a sudden new zero-day vulnerability discovery; many Bitcoin developers have known about this for a while. However, given the intuitive understanding of hierarchical deterministic wallets that many people implicitly promote, including the idea of handing out child private keys to organization departments and master public keys to auditors, this has a great potential to result in a security breach. It may only be a matter of time until a large organization decides to actually adopt a hierarchical deterministic wallet to protect its Bitcoin funds, and suddenly finds a collusion of one of its department heads and an auditor running off with the entire company funds. So the obvious question is: can this be fixed? The answer seems to be no; because the only operations that can be done with public keys is adding and subtracting them, the only way to implement a deterministic wallet with the master public key property is using the “offset” mechanism described here. If this is indeed true, then raising awareness is the only solution, together with a change in BIP32 representation and in clients to make it clear that master public keys and hierarchical wallets do not mix.

There is one clever way in which this might be bypassed: making three hierarchical BIP32 wallets, with every address being a 2-of-3 multisignature address between the three wallets down some particular child key derivation path. Then, an auditor can have one of the three master public keys, and search the blockchain for transactions whose script contains public keys generated from that master public key. The solution is complex, not supported by any existing client, and far from perfect, but something like it seems to be the only way to get around the issue. In most cases, however, simply not handing out the master public key may be the better approach.

So what is the future of deterministic wallets? At this point, BIP0032 is arguably as far as we can go; there are no known tricks in elliptic curve math that haven’t been exploited yet. One obvious upgrade might be BIP0032 multisignature wallets, combining BIP0032’s hierarchical deterministic magic with an advanced feature in Bitcoin that allows you to send bitcoins to an address that requires two out of three given private keys to spend the funds. Another further direction is brainwallets. The two current competitors for memorizing a Bitcoin wallet are (1) choosing a password and using the password or a hash of the password as a seed, and (2) randomly generating a seed and converting the seed into a passphrase in a way that can be reversed. The way that both approaches are implemented is currently somewhat flawed – the standard implementation of the first approach does far too little against brute force attacks, whereas the standard (Electrum) implementation of the second approach is too difficult to memorize – studies show that passphrases like “glow date cost bloody curve wheel cousin picture ring finally bubble press” are no easier to memorize than random strings of characters of an equal security level, and they offer no protection against forgetting one or two words. These are open problems – if you are a Bitcoin developer, you personally have the opportunity to come up with and standardize a solution.

BitPay, Inc. located in Atlanta, GA and currently the lead Bitcoin payment processing company rolled out a series of several exciting announcements this morning. BitPay now works with over 12,000 merchants opening the door to multiple avenues to purchase goods with Bitcoin. Announcing its global bitcoin directory, BitPay features many of the world’s bitcoin-accepting merchants. Individuals can quickly search for ways to purchase everyday goods and services with Bitcoin.

With all the traditional excitement surrounding Black Friday, BitPay is also a lead sponsor of Bitcoin Black Friday, where individuals around the world can put their Bitcoins to good use. In conjunction with Bitcoin Black Friday, PC Game Supply, one of BitPay’s merchants, will be offering a 10% discount on all purchases on November 29, 2013. Are you a business owner and interested in accepting Bitcoin? Feel free to check out BitPay and other payment processing companies that simply make it easy to accept Bitcoin for payment.

BitPay sent out the following press release this morning:

BitPay Launches Bitcoin Merchant Directory

Includes New Merchants such as PC Game Supply and Takeaway.com

ATLANTA — November 25, 2013 — BitPay, in keeping with its mission to build a better e-payments world, has launched a new global bitcoin directory which features many of the world’s greatest bitcoin-accepting merchants. Shoppers looking for everyday goods and services or unique gifts will find a wide variety of places to spend their bitcoins in the bitcoin directory.

As lead sponsor of Bitcoin Black Friday, BitPay will be promoting its merchants and their one day sale on November 29. One of the merchants is PC Game Supply, the largest source for digital distribution of pre-paid products, virtual currencies and PC games.

Takeaway.com, the largest food delivery service in Europe, also accepts bitcoin for ordering through its more than 30,000 restaurants in England, Germany, France, Belgium, the Netherlands, Austria and Switzerland.

“We are often asked where to spend bitcoins and this global directory allows bitcoin merchants around the world to get discovered,” says Tony Gallippi, BitPay co-founder and CEO. “With this service we will be linking over 5 million bitcoin users with merchants and we will continue adding more merchants.”

The directory gives bitcoin users access to thousands of businesses and charities that now accept bitcoin. Some of the most popular categories include Web and IT Services, Electronics and Precious Metals. BitPay has also included a Travel and Tourism section for bitcoiners looking to plan their next vacation and a search feature that shows them where to spend bitcoins with local merchants. 

PC Game Supply and Takeaway.com, like many other merchants, see bitcoin as a compelling alternative to credit cards for online transactions. Bitcoins give merchants a way to decrease the amount of online fraud and subsequent chargebacks that come with accepting traditional credit cards. As part of Bitcoin Black Friday, PC Game Supply will be offering a 10% discount on all purchases on November 29, 2013.

About Bitcoin Black Friday

Jon Holmquist founded “Bitcoin Friday”, a celebration of Bitcoin with special deals for Bitcoin users. Visitbitcoinblackfriday.com

Contact

[email protected]

About BitPay

BitPay is a Payment Service Provider (PSP) specializing in eCommerce, B2B, and enterprise solutions for virtual currencies. Visit https://bitpay.com.

Contact

Jan Jahosky

407-331-4699

[email protected]

 

250,000 US Dollars or 297 Bitcoins (at 840$/BTC). This is what a space travel costs with Virgin Galactic, Virgin Group’s company that is specialized in space tourism.

The price is visible on Virgin Calactic’s website and also mentioned by Virgin’s founder, billionaire businessman Richard Branson, in an interview for CNBC, stating he invested in Bitcoin in the past..

This news coincides with the creation of BTCTrip and an announcement by CheapAir, another travel agency that is already long in business, both now accept Bitcoin for flight and hotel bookings. So, currently one can travel around the world by air and space and pay with Bitcoin. And one day, who knows, also land; if another of Branson’s companies, like Virgin Trains, will accept it as a currency.

Branson doesn’t hide his enthusiasm for Bitcoin and other payment systems like Clinkle. According to him, they “will become serious challengers to traditional banks, which will spur more competition and give customers even more options” and, like the market sector that Bitcoin overtook, he adds, become more open to technological innovations and to the future in general.

Branson says he is aware of Bitcoin’s volatility: two years ago, the currency was trading just at US $10, but he doesn’t worry because he trusts on its upward trajectory. This trajectory opened (and opens) new doors for people who have relied early on Bitcoin, for they may now be able to access this service for initial figures considerably lower than the US$ 250,000 current tour price.

“Virgin Galactic is the future of travel. It’s time we let future astronauts pay with a futuristic currency.” – Richard Branson

According to Virgin, they have a first customer: A flight attendant from Hawaii who acquired her ticket with Bitcoins. The company has exchanged those for dollars immediately to have no risk to comply with their refund policy.

An enterprise like Virgin accepting Bitcoin for one of its branches is a big push in the process of monetization of Bitcoin. In this particular case – if it were adopted among the Virgin Group holding – it could also be the entering of this currency into daily life businesses like groceries, telecommunications, energy, hospitality, music or transport.

Branson envisions Virgin Galactic entering the international flights market, which could lead to Bitcoin’s entry in another brand new market. A flight from New York to Singapur, normally taking sixteen hours, would only last one hour.

What do most Americans and for that matter, individuals around the world do the day after Thanksgiving? SHOP. Well, this year, The BitGive Foundation is partnering with Bitcoin Black Friday to provide you an opportunity to give back  through a donation drive. Bitcoin Magazine encourages you to look into giving back with the best way to give: through Bitcoin!

BitGive issued the following press release:

BITGIVE FOUNDATION – BITCOIN CHARITY DRIVE ON BLACK FRIDAY

A Charitable Giving Organization of the Bitcoin Community

(Sacramento, CA – November 22, 2013) – The BitGive Foundation is partnering with Bitcoin Black Friday to promote charitable giving through a donation drive as part of a Bitcoin alternative to Black Friday.

The BitGive Foundation is collecting donations around the clock in Bitcoin, but on November 29th, 2013 (Bitcoin Black Friday) all donations received by BitGive will be sent to Save the Children for their Typhoon Haiyan Children’s Relief Fund. BitGive has also worked to involve other charities in the Bitcoin Black Friday event. The Foundation’s hope is that as people are drawn to alternatives to the traditional Black Friday commercial frenzy, turning to online deals and Bitcoin transactions, that they will also be reminded of the Season of Giving and donate to charities doing good work around the world.

Madeline Finch, Board Member and Secretary of the Foundation says, “We are excited to be a part of Bitcoin Black Friday and to bring a charitable aspect to this already alternative event. And Save the Children and their relief efforts in the Philippines is exactly where we want to see our donation drive make a big difference.”

To share their vision and continue to educate audiences about Bitcoin, Connie Gallippi, Founder and Executive Director of BitGive, will be presenting on the “Positive Social Impact of Bitcoin” alongside Elizabeth Ploshay of the Bitcoin Foundation Board at the upcoming Latin American Bitcoin Conference in Buenos Aires, Argentina, December 7-8, 2013.

The BitGive Foundation, launched earlier this year, is a charitable giving organization of the Bitcoin community, whose mission is to provide gifts to environmental and public health causes worldwide. BitGive has received several significant donations from Bitcoin mining companies KnCMiner and Butterfly Labs, as well as in-kind donations and services from Perkins Coie, LLP and BitPay, Inc., who also processes Bitcoin donations to charities at no cost.

More donations in Bitcoin have come in through the easy two-step donation process on their website. The Foundation has a multi-million dollar long-term goal for global giving and is confident that the Bitcoin community can support that bold vision.

FOR IMMEDIATE RELEASE

To support the BitGive Foundation, donations are being accepted at:

http://bitgivefoundation.org/donate.html

Contact:

(Before November 23rd) Connie Gallippi 1-916-625-6BIT [email protected]

(After November 23rd) Madeline Finch 1-785-550-5258 [email protected]

###

 

The Bitcoin Alliance of Canada, Canada’s largest nationwide nonprofit Bitcoin organization, has announced the Bitcoin Expo 2014, a full-scale Bitcoin conference that will take place in Toronto in April 2014. Although the event will not be the first Bitcoin conference in the country, an honor that goes to the Bitcoin summit last month, it will be the first major conference in the country, attracting attendees from all around the world.

The location of the venue will be the Metro Toronto Convention Centre, the largest conference and meeting facility in Canada. The space will include four different theater rooms for presentations, and an exhibition hall that can house 20-40 exhibitors – roughly the same amount on both counts as the San Jose conference in 2013. Anthony Di Iorio, founder of the Bitcoin Alliance of Canada and chief organizer of the conference, expects that there will be “upwards of seven hundred people” present; however, he says, the conference will be able to expand and adjust if even more people choose to come. “The great thing about the vanue is that we have a lot of scalability,” Di Iorio says.

Unlike the Bitcoin summit in Toronto last month, which mainly targeted the Toronto Bitcoin audience with a few entrants from the United States, Di Iorio intends for this conference to be a major event, bringing in individuals, businesses and community organizations from all around the world. The speaker list will include:

• Joseph David, CEO of the largest Canadian Bitcoin exchange CaVirtex
• Rodolfo Novak and Peter Gray from Coinkite, a company in Toronto developing Bitcoin wallet and merchant tools
• Stu Hoegner, Bitcoin Alliance of Canada legal counsel
• Adam Levine, Stephanie Murphy and Andreas Antonopoulos from Let’s Talk Bitcoin, a popular weekly Bitcoin podcast
• Charles Hoskinson, head of the Bitcoin Education Committee and creator of the Udemy Bitcoin course
• Jonathan Mohan, Bitcoin community organizer in New York
• Jeffrey Tucker from Laissez Faire Books, a book seller dedicated to selling books about libertarianism and free market economics
• Cody Wilson of Defense Distributed and more recently Dark Wallet
• Erik Voorhees (tentative) from Coinapult, a “send Bitcoin by email” service that is now reinventing itself as a full-scale Bitcoin exchange
• Jason King from the beloved Bitcoin homeless shelter Sean’s Outpost

And the list is not nearly complete; Di Iorio is currently actively looking for more speakers to attend, especially those from Europe and China. If anyone wants to speak but cannot afford to attend, the conference will also have a limited number of scholarships. Scholarships come in three levels: free registration only, partial (free registration plus a daily allowance) and full (free registration plus a daily allowance and travel costs), and will be decided on a competitive basis. Anyone interested in speaking, whether or not they would like to apply for a scholarship, should feel free to contact Di Iorio at [email protected].

As far as we know so far, the event will be the third Bitcoin conference to take place next year, following the conference in Miami at the end of January and the Bitcoinvention in the Philippines in mid-February. There will also be a full-scale event in Amsterdam in May organized by the Bitcoin Foundation, but it is far from certain that it will overshadow the other events to nearly the same extent that the Bitcoin conference in San Jose did in 2013; today, Bitcoin organizations other the Foundation have had plenty of time to catch up, and Bitcoin conferences are happening almost every month. It is quite likely that the Toronto conference will attract more of the Bitcoin audience from North America while the Amsterdam event will be more popular in Europe, although the organizers hope that as many people as possible will attend both.

100% of the proceeds from the conference will go toward the supporting the Canadian Bitcoin community, and the exact way in which the funds will be distributed will be decided in a crowdsourced way by the organization’s members. The Bitcoin Alliance of Canada will also soon make its formal announcement in several weeks, unveiling its new website and announcing a statement representing the organization’s principles and beliefs – a move which Di Iorio believes the Bitcoin Foundation could also have benefitted from making when the organization first launched in September 2012. To find out more about the Bitcoin Alliance of Canada and the Canadian Bitcoin community, see the three part series on bitcoinmagazine.com. Hope to see you at the conference!

See also: part 1, part 2 and part 3 of this series.

Two weeks ago the giant online food ordering and home delivery site ‘Takeaway.com‘ started accepting Bitcoins as payment. This is a big step forward into the world of Bitcoins: it gives access to almost 20,000 restaurants to pay with Bitcoin now.

Takeaway.com is a Dutch dot-com company specialising in online food ordering and home delivery. Working as an intermediary online portal between the customer and the restaurants, customers can order food online from restaurants’ menus, and have it delivered by the restaurants directly to their homes. The company was founded in the Netherlands by Jitse Groen, after an idea at a family celebration in 1999. He wanted to order food and thought he could find a restaurant with home delivery service on the internet. The only result posted on the internet was a list of restaurants in Amsterdam, where they could not order food at that time and for their current location.

So a year later he developed a website, Thuisbezorgd.nl (means ‘home delivery’) with the offer on it of take out restaurants who also deliver at home. This became a success and in 2007 the company expanded to Belgium, Germany and Austria. In 2010 they changed their name into Takeaway.com. Now they operate also in Denmark, France, Luxembourg, The United Kingdom, Suisse and in Vietnam. Takeaway.com works closely with brands like Coca Cola, Ben & Jerry’s, Domino’s Pizza and Heineken. Alltogether the website handles over 800,000 orders a month now, and they have over 20,000 restaurants that work with them. They are still developing and growing over 75% every year.

I contacted the director and founder of Takeaway.com, Jitse Groen, to ask him some questions about the next big step at Takeaway.com: accepting Bitcoins.

Christien Havranek: Why did Takeaway.com start with accepting Bitcoins as a valid payment?

Jitse Groen: Takeaway.com is always one of the first when it’s going about new developments. Just after the launch of the first iPhone we had an iPhone app to use for ordering food. And also in the area of online payments we are almost always the first to add promising developments. We got a lot of clients who order food online because they are already situated behind the computer around dinnertime. Bitcoin is a beloved currency of a very important group of our customers: gamers. We regularly received the question if it was possible to accept Bitcoins. This was the main reason for us to add Bitcoin next to as a payment option.

CH: What was the process going on between the idea of accepting Bitcoins and the acquittal of the currency?

JG: After all the requests we received to accept Bitcoins, we did some research if there will be enough transactions with Bitcoins when we introduce them. It appeared that a relatively big group of regular applicants like to pay with them. So we decided to accept them. Between this decision and the implementation of the currency there was a timespan of one month. We launched the currency on the 5th of november 2013 in the Netherlands, Germany and Austria. Six days later it was also possible to pay for your pizza, burgers or other takeway food with Bitcoins at the food ordering sites of Luxembourgh, Belgium, France, The United Kingdom, Denmark and Suisse.

CH: What are the expectations of Bitcoins for Takeaway.com?

JG: We don’t really know what to expect with Bitcoins for Takeaway.com. But we can say being happily suprised that already so many people pay their transactions with them now. Bitcoins take along a big currency risk. Sure this doesn’t have to be bad, as long as [we’re] taking the right prevention measures. This is the reason why we change them back to euro’s as soon as we received them. So when Bitcoin loses its value, it would not affect Takeaway.com. That would especially be bad for the owners and speculators of them.

CH: How many transactions have there already been done, for example, in the Netherlands?

JG: We receive around a few hundred transactions a day. Compared to the myriads of orders we daily have in the Netherlands, it is just a very small amount. This phenomenon is the same in the other countries where we started accepting them. I can not tell you the exact amounts, but what I can tell you is that this number is already much higher than we expected.

What you might be interested to know is the average amount of an order we receive on Bitcoins in most of the countries of Takeaway.com. This amount is a bit higher than the national average of them paid without Bitcoin.

Table 1: An overview of the average amount of orders in different countries paid with Bitcoin.

CH: Next to the nine European countries of Takeaway.com in Europe, you are also situated in Vietnam since the end of October after taking over Vietnammm.com. With around 700 members there at the moment, why don’t you accept Bitcoin there as well?

JG: This is a question of priorities at the moment. It’s also due to another monetary unit. They are the only non Euro country of Takeaway.com. But who knows where Bitcoin will bring us in the future.

At least we are very happy that we took this step. We got a lot of positive reactions of Bitcoin users, thanks for that! We started as a student company with a start-up capital of just 50 euros and although we grew very big, we really appreciate the support from this party.

(With special thanks to Jitse Groen, Takeaway.com, @takeaway.com on twitter for the picture, the quick online chatservice of Vietnammm.com and Wikipedia.)

——————
Christien Havranek has a background in Social Psychology and (Marketing) Communication. She works as a freelancer and became interested into Bitcoin due to a friend of hers building hardware. She is living in Delft, the innovation city of technology in the Netherlands, and wants to spread Bitcoin by making it doable for everybody. Other jobs she does are helping companies with their Facebook communication, building stages, decorations and entertainment (on festivals, parties). Being half Austrian, in winter she teaches ski and snowboard and loves the mountains. Hobby’s: running, travelling, photographing and playing the drums on stages all over Europe with her band. If you have any questions, don’t hesitate to contact her at [email protected].

Freicoin is a Bitcoin-based currency that has a demurrage fee and zero interest, concepts proposed by Silvio Gesell to reduce hoarding and to promote the sharing of wealth. These theories have been used several times with fairly positive results.

The project is led by Jorge Timón and Mark Friedenbach. They launched a crowdfunding campaign to develop this currency, described by them as “a decentralized, distributed electronic currency designed to address the grievances of the 99% and correct the excesses of the 1%.”. They didn’t achieve their target of 28.000$ but their purpose still stands. We spoke with Jorge Timón to know more about this project.

Ferdinand Reyes: What is Freicoin’s stand about the never ending energy consumption’s run for currency generation?

Jorge Timón: We tried to separate the miner’s function as the way to make the system secure and, on the other hand, as a way to generate the initial units. Bitcoin joins them but we believe that while security is important, to issue all the money through miners is an energetic waste.

For this reason we are creating Freicoin Foundation in order to issue the currency at a lower cost than with mining; in our view currency shouldn’t have a production cost.

SCIP technology is also interesting. It was spoken about in the last Bitcoin conference at San José. Is a technique that allows one to trust an untrusted computer executed a program properly with zero knowledge. This can be mining’s future: instead of working out random hashes, all this computation power can be used for useful projects like volunteer computing. For instance, there is a group in Bitcoin’s community, Curecoin, dedicated to collecting rewards for solving work units from Folding@home, a research project dedicated to finding cures to diseases.

We also support “merged mining”, namely, mining multiple chains at once, instead of chains competing for proof-of-work, they can reuse the same work. Namecoin does that with Bitcoin already and Freicoin will too because they share the same SHA256 algorithm as proof-of-work in Bitcoin. Others like Litecoin replaced it with Scrypt and can’t be merged mined.

FR: What relationship do you have with the developers of Bitcoin?

JT: Mark and I are subscribed to Bitcoin’s development mailing list. We want to continue working with them, as they are the biggest development group. We want to keep the code as compatible as possible with Bitcoin to leverage the changes that we do to their codebase and conversely, to apply downstream changes at Freicoin by ourselves but if we have improvements that can affect to Bitcoin, we promote them to the main branch too.

We’re a little slower at development since we need to apply our own changes on top of Bitcoin’s last improvements, so we’re almost always a version behind.

FR: Freicoin has to do with social currency. What relationship do you have with them? What function does Freicoin?

JT: Personally, complementary currencies have interested me for a long time. From Freicoin we think the interest can be fought in two ways; as Freicoin is a scarce currency, demurrage fee is required, but some local currencies are based on mutual credit and also result in zero interest currencies: even without demurrage fee they can suppress the basic interest.

They also have an important localization factor to create a more sustainable economy; in some sectors it is interesting and efficient to localize production and consumption, as in the case of food production. This can be achieved with local currencies but not with Freicoin, since it is a global P2P currency.

Freicoin can complement social currencies helping them in the global market or, for example, allowing an immigrant to send money to another country; this can’t be done with local currency but can be done with Freicoin. It would be a way for local currencies to be truly independent of national currencies like the euro or the dollar.

We should talk about FreiMarkets when talking about Freicoin’s relation to other currencies. This is an extension of the protocol we are developing to allow issuing any local currency or even other assets that aren’t currencies inside Freicoin’s chain, and also in private servers. Local currencies’ managers may not want to wait 10 minutes for confirmations because since their system are based on trust anyway, it’s much easier for them to implement instant transactions.

Inside FreiMarkets you can issue social currencies in two ways: in private chains that instead of proof of work rely on a central accountant that users have to trust to prevent double-spoending, or issuing them in Freicoin’s chain; a similar concept to Colored coins or Mastercoins, although they don’t change Bitcoin protocol and they are limited in several ways. For instance, to exchange colored coins both parts must be online to sign simultaneously: an user can’t use an order previously signed by someone who is now offline in colored coins like he can on Freimarkets or Ripple.

To implement this extension we are going to add the type of currency/asset at the beginning of the outputs. In this way, Freicoin’s client will support any kind of different currencies; with or without interest/demurrage, for P2P loans, applying a basic income, …

Furthermore, in a single transaction, you could exchange between various currencies as in a P2P market like Ripple. For example, a person might pay with a local currency from Barcelona while the seller could receive Freicoin or another currency.

We are also working on a new type of unique non-fungible assets called tokens which will be more useful for opening a car, numbered seats in an event or any other non-fungible smart property use case.

FR: What other projects does the Freicoin community have in mind?

JT: Besides implementing FreiMarkets’ already published design, we are working on the Freicoin Foundation’s web to distribute freicoins through a faucet and among registered nonprofit organizations. The foundation will give to them in proportion to the donations they get by themselves. A total of 80,000,000 freicoins will be distributed, discounting what will be lost by demurrage during the process.

There are more proposals on how to distribute these funds without the foundation taking too many direct decisions and that are also easy to audit (the public blockchain helps a lot on this), but these two were the simpler and most feasible to implement in the short term.

FR: At present Freicoin has little acceptance as currency and, being scarce, its implementation and circulation is slow. How do you think that associations may use it and what will you do to extend it?

JT: If associations don’t find where to spend their freicoins, they can exchange them for Bitcoins. Since Freicoin is a currency with demurrage fee, people will want it to change hands faster and this will accelerate its circulation. Merchants will be more open to accept them if they see people receiving and willing to spend freicoins.

These associations or other groups may also distribute them physically and give them practical use, as medium of exchange, among the members of a local community.

FR: Finally, the short, medium and long term of Freicoin that you foresee.

JT: We just published our FreiMarkets protocol extension proposal along with a crowdfunding campaign to develop it in the medium term. We think that it can be very well received by the Bitcoin community because we will start the merged mining, attracting more miners and avoiding having to hard-fork in the Bitcoin’s chain to have a P2P markets with similar security.

In the short term, the Foundation’s web will launch this fall and we hope to attract more people.

Moreover, with more currencies and the bigger size of the block in the chain, the development done by Mark to allow clients to work without all the history with no loss of security will be interesting.

More personally, from a company I’m creating with Mark, we want to create a website that encompasses an explorer, a pool and an exchange that allows payments with automatic conversion between Freicoin and Bitcoin. For example, if you have Freicoin deposits you can pay for a product or service with Bitcoin, exchanging the currency just before sending the transaction.

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This interview has been published in Bitcoin Magazine, Issue 14

Bitcoin Magazine is proud to serve as a media partner for the second Inside Bitcoins Conference set to take place in Las Vegas from December 10-11. The Conference will take place at the MGM Grand Hotel in the heart of Las Vegas, Nevada. The last Inside Bitcoins Conference was a success in New York City, NY at the New Yorker Hotel this past July. This conference will once again bring together Bitcoin enthusiasts, entrepreneurs, venture capitalists and those looking to learn more and get involved. With an impressive line up of speakers, your time will certainly be well spent.

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With all the excitement of recent events it is easy to forget that the ecosystem around Bitcoin is still very young. The technology is less developed than our interest in it. This will change over time. In the interim, adoption is challenging.

Software is routinely beta and layers are nascent. For the uninitiated Bitcoin can seem daunting and full of technical jargon. Among the most challenging intellectual leaps involves the decimal.

Each Bitcoin is divisible to 8 decimal places (100,000,000 individual units). The fiat currency we have always known is divisible to only 2 decimal places. This represents a huge paradigm shift.

So Bitcoin is more perfectly divisible than any of its fiat monetary competitors. Theoretically, this is is a source of strength. However, there is a vast gap between theory and reality. For adoption: perception is reality. Perception is king.

In a recent interview, IBM executive Richard Brown made an interesting statement. He noted that, as an alt-coin example, Litecoin was “testing the idea that psychology matters.”

Litecoin’s main differences are well known. Among these, the total number (nominal units) that will ever exist is 84 million, compared to Bitcoin’s 21 million. Richard sees litecoin as testing the idea that “if we have a larger nominal number of currency units, does that change people’s behaviour?”

This question has far reaching implications for adoption. At its heart lay the decimal place and the psychological impact of nominal representations of wealth.

Litecoin to Bitcoin – A Numbers Game.

Theoretically Bitcoin does not need any clones. With 21 million nominal units, divisible to 8 decimal places, it is more than capable of supporting a global economy. Nevertheless, Bitcoin is an open-source project. So, for better or worse, it has a potentially infinite number of copies.

In a marketing sense Litecoin has sought to define itself as the ‘silver’ to Bitcoin’s ‘gold’. However, neither exists physically. So, network effects aside, they are interchangeable for a given user.

A Game of Numbers – Perception Rules.

Numbers, psychology and value all interact inside our minds. Research on pricing psychology suggests that numbers and their arrangement around the decimal place influence perceived value.

As the eyes move left to right, digits to the left of the decimal place are most significant for us. We have learnt to see these numbers as important. We have learnt to overlook anything laying to the right. This leads to an overall rounding-down effect in one’s mind. The exception being ‘special offer’ situations, with numbers to the right of the decimal ending in seven or nine.

As Bitcoin increases in value, wealth representation necessarily moves to the right. An average weekly wage, for example, would now show a ‘0’ digit to the left of the decimal place if represented in Bitcoins on current highs. If price creates expectancy then a ‘0’ to the left is a big disappointment.

Our perception of a given thing creates a price point: the point at which demand changes. Marketing research applied to this case suggests that perhaps Bitcoin’s demand could be affected as units to the left increasingly comprise of zeros: an inevitable consequence of increasing valuations.

Perhaps then, a user will irrationally tend towards participation in a network that denominates their worth with a bigger number. A user may tend towards the use of Litecoins, for example, out of a desire to own whole units. This would give the user a larger nominal representation of wealth, fewer zeros to the left and a greater psychological satisfaction.

Scientist and researcher Stanislas Dehaene notes that prices with precise numbers tend to make consumers uneasy. Prices are rounded to calm consumers and increase perceived value. Dehaene also notes that Rounded numbers convey value.

A Bitcoin is only a mathematical construct. So as a representation of value it is incredibly precise. Allowing for protocol changes it has the potential to be even more precise. Bitcoins are anything but rounded. For the inexperienced this precision must be intimidating.

Unless you hold the opinion that Bitcoin, purely disruptive, will sell itself, then it still faces significant challenges: its continued adoption not yet assured. People who have never given much thought to money, value transfer or distributed consensus are unlikely to immediately realise the implications of Bitcoin. Already software is aiming to work around such issues.

Some Practical Approaches

Phone apps like Bridgewalker aim to use Bitcoin as a ‘behind-the-scenes’ transfer tool, keeping balances denominated in fiat in the user interface. The Multibit and Electrum wallets show fiat denominations next to BTC balances.

There is also a trend towards denominating bitcoins in mBTC and uBTC. Still, handing over so much fiat to own a just small fraction of a purely digital unit is a challenging psychological barrier to breach. Especially given our current preconceptions as to money and value.

It may be the case that the Bitcoin network does not find its eventual long-term success as ‘money’ or ‘currency’ at all. Richard Brown believes that “Bitcoin’s true significance lies in its potential as a global digital asset register”.  This is just another potentially revolutionary and disruptive use case. For Bitcoin, there are many.

The technological quantum leap here is not necessarily a new type of money. Rather, it is the ability to now achieve global consensus over a decentralized and distributed network without a trusted third party. This has many potential applications for various fields of endeavour.

But for now the focus is on the Bitcoin network as a payment system and the Bitcoins as money. Focus will remain on this application for the foreseeable future. If the network is to continue its growth then, for the moment, people need to be satisfied with the idea of Bitcoins as money.

Emotion affects decision-making. Those working on the tools to aid Bitcoin ease-of-use and adoption must understand this. Emotion will affect an individual’s decision to participate in the network. This same principle applies to an individual’s view of these strange new units of account called ‘Bitcoins’ and the price they will pay for them.

The more creative ways we can find to deal with such esoteric nuances, the better. Bitcoin, after all, is full of them. In developing strategies it is important to be clear about the audience and their limitations in stepping outside their current understanding of ‘money’. Bitcoin will then remain awe-inspiring but cease to be baffling.

(Note: Tweet me if you want/need sourcing).

Today, the Bitcoin community entered into the halls of the US Senate once again, this time for a US Senate Committee on Banking, Housing and Urban Affairs Subcommittee on National Security and International Trade and Finance. In his opening statement Senator Mark Warner began the hearing and discussed his first encounter with wireless telephones in the early 1980s. He specifically stressed the need for open minds to hear about the potential and also the important ramifications around monetary policy and taxation related to Bitcoins and other cryptocurrencies. He stated that Bitcoin can radically transform central banks, monetary policy and also pose threats. Senator Warner expressed that Bitcoin is a currency that already has been monetized and is becoming more mainstream. Senator Dean Heller expressed that the US Senate should help maintain an environment that fosters growth and brings about understanding. Senator Merkley stated that Bitcoin and other virtual currencies take money and that “virtual currencies are completely a different animal.” Senator Merkley emphasized that Bitcoin is absolutely fascinating and stated that Bitcoin is a functional and viable technology at this moment. Senator Kirk highlighted his concern that Bitcoin could lead to illegal and terrorist activities.

The First Panel began with Jennifer Shasky Calvery (Director, Financial Crimes Enforcement Network) and concluded with David Cotney (Commissioner of Banks, Massachusetts Division of Banks).

Jennifer Shasky Calvery of FinCen highlighted that virtual currencies must be put in perspective in that virtual currencies have yet to take over traditional financial institutions. She stressed the need for each financial institution to operate within legal bounds and integrity. She stated that those institutions that chose to act outside of the law will be held accountable and used the example of Liberty Reserve. FinCen is the regulator for anti-money laundering and anti-terrorism, so they are unable to determine as to whether or not Bitcoin is an actual currency. FinCen first took note of virtual currencies back with E-Gold and placed virtual currencies under the guise of the AML framework.

Shasky Calvery also addressed the question of Bitcoin’s volatility.

David Cotney (Commissioner of Banks, Massachusetts Division of Banks) proceeded to testify on behalf of the conference of state banks and expressed the benefits of virtual currencies of speed, efficiency and lower transaction costs and also providing an outlet for the unbanked. State regulators are currently looking for an open dialogue. He stated the need for licensing for businesses and that enforcement is also a key part of state supervision. He stressed that cooperation is a hallmark of state supervision. Cotney specifically mentioned the SAFE Act and expressed that states are currently working to ensure that there is an appropriate level of regulations. Cotney mentioned that there is a big demand for more real time payments at lower transaction costs and how many in  Europe and Canada are seeking out faster transaction times and expediency. Cotney is concerned most about consumer protection and fears irrevocability of transactions.

Senator Mark Warner discussed the need to strike the right balance so we do not chase exchanges offshore and leave Americans unprotected. He asked the first two panelists if Bitcoin is a currency or simply an internet protocol. Senator Kirk specifically asked whether or not a specific terrorist group has used Bitcoin. Senator Merkley proceeded to ask about the centralized public ledger and wanted to know if the encryption of the code can be broken. He touched upon the hacking of BitFloor and of Insta-Wallet and proceeded to ask Shasky Calvery how hacks take place. Shasky Calvery explained that Bitcoin is the strongest form of cryptography to date. She highlighted the irrevocability of transactions. The Senators were trying to grapple with the fact that Bitcoin is complex in that it is not as traceable.

Senator Heitkamp (D-ND) touched upon the practicality of Bitcoin and how it is emerging and may replace credit cards and other methods of payment. She stressed the difficulties in categorizing Bitcoin and the question of how to deal with Bitcoin when it becomes more of a common method of transaction. The more commonly accepted it is and the more available Bitcoin becomes, there will be a need for either fitting Bitcoin into a category or creating a new category. Shaskey Calvery highlighted how Bitcoin is going to be a nice experiment that completely fails or it will really take off. Senator Heitkamp mentioned the interesting challenge to come with Bitcoin related to capital gains taxes and financial reporting down the road.

Senator Jerry Moran posted on Bitcoin Reddit requesting questions from his constituents and the Bitcoin community. His main question was related to the dangers of excess regulations and how there additionally may be inconsistencies between federal and state standards. Shasky Calvery expressed that there will be regulations abroad as well and that if US related Bitcoin businesses leave to escape regulations, they will still find regulations abroad.

The witnesses on the second panel included Tony Gallippi (Co-founder and CEO, BitPay, Incorporated), Sarah Jane Hughes (University Scholar and Fellow in Commercial Law, Indiana University Maurer School of Law), Mr. Paul Smocer (BITS President, Financial Services Roundtable), and Ms. Mercedes Kelley Tunstall Partner and Practice Leader, Privacy and Data Security Group, Ballard Spahr LLP.

Mr. Paul Smocer opened up the panel by stating that attempts to develop digital currencies have existed for decades and stressed the need to recognize that digital currency usage exists outside of traditional frameworks. He stated that one measure of a currency’s success is the usability and how widespread it is. He acknowledged that digital currencies can provide access to the underbanked and also highlighted the example of M-Pesa in Kenya and also how digital currencies help individuals in oppressive regimes. He stated that digital currencies can pose significant marketing risks. He defined Bitcoin as a currency, depository system and a payment system.

Sarah Jane Hughes of Indiana University began her testimony by sharing of her father’s early experience in cryptography. She stated that it is incredibly important to enforce AML, anti-terrorism and also current sanctions. She expressed that regulations need to be clarified so that “banks don’t get cold feet.” She also encouraged payment providers related to Bitcoin and virtual currencies to share user protection statements. She stressed the need for rigorous guidelines to prevent illicit use of Bitcoins.

Ms. Mercedes Kelley Tunstall of the Privacy and Data Security Group came down harder than expected on Bitcoin. She currently works with a number of clients on financial innovation issues. She stated that the United States has a long history around currencies but also highlighted some of the supposed shortcomings of Bitcoin related to anonymity, criminal use of Bitcoin and gaps in reliability. She specifically stated that Bitcoin is being used by criminals and terrorists and in order to get through this, the anonymity “needs to go.” She expressed the need for a definition of what a virtual currency is and asked for stronger FinCen guidance and concluded that nothing will stop a US Bank or financial institution from getting into virtual currencies themselves.

Tony Gallippi Co-founder and CEO, BitPay concluded the panel strongly. He specifically stressed the role Bitcoin can play in creating jobs in the United States and around the world. Tony mentioned BitPay’s over 12,000 merchants and also how BitPay strictly follows AML and KYC guidelines. He expressed that Bitcoin has invented something pretty amazing in transferring an asset immediately with no risk. He also emphasized that the credit card was not made for the internet. He stated that in order to assist the housing market, Bitcoin can be used when settling mortgages. He encouraged Congress to take a wait and see approach as Congress did with the internet. Tony highlighted that Bitcoin is a technology with tremendous cost-savings for businesses and consumers. When asked for further clarification, he stated that BitPay’s transaction fee started as 1% compared to the 3-4% transaction fees of credit cards.

Senator Merkley highlighted low transaction fees and how the concept of low transaction fees can change how we deal with credit card companies and banks. Senator Mark Warner compared telecom and asked whether virtual currencies can grow faster in third world countries. He expressed the need to get the balance right. He also asked if a stronger digital currency will emerge. Ms. Mercedes Kelley Tunstall responded that unless Silk Road incidents no longer persist, Bitcoin will not become mainstream. Senator Heitkamp expressed that the more we legitimize Bitcoin in regulation, the more we commercialize Bitcoin and legitimize Bitcoin as a true opportunity. Sarah Jane Hughes recognizes that this is a risk worth taking. Sarah Jane Hughes stated that right now, all risks fall on users. Senator Heitkamp recognized that it might make sense to just leave Bitcoin alone and see what happens.

Senator Schumer (D-NY) expressed his different approach than Senator Heitkamp. Senator Schumer did state that he does not want to shut down or stamp out Bitcoin. He expressed that the rise of alternative currencies could have profound and exciting implications that Bitcoin has in NYC but also how this promise can be compromised by illicit activities. He asked Tony Gallippi as how we can separate illicit from licit Bitcoin related activity. Tony explained the different parts of Bitcoin: low level protocol and application. He explained that BitPay has a strict Know Your Customer policy and that those operating illicitly can get caught by law enforcement. Senator Schumer requested that Tony and the other panelists send specific suggestions as to how to weed out the illicit activity from the licit uses of Bitcoin.

Now will the US House of Representatives follow suit and summon representatives from the Bitcoin community for a hearing on the House side?

In Bitcoin We Trust, one of the lead Bitcoin exchanges in the UK, sent out the following announcement:

After a temporary halt to trading, IBWT has re-launched with alternative methods of funding customer fiat accounts. This alternative funding so far consists of Royal Mail and Postal Orders via Royal Mail. With plans to expand to additional funding methods as the business grows, IBWT has stated that these methods of funding will not be subject to bank account closures, nor transaction freezes, or any other bank related issue.

The IBWT team does have future plans to partner up with interested pro-Bitcoin banks , when they become available, and will be offering additional funding methods at this time.

The new alternative funding consists of sending either hard currency or postal orders to the value of the funding to IBWT (Funding). Using the services Royal Mail provides, IBWT customers can get appropriate cover for their funds (FAQ).

And they have lowered their fees from 0.8% to 0.6%, though added withdrawal fees to cover Royal Mail compensation cover. There are no deposit fees, but IBWT strongly recommends that customers pay the appropriate cover fee that Royal Mail charges.

This new method of funding brings a different element to the exchange market. If an exchange can operate outside the use of a bank, then does this signify a step in the movement from fiat to bitcoin, similar to how gold moved to fiat.

IBWT has also recently added Litecoin implementation and have lowered and removed some of their verification. Customers can now deposit with only a verified email, and withdrawals only require an account and a verified address.

They have also uploaded extra resources to help clarify the subject with regards to current UK regulation, which can be found on their resources page under archive. Detailing information from HMRC and FCA, the IBWT Processes and Primer for interested individuals.

The Director has stated that regulations will eventually come, but for now, due to the banks and the lenient Government view, this opportunity to open up access to Bitcoin for the UK has occurred. He has stated that they will adhere to any regulations as they become available and required.

The IBWT Terms of Service have also been updated to reflect their recent updates from the archaic banking world.

In Bitcoin We Trust also sent out the following press release to announce the relaunch and updated terms of service. Feel free to check out the IBWT Facebook Page as well!

 

Just in this morning, the Global Leadership Institute has taken the step to accept Bitcoin as a form of payment for educational products and services. With the mission to, “facilitate leadership conferences and workshops that enable committed executives to more effectively lead their companies and organizations,” the GLI is moving forward and providing more opportunity to scholars and partners through opening the door to Bitcoin.

The Global Leadership Institute Issued the following press release:

Global Leadership Institute To Accept Bitcoin

Global Leadership Institute (OTC: CEHC) today announced that it will accept Bitcoin as payment for future educational products and services.

Bitcoin is the first decentralized electronic currency not controlled by a single organization or government. It’s a virtual form of currency that can be used to make payments over the Internet with transaction fees or involving a financial institution. It is used by people all over the world who are trading millions of dollars with of Bitcoin every day with no middle man and no credit card companies.

Accepting Bitcoin is an example of GLI following the innovative model that it endorses in in its educational offerings. Additionally, some emerging markets that the company is targeting may be better suited to conduct transactions in Bitcoin than in different currencies.The company also believes that as it embarks on building an intellectual property library in 2014 it will be positioned to enhance monetization of these assets by accepting Bitcoin for articles, video classes, and other downloadable media.

“We forecast that Bitcoin could allow us to reach additional markets and potentially change how education services are bought and sold in the developing world,” added Peter Klamka

Chairman.

For more information on the company’s educational products, visit www.gli360.com.

Contact:

[email protected]

This press release includes certain statements forward-looking in nature and that

involve a number of uncertainties and risks. Such forward-looking statements are

within the meaning of that term in Section 27A of the Securities Act of 1933, as

amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The

forward-looking statements in this press release are based on the company’s current

expectations and projections regarding future events, which are based on available

information. The forward-looking statements in this press release may also include

statements relating to the company’s anticipated new developments, including

accepting Bitcoin for its products and services which are currently in development,

business prospects, financial performance, strategies and similar matters. The

company. disclaims any obligation to update its forward-looking statements, except as

required by law.

 

With a tremendous build-up heading into yesterday’s hearing, the price of BTC peaked at over 600 USD. At the start of today’s hearing beginning with Senator Tom Carper’s (D-DE) opening statement, the price of Bitcoin dropped quickly to 445USD/BTC yet at the close of the hearing, the price of Bitcoin stood at 620USD/BTC and keeps rising. With two panels and a captivated audience on the Hill and via online around the world, the first US Congressional Hearing on virtual currencies can be viewed as a success.

Senator Carper (D-DE) opened up the hearing with an introduction expressing the committee’s interest in learning more of the benefits and potential risks of virtual currencies. Entitled, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” the hearing started off with the first panel of representatives from the US Government including Jennifer Shasky Calvery (Director, Financial Crimes Enforcement Network U.S. Department of the Treasury), Mythili Raman (Acting Assistant Attorney General, Criminal Division, U.S. Department of Justice), and Edward W. Lowery III (Special Agent in Charge, Criminal Investigative Division, U.S. Secret Service, U.S. Department of Homeland Security).

Jennifer Shasky Calvery of FinCen opened the first panel and expressed the need for smart regulations that minimize risk. Jennifer highlighted that virtual exchanges can fit into the pre-existing regulatory regime in the US. She proceeded to explain that the PATRIOT Act and Bank Secrecy Act have already provided the tools and the platform for FinCen and the US Government to crack down on illicit activity and specifically pointed out that Section 311 of the Patriot Act was used to crack down on Liberty Reserve. As FinCen’s main goal is to crack down on terrorism and money laundering, Jennifer emphasized that innovation comes with obligation and encouraged each business to register with FinCen, put in place AML restrictions, maintain records and provide service reports to FinCen. She specifically emphasized that it is a privilege to be a part of a global financial system. In response to Senator Carper’s question related to keeping businesses in the United States, she discussed how each country has an interest in protecting consumers and investors from fraud.

Mythili Raman Acting Assistant Attorney General, Criminal Division of the US Department of Justice stressed that virtual currency services are not in and of themselves illegal. Mythill expressed that law enforcement must remain vigilant and understand the challenges of anonymity continue to keep up with innovation. Similar to Jennifer Shasky of FinCen, Mythili highlighted that current money laundering and criminal statutes are advanced enough to apply to virtual currencies and that money laundering statutes have been very effective thus far. She expressed the goal to send a message to illicit actors and keep pace with what is to come.

Edward W. Lowery III of the Secret Service concluded the panel to explain that the Secret Service must continue to adapt to changing threats and highlighted current efforts in place to aggressively and strategically investigate based in the confines of existing laws. Edward did recognize that technically gifted investigators are needed to tackle the new developments in the virtual currency space. Edward stated that the Secret Service attacks problems strategically and supports aggressive law enforcement. Chairman Carper concluded the first panel with recognition that the committee has an oversight role and a need to make sure that the current Administration is working in a cohesive and collaborative manner. Chairman Carper’s main question was, “Is it possible to reap the economic benefits of Bitcoin but at the same time clean up the criminal misbehavior that is out there?”

The second panel featured  Ernie Allen (President and Chief Executive Officer, The International Centre for Missing & Exploited Children), Patrick Murck (General Counsel, The Bitcoin Foundation, Inc), Jeremy Allaire (Chief Executive Officer, Circle Internet Financial, Inc.) and Jerry Brito (Senior Research Fellow, The Mercatus Center, George Mason University). Ernie Allen began by addressing  the quickening pace of innovation and pressed for global cooperation. Ernie stressed the need to ensure that any response from the government is not so draconian in nature. Ernie expressed his concerns relating to anonymity and stated that absolute internet anonymity is a set up for disaster. He emphasized that the committee cannot ignore the misuse of a digital currency but also acknowledged that Bitcoin is a global phenomena.

Patrick Murck from the Bitcoin Foundation discussed the global role of the Bitcoin Foundation. He stressed that Bitcoin increases dignity, liberty and self determination as many people are not banked in the US and abroad. He acknowledged that Bitcoin can be used for illicit purposes but Bitcoin is based on decentralized systems of open ledgers which are open and transparent. He asserted that Bitcoin does NOT pose a threat to the legal community and also stated that the Bitcoin Foundation thanks FinCen and hopes to continue to move forward with an open dialogue. He stated that there is a real need to create on ramps into the traditional financial system to protect the system from abuse. Current obstacles include the current fear of most banks to work with Bitcoin related businesses.

Jeremy Allaire, CEO of Circle followed Patrick Murck and highlighted that digital currency represents one of the most important technological developments of our time.He emphasized that outside of virtual currencies, there are generally high transaction fees and long periods of time between money transfers. Jeremy did stress the need for clearer guidelines as regulatory uncertainty will hold companies back from utilizing Bitcoin. He also noted that we are at another 20 year start of journey of internet development and that the open nature of Bitcoin and its development is a very positive framework. There is still tension regarding the balance between regulation and anonymity, yet Bitcoin offers great potential to lower the fraud risk when conducting payments as Bitcoin reduces risk and increases consumer privacy and is not subject to chargebacks.

Jerry Brito of the Mercatus Institute concluded the panel and began by stating that Digital Currencies are not new. Bitcoin has prospects for enduring value and is the world’s first completely decentralized global currency. Bitcoin makes possible transactions online that are peer to peer without chargebacks and little to no transaction fees. He agreed that there can be an assessment of the risks of emerging technologies but no need for new laws targeted at this specific technology. Jerry specifically highlighted that the US could lose a head start if regulations are slapped on to Bitcoin related businesses. Bitcoin is an open source project and community and currency providing more opportunities for consumers.

The final question of the hearing caused some laughter: “Who is this Satoshi Nakamoto?” Patrick Murck responded that “Satoshi Nakamoto is the pseudonym for this person or group of people who wrote the white paper,” and expressed that who Satoshi is, is largely irrelevant to the Bitcoin project moving forward as more than half the codebase has been written by others by this point. Senator Carper quoted Albert Einstein to conclude the hearing: “In adversity lies opportunity.”

What will come today with the Senate Banking hearing? Tune in at 3pm to see Bitcoin continue to dominate.

 

What happens when the US Senate meets Bitcoin? Today and tomorrow, the US Senate will conduct two hearings to learn more about this skyrocketing in value, digital, decentralized cryptocurrency. Summoning representatives from the Bitcoin Foundation, BitPay, Circle, Ripple and additionally, representatives from FinCen, Academia and Financial Services Roundtable.

Today, the Bitcoin Foundation and Circle will share the merits of Bitcoin at a 3pm EST Senate Homeland Security and Governmental Affairs Committee hearing entitled, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies.” Today’s first panel will first include Jennifer Shasky Calvery (Director, Financial Crimes Enforcement Network U.S. Department of the Treasury), Mythili Raman (Acting Assistant Attorney General, Criminal Division, U.S. Department of Justice), Edward W. Lowery III (Special Agent in Charge, Criminal Investigative Division, U.S. Secret Service, U.S. Department of Homeland Security). The second panel will be a bit more Bitcoin friendly with testimonies from Ernie Allen (President and Chief Executive Officer, The International Centre for Missing & Exploited Children), Patrick Murck (General Counsel, The Bitcoin Foundation, Inc), Jeremy Allaire (Chief Executive Officer, Circle Internet Financial, Inc.) and Jerry Brito (Senior Research Fellow, The Mercatus Center, George Mason University). Senators are seeking further information on how Bitcoin is used to date and additionally whether or not this digital currency poses a threat or greater benefit to US citizens and those abroad. This first hearing to date on virtual currencies certainly has not taken away from exponential price growth of the currency.

Tomorrow, the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on National Security and International Trade and Finance and Subcommittee on Economic Policy will hold a hearing entitled, “The Present and Future Impact of Virtual Currencies.” The witnesses on the first panel include Jennifer Shasky Calvery (Director, Financial Crimes Enforcement Network), David Cotney (Commissioner of Banks, Massachusetts Division of Banks). The witnesses on the second panel include Tony Gallippi (Co-founder and CEO, BitPay, Incorporated), Chris Larsen (Founder and CEO, Ripple Labs) Sarah Jane Hughes (University Scholar and Fellow in Commercial Law, Indiana University Maurer School of Law), Mr. Paul Smocer (BITS President, Financial Services Roundtable). Discussion will most likely highlight the positive impact Bitcoin on Small Businesses, US economic growth, e-commerce, and most importantly individual US citizens.

What is to come following these hearings? We do not know, but we can only hope that the US government will note the tremendous growth of the Bitcoin economy within the past few month alone and recognize the sure benefits Bitcoin provides not only to the US economy but to individuals around the world. Tune into today and tomorrow’s hearings and let us know your thoughts!

 

Bitcoin is taking off globally. One of the optimal ways for Bitcoiners and those interested in learning more to meet together is through conferences. This past year, the number of Bitcoin related conferences increased exponentially. Having taken part in several, some of the highlights are excellent speakers, a time to be reunited with old friends, and most importantly opportunities to network, share ideas and even, in some cases, meet potential business partners. The North American Bitcoin Conference, set to take place in Miami, Florida from January 25-26 2014 will be one of the premier conferences of this year.

After the success of the European Bitcoin Convention in Amsterdam of September of this year, Moe Levin immediately began planning the next big conference of the year and chose the Bitcoin hot-spot location of Miami. Currently, the Miami International Bitcoin community is one of the largest Bitcoin communities in the US with regular meet-ups, speaking circuits and an active forum community. I personally can not think of a better spot for the next big Bitcoin Conference.

Moe Levin sent out the following press release this week:

BITCOIN SET TO HEAT UP MIAMI

More than 500 bitcoin community members will soon be diverging on Miami for a direction-setting conference aimed at driving the currency from speculation to mainstream. Building on the recent success of the European Bitcoin Convention, the North American Bitcoin Conference will hit Miami Beach on the 25th and 26th of January, 2014.

Rich in potential and steeped in controversy, bitcoin is a radically new kind of money that operates without governments or banks. Already available and in limited use, bitcoin has recently become a hot topic thanks to intense value-fluctuations, political pressure and surging media attention.

In response to these changes in the bitcoin landscape, the North American Bitcoin Conference (NABC) intends to bring focus to the divergent bitcoin community that now includes enthusiasts, speculators, business-users and politicians. To ensure hard-hitting outcomes, speakers will include Roger Ver, Charlie Schrem, Tony Gallippi and Charlie Lee amongst others.

As part of its mission to grow bitcoin use, the NABC will also offer workshops targeted at merchants, and act as a forum for vendors, exhibitors, and recent bitcoin startups to share their latest innovations and inform discussions. In addition, regulators, banks and government officials will be on hand to lead panel discussions that are light on fluff and heavy on content.

For tickets and the most up-to-date news visit: btcmiami.com

—

Contact details from here down.

Moe Levin

Organizer

http://www.btcmiami.com

[email protected]

Nowadays more and more physical places all over the world have started accepting Bitcoins as a payment. But in the Netherlands restaurant ‘De Waag’ in Delft is the place where it all began. They are still seen as the number one in NL which made it possible to pay your coffee, beers and à la carte meals with Bitcoins. We took an interview with Hugo Overvoorde, manager of De Waag, to ask him about the beginning of times, the development of Bitcoin in De Waag and about the present situation.

Christien Havranek: When did you start with accepting Bitcoins in De Waag and what has been the reason of that?

Hugo Overvoorde: In the second half of April 2013 we started with accepting Bitcoins as valid currency. The main reason for that was the suggestion of Ronald Prins (one of the founders of Fox-IT, a Dutch security company who prevents, solves and mitigates cyber threats for government, defense, banking etc worldwide https://www.fox-it.com/en/) who approached me [and said] that it would be great to be the first in the Netherlands where it is possible to pay with Bitcoins. He was already into the Bitcoin for a couple of years and knows a lot about them. And while Delft is maybe the most innovative city of the Netherlands because of the TU Delft, Delft University of Technology (http://www.tudelft.nl/en/) it seemed to be a good idea. I did not know anything about Bitcoins, but I saw it as a change I should take. So I started reading and reading and after two days I knew enough about them to confirm. Together with Ronald Prins we started this up and that made De Waag being the first physical place in the Netherlands where it is possible to pay with Bitcoins.

CH: So that was the first step and the beginning. And then what happened after this decision?

HO: About two weeks later the whole Dutch media approached me for interviews. Newspapers, radio channels and also television programs called me, it was very busy on that way. It seemed to be that Bitcoin has officially born in the Netherlands. They even made a short sketch about how to pay with Bitcoins in de Waag. Also to show others how it works. It seems a bit to be a success story because this craziness is still going on now.

CH: What are the consequences for De Waag itself because of Bitcoin? Do you see changes in sale or audience?

HO: I don’t see a lot of difference in the sales yet. I don’t care about this because I rather regard it as an extra service we deliver to our customers. What I see, is the changing and the growth of the guests who pay with Bitcoins. In the beginning it were especially the ‘ICT guys’ who came in with the story that they bought some Bitcoins in 2009 for a few dollars and asked me if it is true, that they can pay their beers now with them. They were positively surprised. The population who have Bitcoins now is expanding. What I see around me is that not everybody who has them pays with them a lot. While it’s a bit of a rebellious monetary unit it seems to be cool having them, so they keep them. The raising offer of places where you can pay with them creates more news and this increases the interest of people for Bitcoins.

Don’t think that we have hundreds of transactions with Bitcoins now. Normally it is between five and ten a week. We like to see the same people come back. For example a group of around five people who pays with Bitcoins is visiting de Waag for dinner every week now. Generally it’s going about transactions between 30 and 40 euro’s. The last week we just had one or two Bitcoin transactions. This is because of the enormous raise of the value last time. The Bitcoin increased from 97 to over 300 euros in about two weeks. Who could imagine this would happen so fast? Everybody seems to really take care with spending them now and keep them into the pocket because it can be that they raise a lot more.

CH: Do you see it as a risk, using the Bitcoin as currency at De Waag?

HO: Of course you don’t know what is going to happen with the Bitcoin. From the first day on some people laughed about us accepting Bitcoins because they think that it’s just temporarily and it will fall down very soon. But it’s still here, and when this ever would happen, it was a very good step to be the first restaurant in the Netherlands. This also because of all the publicity. Next to the radio and television in the Netherlands also abroad the press approach us for interviews. When you translate this free publicity into money it’s a big win anyhow. And next to this, a great adventure we really wouldn’t have missed.

CH: What do you do with the Bitcoins De Waag receives?

HO: What we do with a Bitcoin transfer is generate the euros into Bitcoin with an iPad, and then people can pay by using the QR-code. Than we put it on a kind of Bitcoin Bank, www.bitmymoney.com. Ronald de Reinder, owner of this bank, sends us an email every week with the question how much of the received Bitcoins we do want to receive as cash. Every week we cash some. But we also leave Bitcoins on it, especially at times like this when the rate is rising so enormously.

CH: What do you expect for the future of De Waag and the Bitcoin?

HO: The only danger I can imagine now is that wallets might be hacked. I don’t expect the Bitcoin to fall down and so we will go on with this for sure. We like it to be a quick and transparent way of paying. It’s interesting that some important parties are approaching us now like the Dutch tax authorities, they don’t know what to do with Bitcoins and taxes. Last week I also had a conference call with the Dutch Bank. They need to do something with the Bitcoin, so they are also looking for a way to maintain this currency. This also means that the acknowledgement about Bitcoin is still raising and proves our statement to accept Bitcoins in De Waag till the end of time.

 ——————

Christien Havranek has a background in Social Psychology and (Marketing) Communication. She works as a freelancer and became interested into Bitcoin due to a friend of hers building hardware. She is living in Delft, the innovation city of technology in the Netherlands, and wants to spread Bitcoin by making it doable for everybody. Other jobs she does are helping companies with their Facebook communication, building stages, decorations and entertainment (on festivals, parties). Being half Austrian, in winter she teaches ski and snowboard and loves the mountains. Hobby’s: running, travelling, photographing and playing the drums on stages all over Europe with her band. If you have any questions, don’t hesitate to contact her at [email protected].

Several days ago three Bitcoin businessmen based in New York, Alex Waters, Yifu Guo and Matt Mellon, came out with an announcement that has made waves in the Bitcoin community. Their new business, Coin Validation, seeks to create a more regulator-friendly Bitcoin ecosystem by maintaining a Bitcoin “greenlist” – a database of Bitcoin addresses tied to established identities, which any user or business can join by signing up with Coin Validation, going through their identity verification procedures, and integrating their API. A more precise name for what the company is doing would actually be “address validation”; the intent is to allow businesses to deliberately use “green” addresses to make trackable payments that are tied to their physical identities. Some businesses may then choose to only accept payments from green addresses, thereby proving to regulators that they are not accepting Bitcoin funds from unknown and potentially problematic sources. This scheme, the project’s founders hope, will be adopted by Bitcoin businesses and embraced by US government regulators as a quick path to helping Bitcoin businesses in the United States remain compliant with the law.

However, the scheme has been met with almost universal disapproval from the Bitcoin community. “It’s hard to count the number of times newbies have made proposals which would have centralized Bitcoin completely in the name of some fool result or another,” Bitcoin developer Gregory Maxwell wrote. “Powerful businesses interests are now reliving the same history of bad ideas, but this time the bad ideas will be funded and they don’t care if luminaries tell them that they’re horrible ideas, they don’t necessarily care about any of the principles that make Bitcoin a worthwhile contribution to the world.” Bitcoin advocates across the internet have denounced the measure as ruinous to Bitcoin’s privacy, and some are advocating an outright boycott of all US businesses.

Network Effects

But what are the effects of this greenlist potentially going to be, and how could it help or harm the Bitcoin ecosystem? The first question to ask is, does it “affect” the Bitcoin ecosystem at all? That is to say, will this potentially have a negative effect on even those Bitcoin network as a whole, or is it simply an optional layer which those interested can use, similar to colored coins or Mastercoin?

As Waters would have us believe, it’s the latter. “The existing Bitcoin community will find this very controversial from a privacy perspective,” Waters admits, “But it’s simple, straightforward and opt in.” As far as being simple and straightforward, he is entirely correct, at least at first glance. Although anti-money-laundering identity verification procedures are always difficult to go through, a green address mechanism is not particularly technically difficult to integrate. On the “opt in” point, however, the situation is much more tricky. The “it’s voluntary” argument may strike a chord with many in the Bitcoin community, who often hold the philosophy that voluntary interactions are ethically good and should not be restricted. Ordinarily, this philosophy has a solid economic underpinning: a person will only consent to a transaction if that transaction leaves them, in their own view, better off, so a voluntary transaction should benefit all parties who participate. However, in this particular case the economic underpinnings behind voluntarist philosophy fall apart precisely because there is an involuntary actor involved: the US government. Thus, what we have is a bargaining problem, the game-theoretic analysis of which is much less simple.

To understand why bargaining situations are so problematic, consider a fairly simple example. Suppose that armed robbers go into a gold storage facility, and demand at gunpoint that the owners open the safe and hand over all the gold. Fearing for their lives, the owners do, and the robbers get away with some quantity of gold. However, now suppose that the safe had been designed so that it is impossible to open it without waiting twenty minutes. Then, the robbers would know that the owners would not be able to open the safe quickly, and therefore would be less likely to try to mount an attack in the first place. The counterintuitive conclusion is this: under some circumstances, strictly reducing an agent’s freedom in a bargaining problem can actually be very beneficial to them.

The situation is the same here. In terms of privacy, Bitcoin has the potential to be both much, much better and much, much worse than the status quo of the financial system today. On the “better” side, we can have an ecosystem of overlay services such as Zerocoin, trustless mixing and conventional mixing to effectively eliminate the traceability of Bitcoin payments on the small scale – although large-scale financial movements on the order of millions or billions of dollars would still be very difficult to hide. On the “worse” side, however, Bitcoin as it stands allows every transaction to be tracked, and governments may mandate that Bitcoin users only make transactions with Bitcoin addresses verified to their identities. Accepting non-whitelisted bitcoins or mixing non-whitelisted bitcoins along with whitelisted ones may even become a criminal offense. This “greenlist” will make it much easier for businesses to adopt the second model – and therefore, just like removing the twenty-minute timer on the safe, make it much more attractive for governments to mandate that they do just that. In fact, Waters even recognizes this fact himself, saying that eventually “every user who wants to do business in the U.S.” will have at least one registered Bitcoin address.

Furthermore, the consequences of this will extend far beyond the United States. The privacy properties of Bitcoin are such that the more addresses can be reliably linked to their users’ identities the easier it becomes to uncover other identities as well. Without any knowledge of identities, mapping Bitcoin addresses to users is a highly difficult, and imprecise, graph isomorphism problem, and so far researchers have been unable to identify anyone other than very large entities like BitPay and MtGox. Once even a few address-owner pairs are known, however, they can be used as “anchors” to discover other address owners as well – employers, business customers, friends, anyone with whom you have a relationship with that is visible on both the real world level and the Bitcoin level is potentially fair game.

The Bitcoin economy is highly globalized, as the ability to quickly and cheaply send money internationally is one of Bitcoin’s greatest advantages. The globalized nature of the Bitcoin economy is very beneficial to Bitcoin, even in terms of its resilience against regulation – if some governments crack down, Bitcoin businesses can simply move to more welcoming jurisdictions. But this advantage can also be turned on its head. With an entity inside the United States, and heavily cooperating with regulators in the United States, knowing the owners of even ten percent of Bitcoin addresses, as Waters hopes, the United States government will have sole, proprietary access to a large amount of financial data about the entire world – that is to say, a privacy disaster on a scale as vast, if not vaster, than the National Security Agency. Thus, even if Coinvalidation was set up with the noble intention of helping to “proliferate Bitcoin, and to help Bitcoin companies succeed specifically in the United States of America,” what it has done in effect is set itself up as yet another arm for the US government to extend its surveillance and control over the entire world.

Economics and Fungibility

Another major criticism of this system, one that has been most prominently made by “grandfather of Bitcoin” Adam Back, is that it breaks fungibility. Fungibility is an important aspect of Bitcoin as a monetary system; what it means is that every bitcoin is worth the same as every other bitcoin regardless of whether the bitcoin is freshly mined, received two weeks ago from an exchange, earned in the process of employment, received from a known drug seller on Silk Road or seized by the FBI from Silk Road. Any kind of “greenlisting” (or, for that matter, blacklisting) scheme breaks fungibility. What will happen is this. First of all, bitcoins that are inside the green address system will inevitably become worth more than bitcoins outside the system; say, there might be a “green premium” of 1%. Businesses will thus accept green bitcoins at a 1% discount, so it will become 1% more lucrative for ordinary users to buy bitcoins from regulated exchanges than from private employers or localbitcoins. The profit potential for those businesses that have the power to convert non-green bitcoins into green bitcoins by passing them through their system is obvious, and potentially massive – and, necessarily, at the wider Bitcoin community’s expense.

From the merchant’s point of view, Bitcoin would incur a de-facto transaction fee. Any merchant that does not opt in to the list will have no way of knowing if they are receiving “green” bitcoins or “standard” bitcoins; thus, customers would likely end up sending all of their standard bitcoins to merchants, leaving merchants to sell those bitcoins to exchanges without the green premium – paying what is essentially a 1% fee along the way. The greenlisting system may not work exactly as was implied here, but in any case one can figure out how similar consequences will arise. The long-term economic effects of such a system are completely unknown, but in any case Bitcoin’s status as a friction-free, nearly cost-free transaction medium will be fatally compromised.

The final question is, will this actually help reduce Bitcoin-related crime? Bitcoin crime is an issue; although many Bitcoin users proudly support sites like the illegal drug market Silk Road, nearly everyone agrees that “ransomware” bots like Cryptolocker, which infect computers and encrypt their hard drives releasing the unencrypted data only in exchange for a ransom, are undesirable, and ideally there would be some way to prevent such services from existing. But would a green list actually help? Probably not. Criminals likely already avoid the regulated exchange ecosystem entirely, instead either buying and selling through localbitcoins or in-person exchang events or simply using their illicit earnings to buy products. One can even launder the funds cross-chain – send one’s illicit earnings to an altcoin exchange to buy litecoins, mix the litecoins, and then sell the litecoins in exchange for green bitcoins. In order to avoid this, every cryptocurrency in existence would need to have a greenlist mechanism. In any case, the conclusion is the same: even if the greenlist program was effective, it would do nothing against genuine crime, and would instead primarily affect legitimate users that still want to participate in society.

So what can the privacy-conscious Bitcoin community do? First of all, not participating in the greenlist will be a start. But the idea of a greenlist will come back, and grow, if there is an incentive for companies to adopt it. Simply doing nothing and hoping the problem goes away is not a viable solution. Another alternative is to support the adoption of privacy-enhancing technologies. Zerocoin is building a more fully anonymous version of Bitcoin, and trustless mixing provides a good-enough form of Bitcoin anonymization that we can use today. The Dark Wallet, initially derided by many as unnecessarily extremist and dramatic in its announcement, is now appearing much more attractive now that we are seeing what the alternative might be; to guard against Bitcoin de-anonymization, the wallet will include built-in automatic trustless mixing as one of its core features. The project is actively seeking crowdfunding on Indiegogo to fund its development. Finally, of course, there is the political solution: interact with the United States as little as possible. Fortunately, if Bitcoin businesses do choose to take that path, China appears to be quite willing to take them.

Disclaimer: Mihai Alisie and myself have some involvement in the Dark Wallet project

Just this morning, Gyft, Inc, the lead mobile gift card company announced the Gyft Points program to reward customers for use of gift cards. In May of this year, Gyft began accepting Bitcoin for payment back and as a result exponentially increase the growth of the number of opportunities for individuals to shop with Bitcoin. An individual is able to purchase 1 of 50,000 gift card options and as a result put Bitcoins to use.

Gyft put out the following press release:

Gyft Launches Rewards Platform to Give Consumers Up to 3% Back on Gift Card Purchases

Expands Options for Payment to Include PayPal In Addition to Credit Cards and Bitcoins

SAN FRANCISCO, Nov. 14, 2013 – Gyft, Inc, the leading mobile gift card company that allows customers to buy, send, manage and redeem gift cards via mobile devices and the web, has announced the launch of the Gyft Points program which has been specifically designed to reward consumers for their growing use of gift cards. Gift cards can be purchased through Gyft’s mobile app or the web site using credit cards, PayPal or bitcoins.

In a recent report by the National Retail Federation, almost 60% of Americans want gift cards – the most requested item to send and receive this holiday season. Just in time for the holidays, consumers can now earn Gyft points when purchasing gift cards from over 200 retailers and earn Gyft Points to apply towards future purchases. Those who purchase with bitcoins earn 3% while PayPal earns 2% and credit card purchases earn 1% back.

“With the launch of Gyft Points, we are showing our appreciation to our customers for helping us become the leading mobile gift card retailer,” says Gyft CEO and co-founder, Vinny Lingham. “We have also chosen to reward and thank the Bitcoin community in particular for their support, with 3% back in points for all purchases made using bitcoin until the end of the year – which is better than any credit card program out there.”

As a part of the launch, Gyft is giving away over 10,000,000 in Gyft Points from now until the end of the year to reward customers for all their purchasing and usage of the service.

Gyft also recently announced the launch of their Gyft Registry, a great way for consumers to create a wish list of their favorite gift cards. Gyft also received a $5 million round of funding in August 2013.

The Gyft platform now allows consumers to seamlessly earn rewards for shopping at over 100,000 retail stores across the country, all linked to a central rewards program. The Gyft mobile app allows for instant purchase and redemption of gift cards at the point of sale.

Consumers will still receive all of the benefits from their credit card providers on top of the rewards offered by Gyft, and will receive additional rewards points for making purchases with PayPal and Bitcoin.  

Gyft, a Techcrunch Disrupt Finalist, launched in 2012 and has quickly risen to be one of the most popular gifting apps. To learn more about Gyft points, please visit www.gyft.com/points/ or download the app from Google Play or the App Store.

About Gyft:

Gyft was founded in January 2012 by Vinny Lingham, CJ MacDonald and Mark Levitt – with a goal to disrupt the existing $100 billion gift card market.  Gyft provides a gift card platform for consumers and retailers that enables customers to upload, buy, send, and redeem gift cards conveniently from their mobile device. Gyft is seamlessly integrated with Facebook so users can send gift cards to their friends around special events. Gyft is a private company funded by Google Ventures, Karlin Ventures & Ashton Kutcher’s A-grade investments, with offices in San Francisco, CA. For more information, visit www.gyft.com.

 

Something BIG is happening in Argentina…

From December 7 through 8, Bitcoin enthusiasts and those interested in learning about this digital, decentralized phenomena will gather in Buenos Aires, Argentina for the first Latin American Bitcoin Conference hosted by the Fundación Bitcoin Argentina.

Why Argentina? The Argentinian Bitcoin community is rapidly growing in reaction to national economic strain, but most importantly due to the opportunities Bitcoin represents as a disruptive technology and economic growth potential. With an inflating Argentinian Peso and limited access to additional fiat currencies such as the US Dollar, Bitcoin provides a credible solution and represents opportunity for Argentinians and those interested in doing business in Argentina.

Argentina’s citizenship has turned to Bitcoin just as citizens of Cyprus have to guard savings accounts and financial futures against inflation and excess government intervention. Argentinians are now keeping their savings in alternative currencies such as Bitcoin and assets. To date, Bitcoin has also had a high technological adoption rate in terms of broadband and mobile telephone and Internet within Argentina.

Aside from laBITconf 2013 the Fundación Bitcoin Argentina hosts over a dozen bitcoin related projects and activities with a varying degree of development such as the Meetups and µMeetups Organization, University Seminars, Press Management, Local Referrals Database, incuBITcoin, theBITclub, Bitcoin Training, Statistical Analysis of Bitcoin Adoption, Legal and Taxing Regulation Research, the Bitcoin Fair, Startup Seeding and Jobs Offerings Channeling. As a local foundation that started to take shape back on March 2013, Fundación Bitcoin Argentina (FBA) formed when the three founding members decided to give a proper framework to their ongoing efforts to promote and inform about bitcoin. Now the FBA has over 97 volunteer collaborators and has hosted over 14 meetups, some of them with over 150 attendees.

The laBITconf team released the following announcement:

laBITconf (Latin American Bitcoin Conference) is perhaps the last BIG conference of the year and will be the first one simultaneously translated for Hispanic audiences. Wisely hosted in Argentina, it attracted over 25 top notch speakers such as Jeff Garzik, Andreas Antonopoulos, Erik Voorhees, Tony Gallippi, Roger Veer, Marco Santori, Charlie Shrem and Tuur Demeester among others.

Why is Bitcoin blooming in Argentina?

Bitcoin is gaining strong local adoption and constant main media coverage given that we live at “the perfect storm” for Bitcoin to succeed: We have over 30% of yearly inflation (in the our 130 years of local currency we lost over 10 zeros); we suffer a hard restriction for buying foreign currencies, also for international money transfer, we even suffered a major “corralito” back in 2001 which blocked their holdings and diminished its value (similar to what Crete has recently suffered). So most people tend to prefer keep their savings in other currencies.

What can we expect from this conference?

We have two major objectives; the first one, as one of the last conferences of the year it will summarize the best practices, and up to date information in all major Bitcoin projects with most speakers adding a special approach to Latin America and the second one, to provide an excellent opportunity for locals and international attendees to network (we already have over 70 international attendees registered seeking for local opportunities). We might also have some new business/projects announcements.

This conference is divided into two days, the first one more general and the second one full of local and international case studies. We will have 6 lunch talks for specific topics including Trading, Altcoin, Mining or Security and a local study related to Satoshi’s Steps.

What is the Fundación Bitcoin Argentina?

It’s a local foundation founded on March 2013 by three members but today it has over 97 collaborators and hosted over 14 meetups with up to 150 attendees. Actually we have over 12 different projects such as laBITconf, Meetups, µMeetups, University Seminars, Press Management, Local Referrals Database, incuBITcoin, theBITclub, Teaching, Statistical Analysis, Legal Analysis, Bitcoin Fair, Seeding, Jobs Offers, and others.

Bitcoin Magazine is privileged to serve as a Media Sponsor for the Conference and looks forward to seeing you there!

To kick off the month of November, Bitcoin Magazine is now offering a reduced price per magazine on Amazon USA, Amazon Germany and Amazon UK.

We are now only charging 5USD, 3.11 GPG and 3,65 Euros per magazine when purchasing directly through Amazon.com. As we are currently printing our 15th Issue, Issues 1 through 14 are available on Amazon for you to enjoy.

Since we first released our first print magazine issue, the Bitcoin currency has grown to a significant level of prominence.  We encourage you to purchase back issues on Amazon.com and then in turn sign up for a subscription to regularly receive copies of our newest issues! We encourage you to renew your subscription in full for another year OR start up a subscription TODAY!

As the Bitcoin currency continues to flourish and as digital currencies become the norm, you will want to regularly receive your copy of Bitcoin Magazine and also back copies of the magazine for a full history of this decentralized movement.

As we continue into Bitcoin Magazine’s second year, we have expanded to now have a digital edition and have welcomed and continue to welcome some new writers to the team.

We plan to keep you informed on the latest news in the Bitcoin community and provide more in depth articles on this fascinating digital, decentralized cryptocurrency through a monthly tangible copy of Bitcoin Magazine!

If you have any questions about the current status of your subscription, please contact us at [email protected].

Please visit Amazon USA, Amazon Germany and Amazon UK and enjoy the wide selection of magazines for only 5USD!

The Bitcoin community in Israel has made considerable waves over the past year. A meetup group that, one year ago, had less than twenty people attending every month, now has over sixty people attending every two weeks, with a record of over three hundred in April. The Israeli Bitcoin Facebook group recently grew to over 800 members, an impressive amount for a country of only eight million. Tel Aviv, a city of 410,000, has no less than three Bitcoin-accepting restaurants – a higher density than even that of Berlin. Finally, perhaps most importantly of all, Israel is know worldwide for being a very entrepreneurial country, with a large number of startups coming out every year, and the Bitcoin fever has not escaped the startup community either; Israel has what are perhaps among the most interesting Bitcoin startups in the entire world.

In the previous parts of this series, we had an in-depth interview with Meni Rosenfeld and Ron Gross, the founder and chief co-founder of the Israeli Bitcoin community, where we discussed the developments that had been going on in the past two years and their view for the future of the Bitcoin community in Israel. Here, I look at what is happening in Israel, today, including the key cultural and business landmarks of this amazing Bitcoin community.

Restaurants

The oldest of the three Bitcoin-accepting restaurants is called the Bar Kayma. The Bar Kayma is a vegetarian/vegan restaurant that opened in 2012, and was recruited into the Bitcoin fold very soon after. The restaurant is unique in that it is a cooperative; the restaurant is collectively owned by a few hundred individuals, each of whom has an equal vote in the restaurant’s decision making. Anyone can join the cooperative; the only requirement is that members make a one-time investment requirement of 1000 NIS (~$283 USD), which entitles them to voting rights as well as a permanent 20% discount at the Bar. The Bar is also not just a bar; the upper floors of its building hold presentations, usually on social and economic concepts, every day, and the Bar also has a few rooms available for rent as a living space or hotel, with a price of about $30 USD per day.

The next is called October Bar, and is where the local meetup group now holds most informal gatherings. At the end of October, the meetup group held a special event to celebrate the fifth anniversary of Satoshi’s now famous Bitcoin white paper – a date which has now semi-officially been christened as Satoshi’s birthday:

Finally, there is Galabi-Anat’s place, a less prominent Bitcoin restaurant, but one which has nevertheless started accepting the currency more recently.

Math and Startups

The Israeli Bitcoin community particularly distinguishes itself in two key ways: cryptography and entrepreneurship. On the cryptography side, Israel is home to Adi Shamir, well-known for his pioneering work in RSA encryption, secret sharing and differential cryptanalysis; more recently he made a semi-famous analysis of the Bitcoin transaction graph. Somewhat less famous, but potentially much more important to Bitcoin’s future, is Eli ben Sasson, leader of a team at the Technion developing an implementation of “secure computational integrity and privacy“, a new cryptographic technology that may eventually be used to make cryptocurrencies thousands of times more space-efficient. Finally, the most well-known of all in the Bitcoin community is Meni Rosenfeld, a mathematician responsible for an analysis of mining pool reward methods and an analysis of double-spending attacks – as well as founding the Israeli Bitcoin community in the first place. As far as entrepreneurship goes, the Israeli Bitcoin community is largely responsible for nearly all work around the concept of “colored coins“, and is responsible for perhaps the largest per-capita number of Bitcoin startups in the entire world.

• Colored coins – the idea behind colored coins was first conceived with the help of Meni Rosenfeld, the main Israeli Bitcoin community organizer, and has been largely funded by eToro, a “social investment” platform based in Tel Aviv which is looking at using the technology in 2014; today, many people are predicting that colored coins will be the next big development in Bitcoin technology, even going so far as to call 2014 the “year of the colored coin“.
• Mastercoin – Mastercoin is an advanced crypto-finance protocol that lives on the Bitcoin blockchain and offers advanced features such as on-blockchain price feeds, scripting and self-stabilizing currencies. The protocol was invented by J.R. Willett, who lives in the United States, but there is a high level of Mastercoin interest in Israel; Ron Gross, the co-founder of the Israeli Bitcoin community, has recently stepped up as the Executive Director of the Mastercoin Foundation.
• Buy The Way – Buy the Way is a social commerce startup, which is using Bitcoin to target two specific use cases. First of all, it is developing a mobile application to make it easy to split a restaurant bill after the fact, with one person paying the bill at the time and everyone else later compensating them in BTC. The second use case is on-the-fly proxy buying; if you see a product that you think a friend might like, you can take a picture and send it to them to see if they want it. If they do, you can buy it for them and they will compensate you in BTC. Buy the Way is particularly promising because it provides a convenient way to spread bitcoins around to your friends, potentially getting Bitcoin into the hands of many thousands of people for the first time.
• Dov-E – in long form, “Data over Voice”, Dov-E is a startup that is creating a technology that allows phones to communicate with each other over voice. This can potentially provide a more secure and easy-to-use alternative to QR codes, allowing a customer and merchant to simply put their two phones against each other to quickly process a Bitcoin payment.
• Proxycoins – essentially, a peer-to-peer Bitspend. Bitspend, when it was around, offered a “proxy buying” service with which someone with BTC can order a product which is normally only purchaseable via a credit card, and have Bitspend’ customer service personnel rapidly process the order for them and pay with their own credit cards in exchange for BTC. However, Bitspend shut down after losing its bank account. Proxycoins gets around the centralized point of failure problem by essentially allowing anyone to be the “proxy”.
• Coinpair – an instant altcoin exchange. Anyone can go to coinpair.com, enter their address in any cryptocurrency, and then receive another address to which they can deposit money in any other cryptocurrency. Upon receiving any payment, Coinpair then sends an equivalent amount of coins to the address that the user entered in the user’s desired currency.

If you do plan on visiting Israel, be sure to check out BTCTrip for Bitcoin-friendly plane tickets.

The IDESG or Identity Ecosystem Steering Group recently filed paperwork with the Commonwealth of Virginia to incorporate the IDESG as a nonprofit corporation.  The IDESG was basically spun out of NIST or the National Institute of Science and Technology to “administer the development of policy, standards, and accreditation processes for the Identity Ecosystem Framework.”   

In April 2011, President Obama signed (PDF) the NSTIC or the National Strategy For Trusted Identities In Cyberspace where public and private players are collaborating on the creation of an “Identity Ecosystem” to address “(1) the insecurity and inconvenience of static passwords and (2) the cost of transactional risks that arise from the inability of individuals to prove their true identity online.”

Image via “Interim Identity Ecosystem: “Are we there yet?””

Shortly thereafter, Chicago based Payment Pathways Inc. submitted a recommendation “Governance recommendation for Greenlist and the importance of its relationship to NSTIC” to National Strategy for Trusted Identity in Cyberspace and stated that a wide variety of stakeholders collaborated on Payment Pathways’ Greenlist to play a role in the NSTIC.

Payment Pathways (PPI) describes itself as a company that “makes it safe to transfer ownership of assets electronically. Through its patented Greenlist registry, PPI defines liability responsibilities and ensures that operational, legal, and security obligations are met in alignment with the Fair Information Practice Principles as articulated in the NSTIC to reduce friction and risk.”

The United States Patent and Trademark Office (USPTO) recently published Richard O’Brien and Andrew Gallant’s patent application 20130282580, “Systems And Methods for Extending Identity Attributes and Authentication Factors In An ePayment Address Registry.” Although the patent doesn’t appear to be assigned to Payment Pathways,  Mr. O’Brien is the President and CEO of the company and Mr. Gallant has been listed in numerous patents by Payment Pathways and is also a member of the Identity Ecosystem Steering Group.  The patent application discusses Payment Pathways’ Greenlist which is also a Registered Trademark issued to Payment Pathways by the USPTO which according a Wordmark Search dates back to September 2005 and was first used in commerce in June 2007 as an “on-line directory of secure consumer financial identity information for authentication and authorization for transaction processing, namely, payment processing.” While the Greenlist predates Bitcoin, this patent filing incorporates Bitcoin into its features.

Following is the Abstract of the patent application:

“The present invention relates to a network of registries that are: synchronized in whole or in part to a root registry; and are compilations of registrant data from accredited Identity Providers that accept liability for registering verified and accurate identity attributes. Registries associate a unique identifier with: a financial account owner’s Personally Identifying Information; one or more linked publicly discoverable ePayment addresses to an account at a Financial Institution; and a financial account owner’s profile of preferences related to the capture, handling, transfer and storage of monetary and informational assets. Preferences extensions include: operating instructions and rule sets; and authentication factors that may make use of time sensitive data at one or more institutions.”

More specifically:

 “This invention relates to a computer system and method to a.) establish and validate an individual’s new and existing unique identity attributes related to the individual’s primary identity; b.) validate physical devices when used to effect the transfer, storage and retrieval of informational and/or monetary assets; c.) maintain safeguards to ensure that custodians of informational and monetary assets execute instructions of owners; and d.) facilitate the use of additional authentication factors when effecting the transfer, storage and retrieval of informational and/or monetary assets.”

It further defines the Greenlist:

“Greenlist.RTM. verified ePayments are safe and secure without consumers having to disclose any actual account or bankcard information whatsoever. In order to attain scale and ubiquity, this registry resource is operated by a network of synchronized Authoritative Parties that verify identities and payment addresses before transactions are made. Data in the Greenlist.RTM. network of registries are supplied by only Financial Institutions (FIs) functioning as registrars that accept the liability for accuracy. Registrars perform identity proofing of every registrant’s Personal Identifying Information (PII) prior to registering new linked identity attributes to the Greenlist.RTM. registry. A Relying Party obtains access to trusted registrant data from an Authoritative Party and may provide access for applications or individuals via its public or private portal.”

An example whereby a Bitcoin is used in the Grenlist was provided as follows:

“..a customer’s registration records may include identity attributes related to other information or transaction addresses. In one example, a registrant may wish to include a Bitcoin address, so that this address may be retrieved during a transaction when both parties agree to use Bitcoins as the currency. In this case, the payee (the customer) provides at least the identifier registered in the ePayments address registry. The payor, who may be either trusted or may be acting through a trusted entity, receives the payee’s Bitcoin payment address after the registry is queried, and may then proceed with the transfer. In other examples, other payment addresses, e.g., for bank accounts, PayPal.TM. accounts, etc., may be stored as identity attributes, possibly masked, hashed, or tokenized, and then retrieved for use.”

And finally, Anti-Money Laundering features are discussed:

“In cases where an anonymous Bitcoin ePayment address is registered in the Greenlist, Anti-Money Laundering (AML) concerns are alleviated because lawful interceptors now have a mechanism to subpoena records of the Identity Provider that functioned as the registrar of the Bitcoin ePayment address. In the future, the banks with customer accounts that are the final recipient account addresses of a multi-step money transfer, and where that transfer involves intermediate currency conversions, can be regulated to only receive money transfers from an intermediate Bitcoin currency account that is registered as paired with a sender’s unique identifier, and additionally when that sender’s identity is similarly registered as linked to the receiver. In this example, anonymity can be protected for commercial and privacy purposes but in extreme cases where threats to the state or public safety are concerns, a mechanism can exist for lifting the veil of anonymity after proper judicial review and permission is obtained.”

It is interesting to note that the patent application was filed on March 15th, a mere three days prior to FinCEN’s Guidance on “Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies.”

While FinCEN’s “guidance” received mixed reviews by the Bitcoin Foundation, Anti-Money Laundering proposals for the cryptocurrency such as Payment Pathways’ Greenlist are being brought to the table while AML framework is being hammered out by bureaucrats. Clearly defined AML and KYC (Know Your Customer) systems are needed for larger players who have been stifled by the current regulatory and compliance climate. For instance, BitInstant has a lengthy AML statement (PDF)  “Statement of BitInstant on Preventing Money Laundering and Illegal Activity through its Services and in the Bitcoin Network” but has apparently suspended operations since earlier this summer. While it is uncertain if Payment Pathways’ technology is an AML silver (green??) bullet and patent applications do not necessarily indicate there are commercial products ready, you can be certain that this patent application will be one of many to follow.

This morning, Bitcoin Magazine had the privilege of speaking with CEO and co-founder of itBit, Richmond Teo and also representatives from Liberty City Ventures. Today, itBit announced its official opening and global platform for the trading of Bitcoin with US dollars, Singapore dollars and Euros. itBit is a Singapore based exchange with the intent of reaching out globally to provide a platform for institutional investors to utilize Bitcoin in new ways and to take Bitcoin to the next level.

CEO and Co-Founder, Richmond Teo, created itBit to serve as a Bitcoin exchange that covers global equity standards. itBit will also aim to raise the overall liquidity of Bitcoin in the market. Richmond and his co-founder and CTO, Jason Melo, both have experience in financial services. itBit also just received 3.25 million in seed funding from Canaan Partners, RRE Ventures, Liberty City Ventures and notable angel investors including Jay W. Jordan II and Ben Davenport.

Additional exchange goals include helping minimize threats across exchanges and within each exchange, helping institutions hedge the risk, and setting the tone for more sophisticated exchanges. In particular, itBit is focused on compliance to help elevate Bitcoin as a currency. To date, itBit is compliant within its home country of Singapore and has a close relationship with the monetary authority of Singapore. In addition to working closely with MAS, Monetary Authority of Singapore, itBit has also partnered with Thomson Reuters to utilize their suspicious activity monitoring system. itBit aims at working within compliance standards that will mirror compliance more of a bank and or broker rather than an online merchant compliance system.

itBit sent out the following press release and announcement:

itBit Debuts Bitcoin Currency Exchange

Company Raises $3.25 million in VC Funding

Singapore – November 11, 2013 – Digital currency exchange itBit today has unveiled its global platform for the trading of Bitcoin with US dollars, Singapore dollars and Euros. itBit offers a new level of professionalism and security to Bitcoin trading. It can be accessed directly at www.itBit.com worldwide by institutional investors, commercial businesses and retail investors (retail investors must reside outside the United States*).  The itBit exchange operates as a traditional currency exchange with a central limit order book. It also offers Bitcoin wallet capabilities, allowing traders to store and access their Bitcoin directly and conveniently on the itBit platform.

“Bitcoin is a global currency, which enables immediate transactions directly between two people, no matter where they are in the world. Fully realized, Bitcoin will fuel a truly global economy, and give the power and security of digital payments to the unbanked,” said itBit CEO and co-founder Richmond Teo. “We built itBit to be part of the underlying infrastructure that supports that greater global economy.”

 itBit is proudly dedicated to the following principles:

• Reliability. itBit is built for scale. It can handle trading volume at many orders of magnitude higher than the combined total volume of Bitcoin traded globally today and for the foreseeable future. The trading and matching engine can successfully cross millions of trades per second while delivering peak performance. itBit employs NASDAQ exchange technology, and has customer service available 24/7 to serve global markets.

• Privacy and security. Multi-factor authentication, multiple layers of DDoS attack mitigation provided by Akamai Technologies, cold storage techniques and defense-in-depth security help ensure that all exchange activity and financial assets are secure.

• Deep market liquidity. itBit is the first Bitcoin exchange to offer advanced market making techniques and also operates on a maker-taker pricing model. These techniques enhance liquidity in Bitcoin trading, optimizing trade price for both buyers and sellers.

• Compliance. itBit takes a proactive approach to ensure its operations are always in full regulatory compliance with the laws of its home country and the home countries of its users. Utilizing Thomson Reuters for screening and continuous suspicious activity monitoring, and Jumio for identity verification, the company’s KYC/AML procedures significantly exceed current standards.

The company today also announced the completion of a $3.25 million round of venture capital fundraising, co-led by Canaan Partners and RRE Ventures. Additional investors include Liberty City Ventures and angel investors including Jay W. Jordan II and Ben Davenport. itBit plans to use the funding to support its global operations, expand its offerings and pursue further regulatory approvals. Including this round of funding, itBit has raised a total of $5.5 million in institutional capital.

 “Bitcoin is one of the most promising payment innovation protocols that exists today. A reliable exchange is of critical importance to the Bitcoin ecosystem, and itBit has put together a compelling offering that is not only fully compliant but also one of the most elegant and easiest to use exchange platforms that currently operates in that ecosystem,” said Dan Ciporin, General Partner, Canaan Partners. “With its state-of-the-art trading capabilities, itBit introduces Bitcoin to a heightened level of sophistication, security and reliability.”

For more information, and to sign up as a user, please visit www.itBit.com.

*Trading at a retail level is currently not available for individuals who reside within the United States. Regulatory approvals are currently being pursued on a state-by-state basis.

About itBit

itBit offers an electronic global currency exchange for trading fiat currencies with digital currencies like Bitcoin. The platform is based on global exchange standards with state-of-the-art technology powering its matching engine, trade execution, security and privacy. The company is venture-backed by Canaan Partners, RRE Ventures, Liberty City Ventures and notable angel investors including Jay W. Jordan II and Ben Davenport. To learn more, visit www.itBit.com.

Bitcoin continues to infiltrate and benefit numerous industries around the world. Just this past week, Vanity Cosmetic Surgery chose to accept payment for services in Bitcoin. After reading a news article on BTC China taking Bitcoin to 200USD per BTC, Vanity Cosmetic Surgery’s team decided to accept Bitcoin as a method of payment.

Vanity Cosmetic Surgery issued the following press release:

Miami, Florida (PRWEB) November 02, 2013

Since Vanity began doing business, they have gone through extraordinary lengths to facilitate payment options for their international patients. Since they treat people from all over the world, they usually accepted most major currencies, but now with the implementation of Bitcoin they open the doors to new possibilities in cyberspace. By doing this, Vanity becomes the only medical center in the world to accept Bitcoins as an official payment method. Patients may request to pay with Bitpoints, when they call or visit any of their three centers in South Florida. These innovative services benefits anyone, especially foreigners who do not want to exchange their currency for US dollars, who already have a Bitcoin account.

What does this mean to patients? They can now use their loaded Bitcoin account to pay for a breast augmentation or a nose job, or maybe a laser hair removal treatment. This will definitely transform the way people will choose their doctors in the near future.

Initially any currency could be converted into this internet token, but now the other way around is possible, with the new ATM machines installed in some places across the globe. Bitcoins can usually be used to pay things with a cellphone or in certain online stores. As such, once Bitcoin’s concept becomes global, traveling around would not require monetary exchange, as more brick-and-mortar businesses start to welcome this new payment method. For users the Bitcoin website offers a lot of security measures for a minor price.

About Bitcoin Exchange

Bitcoin has become a universally accepted internet currency. It’s free to open an account. At Localbitcoins.com, Bitcoins can be used to buy and sell anything, as long as the information required is available. In most transactions, security fees may not be required.

About Vanity Cosmetic Surgery:

Vanity CS performs the most variety of plastic surgeries in all the South Coast. They have become famous for performing the most Trans-umbilical breast augmentation surgeries in the US, making them an authority when it comes to TUBA surgery. This versatility draws patients from all over the US and the world. Their large 5,000 square feet state-of-the-art facility makes them the biggest plastic surgery center in South Florida. They can be found in Miami, Hialeah and Plantation. They currently offer TUBA (Trans-umbilical breast augmentation), liposuction, butt-lift, breast reduction and many other kinds of cosmetic surgeries.

Bitcoin Magazine had an opportunity to interview Carlos Yela of Vanity Cosmetic Surgery.

Bitcoin Magazine: When did you first hear about Bitcoin?

Carlos Yela: A couple of months ago I found several discussions online about Bitcoin being a new trend and how China was getting more involved in it.

BM: What was it about Bitcoin that you found interesting?

CY: I think that Bitcoin itself is revolutionary, It’s a total new way of creating wealth and trade, and its growing popularity rate is so extraordinary.

BM: When did you first get the idea for your organization/site/services and what inspired you to create the site?

CY:Vanity Cosmetic Surgery is a well established cosmetic surgery center that in only 5 years has become the largest center of its kind in the state.

BM: Where do you see organization/site/services going in a year?

CY:At this point we are expanding our presence in the web, this is a strategy to promote our services not only in our local market but nationally and internationally as well, this strategy will allow us to become the number 1 plastic surgery center to receive patients from other states.

BM: What makes your product stand out in comparison to other products/businesses utilizing Bitcoin?

CY:We are not only the largest and most comprehensive center in the state with the widest variety of procedures available, but we also have a medical team of 6 of the best plastic surgeons in the East Coast as well as the best facilities, we only use the latest equipment available for all our procedures and treatments and always in the cleanest and most sanitized environment.

BM: What are your suggestions for individuals hoping to use Bitcoin in a business like yours?

CY:Our suggestion for Bitcoin users is for them to make up their mind if they are thinking of getting some cosmetic procedure done, we are the best option for many reasons: price, service, quality, accessibility and most important we are located in the most touristic city of the United States; when people come to our center from other places, they don’t only receive our excellent service but they enjoy our beautiful weather and beaches here in South Florida.

To kick off the month of November, Bitcoin Magazine is now offering a reduced price per magazine on Amazon USA, Amazon Germany and Amazon UK.

We are now only charging 5USD, 3.11 GPG and 3,65 Euros per magazine when purchasing directly through Amazon.com. As we are currently printing our 15th Issue, Issues 1 through 14 are available on Amazon for you to enjoy.

Since we first released our first print magazine issue, the Bitcoin currency has grown to a significant level of prominence.  We encourage you to purchase back issues on Amazon.com and then in turn sign up for a subscription to regularly receive copies of our newest issues! We encourage you to renew your subscription in full for another year OR start up a subscription TODAY!

As the Bitcoin currency continues to flourish and as digital currencies become the norm, you will want to regularly receive your copy of Bitcoin Magazine and also back copies of the magazine for a full history of this decentralized movement.

As we continue into Bitcoin Magazine’s second year, we have expanded to now have a digital edition and have welcomed and continue to welcome some new writers to the team.

We plan to keep you informed on the latest news in the Bitcoin community and provide more in depth articles on this fascinating digital, decentralized cryptocurrency through a monthly tangible copy of Bitcoin Magazine!

If you have any questions about the current status of your subscription, please contact us at [email protected].

Please visit Amazon USA, Amazon Germany and Amazon UK and enjoy the wide selection of magazines for only 5USD!

Only six months after the Bitcoin price last reached an all-time high of $266 in April, Bitcoin is shooting up yet again. The rise started almost immediately after the beginning of October, when the anonymous market Silk Road was shut down and its owner arrested; although the price did drop down from $127 to a low of $85 on Bitstamp, it recovered quickly, and soon started rising from $127 at an average rate at over three percent per day. After a brief crash and consolidation at $200, Bitcoin kept rising again, and soon finally hit its new all-time high.

First of all, what is different between the post-crash period this year and that in 2011? The main answer is, this time the recovery came much more quickly. While in 2011 the Bitcoin price kept steadily dropping for over five months, losing over 93% of its value compared to is peak before finally starting a slow and arduous recovery that would last all the way through 2012. Here, the situation was different. The price dropped to a low of $50.01 on MtGox a mere three days after the spike to $266 and the subsequent crash; if one could anthropomorhize the mind of the market at the time, we might hear something like “yeah, we know the price is going to crash hard, let’s get it over with already”. From there, the market quickly recovered, and although a more protracted two-month-long secondary slump did follow, the price never again fell below $65. Why did this happen? Essentially, the market was more experienced. Many of the market participants had already been through the hard crash in 2011, and knew exactly what was going to come.

What is more interesting, however, is the peculiar characteristics that make this rise different from the last. The first difference is one that is subtle, and difficult to quantify in terms of statistics. And that is this: the rise from December 2012 to April 2013 was marked by a flurry of positive news in the Bitcoin ecosystem. WordPress started accepting Bitcoin in November, Bitcoin Central made a first-of-its kind deal with a licensed payment processor in France in December, and January saw a flurry of positive news around the Bitcoin gambling industry. Finally, during February, the month during which the price made its last leg up before crossing the $31.91 peak that it set back in 2011, the list of Bitcoin-accepting businesses was joined by Mega and Reddit, and the internet Archive became the most prominent organization to pay its employees in Bitcoin.

What do we have today? Essentially, Baidu Jiasule. So in what specific ways is the Bitcoin ecosystem better today than it was six months ago? Essentially, the answer is a subtractive one: the Bitcoin ecosystem got rid of risk. In May, everyone was concerned about the regulatory consequences of the FinCEN guidance detailing legal guidelines for Bitcoin users and exchanges. Since then, however, many countries around the world have clarified Bitcoin’s tax status, Germany gave Bitcoin official recognition as a private currency, and even China and India had government officials come out to say that they do not intend to regulate Bitcoin for the time being. The other major risk factor that the Bitcoin ecosystem lost was economic centralization. In April, MtGox had over 70% market share in the Bitcoin exchange industry, BitPay was by far the largest payment processor, and the Bitcoin drug market, which many thought was crucial to the Bitcoin economy, was dominated by Silk Road. Since then, MtGox’s market share has been eclipsed by those of Bitstamp and BTCChina, BitPay has been joined by Coinbase, to a lesser extent BIPS and now Circle, and at the beginning of October the last point of vulnerability, Silk Road, was shut down – and Bitcoin’s prices soon went up rather than down. Today, the only centralization that remains is a technical one: the monopoly of the bitcoind source code, and even that is open-source and governed by a semi-public development process.

This rally is also different from the last in terms of technical analysis. The Bitcoin markets, as well as many other markets, follow very clear patterns. The most common of these is the concept of a psychological threshold. This graph shows quite well the general effect:

Here, the price reached a level slightly below 30 USD, fought against the threshold for days, and then finally breached it and entered a minor bubble up to 31.3 USD, before crashing and consolidating slightly above 30. Threshold effects can happen in two places: at psychologically significant numbers (eg. $30, $200), and at previous peaks. So what is different now compared to then? Then, these effects took place entirely on MtGox, and the other exchanges closely followed MtGox’s behavior. This time, there are three major exchanges: MtGox, Bitstamp and BTCChina, and each one has a life of its own. Here are BTCChina’s battle against 1000 CNY:

And 2000 CNY:

And here is the rise of the Bitstamp price from $180 to $230:

Here, notice how the Bitstamp price actually broke two successive thresholds. First, it spent days breaking through the peak of $206 that it made before its brief crash to $160. Soon after it does, however, once can also see another, smaller plateau lasting only a few hours. This is actually the BTCChina price brushing up against its own peak of 1339 CNY.

What this means is two things. First, there are far more thresholds that the Bitcoin price will need to break through, and not all of them will be obvious. We may see a minor battle as MtGox brushes against a certain price threshold, and then another larger battle as Bitstamp hits it a day later, and then BTCChina force a consolidation after approaching a round number measured in Chinese yuan. Second, the effect of each threshold will be lower. North American and European speculators may be excited about the prospect of Bitcoin hitting 1000 USD, but for Chinese users the threshold is much less interesting; they are more closely watching for Bitcoin to break 10000 CNY (~$700). This also creates opportunities for clever inter-exchange speculation; if the price on BTCChina breaks through 10000 CNY, it may be difficult to buy on BTCChina quickly enough to take advantage of this, so it may instead be a viable strategy to buy on Bitstamp and MtGox at that time. This threshold weakening effect will have an unknown effect on Bitcoin pice growth in general; it may cause prices to rise faster by reducing barriers, but it may also more quickly create the conditions for a large crash.

In what ways is this rally just like the last? Largely, it’s a matter of the precise nature of the correlation between price growth and media attention. Earlier this year, the growth in price preceded the growth in Google Trends volume:

And this year the situation is the same:

What does this mean? Essentially, that media attention on Bitcoin is largely caused by Bitcoin price rises, more so than the other way around. The effect is certainly a positive feedback loop, with both effects supporting the other, but price rises come first. Of course, there is one alternative explanation – that people inside the media companies know that they are going to write about Bitcoin ahead of time, and thus buy up bitcoins beforehand, but the fact that this effect has survived even as media organizations in the US, Europe and China are now reporting on Bitcoin suggests that it is not too likely to be taking place to a significant extent.

Welcome to the third great Bitcoin bubble; we certainly do live in interesting times.

London: Bittylicious expands services to international market.

Bittylicious, the UK-based startup enabling users to buy Bitcoins with British Pounds, has expanded its service into the Netherlands, South Africa and the Czech Republic.

The new service enables users in the Netherlands to pay in Euros via SEPA. In South Africa, users may pay in S.A. Rand via FNB bank, and in the Czech Republic, users pay in Czech Koruna.

Bittylicious aims to offer users an easy way to acquire Bitcoins. New users can purchase a small amount of Bitcoins without registering, although larger amounts require various account verification methods.

New users enter their Bitcoin wallet address and email, and then have 30 minutes to pay via any participating bank. Upon confirmation, the corresponding value in BTC are transferred to the user’s wallet, usually within 30 minutes.

Bittylicious hopes that increasing the global availability of their system will help to promote Bitcoins as a legitimate and useful alternative currency, and that it will be of particular benefit in those countries where there is a significant price difference between local exchanges and rates on the larger global exchanges.

In addition to the three new countries, Bittylicious is looking to expand further and is interested in cooperating with Bitcoin sellers in other countries to explore further expansion of the Bitcoin ecosystem.

For further information contact: [email protected] or  https://bittylicious.com/

###

Cointerra, the Austin, Texas based ASIC Bitcoin mining hardware firm has announced its completion of the design of the new “Goldstrike1” mining processor. The final circuit design, known as a ‘tape out’, is the last process in the design stage before actual manufacture.

 Based on a 28 nanometer ASIC (Application Specific Integrated Circuit) chip designed in collaboration with California based Open Silicon and forged at Global Foundries, it represents the latest development in the “arms race” for the fastest and most efficient Bitcoin mining hardware.

A spokesman for Cointerra says the new chip will be in all of its December and January shipments of its batch 1 and batch 2 Terraminer systems with new batch 3 Terraminer systems expected to ship in February of 2014.

The Cointerra announcement follows:

CoinTerra®, (http://www.cointerra.com) the performance and value leader in ASIC Bitcoin mining solutions, and design partner Open-Silicon® (http://www.open-silicon.com) today announce the tape out of GoldStrike1™ 28nm ASIC Chip.

Austin, TX (PRWEB) November 08, 2013

 The GoldStrike1 ASIC will provide CoinTerra’s customers with the highest performance Bitcoin mining equipment in the market at the lowest price and the lowest power consumption. The ASIC is expected to exceed 500 Gh/s in hash performance, packing around 1.5 GH/s per mm2 while consuming less than 0.6 W per Gh/s.

CoinTerra’s chip will lead the market in two important metrics: Gigahash per unit die area (Gh/mm2) and energy per hash (J/Gh). These measures guarantee the lowest price and operating cost, and are essential in providing long term ROI for Bitcoin miners.

“In Bitcoin mining hardware, the factors that matter the most are the speed of hashing and the consumption of power. The CoinTerra GoldStrike1 based TerraMiner series is poised to be the leanest and most powerful Bitcoin mining line in the market.” Ravi Iyengar, CEO – CoinTerra Inc.

The GoldStrike1 chip is fabricated at Global Foundries using the 28nm HPP process, ensuring high clock speed and performance, at lowest possible power consumption. CoinTerra’s manufacturing and production lines stand ready for the arrival of the GoldStrike1.

“CoinTerra is an exciting company with an industry leading roadmap and several challenging ASICs on the roadmap. The first generation device required pushing boundaries on thermal, timing and power. Open-Silicon is pleased with the results of this design.” – Naveed Sherwani, CEO – Open-Silicon, Inc.

With the first two batches of TerraMiners now sold out, CoinTerra is opening sales of TerraMiner batch 3 with delivery in February 2014.

###

Interview Conducted by: Yang Yang

Translated by: James Choi

Edited by: Elizabeth T. Ploshay

Bitcoin continues to grow in value and BTC China, the lead Chinese Bitcoin exchange and one of the lead Bitcoin exchanges in the world, is expanding tremendously. Bitcoin Magazine received a transcribed and translated copy of Yang Yang of 8BTC’s interview with Bobby Lee, CEO of BTC China and co-founder Yang Linke.

Please feel free to read in English while watching the youtube video below:

http://v.youku.com/v_show/id_XNjMwNjQzOTYw.html

Yang Yang: Hello everyone. Today we are having an interview with the founder of BTCChina, Mr. Yang Linke and CEO Bobby Lee. Would you like to give us a self-introduction?

Yang Linke: Hello. I’m Yang Linke of BTCC. I’d like to express my gratitude for all the support in the past few years.

Bobby Lee: Hello. I’m Bobby Lee, CEO of BTCC. Glad to be here today.

Yang Yang: Thank you both for the interview. Mr. Yang and Mr. Lee, would you give us a brief introduction of the history of BTCC? As we know, it is one of the first exchanges in China.

Yang Linke: I established BTCC in June 2011 with one of my friends who has technical background. We’ve been doing the business for over 2 years. In April this year Bobby Lee joined us and he became the CEO to lead the company.

Yang Yang: Why did you choose Bobby to be the CEO?

Yang Linke: In April of this year Bitcoin saw a rise in its price. The price was so high at that time: more than 1900 RMB. Bobby came to visit me then and he also thought it was a very promising industry. He wanted to work with us to make Bitcoin better-known in China. Our trading platform also improved when Bobby joined us. He has a lot of experience working in multinational companies, which benefits our company a lot.

Yang Yang: It is said that Bobby and Charles Lee, founder of LTC, are brothers.

Bobby: Yes, he is my biological brother.

Yang Yang: You came back to China and joined BTCC. Are you preparing for a global expansion of the company?

Bobby Lee: I actually came back to China 7 years ago and stayed in Shanghai for a period. I worked for a different company for the past few years. My dream was to join the Bitcoin industry and help develop BTCC.

Yang Yang: Mr. Yang, I heard you were in the leather goods business?

Yang Linke: I used to be involved in some projects which were producing equipments for regimen. I also did keep an eye on the Internet. When I came across Bitcoin I thought this was a promising project and didn’t hesitate to participate in it. That was why I established the BTCC platform.

Bobby: Bitcoin is like Internet in 20 years ago. The first time I used the Internet was 20 years ago, when I was at Stanford. I started to use a browser in 1993 or 1994. My major was computer science then, so I had an earlier chance than others to use it. So, today the Bitcoin industry is quite like Internet in 1990s. I always regret that I didn’t drop out of Stanford and start a business myself. I joined Yahoo and worked there for 8 years after I graduated as a MCS. I did gain a lot of experience at Yahoo, and learned how to operate and develop an Internet-based company. When I joined Yahoo, there were less than 500 people, but now it is such a large company. I hope I can also  work with Yang Linke to help BTCC grow like this.

Yang Yang: There are many BTC exchanges in China currently. A lot of new exchanges have appeared this year. Your company is now the largest in China. Have you been attacked by hackers in the past?

Bobby Lee: Yes. This last month we were under attack by hackers with DDoS. Since we are now the largest exchange in China, some people attack us on purpose, or just for fun.

Yang Yang: In March of this year FxBTC attacked you verbally, claiming that you attacked FxBTC’s website. Can you explain the background?

Yang Linke: First we didn’t attack FxBTC’s website, and we considered that accusation unfounded. After FxBTC was attacked, they posted on some threads on some forums and branded us as the attacker. As a matter of fact, I didn’t even know how to conduct a DDoS attack. After he posted on that thread, I requested that he take it down and sent him a lawyer’s letter. I didn’t get any reply then, but they did pull off the thread after some time. We can see from this case that the industry is now still a bit chaotic.

Yang Yang: Bitcoin is still a new thing in China. Didn’t you worry about the legal aspects when you established BTCC? A license should have been required then, right?

Yang Linke: We did it just for fun at first. To be honest, we didn’t consider those legal things. But now we’ve already registered in Shanghai and we will comply with regulations in China.

Bobby Lee: Indeed Bitcoin is still in a grey area now in China. Officially speaking it is not legal, but it is not illegal either. I believe policies would be made for Bitcoin in the future. We shall do everything we can to comply with our government and our country.

Yang Yang: That’s why you would like to register in China? So the legal risk is quite high?

Yang Linke: I’d like to have additional comments on this. There are actually a lot of companies in the industry, like p2p loan companies. They are also facing this problem. Some of them have taken steps further than Bitcoin. It would still take some time for this country to understand what is happening.

Yang Yang: What Mt.Gox faces is the US government freezing their account. Right now only the Japanese Yen can be withdrawn from them. So do you think when the trading volume of BTCC has reached a certain level, the government will also jump in?  What if the money in your bank account is freezed? Any emergency plan?

Bobby Lee: Mt.Gox is doing business in the USA as well as in other countries. I heard that Mt.Gox did break some laws in the USA. They didn’t get a license when they were dealing with cash business. We’ve already registered in China and we put our customers’ money in a third-party company.

Yang Yang: So what if the personal account of Mr. Yang or other colleagues is frozen?

Bobby Lee: We don’t use personal accounts. We use a corporate account.

Yang Yang: Right. So if your corporate account is frozen, the money deposited by your customers would not be in jeopardy.

Bobby Lee: Yes. Money from our customers should be protected.

Yang Yang: May I ask how much money your customers have deposited in BTCC?

Bobby Lee: We couldn’t answer that.

Yang Yang: Someone also complained that when the price of Bitcoin reached 266USD in April, it was hard to trade in BTCC. When all bids and asks had to be in queue, the matching process took a long time. What was the cause then?

Bobby Lee: Let me answer this question. In April when the price was high, the engine of our system was indeed very slow. You could still buy or sell then, but had to be in queue. It takes around ten minutes to match the bids after you placed an order. Same problem also happened to Mt.Gox, if my memory is correct. The delay in Mt.Gox was more than 2 hours. We’ve perfected our website now so this problem should not arise from now on.

Yang Yang: You are one of the first exchanges here and you did charge a high percent of commission. Why didn’t you put in more money to improve the website?

Bobby Lee: Actually we did. We spent a lot of time in the past few months in this area. For example, in the last week the trade volume in our website reached 50,000 BTC, our highest record, which was even higher than Mt.Gox. The record before April was 28,000 BTC, while we reached the level of 40,000 BTC in October. So you can see there were several consecutive days when our trade volume was higher than Mt.Gox. So technically the problem would arise again. But of course the price of your order should be reasonable to be matched.

Yang Yang: There was a fraud recently with an exchange called GBL. Apparently GBL cheated its customers as the company head stole all customers’ money and disappeared. May I know you opinion to it?

Bobby Lee: We don’t know too much about it. But we don’t feel surprised about it. Someone did an investigation about this industry before and concluded that more than half [of the] companies would cease operation within one year. That’s why we keep promising our customers that we are doing a long-term business. In 2011 there were three exchanges while now only one (BTCC) [is] left. You can see there are a lot more exchanges established this year and we believe half of them will disappear. Some may lack proper management and some have malicious fraud. We are always trying to make money by doing the right thing. That’s also what we would like to deliver through this interview.

Yang Yang: Do you have your team of lawyers to deal with questions from outside your company as well as legal issues you might encounter later on?

Bobby Lee: Yes. We have a team specific for this aspect. We are very serious about the political, legal and financial facets. Our principle is to prioritize our nation and our people, and to comply with the laws and policies of our government.

Yang Yang: Is BTCC going to accept other currencies besides RMB?

Bobby Lee: Hard to tell. It depends on the openness of China. Legally speaking, RMB is the only fiat currency in China. We may only accept RMB, as foreign exchanges are complicated.

Yang Yang: Who do you think is your strongest competitor?

Bobby Lee: They must be from traditional industry as Bitcoin wouldn’t just disappear suddenly someday. We are actually competing with ourselves. What concerns us most would be if our customers don’t believe in Bitcoin anymore.

Yang Yang: So you don’t worry about the P2P exchanges? Like Peatio and Bitshare.

Bobby Lee: They might focus on [a] different market. We do keep an eye on them.

Yang Yang: Recently the trade volume of BTCC is higher than other exchanges in the world. Do you think it’s because a large sum of money was pumped into the market or just because of some short-term speculation?

Bobby Lee: Actually in the past few weeks the trade volume did increase. Old users as well as new ones are willing to trade here because we are the most stable, most reliable exchange. So quantitatively speaking, we could have a reasonable guess that the price of Bitcoin in BTCC is now acting as an anchor for [the] global market. Maybe it’s because we don’t charge our customers transaction fees.

Yang Yang: Why did you decide not to charge your customers for transactions? Except for fiat money withdrawal, every transaction including depositing and withdrawing Bitcoin, buying and selling Bitcoin, is now free.

Bobby Lee: We were asked the same question in September. We are trying to promote the Bitcoin business and make it more widespread.

Yang Yang: Or maybe just because other exchanges in China started to avoid charging their customers a fee?

Bobby Lee: We were actually the first one to not charge. After we announced this decision, other exchanges just followed us.

Yang Yang: Your relationship to LTC is close. Do you think that BTCC may accept LTC someday?

Bobby Lee: A lot of people ask us about that. We don’t have any comment on this at this moment, but we will keep you posted.

Yang Yang: As an old Chinese saying goes, a new boss would initiate new reforms. What do you think reforms will aim at?

Bobby Lee: We’ve been working on reforms now for almost half a year. The first thing we did was to register our company in China, so we are now operating in the form of a company. We also improved our technical team and our customer service team. Our next step is to improve the customer experience on our website, since this is what Internet businesses care about most.

Yang Yang: Now many people with larger sums of money don’t trade on these trading platforms. Instead they seek individuals with lots of Bitcoins to trade over the counter. Do you ever consider having VIP service for some VIP customers, so they can get their Bitcoins without influencing the market price? I think that would become a trend.

Bobby Lee: Yes, we did find some customers were trading with a lot of money. The advantage of our website is that the trading volume is quite large, so those people can get their Bitcoins easily without influencing the market price. Actually you can find some accounts trading thousands of Bitcoins in one day, and the market price is staying stable.

Yang Yang: But how can you profit when you don’t make money from customers’ transactions?

Bobby Lee: We earned a lot of money in the past few years. So now we can make a long-term plan, after improving our service.

Yang Yang: Could you reveal me this further plan?

Bobby Lee: I’m afraid not.

Yang Yang: Thank you both for your time. We wish a great future for BTCC.

Bobby Lee: Thanks.

Disclaimer: Vitalik Buterin and Mihai Alisie have some involvement in the Dark Wallet project

Once in a while a really big idea comes along: an idea that completely changes our concept of society.

In 1448 Johann Gutenberg brought together existing, disparate technologies. With some innovation of his own he perfected the printing press. The invention spread globally and initiated a process of immense social change.

In 1876 Alexander Graham Bell, standing on the shoulders of scientific giants, invented his telephone. In an internal memo for Western Union, the very same year, it was noted that – “ This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”

Now another monumental change is upon us. We’ve long imagined that only the state and its central bankers can issue money. The Bitcoin protocol directly challenges that notion.  Most importantly, unlike similar inventions before it, Bitcoin can only be stifled. It can never be stopped. Its importance is unequivocal.

As Bitcoin continues to spread globally, we, as a community, must grapple with a very challenging and unsettling question of principle: should Bitcoin actively engage the apparatus of state?

The Foundation and unSystem; big-business and cypher-punk roots

On one side we have the US Bitcoin Foundation. Their answer to the question appears to be a resounding “yes”.

As self-appointed custodians of the Bitcoin protocol and its ‘reference’ implementation, the Foundation this year began active participation in the political machination of state.

On the other side, we have unSystem. Their answer to the above question is an unequivocal “No”. Described by its co-founder; Cody Wilson, as “an international group of activist-developers lead by Amir Taaki”, it is born out of concern for “the Foundation’s centralised development and advocacy.” According to the rhetoric of Cody Wilson, there is no middle turf on this battleground.

Bitcoin is getting political. Parties are forming. unSystem, through its Dark Wallet, has ostensibly drawn a line in the sand. There is much at stake. A battle is now on for the protocol and the hearts and minds of we, the 99%. As Bitcoin inches its way to the mainstream, the propaganda machines are in full swing.

As a grass-roots initiative, Dark Wallet has resonated with a large portion of the Bitcoin Community. As unSystem rapidly approaches its crowd-funding target of US$ 50,000, we can consider each dollar as a vote for a principle: a cry of “no we won’t”, to moves for active engagement with the state.

As a community, we are forced to take a closer, more honest look at the situation. Ironically, it is Dark Wallet that seeks to bring this to light.

The active Bitcoin community, though growing, is still relatively small and fringe. Within it the Foundation has earned itself a reputation. Undeserved or not, it is often viewed as primarily representing the corporate interests that finance it. It is seen as an organisation aiming to bring Bitcoin into the mainstream, at any cost. Practically, that means regulation.

Corporations need to make money. For that they need a certain external business environment. This is the sort of environment typically fostered by government rules.

With bigger business comes a greater desire for regulation. Numerous and complicated rules raise the barriers to entry. Thereby protecting incumbents by sterilising new competition: the lifeblood of any effective marketplace. Onerous regulation can only ever foster a prohibitive business environment.

In a pure market sense, government regulation is rarely a force for positive change. So it is not certain why one would seek it. Especially when the core technology involved is free-market money in its purest form. It is ideologically confusing, at best.

The Foundation has argued that regulation is inevitable. So it is better to be a part of the process, contributing intelligently. Rather than being left out in the cold.

unSystem, by contrast, has it roots in cypher-punk and anarchist movements. It seeks a return to this ethos. An ethos business would sooner forget and actively tries to distance itself from. The irrefutable reality is that Bitcoin is the direct manifestation of a cypher-punk dream, born of the cypher-punk realm. Without cypher-punks there would be no Bitcoin.

Like the punk-rock movement, which reached its zenith in the mid-1970’s, the cypher-punk movement is anti-establishment. It rejects the politically idealistic notion that one can reasonably negotiate with the establishment: the enemy.

At the heart of unSystem is libbitcoin. A little publicised though potentially revolutionary implementation of the Bitcoin protocol. Written entirely by unSystem’s co-founder; Amir Taaki, it is conspicuously missing from any web presence controlled or influenced by the Foundation. Why?

A good network, like any organism, requires genetic diversity to survive in the face of potentially deadly pathogens. One would think that a Foundation existing to protect the integrity of Bitcoin would welcome the diversity that an implementation like libbitcoin brings. So, why actively ignore it? (see “what-libbitcoin-and-sx-are-and-why-they-matter” by Vitalik Buterin for full technical analysis)

Regardless of the Foundation’s motives, or unSystem’s approach, they have sparked a skirmish that spans continents and years of meticulous work. At stake is nothing less than the future of Bitcoin. Or, maybe not.

Perhaps the Foundation is right when it says regulations are coming, no matter what. Perhaps unSystem too is correct and it is futile to engage the state.

The X-Factor: The State’s Own Propaganda Machine and Gold 2.0

Bitcoin is direct competition to centrally issued paper. Bankers engaged in the fraud of fiat paper on such a massive scale are unlikely to welcome the competition that Bitcoin brings. These same bankers have unparalleled financial resources and political influence. They will likely come at Bitcoin with fire and fury, regardless of what anyone says or does.

Quite simply, Bitcoin is direct competition. As direct competition, it is insidious, ever so slippery and, at its core, disruptive. Most importantly, Bitcoin can win.

In effect Bitcoin takes all the attributes that make gold real money and digitizes them. In form and function Bitcoin exists only in the ether, in the realm of ideas. Although completely intangible, Bitcoins, like gold, must be earned.

To the masters of printed-paper, Bitcoin is gold 2.0. How did these fraudsters deal with gold 1.0? Over several generations they relegated it to the dustbin of history. So, what do they intend on doing with gold 2.0? The answer to that question belongs to the future. But I posit that their intentions are the same.

If this is indeed the case, then the state too will no doubt ramp up its own formidable propaganda machine. They will show little concern for division within community. They will seek to capitalise on any such schism for their own selfish ends.

If the state intends on waging an insidious war on Bitcoin, it will certainly use restrictive regulation to strangle it and propaganda to manipulate public perception of it.

More Organisations – Greater Decentralisation

The enemy is not likely to be found in the community’s rank and file or any of its organisations, but in the machinery of state: the very entity that made Bitcoin so necessary in the first place.

There is a place for both sides amongst a free and thinking community such as ours. Unified, against the machinery of state. Technique in this endeavour is purely individual. It is a personal means of expression. So long as the intention is good.

Regardless of where you stand it is always important to remember that the Foundation is a US organisation. The US is not the world and Bitcoin does not belong to the US. unSystem, as a newer and more decentralised alliance, shows by example that we are free to co-operate and collaborate in any way we see fit. Forming any independent organisations we so choose.

If we do this, in the same spirit of decentralised organisation that Bitcoin embodies, then there will be no single monolithic entity exercising too much control over the protocol. The state will have no one to coerce or manipulate. And the system will necessarily remain true to its principles, by default.

To kick off the month of November, Bitcoin Magazine is now offering a reduced price per magazine on Amazon USA, Amazon Germany and Amazon UK.

We are now only charging 5USD, 3.11 GPG and 3,65 Euros per magazine when purchasing directly through Amazon.com. As we are currently printing our 15th Issue, Issues 1 through 14 are available on Amazon for you to enjoy.

Since we first released our first print magazine issue, the Bitcoin currency has grown to a significant level of prominence.  We encourage you to purchase back issues on Amazon.com and then in turn sign up for a subscription to regularly receive copies of our newest issues! We encourage you to renew your subscription in full for another year OR start up a subscription TODAY!

As the Bitcoin currency continues to flourish and as digital currencies become the norm, you will want to regularly receive your copy of Bitcoin Magazine and also back copies of the magazine for a full history of this decentralized movement.

As we continue into Bitcoin Magazine’s second year, we have expanded to now have a digital edition and have welcomed and continue to welcome some new writers to the team.

We plan to keep you informed on the latest news in the Bitcoin community and provide more in depth articles on this fascinating digital, decentralized cryptocurrency through a monthly tangible copy of Bitcoin Magazine!

If you have any questions about the current status of your subscription, please contact us at [email protected].

Please visit Amazon USA, Amazon Germany and Amazon UK and enjoy the wide selection of magazines for only 5USD!

Bitcoin continues to open doors for companies around the world as a convenient currency and a movement towards innovation and decentralization. Just this week, Brazilian lead magazine, SUPER, implemented a Bitcoin paywall through Brazilian Bitcoin exchange, Mercado Bitcoin. SUPER will utilize a Bitcoin paywall for premium content including English translations of articles  including and not limited to texts also published by The New York Times and The Economist. Just this past fall, BitMonet began accepting payment in Bitcoin for paywalls through integration with BitPay Inc.

CEO, Mercado Bitcoin, Rodrigo Batista, issued the following press release:

Brazil´s most influential scientific and cultural magazine pioneers by trying a Bitcoin paywall, developed by MercadoBitcoin.com.br

Brazilian magazine SUPER (http://en.wikipedia.org/wiki/Superinteressante), has just printed its second article covering Bitcoins to celebrate Satoshi’s paper creating the Bitcoin. The magazine is published by Editora Abril (http://www.grupoabril.com.br/IN/institucional/perfil-in.shtml), arguably one of the largest and most influential communications companies in Latin America.

However, this second report comes with a innovative initiative: the editors decided to test how Bitcoin works in the real world and implemented a Bitcoin paywall, brand-new tool developed by Mercado Bitcoin, the Brazilian bitcoin exchange. As a result, SUPER´s customers and people from anywhere in the world will be allowed to buy some of their issues and pay with Bitcoins.

 Behind the paywall, a system that prevents Internet users from accessing webpage content without a paying a fee, the magazine is publishing an English version of the article “Why is everything so expensive in Brazil?”, which is one of their most read articles ever and source of texts published by The New York Times in July and The Economist in September. Some other Portuguese language articles are also available.

Bitcoin micropayments have already been discussed for quite some time and such initiative from a renowned company is certainly very helpful to make it really happen.

It is probably the first time that a major global publisher of traditional media will be dealing with Bitcoins this way and it certainly is a major achievement for SUPER, for the Bitcoin community and for MercadoBitcoin.com.br.

To check what what we have accomplished go to:

http://super.abril.com.br/tecnologia/compre-materias-super-bitcoins-758822.shtml

Rodrigo Batista

CEO, Mercado Bitcoin

www.mercadobitcoin.com.br

www.facebook.com/mbitcoin

twitter.com/mercadobitcoin

Bitcoin Magazine had an opportunity to interview Rodrigo Batista, Mercado Bitcoin’s CEO.

Bitcoin Magazine: When did you first hear about Bitcoin?

Rodrigo Batista: The first time I read about it was when the SUPER Brazilian magazine had its first article about Bitcoin published. At the same time the company I was working at (Morgan Stanley Brazil) had an intern that was involved in Bitcoin mining. So we had some chats about it and then I started following the market, but it was the time of the 2011 bubble, so I did not pay too much attention.

BM: What was it about Bitcoin that you found interesting?

RB: At the time I did not give too much importance to it because the 2011 bubble happened when I was studying. In 2012 I got back to it and its resilience impressed me a lot. So I decided to study it more and found it very powerful and useful. The internet needs its own type of money and I think that bitcoin is very likely to be it. People need a frictionless way to do small payments to other people offshore and the big majority of us in developing countries don’t even have international credit cards.

BM: When did you first get the idea for your organization/site/services and what inspired you to create the site?

RB: In 2012 I decided to run a Bitcoin exchange, but it was tough to find a programmer and try to explain the business. I used to be a programmer but I’m not good enough. In Jan 2013, I started conversations to become partner of the local Brazilian Exchange, Mercado Bitcoin. In May, I became an investor and CEO of the website.

BM: Were there any pre-existing businesses that inspired you to create your organization/site/services?

RB: Mt.Gox at the beginning. Now we are checking with BitPay and BitWall businesses as other payment processors are doing.

BM: Where do you see your organization/site/services going in a year?   

RB: We are already the biggest Bitcoin company in Latin America, but that does not mean too much because the market in Brazil and in the rest of the region is still very small. We want to develop the best products and make the market in the region grow. To meet those expectations we have an aggressive plan of marketing and new product launches.

BM: What makes your product stand out in comparison to other products/businesses utilizing Bitcoin?  

RB: We almost don’t have completion in Brazil. That give us time to think and create the best products and have some profit. Also, our products are made taking the local needs into account, like currency, language, laws, etc. We try to do what other business are already doing in Europe, Asia and US, and improve their products.

BM: What are your suggestions for individuals hoping to use Bitcoin in a business like yours?

RB: People need to get educated about bitcoin. Most of them don’t understand what it is, but they start putting their money on the table anyway. That is very risky. Unfortunately we still have a long way to get to the point where people will use bitcoin without even bother[ing] about what is going on behind the scenes.

Today, CoinJar, Melbourne-based Bitcoin payments provider, announced Tomcar’s decision to accept Bitcoin in payment. Tomcar Australia is now the world’s first original equipment car manufacturer to accept Bitcoin.

Tomcar Australia’s Co-Founder & CEO, David Brim, highlighted the similarities between Bitcoin and Tomcar. According to Brim, Tomcar “disrupts the old system” just as Bitcoin provides around traditional payment methods. Tomcar has been in the business of manufacturing unique commercial off-road utility vehicles for over 30 years. Bitcoin will inevitably open up the door for greater growth potential and possibilities for Tomcar and additional equipment manufacturers in the future.

Tomcar Australia and Coinjar issued the following joint press release:

Tomcar Australia is world’s first car manufacturer to accept Bitcoin

Melbourne, Tuesday 5 November: Tomcar Australia has become the world’s first original equipment car manufacturer to accept Bitcoins, through a partnership with bitcoin payments provider CoinJar.

Customers at Tomcar Australia’s new online store can buy vehicles, parts and merchandise with either Australian dollars or bitcoins, a global, digital currency. Customers simply select bitcoin as a payment method, and the transaction goes through CoinJar’s payment Gateway.

Mr David Brim, Tomcar Australia Co-Founder & CEO, says they are a strong supporter of the Bitcoin economy, as it allows overseas transactions with less fees and exchange rate fluctuations.

“As Australia’s first new mass production car manufacturer in over 30 years, our business is based on disrupting the old system. To be a truly innovative auto manufacturer, it needs to be about more than what you make. It needs to transfer through the entire company system, your supply chain, distribution, and now even payment systems such as Bitcoin,” Mr Brim says.

Tomcar sees its role as new car manufacturers as helping redesign the auto ecosystem. Mr Brim believes the auto sector needs considerable systemic change.

 “Bitcoin helps us reduce the inherent costs involved in international trade. Tomcar Australia already uses Bitcoin to pay a growing number of overseas suppliers. Our manufacturing partner, MTM is also actively exploring using Bitcoin to do this as well. If we use Bitcoin ourselves, it makes sense to accept it from customers too,” Mr Brim says.

Transactions made in Bitcoins still include Goods and Services Tax (GST). The bitcoin exchange is calculated in realtime and reconciled by CoinJar so Tomcar Australia gets the exact amount it charges.

Asher Tan, Co-Founder of CoinJar says it’s a smart move for companies like Tomcar Australia to embrace new consumer trends.

“The Bitcoin economy is here. It’s becoming an increasingly mainstream currency, with companies such as WordPress and Chinese internet giant Baidu accepting it. Australia is one of the largest markets for Bitcoin users outside the US, and it makes excellent sense to respond to that growing demand,” says Tan.

Press contact:

Caroline Shawyer, The PR Group

T: +61 (0) 401 496 334

E: [email protected] 

About Tomcar

Tomcar Australia manufactures unique commercial off-road utility vehicles. They are specifically designed for defence, agribusiness, mining, emergency services and recreational purposes. Tomcar Australia sells directly through the internet to customers rather than relying on legacy dealer networks. Tomcar commenced manufacturing in Melbourne, Australia in late 2011, as part of a strategic partnership with tier one automotive components supplier MTM. It is the first Original Equipment auto Manufacturer (OEM) to set up operations in Australia for over 30 years, and sees highly skilled niche manufacturing as the future of Australian manufacturing.

About CoinJar

CoinJar is a Melbourne-based bitcoin payments provider bridging the divide between digital currency and the dollars in your wallet. www.coinjar.com

About Bitcoin

Bitcoin, first introduced as a concept in 2008, is a distributed peer-to-peer digital currency that functions without a central authority. Bitcoins are generated by computers performing complex mathematical calculations. They are held in digital “wallets” and can be used to transact for different products and services.

Bitcoin Magazine congrats Tomcar and CoinJar on their new partnership and looks forward to continual new “firsts” in the Bitcoin ecosystem.

 

Mediabistro is set to host a second Inside Bitcoins Conference in Las Vegas from December 10 through 11. On July 31st Mediabistro hosted the first Inside Bitcoins Conference in New York City and from there has sent out daily news clips related to Bitcoin.

Given the success of the first event, Bitcoin Magazine is happy to announce that  we will once again serve as a media partner with Inside Bitcoins to provide discounted rates for Bitcoin Magazine readers. Use code MAG15 at checkout to receive 15% OFF admission prices. Register Now!

This conference will be of particular interest to entrepreneurs, developers, financial professionals, venture capital investors, bankers, online retailers, consultants, payment processing companies and many more individuals who have caught the Bitcoin bug or are interested in learning more!

The conference venue will coincidentally highlight one of the growing areas of Bitcoin usage: gaming and casinos. With new Bitcoin-based companies such as Bitmarkers emerging, Las Vegas is a strong choice for a west coast spot. Bitcoin Magazine looks forward to seeing YOU at the upcoming Inside Bitcoins Conference in December!

Mediabistro issued the following press release:

Inside Bitcoins Conference is Heading to Las Vegas this December

After this past summer’s Inside Bitcoins conference in NYC debuted to large crowds with such a tremendous response, Mediabistro has decided to bring the successful event to the west coast. Inside Bitcoins, the event focused on bitcoins and the impact they’ll have on traditional currency, will be taking place in Las Vegas this December 10th to 11th.  

Attendees will hear from industry experts including Justin O’Connell, Author of Bitcoinomics and CEO of GoldSilverBitcoin; Steve Beauregard, CEO and Founder of GoCoin.com; Patrick Murck, General Counsel for Bitcoin Foundation; Bobby Lee, CEO and Co-Founder of BTC China; Adam B. Levine, Editor-in-Chief of Let’s Talk Bitcoin!; and Robert Cho, Vice President of SecondMarket. View the full speaker list.

The event kicks off on December 10th with an opening keynote on “A State of the Union for Bitcoin”. The presentation will be given by Jered Kenna, the Founder and CEO of Tradehill, a company that quickly grew to become the second largest bitcoin exchange after its inception in 2011.

For the next two days, attendees will participate in networking sessions, debates, and discussions on relevant topics concerning the cryptocurrency, including bitcoin compliance and regulation, the future of free market money, the bitcoin exchange ecosystem, and how to bring trust and legitimacy to the market.

Of course, you can pay for your conference pass in Bitcoin! Each registrant will also receive a Bitcoin paper wallet with a 0.01 Bitcoin. Additionally, an exhibition hall will be open throughout the day where you will have an opportunity to interact with leaders in the Bitcoin community.

Given the success of the first event, Bitcoin Magazine is happy to announce that they will once again serve as a media partner with Inside Bitcoins to provide discounted rates for Bitcoin Magazine readers. Use code MAG15 at checkout to receive 15% OFF admission prices. Register Now!

Alternative currencies have become a popular topic in the Bitcoin space. We have Litecoin and Primecoin introducing alternative mining algorithms with novel properties, PPCoin replacing mining entirely with a non-costly alternative, Ripple creating a cryptocurrency network that can store credit relationships and user-defined currencies, and over seventy more up and running with new ones being created every week. One particularly interesting project that has received a large amount of attention over recent months, however, is Mastercoin. The key difference in Mastercoin is this: rather than trying to bootstrap an entirely new blockchain, as every other cryptocurrency does, Mastercoin seeks to create an entirely new network of currencies, commodities and securities on top of Bitcoin itself.

The concept of an alternative currently relying on Bitcoin to take advantage of its powerful and secure network backed by petahashes of mining power is not a new idea. The general concept first appeared in a much weaker form as “merged mining”, a mechanism in which alternative currency miners publish pointers to their blocks in the Bitcoin blockchain to mitigate the threat of 51% attacks. Mastercoin, however, takes this principle a step further. Rather than simply using the Bitcoin blockchain as a secure timestamping system to store its own blocks, Mastercoin uses the Bitcoin blockchain to store every transaction. Philosophically, the best way to think of Mastercoin is as an alternative way of making sense of Bitcoin transactions; just like the Bitcoin protocol takes a series of transactions and parses them to determine how many bitcoins are in every address at any particular moment, the Mastercoin protocol also takes the available Bitcoin transactions and parses them to extract data relevant to the Mastercoin network.

The first draft for the Mastercoin protocol was published on January 6, 2012 in a document that original developer J. R. Willett called “The Second Bitcoin Whitepaper“. Willett’s whitepaper starts off by arguing that the Bitcoin protocol “can be used as a protocol layer, on top of which new currency layers with new rules can be built without changing the foundation.” Why a new protocol layer on top of Bitcoin, and not just an alternative cryptocurrency as everyone else was doing at the time? Willett goes on to write:

Alternate block chains compete with bitcoins financially, confuse our message to the world, and dilute our efforts. These barriers interfere with the adoption momentum of bitcoin and the adoption momentum of alternate currencies as well, regardless of how well-conceived their rules may be.
New protocol layers on top of the bitcoin protocol will increase bitcoin values, consolidate our message to the world, and concentrate our efforts, while still allowing individuals and groups to issue new currencies with experimental new rules. The success of any experimental currency protocol layer will enhance the value and success of the foundational bitcoin protocol.

From a less philosophical standpoint, the practical advantages that a Mastercoin protocol has on top of Bitcoin are essentially twofold. First, Mastercoin can leverage the high degree of security that the Bitcoin network gains from its popularity and its high level of mining power. Second, it becomes much easier to create protocols that interact between Bitcoin and Mastercoin, and potentially with other on-blockchain protocols to come in the future.

The project formally launched on July 31, 2013. The project started off with a month-long fundraiser, in which anyone could buy mastercoins by sending bitcoins to the Mastercoin Exodus address, 1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P. 1 BTC sent to 1EXoDus would get you 100 MSC, and an additional 10% more for every week between the end of the fundraising period and the time at which you bought the mastercoins, encouraging investors to buy earlier. Altogether, over 5120 BTC were sent in, worth around $500,000 at the time – far more than almost anyone expected. The funds are intended to be used for development, paying bounties for projects around the Mastercoin ecosystem; currently, there is a 300 BTC bounty for a decentralized exchange interface. Today, one mastercoin is worth about 0.1-0.3 BTC, over ten times its original BTC price at the timeof the fundraiser, and twenty times its original USD price.

Why has Mastercoin seen so much attention? Essentially, the main attraction of Mastercoin is the sheer number and depth of the features that it brings. The following is a sample of what the Mastercoin specification intends for Mastercoin to support:

• User-defined currencies – anyone can create their own currency on the Mastercoin network.
• Decentralized exchange – the Mastercoin network itself serves as a fully-functional exchange between any two currencies in the Mastercoin network. Anyone can place an order on the blockchain to trade a quantity of one currency for another, and anyone else can match the orders and have the trade complete automatically without the order poster’s further involvement.
• On-blockchain price feeds – trusted organizations can publish price data (eg. the value of one ounce of gold in USD) which can then be used in Mastercoin scripts
• On-blockchain bets – it is possible to register a bet with another party that a given price feed will be above or below a certain value at a particular future time. This essentially allows leveraged speculation on currency pairs, as well as hedging, so that users can store value in the Mastercoin network without exposing themselves to a high degree of currency risk from Bitcoin or Mastercoin volatility.
• Savings addresses – a transaction from a savings address can be reversed within N days (with N set for each address) by a “guardian address”. This essentially provides an additional level of security for high-value savings accounts.

And these are only the beginning.

Technical Details

A Mastercoin send transaction looks as follows:

{
    inputs: [
        { address: '1LQBddrjjUaMLHcd4cG9XnN4cCZbHfREJF' , value: 1445759 }
    ],
    outputs: [
        { address: '1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P', value: 6000 },
        { address: '12ARS3euPbdQ9S68xXhmq4ySzSADfMaR1a', value: 6000 },
        { address: '1D3tBJ6b3htSaMhEV3EtTAPLvTHwLBrQPH', value: 1417759 },
        { address: '121AS7PVawbgo7f4zbkZisYEC4yhJCoUEN', value: 6000 }
    ]
}

This transaction actually sends 10.78119709 MSC from 1LQBddrjjUaMLHcd4cG9XnN4cCZbHfREJF to 12ARS3euPbdQ9S68xXhmq4ySzSADfMaR1a. Where is this information actually encoded? The answer is, in one of the output addresses. Converting 121AS7PVawbgo7f4zbkZisYEC4yhJCoUEN to hexadecimal form, we get:

0b0000000000000001000000004042cd1d000000

This can be broken down as follows:

• 0b – sequence number
• 00000000 – transaction type (regular send)
• 00000001 – currency ID (Mastercoin)
• 000000004042cd1d – value (1078119709)

The 6000 satoshis sent to the Exodus address mark the transaction as a Mastercoin transaction (as well as providing the Mastercoin developers an extra $0.012 USD to use to fund the project). The recipient is taken as the 6000-satoshi output that does not encode data and is not the Exodus address, and the sender is taken as the owner of the address that the transaction spends from. There are also other types of transactions, such as currency issuance, price ticker updates, bets and decentralized exchange, and they all have their own transaction type, and a similar data protocol is used to determine the details of the transaction. Recently, Bitcoin developer Gavin Andresen announced an update to the Bitcoin protocol, allowing users to encode data in transaction outputs in a way that Bitcoin nodes that only want to store the minimum amount of information can safely remove; soon, Mastercoin will be switching its data-encoding outputs to this new format to better cooperate with the Bitcoin community.

Self-stabilizing currencies

The most ambitious feature of the Mastercoin protocol, however, is the concept of self-stabilizing currencies. With Mastercoin as it is, it is certainly possible to use bets to hedge one’s position so as to have one’s net worth in the Mastercoin network effectively track the value of a traditional stable currency or asset, such as the USD, commodities or silver; the basic strategy is (assuming 1 MSC is currently worth 40 USD and you have 10 MSC) to set up a bet for 5 USD that MSC will be below X for every X in some dollar range around 40. The more MSC drops, the more you lose, but the more you gain back from winning bets; similarly, if MSC goes up your winnings are counteracted by lost bets. Note that if Mastercoin were to implement contracts for difference as a type of bet, this process would be much easier, requiring only a single bet.

Self-stabilizing currencies, however, potentially offer a much more efficient means of doing this. A self-stabilizing currency works as follows. First, the currency’s creator (who has no further involvement once the currency is up and running) picks a currency or commodity that the currency would follow, and finds a price feed for that currency. They then take this information, along with some other metadata such as an “aggression factor” to indicate how closely the currency should track the underlying index, and publish it as a Mastercoin transaction. From that point on, the Mastercoin protocol itself simulates a sort of central bank for this currency, creating units out of thin air and selling them to anyone who is willing to pay slightly above the market price.

For example, if the currency (call it XUSD) is intended to track USD with an aggression factor of 4%, and 1 MSC = 40 USD, then the protocol would create and sell XUSD to anyone who wanted to buy it for a price of at least 0.026 MSC per XUSD (that’s 0.025 MSC per USD plus 4% from the aggression factor). Once the fund has sold some XUSD, and therefore has an MSC reserve, it would also start buying XUSD at a price of 0.024 MSC per XUSD. If the price feed then registers that 1 MSC is now worth 50 USD, these buy and sell prices would automatically drop to 0.0208 MSC and 0.0192 MSC, respectively. The intent is that the fund itself would become stronger over time through this process of buying low and selling high, creating a stable currency with no centralized human involvement except for the external price feed. Perhaps even the price feed itself can later be decentralized.

In theory, the idea of a self-stabilizing currency sounds very seductive; if successful, it provides a way for users to store any currency in the network without having to trust that a centralized issuer has the funds to back the currency up, which is the weakness that currencies on Ripple have. Even though the price feeder can potentially manipulate prices for their own benefit, they have no clear incentive to cheat the way that asset backers do – namely, by running away with everyone’s funds. However, the self-stabilizing currency does have one obvious potential failure mode: the fund can run out of money. For example, suppose that the above described XUSD fund sells 1000 XUSD for 26 MSC. Then, however, the value of 1 MSC drops by 50%. Perhaps, at that time it might come to pass that some XUSD holders wish to exchange back into MSC. If the fund needs to buy back 400 XUSD, it uses up 19.2 MSC and everything is still fine. If, however, the fund needs to buy back 600 XUSD, it will run out after 520 – causing a digital bank run as the value of the XUSD will likely drop to zero.

There is one guard against this problem: the XUSD fund itself will not necessarily need to do all that much. Since traders know that, as long as the fund is active, the price will not drop below $0.96 USD, they might maintain orders at around $0.97 USD, knowing that the price will not fall far below that and they will likely be able to profit when the price goes back up. However, this is a double-edged sword – the exact same mechanism will cause traders to sell XUSD at $1.03 USD, depriving the fund of revenue. It is difficult to say exactly how likely a fund bankruptcy scenario is; some people are confident that the self-stabilizing currencies will work, while others are convinced that they will work just fine until an unforeseen “black swan” event sends many self-stabilizing currencies at once down to the abyss.

Concerns and flaws

One problem that many have with Mastercoin as it stands is that, in some ways, Mastercoin is much more centralized than more standard cryptocurrencies such as Bitcoin, Litecoin and Primecoin. Unlike these more standard cryptocurrecies, where everyone has a chance to earn coins by a neutral process of computational mining, in Mastercoin all mastercoins were initially issued to users who donated money to the Mastercoin Foundation’s Exodus address. In response to the question “Was Mastercoin pre-mined?”, the Mastercoin FAQ answers:

No. Mastercoins were generated in a completely public fundraiser project, Kickstart style, during August 2013. It is true that the investment period was relatively short, and that a lof of people didn’t hear about it. Still, it can be said that a lot of people didn’t hear about Bitcoin until 2011, by which a lot of the Bitcoins were already mined. In August 2013 there were a lot more people looking into crypto-currencies in general, and Mastercoin was published on a lot of forums, so it had a lot more exposure than Bitcoin did in its early days.

However, this answer is somewhat misleading, as it does not address the reason why pre-mines are unpopular. Many Bitcoin users do not like pre-mines because there is a strong belief that the whole point of cryptocurrencies is that they are decentralized, and thus a true cryptocurrency should not privilege any specific centralized parties in any way. It is true that Mastercoin’s issuance model is not like Ripple’s, in the sense that there is no central party that started out owning any mastercoins by default. Furthermore, on a practical level, Ripple Labs is a private corporation, whereas the Mastercoin Foundation is a nonprofit organization and a silver-level business member of the Bitcoin Foundation. However, the Mastercoin Foundation is nevertheless a privileged party, as no one else had the ability to earn BTC from the issuing process. Furthermore, with the way the protocol is organized now, the Mastercoin Foundation is entitled to extract ~1.2 cents from the marker output in every transaction in perpetuity. Both the centralized issuance and the ongoing privileged status that the Mastercoin protocol gives to this one organization, many Bitcoin users beleive, disqualifies Mastercoin from being classified as a truly decentralized currency.

To that end, one idea that some Mastercoin community members have is to create a new currency, “Mastercoin 2”, with no fundraiser at all. Instead, anyone with Bitcoin can claim MSC2 by sending a transaction to themselves, with a minimal 0.00006 BTC to a specific address to serve as a marker. To prevent abuse, a “coin age” based formula will be used – the amount of MSC2 that you get per BTC is proportional to the amount of time since those bitcoins last took part in a transaction. Thus, if you send to yourself multiple times, even mixing the coins along the way, the subsequent attempts will generate only a very small amount of MSC2.

This scheme has the advantage that coins will be distributed in a fair way, but without wasting resources or privileging anyone; the only thing that will be sacrificed is the pristine status of a few old coins. This new Mastercoin 2 would be usable in the Mastercoin protocol for the exact same purposes as the original Mastercoin – backing self-issued currencies and serving as a medium of trade between the various Mastercoin user currencies, most of which will be too small to have highly liquid markets directly between each currency pair.

Another flaw of Mastercoin is security. With Bitcoin, and with colored coins and alternative currencies, even instant transactions have a certain degree of security. Bitcoin nodes refuse to propagate transactions that are incompatible with transactions that they have already seen, so if an attacker attempts to send money to a merchant and then immediately send another transaction sending the same money back to themselves the second transaction will be rejected by the network. With colored coins, the situation is the same, and alternative cryptocurrencies also benefit from this mechanism.

With Mastercoin, however, most of the Bitcoin network does not “speak” Mastercoin; the result is that an attacker can send a transaction sending MSC from themselves, and then send another transaction sending MSC from themselves using a different transaction outputs. The second transaction is incompatible with the first under Mastercoin’s rules, but perfectly compatible under Bitcoin’s rules, so miners will accept both, and the Mastercoin protocol may process either one first. Thus, Mastercoin transactions are only secure after one confirmation (~10 minutes). “MasterCoin double-spends are essentially ‘half a confirmation easier’ than bitcoin double-spends,” J. R. Willett admits. In theory, Mastercoin can potentially be modified to get around this vulnerability; if a sending transaction spends all outputs associated with a given address, and special features like limiting accounts are not used, then it would be impossible to double-spend the Mastercoin transaction without double-spending the associated the Bitcoin transaction. However, implementing double-spend-proof transactions and the advanced Mastercoin features at the same time will require some thought.

What is the future of Mastercoin going to be? There are definitely many new features around the corner. One interesting idea is the concept of limited accounts, which will allow users to set up accounts that can spend from a particular source of funding but once up to a set maximum within a prespecified timespan. This willhave two main use cases. First of all, it can be used as another safe mechanism for storing a savings account, limiting the losses from the limited address getting hacked. Second, it can be used as a Coinbase-like “recurring subscription” feature – for example, I might give Private Internet Access a limited account for $7 per 30 days in exchange for a VPN subscription. Other developments include a bounty for a Mastercoin faucet, and much further into the future we may even see Mastercoin serving as the base of a decentralized market.

Anyone interested in looking more into the Mastercoin project can check out the Mastercoin website, the various Mastercoin development tools and the Mastercoin reddit. If you want to purchase mastercoins, check out the Google Docs Mastercoin order book or buy directly at www.buymastercoin.com.

One of Bitcoin’s core security guarantees is that, for an attacker to be able to successfully interfere with the Bitcoin network and block and reverse transactions, they need to have more computing power than the rest of the Bitcoin network combined. The reason for this is that the Bitcoin network builds up its transaction history in the form of a “blockchain”, with a random node adding a new block on top of the previous block every ten minutes. To reverse a transaction, an attacker would need to make a transaction and then “fork” the blockchain one block behind the block the transaction was included in – from which point the attacker would be in a computation race against all of the other miners combined as he attempts to catch up. A new paper by Cornell University researchers Ittay Eyal and Emin Gun Sirer, however, significantly reduces Bitcoin’s security guarantee by introducing another type of attack – an economic attack. The economic attack does not allow hostile miners to mount successful attacks against Bitcoin unilaterally, but it does change the incentives such that normally honest, profit-maximizing nodes would want to join the attacker’s coalition, potentially allowing for 51% attacks as a second stage.

The high-level overview of the attack is this: rather than acting as a normal miner and publishing blocks to the network immediately upon finding them, the attacker selectively publishes blocks, sometimes sacrificing his own revenue but also often publishing many blocks all at once and thus forcing the rest of the network to discard blocks and lose revenue. This does reduce the attacker’s revenue in the short term, but it reduces everyone else’s revenue even more, so neutral nodes now have the incentive to join the attacker’s coalition to increase their own revenue. Eventually, the attacker’s coalition would expand to above 50% in size, potentially giving the attacker a high degree of control over the network.

The attacker’s precise strategy is as follows. The attacker keeps track of its own “private chain”, which is separate from the “public chain” that the rest of the network works on. At first, the private chain and the public chain start out the same. The attacker always mines on the private chain and keeps any blocks that he finds private. The strategy dictates exactly when the attacker should publish blocks. Suppose the attacker’s portion of the network hashpower is X, and when there are two competing public chains the portion of the network that picks up on the attacker’s chain is Z.

• State 0: If the attacker’s private chain is the same as the public chain, mine on the private chain. With probability X, the attacker discovers a block and advances to state 1 (private chain 1 block ahead). With probability 1-X, the public network discovers a block, and the attacker resets his private chain to the public chain.
• State 1: If the attacker’s private chain is 1 longer than the public chain, mine on the private chain. With probability X, the attacker advances to state 2 (private chain 2 blocks ahread). With probability 1-X, the public network discovers a block, setting the system to state 0′.
• State 0′: The attacker publishes his block. There are now two competing chains, both one block long. With probability X, the attacker will discover another block, causing the network to switch over to the private chain. The attacker gains a revenue of 2, and the system resets to state 0. With probability (1-X)Z, the network finds a block on top of the attacker’s block. The attacker and the network gain a revenue of 1, and the system resets to state 0. With probability (1-X)(1-Z), the network finds a block on top of its own block, the network gains a revenue of 2 and the system resets to state 0.
• State 2: With probability X, the attacker advances to state 3 and earns a revenue of 1 (technically, the attacker will earn the revenue later, but it’s easier to account for it here). With probability 1-X, the network finds a block, so the attacker publishes his 2-block private chain, which is still one block longer than the public chain, so the network will switch to the attacker’s chain. The attacker earns a revenue of 2.
• State n (n > 2): with probability X, the attacker advances to state n+1 and earns a revenue of 1. With probability 1-X, the attacker falls back to state n-1.

To see why this strategy works, suppose that Z is close to one. In this case, there is never any chance that the attacker has to discard a block; the only time that might happen is from state 0′, and if Z ~= 1 almost all of the network, attacker and other nodes included, is mining on the attacker’s block so the attacker’s block will not be discarded. Thus, the attacker is mining at full efficiency. However, the public network might see blocks discarded at state 0′ and state 2, so the public network is mining at partial efficiency. Thus, neutral (profit-maximizing) nodes have the incentive to join the attacker’s coalition to increase their revenue. As Z decreases, the attacker’s advantage goes down; at Z = 0.5, Eyal and Sirer showed that the attacker becomes more efficient than the public network at X > 1/4, and if X > 1/3 the attacker is more efficient than the public network at any Z.

So how do we calculate Z? Currently, the Bitcoin network is set to follow a simple rule: every node only mines and propagates the first block that it sees. Against attackers with only mining power, this is a successful defense; because the attacker’s strategy is reactive, publishing blocks only after the public network does, Z is close to zero. However, well-funded attackers (or attackers controlling botnets) can mount a “Sybil attack”, creating millions of nodes and inserting them into the network in as many places as possible. During an attack, the Sybil nodes would propagate only the attacker’s blocks. In this case, the Eyal and Sirer conjecture, Z can potentially get very close to one. In reality, that is not quite true; at the minimum, every mining pool will be the first to hear about its own blocks, so Z <= 0.8 is essentially guaranteed, but it is a matter of debate just how much a Sybil attack can do. To make Bitcoin secure against Sybil attacks, Eyal and Sirer argue, honest miners should switch to the strategy of propagating all blocks and if they receive multiple competing chains of the same length mining on a random one. If all miners implement this, we would have Z = 0.5, creating a reasonably threshold of X >= 1/4 for this attack to work.

Is this a fatal threat to Bitcoin? Not really. The idea behind the attack is not new; very similar attacks were theorized about on the Bitcoin forums as early as 2010, and lead Bitcoin developer Gavin Andresen himself participated in the discussion. However, at the time no action was taken – largely because everyone at the time considered the attack to be not worth worrying about compared to the other threats that Bitcoin has to face. In practice, most Bitcoin miners act altruistically to support the network, both out of ideological considerations and because they do not want to destabilize the source of their own revenue. Such higher-level economic concerns are beyond the scope of Eyal and Sirer’s paper, but they seriously reduce the chance that this economic attack will work in practice.

Furthermore, unlike a standard 51% attack, which only becomes obvious after the fact, this economic attack would need to be announced in advance to let neutral miners know that they have the opportunity to join the attacking coalition for their own benefit. Thus, mining pools cannot practically pull this off; as soon as one announces its intention to cheat the network, its users will leave out of ideological considerations, and even if they do not other mining pools will likely offer heavy discounts on fees to that mining pool’s users to convince even profit-maximizing participants to switch away. But nevertheless, Eyal and Sirer’s result, as well as the work of others in the years before, are an important and under-appreciated part of the game-theoretic research around Bitcoin, showing us that Bitcoin’s network security is slightly less infallible than we at first might think it is.

This post was released for Issue 13 of Bitcoin Magazine as part of a series of  articles about puzzles and games that started with Issue 12. I hope you enjoy reading them as much as I enjoy writing them.

BACKGROUND

In 2005, computer scientist Cameron Browne¹·¹ begins work on a computer program called LUDI as part of his Ph.D. research. On November 2007, after running for a month, LUDI becomes self aware. In a panic, humans attempt to shut it down…

Okay, okay. LUDI did not become self aware (yet). But it did something amazing.

While humans code sets of rules to be executed by computers, LUDI coded sets of rules to be executed by humans. But not only that, LUDI coded sets of rules that humans enjoy executing.

LUDI invented games.

It invented thousands of games, and tested them by playing against itself over and over. And it evolved them, combined them, mutated them, repeating this process until it came up with a final list: LUDI’s nineteen playable games.

Two of these games were recognised as being outstanding. LUDI also invented names¹·² for these games – Yavalath and Ndengrod – although Ndengrod was later changed to Pentalath by myself. Both were published by nestorgames in 2009. LUDI was described in the “Evolutionary Game Design” book and it went on to win the GECCO Humies gold medal for human-competitive results in evolutionary computation in 2012.

I’ll show you the most popular of the two, Yavalath, which at one point was ranked in the top #100 abstract board games ever invented on boardgamegeek, the largest online database of games. Quite impressive for a game designed by a computer. In fact, Yavalath is ranked higher that any of the games designed by Cameron himself, much to his embarrassment; his program is a better game designer than he is!

YAVALATH

Yavalath is a board game played on a hexagon made of hexagons. The standard board size is 5 cells per side.

Figure 1: A hexagonal board

You can play Yavalath with paper and pencil. Here’s how to draw a hexagonal grid on graph paper.

Figure 2: How to draw a hexagonal grid substitute

The rules are simple. Two players (White and Black) alternate turns placing a piece of their colour on an empty cell and win by making four-in-a-row of their colour, but lose by making three-in-a-row of their colour beforehand.

Figure 3: White wins (left) and Black loses (right)

After reading the rules for the first time, two thoughts might arise:

1. “How can I make four-in-a-row without making three-in-a-row beforehand?” You’ll quickly realize how. But this simple mechanism hides something deeper which I’ll talk about later.

2. “I can avoid losing by simply not making a three-in-a-row. What a weird rule! Nobody will make a three-in-a-row!” Not so fast. See figure 4.

Figure 4: A forced move

If Black wants to prevent White from making four-in-a-row, he must place a stone at ‘a’, thus making a three-in-a-row and losing! This is called a ‘forced move’. So the goal of the game is not so much to create a four-in-a-row (which could easily be blocked), but to create a situation in which the opponent is forced to make a three-in-a-row and thereby lose the game. This is the first “aha!” moment that players typically experience. Se second “aha!” moment comes when you realise that you can use such forcing moves to manipulate your opponent into a losing position. The following challenge is a good example for this.

Challenge 1 (easy): White to play and win in three.

Figure 5: White to play and win in 3

Now that you’ve grasped the basics, let’s dig a bit deeper into what LUDI achieved. LUDI found a constraint (3-in-a-row is forbidden) that is a subset of a goal (4-in-a-row wins). So in order to reach your goal, you have to find alternate paths that are not forbidden, while subsets of your goal are¹·³. LUDI created a set of rules that makes you think ‘out of the box’²·¹; simply making your line longer is not enough.

Figure 6: Think out of the box in order to reach your goals. The forbidden pattern is indicated in red.

But LUDI, even being a groundbreaking piece of technology, was just a prototype of what will²·² come in the near future, and thereby had its flaws. In 2012, while testing the AI that LUDI used to play the games, I found a way to consistently beat it when playing White, in seven turns at most. LUDI’s AI had some issues when dealing with short-term threats.

Challenge 2 (hard): Find a sequence of seven moves that guarantees a win for White (this was posted online, so don’t cheat).

Fortunately we fixed this problem by adding the pie rule to the game, which is often used in game design to counteract a first player advantage. After White’s first move, Black has the choice of either swapping colours – effectively stealing the first move – or continuing with their move as usual. This discourages White from making an overly strong opening move, i.e. near the board centre in this case.

Yavalath has inspired a plethora of new games. In case you don’t have a hexagonal board handy, don’t want to draw one, or wish to play a shorter game, here is a small Yavalath derivative of my own design that can be played on a small square board.

SQUAVA

Squava is played on a 5×5 square board according to the same rules as Yavalath. Lines can be horizontal, vertical or diagonal. I came up with this variant while trying to solve the ‘strong centre’ problem; in Yavalath the board centre is a powerful opening move, whereas in Squava it might be a bad idea. Can you see why? I also had to reduce the size of the board, as Squava has four available directions (horizontal, vertical and two diagonals) instead of three (as in the hexagonal Yavalath), making White unstoppable on bigger boards.

Figure 7: White wins.

Challenge 3 (hard): Can you find a winning Squava strategy for White or Black?

Please post your answers in my forum and I will reward the best post with a copy of one of my games! I’m looking forward to discussing your findings. Thank you for reading!

 

———————————————————————————–

1.1 Cameron Browne is now a researcher for the Computing Department of Goldsmiths, University of London, member of the ‘UCT for games and beyond’ project, outstanding game designer and a good friend. My acknowledgements to him for checking and approving this article.

1.2 LUDI creates names for its games using Markov chains based on letter combination frequencies in a list of Tolkien-style names from the game Angband.

1.3 Sounds familiar? Satoshi Nakamoto did the same thing on a way bigger scale recently.

2.1 You might wish to check out issue 12 of Bitcoin Magazine or the online article here, where I describe a puzzle that uses another goal-but-not-subset mechanism.

2.2 Stay tuned. We’re on it.

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Disclaimer: Vitalik Buterin and Mihai Alisie have some involvement in the Dark Wallet project

The Bitcoin Dark Wallet has been all the rage in the Bitcoin news these past few days. While the media was abuzz with claims that Bitcoin is finally abandoning its cryptoanarchist past and going mainstream, and cashless society advocate David Wolman writing an article in Wired calling for increased centralization, this collaboration between Cody Wilson’s Defense Distributed, unSYSTEM and Coinpunk seems to have fired a shot out of left field in the exact opposite direction. In the project’s Youtube video and project page, its organizers have denounced the Bitcoin Foundation as “a group of corporations and lobbyists … trying to both agree with and maintain an independence from regulatory power”, accused Bitcoin developers like Mike Hearn of “active collusion with law enforcement” and created and advertised a project to make a wallet with the explicit intent of “locking out the State [and] flipping the channel to one beyond observation”. The project page lists dozens of articles and manifestos on topics ranging from open source software to direct democracy and anarchism and links to examples of what the Dark Wallet’s creators see as explicit attempts by the “core” Bitcoin community to marginalize the radical extremes.

Amidst all of the ideological grandstanding and inevitable backlash, however, there has been surprisingly little talk of what the Dark Wallet actually is, and what Amir Taaki, Cody Wilson and its other creators intend to achieve on a practical level. At the core, Dark Wallet is going to be a Bitcoin wallet that exists entirely as a Chrome and Firefox browser extension, allowing Bitcoin users to make payments online much more conveniently than was possible before. Imagine double-clicking on a Bitcoin address, double-clicking on a price, and being able to send the payment right there. No tab opening or separate applications required. Currently, there is only one browser-extension Bitcoin wallet that continues to be seriously maintained, blockchain.info, and its interface is essentially equivalent to a web page; Dark Wallet, on the other hand, will be the first wallet to take the concept of an in-browser wallet and truly bring it to the next level.

Second, and arguably more important, is the “dark” part of Dark Wallet. In what way exactly is Dark Wallet dark? The answer is simple: built-in trustless mixing. Mixing services in general are an essential complement to the anonymity properties that Bitcoin has today to preserve privacy. The problem that they solve is this: although Bitcoin allows anyone to easily create an account and start making transactions without providing any personal information whatsoever, what it does not do is hide the actual transactions. Every transaction that takes place through the Bitcoin network is public, and is remembered in the Bitcoin blockchain in perpetuity. Using this information, in theory it may be quite possible to de-anonymize some Bitcoin users after some time. In practice, mathematical analyses done by university research departments over the past two years have managed to successfully identify the Bitcoin exchange MtGox, the now-defunct online black market Silk Road and other large businesses, so the worry is that it is only a matter of time until smaller and smaller Bitcoin users start to be de-anonymized as well.

The way a traditional, centralized mixing service works is that it provides the user with an address to send bitcoins to, waits for the user to do so, and then sends an equal number of bitcoins (or perhaps minus a small fee), but from a different source, to the user’s desired destination address. The mixing service then deletes all of the data about the transaction once all the funds have been sent out. Because the user gets back different bitcoins from what they put in, the theory goes, mixing services break a blockchain sleuth’s ability to trace money through the system. The most popular mixer today is operated by blockchain.info, and charges a 0.5% fee for the service.

However, there are obvious problems with centralized mixing. The two most serious problems both revolve around the issue of trust. When you send money to blockchain.info, blockchain.info can theoretically simply keep the funds for themselves; you would have no way of proving that you sent money into the mixer, as the whole point of the mixer is to anonymize as much as pssible and leave no traces. More importantly, however, you can never be sure that blockchain.info actually deletes the data about transactions through the system once they send out the funds. Blockchain.info may well be quietly collecting the data, and selling it to the Chinese government – or simply giving it to the US government, under the force of a secret government subpoena or a national security letter. And finally, but somewhat more mundanely, centralized mixers often charge high fees; blockchain.info’s 0.5% is actually on the low side.

How can these problems be fixed? In essence, the answer is decentralized mixing. It is possible to create a mixing service with no central party, where users download specialized Bitcoin clients which come together on a chat channel over the encrypted Tor network and create a mutually anonymizing transaction with each other. If the process is done right, none of the users would be able to tell which output of the resulting mix belongs to whom. The simplest way to accomplish such a thing in practice is using the CoinJoin protocol, developed by Gregory Maxwell; two months ago, Amir Taaki and Pablo Martin created the first truly practical implementation of the protocol. In Dark Wallet, however, Taaki and Martin intend to take trustless mixing to the next level: the mixer would be integrated directly into the wallet, so its users can simply use the wallet and benefit from the privacy that trustless mixing offers automatically.

The third major feature of Dark Wallet will be a built-in identity system. The identity system will serve two purposes. First, it will serve as an alternative to traditional password-based and social network-based authentication schemes. Instead of relying on one of those schemes, authentication through Dark Wallet would be done with a relatively simple cryptographic protocol. When a user registers with a site compatible with the Dark Wallet authentication scheme, the wallet would send to the site the user’s public key. When a user wants to log in, the site would send the user’s wallet a message, the user’s Dark Wallet would sign the message with the user’s private key and send back the signature, and the site would verify the signature against the public key (for more on how public key cryptography works, see the Wikipedia article on the subject, or my own recent piece which, among other things, looks into the public key cryptography used in Bitcoin). Hopefully, some Bitcoin sites will be persuaded to adopt the scheme.

Further in the future, however, the identity system may serve as the basis for a cryptographically secure social network – which could then be used to implement the holy grail of “dark” privacy and security: a fully decentralized, private and uncensorable crypto-market, with a powerful reputation system for consumer protection built in. Will such a crypto-market be “just for drugs”? Just like Bitcoin, probably not; regular users can still benefit from such a market’s near-zero fees, friendliness to automation and the assurance that there is no central third party that they need to trust to keep the market online and not defraud them.

Ultimately, however, the Dark Wallet project is about more than just the wallet. As Amir Taaki describes it, the ultimate aim is to build a community, which will stick together and continue to develop tools for the Bitcoin community even after the original project is done. “[I want to] create an environment where creativity and merit thrive,” Taaki explains. “So, create the space where we can operate, put all the talented people there, and the magic will happen by itself. Planning is premature because maybe everyone else has different ideas on how things will go.” Alongside Dark Wallet, some of the other projects that will take place include a concerted effort to bridge together the Python Bitcoin software tools (currently consisting of Electrum, Robert Williamson’s Block Alchemy, Pablo Martin’s pure python ZeroMQ implementation and Obelisk client and my own pybitcointools, among many others), development on libbitcoin and SX and the continued effort to convert the project’s de-facto homebase, Calafou, into a fully-fledged unSYSTEM project incubator. “This is the story we need to get out,” Taaki writes, “one of cooperation and mutual solidarity between competitors finding middle ground to make effective use of resources. This is the power and beauty of openness.”

Is the project’s extremist ideological marketing and image unnecessarily repelling people who would otherwise be interested in cooperating? Perhaps so. On the other hand, Dark Wallet has already been covered by Forbes and the project has received over $20,000 in donations in under two days. Furthermore, one of the project’s partners, Coinpunk, is the recipient of a grant from the very same Bitcoin Foundation that Taaki and Wilson are so keen to criticize. Perhaps, beneath the disagreements and the rhetoric, there is a set of common ideals shared by many members of unSYSTEM and the Bitcoin Foundation alike, and there is actually much more room for cooperation between the business-focused entrepreneurial community and the cryptoanarchists, the seemingly two great factions of the Bitcoin divide, than we think.

The state of Bitcoin in Australia is strong. The local Bitcoin economy is the healthiest it has ever been. Its newly incorporated custodians – The Bitcoin Association of Australia – plan on keeping it that way.

A talented team of Bitcoiners has assembled and incorporated Australia’s not-for-profit organisation, preserving, protecting and nurturing the community down-under. While, at the same time, forming strong international alliances and regional bonds.

They are currently over-seeing a host of important projects.

The Association’s governing committee consists of entrepreneurs and developers with both breadth and depth of experience. Specifically:

• Martin Bajalan: A B.Sc. in applied mathematics with 14 years experience managing and developing enterprise level software products in payment processing. Martin is developing a trading platform for digital currencies, launched in September 2013.

• Max Kaye: A programmer with a vast array of experience dealing with crypto-based technology; running a NMC/BTC mining pool and experimenting with trustless exchange.

• Adam Poulton: An entrepreneur holding a Degree in Applied Science with a strong interest in money and macroeconomics. Martin is developing a Bitcoin startup, currently in beta, designed to integrate Bitcoin into people’s daily lives.

• Pantelis Roussakis: A digital marketing strategist and consultant for business and government. Pantelis is building the Artbits project. With a view to help artists leverage digital currency, by bypassing the arbitrary penalties imposed by the archaic financial system.

• Bret Treasure: An online marketing consultant and Chairman of the Australian Web Industry Association. Bret brings years of experience with foundations and virtual payment systems.

• Leo Treasure: A long-time active participant in the Bitcoin community; mining, investing and making Bitcoin themed electronic music. Leo is currently importing 25 Lamassu machines into Australia.

• Jason Williams: A developer heavily involved in emerging technologies from their early stages, including cable Internet. Jason is the prime organiser of the Bitcoin Sydney meet-ups. He is also responsible for Australia’s first bricks and mortar Bitcoin establishment and coding their POS.

• Tristan Winters: An agricultural commodities trader holding degrees in law and economics. Tristan is a self-described libertarian. He is actively involved in the Bitcoin community in Australia and Europe, across several projects. Including the libbitcoin implementation of the Bitcoin protocol.

In Australia there exists an excellent opportunity to develop Bitcoin in the Commonwealth and the Asia-Pacific region. This is the Association’s focus.

There has been little in the way of legal guidance thus far. It is certain, however, that authorities are aware of the existence of crypto-currency and are monitoring it closely.

The Association’s Martin Bajalan describes an interesting though not unfamiliar experience establishing an exchange in Australia. The organization in charge of AML/KYC in Australia is called Austrac and generally any financial organization would have to register with them and follow AML policies.

In contacting Austrac, in order to help classify Bitcoin markets as one of the existing categories of financial services, the response from Austrac has been consistent. That is: “Bitcoin is not backed either directly or indirectly by precious metal or bullion and therefore such digital currency is not covered by the AML/CTF Act”.

The Act was created in 2006, with an expiry date of 2013. Bitcoin’s genesis was in the interim. So it is reasonable that the previous act did not cover Bitcoin. Max Kaye of the Association notes that The Act is “outdated” and the Association is dedicated to helping bring it into the modern era “as Bitcoin-positive as it can be”.

The association respects the revolutionary promise of Satoshi’s original protocol. Nevertheless, it is not necessarily averse to engaging authorities, where appropriate. It is certainly a delicate balance to strike.

Exchange and kiosk machines are probably the most difficult part of the regulatory landscapes to navigate. In showing a commitment to maintaining proper compliance, Martin Bajalan, by example, is working with a leading organization in ID verification. The company is approved by the Government and assists in maintaining compatibility with Austrac for AML/KYC regulations.

Overall, the Association’s leadership is capable, bringing hope for peace and progress with Australian regulators.

For now the Australian Foundation will direct its attention in three fundamental directions. Firstly: education, as a means of awakening the people to the importance of crypto-currency. For their lives, their prosperity and the future their children will inherit.

Secondly: the Foundation will, where needed, face regulators confidently. They will no doubt desire to preserve their old and enduring values and institutions. The Association will take them in its capable hands and lead them to the future.

Thirdly: project development. Bitcoin is, fundamentally, an open-source project and the most promising peer-2-peer network on earth. This is its source of strength. The Association will foster projects that capitalize on that strength.

Big government is a concern for Bitcoin globally. It is no different in Australia and the Asia-Pacific region. With capable foundational leadership the Australian Association is facing this peril head-on. While, at the same time, “fostering the natural social structures that could form around an economy based on Bitcoin”, as the Association’s Max Kaye notes.