Bitcoin Money
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Forbes - Lex Mercatoria: Self-Regulation and Bitcoin
Forbes columnist Jon Matonis (@JonMatonis) describes essentially how Bitcoin and its community are managing through setbacks that would otherwise devolve into law enforcement actions, lawsuits, and government regulation. Excerpts:
“Bitcoin entities and their customers currently operate under their own brand of lex mercatoria to enforce accountability.”
“We are actually in the midst of such a case right now as the leading Bitcoinica parties attempt to sort out the claims process to the best of their abilities with limited account records. There is no court. There is no judge. Bitcoin is not defined as legal property.”
“It is clear that a sort of ‘digital’ lex mercatoria is emerging — one that recognizes the complete voluntarist nature of the bitcoin protocol in commerce. We don’t have to imagine The Enterprise of ‘Law: Justice Without the State’ because we are living through it now.”
“The beatings will continue until security improves.” -
The Bitcoin Trader - Bitcoin's Liquidity: A Third Look
GoWest of The Bitcoin Trader (@GoWestBTC) looks at how much sway $50K USD has when buying or selling bitcoins today versus previous points in time. Excerpts:
“The market is looking considerably more stable. Today, a $50,000 purchase would only move the price from $5.11 to $5.16, a 1% increase.”
“The Bitcoin market has clearly matured significantly, making it increasingly stable and usable as a currency; something many merchants have been waiting for before deciding to accept Bitcoin.” -
![Gone With The Cloud - Bitcoinica Made No DB Backups
Revealed today was something that many traders had begun to suspect — Bitcoinica kept no “off-site backups”. Not only did Bitcoinica’s hacker steal 18K BTC of funds (worth about $80K USD) but that individual had also deleted the Rackspace Cloud Server instances which held the service’s customer account and transaction history databases.
The financial service’s USD funds remain intact and 80% of their bitcoin funds were kept in an offline wallet, so the only remaining gap that would have been needed to make customers whole was the remaining bitcoin funds (about $80K USD worth). Without the customer and transaction databases though, the service will have a hard time verifying customer claims. The claims form asks customers to provide their USD and BTC balances and to choose the qualifier “Exact”, “Approximate” or “Guess”.
At the time of the hack, many accounts still had open positions in the service’s BTC/USD contract for difference market (being either long or short the BTC/USD) so those account balances will be affected by gains or losses when those positions are closed out. Presumably this will be at the level just under the $5 spot where the BTC/USD was at when the service was hacked. The claim form asks for the net position and the cost basis for those open positions. Most individual traders do not keep this type of information to be able to provide an accurate claim.
The service’s founder, teenage college-student Zhou Tong, is no longer a part of the organization but is providing information as to what records the service might have available to help administer account recovery. The service reportedly still has its e-mail messages which sent out verifications for deposits, withdrawals and transaction executions as well as in/out transaction information with financial partners and includes bank transactions as well as redeemable code transactions that transfer funds to and from Bitcoin exchanges.
Organizations that handle customer’s funds don’t often trust cloud computing for their customer financial transaction data. This was the second security incident that Bitcoinica had where root access to cloud infrastructure was achieved using attack vectors that wouldn’t normally be available for self-managed systems. As far as recovering, even those organizations that do use cloud infrastructure are advised to have sufficient archives with a recovery plan to recover should the cloud provider have technical issues or should some other service problem arise.
It is possible that the hacker still holds a copy of the database though no public leak has occurred, even though the hacker has communicated in a unique way the message “expect mass leak soon”. Nearly all the stolen bitcoin funds appear to remain unspent by the hacker, though some amount of the funds were given away Robin Hood-style recently.
The service reported that it had about 5,000 accounts though some of those accounts would have low or no USD and BTC balances (e.g., under 1 BTC and/or under $5 USD). Additionally, some accounts still hold negative balances. That can occur for accounts that use the highest leverage levels but see forced margin call trading occur during periods when there is great exchange rate volatility.
Many of these accounts were opened with no more information than an e-mail address. To claim funds, more complete information is required, and in many instances where the claim amounts to any funds of significance it is likely a photo ID will be required.
There will be a few accounts where a lot of money is involved. A few months ago the service had begun offering interest on USD and BTC balances to attract a wider level of liquidity that would be used for providing leverage to Bitcoinica’s customers.
Earlier this week a forum user “tseale” (possibly by Tihan Seale, who is already known for his investment in Bitcoin startup CoinLab) posted information that has yet to be confirmed. The statement asserts that Bitcoin Consultancy is a General Partner in Bitcoinica LP. Bitcoinica LP was registered as a Financial Services Provider in March.
The Bitcoinica service had been wildly popular and it had days where nearly a million dollars worth of positions were traded. For a period of time, those volumes were second only to Mt. Gox, Bitcoin’s largest exchange. There had been plans that Bitcoinica will be reopening but that will depend on a few factors Servicing customer claims is the organization’s first priority and the amount of time it will take to implement proper security measures before reopening is unknown. As the details emerge of what security and processes had been employed the organization may find it difficult to regain customer’s trust.
A competing “forex-like” service, Kronos.io, is likely to end up with a head start over a re-opened Bitcoinca, though there is likely sufficient demand for leveraged trading that more than one service could operate profitably. Having multiple, separate, providers may even bring stability as leverage extended to Bitcoinica’s customers came from the organization’s own reserves which were often insufficient for the level of demand. Traders frustrated by insufficient reserves at Bitcoinica previously had few options elsewhere.
Little did they know at the time that insufficient reserves were about to become the least of their problems.
[Update: A later reply by Zhou Tong in that forum thread does reference “all kinds of records” and specifically describe a set of older records being available which can help in the account reconstruction process. The as-of date for that set of records is purposely not being shared for obvious reasons.]
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Gone With The Cloud - Bitcoinica Made No DB Backups
Revealed today was something that many traders had begun to suspect — Bitcoinica kept no “off-site backups”. Not only did Bitcoinica’s hacker steal 18K BTC of funds (worth about $80K USD) but that individual had also deleted the Rackspace Cloud Server instances which held the service’s customer account and transaction history databases.
The financial service’s USD funds remain intact and 80% of their bitcoin funds were kept in an offline wallet, so the only remaining gap that would have been needed to make customers whole was the remaining bitcoin funds (about $80K USD worth). Without the customer and transaction databases though, the service will have a hard time verifying customer claims. The claims form asks customers to provide their USD and BTC balances and to choose the qualifier “Exact”, “Approximate” or “Guess”.
At the time of the hack, many accounts still had open positions in the service’s BTC/USD contract for difference market (being either long or short the BTC/USD) so those account balances will be affected by gains or losses when those positions are closed out. Presumably this will be at the level just under the $5 spot where the BTC/USD was at when the service was hacked. The claim form asks for the net position and the cost basis for those open positions. Most individual traders do not keep this type of information to be able to provide an accurate claim.
The service’s founder, teenage college-student Zhou Tong, is no longer a part of the organization but is providing information as to what records the service might have available to help administer account recovery. The service reportedly still has its e-mail messages which sent out verifications for deposits, withdrawals and transaction executions as well as in/out transaction information with financial partners and includes bank transactions as well as redeemable code transactions that transfer funds to and from Bitcoin exchanges.
Organizations that handle customer’s funds don’t often trust cloud computing for their customer financial transaction data. This was the second security incident that Bitcoinica had where root access to cloud infrastructure was achieved using attack vectors that wouldn’t normally be available for self-managed systems. As far as recovering, even those organizations that do use cloud infrastructure are advised to have sufficient archives with a recovery plan to recover should the cloud provider have technical issues or should some other service problem arise.
It is possible that the hacker still holds a copy of the database though no public leak has occurred, even though the hacker has communicated in a unique way the message “expect mass leak soon”. Nearly all the stolen bitcoin funds appear to remain unspent by the hacker, though some amount of the funds were given away Robin Hood-style recently.
The service reported that it had about 5,000 accounts though some of those accounts would have low or no USD and BTC balances (e.g., under 1 BTC and/or under $5 USD). Additionally, some accounts still hold negative balances. That can occur for accounts that use the highest leverage levels but see forced margin call trading occur during periods when there is great exchange rate volatility.
Many of these accounts were opened with no more information than an e-mail address. To claim funds, more complete information is required, and in many instances where the claim amounts to any funds of significance it is likely a photo ID will be required.
There will be a few accounts where a lot of money is involved. A few months ago the service had begun offering interest on USD and BTC balances to attract a wider level of liquidity that would be used for providing leverage to Bitcoinica’s customers.
Earlier this week a forum user “tseale” (possibly by Tihan Seale, who is already known for his investment in Bitcoin startup CoinLab) posted information that has yet to be confirmed. The statement asserts that Bitcoin Consultancy is a General Partner in Bitcoinica LP. Bitcoinica LP was registered as a Financial Services Provider in March.
The Bitcoinica service had been wildly popular and it had days where nearly a million dollars worth of positions were traded. For a period of time, those volumes were second only to Mt. Gox, Bitcoin’s largest exchange. There had been plans that Bitcoinica will be reopening but that will depend on a few factors Servicing customer claims is the organization’s first priority and the amount of time it will take to implement proper security measures before reopening is unknown. As the details emerge of what security and processes had been employed the organization may find it difficult to regain customer’s trust.
A competing “forex-like” service, Kronos.io, is likely to end up with a head start over a re-opened Bitcoinca, though there is likely sufficient demand for leveraged trading that more than one service could operate profitably. Having multiple, separate, providers may even bring stability as leverage extended to Bitcoinica’s customers came from the organization’s own reserves which were often insufficient for the level of demand. Traders frustrated by insufficient reserves at Bitcoinica previously had few options elsewhere.
Little did they know at the time that insufficient reserves were about to become the least of their problems.
[Update: A later reply by Zhou Tong in that forum thread does reference “all kinds of records” and specifically describe a set of older records being available which can help in the account reconstruction process. The as-of date for that set of records is purposely not being shared for obvious reasons.]
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Discount For Cash - Advantage: Bitcoin
For a merchant, Bitcoin has properties that are advantageous over other payment networks. These advantages make it so that it costs the merchant less to accept payment in Bitcoin than it costs to accept payment using other payment networks.
Some gas stations in the U.S., for instance, are cash or debit card (ATM) only. Others will have signage displaying two separate prices, a cash price that includes a discount, and a higher price for those paying with Visa, Mastercard, American Express, etc.This is because for every $100 worth of credit card transactions, the merchant gets only an amount in the range of $97. The difference is withheld from the merchant and become fees paid to the payment processor.
For customers, this discounted price difference is enough to cause them to patronize the merchant offering the discount. As a result, retailers can use a cheaper payment system to gain an advantage over their competitors.
With Bitcoin, transaction fees are paid by the customer sending payment. This is in contrast to traditional payment systems where fees are subtracted from the amount delivered to the merchant. Because Bitcoin transaction fees are ridiculously low (usually under a penny, regardless of the amount being sent) customers don’t even factor transaction fees in when considering payment alternatives.
Additional savings to the merchant comes from the fact that with Bitcoin, there is no concept of a chargeback.The BItcoin payment network protocol simply does not support any mechanism that would allow the customer to dispute a payment where the transaction could later be reversed. If the customer is due a refund, then the merchant simply creates a new transaction to return funds to the customer.
For businesses without access to credit or whose cost of capital is expensive, Bitcoin payments have another big advantage — fast settlement.Bitcoin payments received by a merchant can be used for spending within minutes. Compare this to payment networks where funds don’t settle for several days, or worse — systems like PayPal and Stripe which employ multi-day holds on funds as a fraud prevention measure.
Some of the critique of Bitcoin from economists is based on Gresham’s law. They may argue that if bitcoin is expected to rise in value, a consumer will consider bitcoins to be “good money” and will instead choose to pay with another form of payment. If the cash discount is considered in the equation however, bitcoins become the preferred payment method for the consumer.
Consumers can easily replenish funds in their Bitcoin wallets thanks to the links between banks and exchanges.
Merchants who accept bitcoins should be able to offer enough of a discount to make the payment alternative attractive enough for the customer to choose it yet at the same time keep the discount no deeper than necessary causing sales where bitcoins were used to be more profitable than any others.
While there are hundreds of merchants that accept bitcoin payments, few have offered a discount, particularly for those in low margin businesses.
The first merchants to start offering discounts for bitcoin payments are starting to arrive, however.
Tangible Cryptography has begun offering prepaid wireless refills at a discount. With a list of two dozen mobile carriers including T-Mobile, Verizon, AT&T and more (mostly just U.S.-based carriers though, for now) nearly every subscriber for prepaid wireless service can save by paying for the next refill with bitcoins.A $50 T-Mobile refill e-code is available for $49.50 worth of bitcoins, for instance. Larger discounts are available for larger purchase denominations (e.g., 2.5% discount on the $100 card.)
Tangible Cryptography is now the second source for prepaid wireless, as BTCBuy.info started offering wireless refills weeks ago, though not at a discount.
Until there is a first wave of merchants successfully converting Bitcoin’s cost difference into market share gains, top tier eCommerce such as Amazon, NewEgg, and eBay will probably not consider accepting bitcoins directly. Fortunately, there are options for these now with SpendBitcoins (Amazon, eBay, Costco, Kroger/Ralphs/etc.) and BTCBuy.info (NewEgg) such that when these e-Code sales volumes rise to sufficient levels the companies might realize there is profit to be made when accepting bitcoins directly.
Other intermediaries such as GiftCoin.net (Starbucks, Quiznos, Chevron, Target and dozens more) are able to charge a premium even for converting bitcoins to cash (prepaid gift cards). To these retailers, that’s money they could be earning themselves. It may be just a matter of time before they come to the same conclusion.
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Bitcoin “Stock Markets” - It’s Time To Have A Chat
Over a year ago a Bitcoin-related service named GLBSE (an acronym for GLobal Bitcoin Stock Exchange) had launched. The reason for building this exchange system was described by one of GLBSE’s founders quite clearly:
The market, when it comes will be in an unknown location. Backed up, encrypted, anonymous, secure. Away from the hands of any typical terrestrial law enforcement agency. And nothing short of banning cryptograhy and turning off the internet in most countries worldwide would be able to stop this one it begins.
A bitcoin stock market, will involve 0 law, it will evolve and grow at a much faster rate than any normal stock market without so much overheads or red-tape holding it back.
And that is the system that was built. But it didn’t necessarily thrive. It did, however, become the stepping stone that brings us to GLBSE v2, launched in March. With this release, the exchange became much more usable. Buying a GLBSE-listed asset is now easier than buying a book from Amazon.
This enabled a broader user base which then brought greater investor interest. The number of “assets” that are listed on the market exchange has exploded since v2’s launch and there are several entries showing per week on the “IPO” schedule.
The first bit of evidence indicating how successful GLBSE would be with this new audience came when the “IPO” for the GIGAMINING “asset” occurred. The IPO raised for its issuer tens of thousands of dollars worth of capital, in bitcoins — the currency used for all GLBSE transactions. The GIGAMINING asset continues to trade above the price from the IPO.
These asset size levels are much higher than many would have believed possible after watching the boatload of fail for investments made through GLBSE v1.
The inflow of bitcoins since that IPO launch have been steady. A table of asset valuations from GoWest (@GoWestBTC) indicates there is over a half million dollars worth of “asset” shares now in just the top half of the exchange’s listed assets.
As far as equity markets go, that amount is still a trivial amount of funds — less than a rounding error even. Last Friday’s Facebook IPO alone was 200,000X larger than the current value of all assets on GLBSE combined. The amount of money in GLBSE assets is enough though to begin stirring interest in wider circles than just the Bitcoin community which was exclusively GLBSE’s initial base.
And that is why it is becoming necessary to see a greater amount of conversation about what this “stock market” is now and what it becomes.
The author of this post is not qualified to know what that conversation needs to include, but is qualified to see that there are a few turds floating in the punchbowl. Instead of this Bitcoin “stock market” being a rapidly advancing innovation for capital formation, there is instead a growing concern that the whole place is becoming a cesspool.
Progressively more and more bitcoins are being invested in “funds” listed on GLBSE as assets. These funds might be acting as feeder funds dependent on a larger underlying investment. If this is what truly is occurring, these things usually end badly.
When the Bitcoin digital currency first caught the media’s attention, there was intense scrutiny into every conceivable aspect that Bitcoin touched. The amount of discussion from technical, legal, political, and economic angles was expected, warranted and truly useful in helping Bitcoin rest on a more stable base.
Conversation on various topics regarding GLBSE (and with related markets such as MPEx) are nearly absent though and information on each listed “asset” is usually sparce. For instance, what does an investor holding a share of a listed asset really own?
Investors seem to proceed with the belief that these “asset” listings closely resemble the concept of stocks or other security investments made in the regulated world. We might blame Kickstarter for that.
Kickstarter in its initial form is a platform that simply allows a donation towards a project where the donation earns some type of reward. Without there being equity there need not be the concept of a corporation as issuer. Equity markets are not equity markets without the concept of a corporation which can have ownership shared by its equity investors.
Without this concept of a corporate entity there is then little parallel between an asset listed with GLBSE and a company that trades on a regulated exchange. But when a GLBSE “asset” fails financially or the issuer defrauds, some investors feel the issuer has responsibility for the capital invested into the cyber-equity. These investors may believe that there is responsibility that extends to the real world. Already occurring is evidence of pressure by investors being applied against individuals who had been issuers of assets where financial losses were the result.
The purpose of this post is to try to raise awareness that should there be any doubt, a $100 investment into a GLBSE “asset” is vastly different than a $100 investment into a Nasdaq or pink sheet (OTC) stock even. There needs to be conversation about this difference each and every time the words “equity”, “fund”, “dividends”, “shareholder”, “stock”, “company”, “capital’ and “investment” are used.
There are some good “assets” listed on GLBSE and many more will be forthcoming. But don’t make the mistake of thinking that of any of these “assets” are “equities” in any shape or form.
These investments are either donations that come with benefits (à la Kickstarter) or they are speculative gambling at the cheapo casino. There is nothing in between.
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Q: who can I use to buy bit coins with my cell phone
A:
Presumably you are asking how to buy bitcoins using SMS where the payment goes through the mobile provider?
Carrier billing is a very expensive method to acquire bitcoins. But if the size of the purchase is small enough the convenience using that method may outweigh the higher cost.Btc-Direct.fr offers bitcoins using SMS billing in two dozen countries. My Wallet from BlockChain.info/wallet also offers an SMS deposit method (max one purchase per-month).
In most areas, there are preferable methods for buying bitcoins. In the U.S., cash can be deposited at a bank and the link to claim the bitcoins would arrive via e-mail thanks to that service by BitInstant and their partner Coinapult.
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Slideshow - The Evolution of E-Money
Jon Matonis (@JonMatonis) presented this slideshow on E-Money and Bitcoin at ITWebSec in Johannesburg, South Africa:
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SWIFT White Paper on Mobile Payments
Interbank messaging network SWIFT put out a white paper identifying opportunity for its bank industry customers to build and deploy regional and global mobile payments technology and services. The paper includes the photo used in this post which surveys the innovators in the mobile payments space. Excerpts from the paper:
Out of a world population of 7 billion, over 5 billion or 70% have a mobile phone, whereas only 2 billion or 30% have a bank account. Take India: on a population of 1.2 billion over 800 million have a mobile phone and only 250 million have a bank account.
Deploying a mobile payments service is not straightforward as legal frameworks across countries are not harmonised.
So where is the next big opportunity? [Multiple factors including] population size (to develop a significant business), lead us for example to Nigeria, India, Pakistan, Brazil, Mexico and Colombia.
Not one single bank or mobile network operator covers the whole world, so there is a need for cooperation and partnerships.
Today, most mobile payments services are closed-loop systems whereby one customer cannot send a payment to a customer in another system, even within one country.
Because Bitcoin doesn’t need to be introduced to a country by a bank or mobile network operator and needs no government sponsor or prior approval it can start to become entrenched, organically. Bitcoin doesn’t need a bilateral agreement to have interconnectivity between the sender in one country and the recipient in another. Bitcoin used for mobile payments doesn’t need multiple variants, each different due to specific requirements before each target nation would grant approval.
Bitcoin is the one-size-fits-all mobile payments system that clears all the hurdles this SWIFT research and analysis presents.
Of course, Bitcoin yet has hurdles of its own to surpass. Apple yet once again has removed Blockchain for iPhone from App Store and referred the app’s developer to their legal department. There are technical issues relating to growth and griefing from cyberattackers that have plagued even this third-party provider’s service for its Android users over the past few weeks.
Additionally, unless the mobile network providers enter the bitcoin exchange business, the need exists to develop local Bitcoin exchanges in each area — something that would probably need to find its start in the unlikeliest of places before catching on elsewhere.
Bitcoin may first need to prove itself with at least one specific use as a currency or payment method before adoption would spread to parts of the world where Bitcoin is yet an unknown.
That may take some time yet or, perhaps, success with just one of the many opportunities for Bitcoin will cause subsequent fast track adoption globally.
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Bitcoin Magazine - Adam Kokesh on Bitcoin and Free Market Money
Ryan Taylor asks Adam Kokesh (@AdamKokesh) some questions in a post on Bitcoin Magazine. Excerpts:
“Adam: Bitcoin kind of throws a lot of people like us for a loop and we go “Wait, wait, wait a second! It’s just another fiat currency, right?” because there’s nothing backing it.”
“Adam: Bitcoin is proving itself, at least in this controlled market, as an alternative, to be extremely effective to provide people with a way to opt-out from the US dollar.”
“Adam: I’m surprised that there hasn’t been a serious government crackdown attempt on Bitcoin because it is a huge threat to the government fiat currency scam. It is a huge threat to the Federal Reserve.”
“Ryan: Do you think fractional-reserve banking could happen once Bitcoin stabilizes and gets enough usage?”
”Adam: […] I can only issue certificates and promissory notes and say ”Here’s a promissory note for one Bitcoin and if you bring this back, I will redeem it for a Bitcoin”. Then it’s based on the credibility of my institution and me as an individual, not on special privileges granted by government.””
“Adam: I don’t want to say what I want Bitcoin to be because it would be a meaningless stance when, really, what Bitcoin will become will be determined by the market.”- http://bit.ly/JlSUic
- https://www.adamvstheman.com/invest (with Bitcoin address) -
What’s Your SHTF Plan?
This video clip from the movie classic Trading Places shows the scene where Louis Winthorpe III (Dan Akroyd) is at a pawn shop having a hard time getting any amount of value for his seven thousand dollar authentic “Rouchefoucauld” hand-crafted watch.
In the film, Louis is reduced to poverty in an instant when all ties to his affluent life are forcefully cut as part of an experiment by his former bosses.
This scene tells a significant lesson, however. The pawnshop broker knows that every person that comes through the door with something to sell is desperate. Having the upper hand then the broker gives a lowball offer and resists any haggling on the price. Louis needs the pawnbroker’s cash much more than the pawnbroker needs Louis’ watch.
How many individuals don’t realize how little they’ve done to prevent themselves from becoming a Louis? Due to a sudden and unexpected turn of events, the concerns of a privileged life or even a middle-class one suddenly become no different from those of the very poor, including being forced to sell any assets that are not absolutely critical for survival and trading them for cash to buy goods and services that are.
Louis’ pawnbroker will only want just one or two luxury watches for his display case. The next Louis to come through the door might not even get a buy offer. Nowadays Louis might consider selling on eBay or HipSwap, but those services are not for the naive. Louis would be better off taking the $50 from the pawn shop than selling through an eBay auction to a $500 winning bid only for that amount to later get charged back once the buyer has taken possession of the watch.
Anyone paying any attention to the events in the world, particularly with what is happening in Greece, Spain and elsewhere in Europe does at least already have thoughts along the lines of “What will I do if the shit hits the fan (SHTF)?”.
What does a SHTF world look like? Does it turn into a ‘Mad Max’ or do things stay civil as a severe economic depression causes living conditions to collapse? Nobody knows. The problem is, by the time it is apparent things are swirling down the drain it is then too late to only begin trying to adapt to and survive the new realities of life. Only actions taken previously to prepare will help to avoid dire consequences once dependencies on institutions and other people start to fall apart.There are various degrees and forms of preparation and there is no shortage of advice on ways to prepare. What doesn’t get discussed enough is what life is like for those who failed to prepare once the SHTF actually occurs.
Even relatively trivial changes can become a catalyst towards insolvency and desperation for the unprepared. A large limit on a credit card is not cash, for instance. In 2008, credit card companies began to lower credit limits and do “involuntary credit card cancellations”. These cancellations meant people could no longer use their credit cards for new charges, even if they were current on their payments and hadn’t even been close to their previous limits. That situation alone is enough to start a downward spiral for the unprepared.
Even those who believe they are prepared may not be. A stash of gold and silver may cause a person to feel prepared for any eventuality, but when transportation and security become obstacles, even if the metals are traded the effort to do so lessens their usefulness. And just as Louis’ trip to the pawnbroker revealed, the buyer may have less desire to acquire the asset than the desire of seller wishing to unload it. This can cause a trade to occur at a value lower than the seller had hoped and planned for.Actions taken now can begin to prepare us for the scenario where instability reigns. Not coincidentally, Bitcoin has a place in these preparations. In addition to Bitcoin being a resilient payment network and also functioning very well as a store of value, Bitcoin and its ecosystem thrive in this future scenario — one in which there is the loss of trust.
For instance, Bitcoin transactions are non-reversible. Once a payment is received, there is no technical means for a chargeback to claw back the funds. There is a “confirmation” step that means the transaction shouldn’t be accepted as a payment for a period ranging from a few second to as long as an hour or so, but after confirmation the funds are secure. This means bitcoins can be accepted as payment from parties without needing their identity or any other mechanism to lessen the risk of loss to a fraudulent buyer.
The #bitcoin-otc marketplace is an IRC-based live market and order book that allows trading between pseudonymous parties, oftentimes from opposite ends of the earth. Though most buy and sell offers include bitcoin on at least one side of the trade, there is no requirement that Bitcoin be any part of the deal. For instance, a party with a Starbucks gift card might be willing to sell the card for Dwolla funds which opens up the market who can buy the gift card yet provides Dwolla funds for the seller which are easily convertible into bitcoins.This transaction is something that can occur without the need to trust a counterparty. To help lessen the chances of being defrauded, the #bitcoin-otc Web of Trust (WoT) includes ratings and trust histories. Preparations for a time in the future where banking systems fail and government protections are unavailable might include gaining experience with the #bitcoin-otc markeplace and earning a trust rating history.
The #bitcoin-otc marketplace and several other services in the Bitcoin ecosystem employ GPG authentication. This open source technology is also used with e-mail systems as well, through the use of a plugin for Microsoft Outlook or as an add-on for Thunderbird e-mail. With GPG (or PGP), a message can be encrypted and sent protected. This is important because the SMTP mail protocol through which most all email traffic passes uses only clear text, so your message is visible to your ISP and to any parties monitoring the traffic as the message is relayed to its destination inbox. In a SHTF environment, criminals will use technology to identify where the most lucrative targets exist and even use our own communications against us. Encryption keeps the message contents hidden.
Cryptography such as GPG can also be used to verify identity or to perform an action referred to as signing a message. For instance, spreadsheets and word processing documents are easily editable and changes that are made are hard to detect or prove — especially when transmitted electronically. The document could instead be electronically signed by the parties involved leaving no doubt as to the contents and the details which are relied upon when the document is a contract agreement, for example. When trust is harder to come by, methods to independently verify help to lessen the incentive for a counterparty to misbehave.
Escrow is another tool that becomes important when trust disappears. Escrow traditionally has not been offered inexpensively and thus is not yet widely used except for high-valued transactions. With bitcoin being non-reversible, the escrow process becomes significantly easier to offer. When escrow is used, buying from an untrusted seller even becomes possible. In addition to the Bitcoin ecosystem having trusted escrow partners, the bitcoin network itself can facilitate escrow thanks to a new feature referred to as P2SH.
And, of course, the use of bitcoins themselves are a necessary component to be able to take advantage of these services available through the Bitcoin ecosystem. Waiting to see whether or not Bitcoin takes off before buying them does not ensure that you can become prepared. The banking system could suddenly experience a crisis in which withdrawals to Bitcoin exchanges become restricted activity, for instance.
The only way to ensure you have spending power for that day is to acquire bitcoins in advance. By acquiring and then holding bitcoins locally (in a paper wallet even) one has an asset that is valued globally, yet usable locally. This asset becomes even more useful should the system deteriorate where institutions become unstable and trust deteriorates.
Holding bitcoins and learning how to transact where trust is nonexistent are the preparations not covered well elsewhere. With what is at stake however, starting preparations now would not be unwise.
![SWIFT White Paper on Mobile Payments
Interbank messaging network SWIFT put out a white paper identifying opportunity for its bank industry customers to build and deploy regional and global mobile payments technology and services. The paper includes the photo used in this post which surveys the innovators in the mobile payments space. Excerpts from the paper:
Out of a world population of 7 billion, over 5 billion or 70% have a mobile phone, whereas only 2 billion or 30% have a bank account. Take India: on a population of 1.2 billion over 800 million have a mobile phone and only 250 million have a bank account.
Deploying a mobile payments service is not straightforward as legal frameworks across countries are not harmonised.
So where is the next big opportunity? [Multiple factors including] population size (to develop a significant business), lead us for example to Nigeria, India, Pakistan, Brazil, Mexico and Colombia.
Not one single bank or mobile network operator covers the whole world, so there is a need for cooperation and partnerships.
Today, most mobile payments services are closed-loop systems whereby one customer cannot send a payment to a customer in another system, even within one country.
Because Bitcoin doesn’t need to be introduced to a country by a bank or mobile network operator and needs no government sponsor or prior approval it can start to become entrenched, organically. Bitcoin doesn’t need a bilateral agreement to have interconnectivity between the sender in one country and the recipient in another. Bitcoin used for mobile payments doesn’t need multiple variants, each different due to specific requirements before each target nation would grant approval.
Bitcoin is the one-size-fits-all mobile payments system that clears all the hurdles this SWIFT research and analysis presents.
Of course, Bitcoin yet has hurdles of its own to surpass. Apple yet once again has removed Blockchain for iPhone from App Store and referred the app’s developer to their legal department. There are technical issues relating to growth and griefing from cyberattackers that have plagued even this third-party provider’s service for its Android users over the past few weeks.
Additionally, unless the mobile network providers enter the bitcoin exchange business, the need exists to develop local Bitcoin exchanges in each area — something that would probably need to find its start in the unlikeliest of places before catching on elsewhere.
Bitcoin may first need to prove itself with at least one specific use as a currency or payment method before adoption would spread to parts of the world where Bitcoin is yet an unknown.
That may take some time yet or, perhaps, success with just one of the many opportunities for Bitcoin will cause subsequent fast track adoption globally.
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Forbes columnist Jon Matonis (@JonMatonis)...
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GoWest of The Bitcoin Trader (@GoWestBTC)...
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Having a great discussion on #Bitcoin (Wurde mit instagram aufgenommen)
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