Bitcoin Money

Mt. Gox Gets Goxed - Dwolla Account Seized By U.S. DHS

Tue, 14 May 2013 14:13:10 -0700

Mt. Gox Gets Goxed - Dwolla Account Seized By U.S. DHS:

In a post on BetaBeat by editor Jessica Roy (@JessicaKRoy) includes confirmation from Dwolla that funds held by Mt. Gox in the U.S. had been seized by the U.S. authorities. Excerpts:

“‘The Department of Homeland Security and U.S. District Court for the District of Maryland issued a ‘’Seizure Warrant’’ for the funds associated with Mutum Sigillium’s Dwolla account (a.k.a. Mt. Gox),’ [a representative from Dwolla] said. ‘Dwolla has ceased all account activities associated with Dwolla services for Mutum Sigillum.’”

[Note - Camp BX, based in the U.S., is the only other market exchange that allows accounts to be funded with Dwolla and performs withdrawal of USD balances to Dwolla. FastCash4Bitcoins performs cash-out service to Dwolla.]

- http://bit.ly/10wQRvI (Betabeat article)
- http://i.imgur.com/soOTB5N.png (Dwolla notice received by Mt. Gox customer)
- http://bitcointalk.org/index.php?topic=205370.0 (Further discussion on the development)

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Forbes writer, Kashmir Hill (@KashHill), invited Bitcoiners to...

Fri, 10 May 2013 12:14:00 -0700

Video: Kashmir Hill's Week Of Bitcoin

Forbes writer, Kashmir Hill (@KashHill), invited Bitcoiners to join her for a dinner at Sake Zone in San Francisco to celebrate the conclusion of her Week Of Bitcoin series of posts. In her video she interviews some of those who joined her.

Length: ~4 minutes

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Reminder: Hard Fork Coming May 15th, Backports Of v0.8.1 Fix Available

Thu, 09 May 2013 12:02:00 -0700

Reminder: Hard Fork Coming May 15th, Backports Of v0.8.1 Fix Available:

Released following the Bitcoin blockchain fork on March 11th 2013 was an updated v0.8 client (v0.8.1) that temporarily respects an undocumented limit found in all prior versions of the Bitcoin-Qt/bitcoind clients.

That temporary grace period ends and on May 15th 2013 (12:00 am UTC) any node that still hasn’t been fixed to remove this limitation will eventually find itself rejecting valid blocks from the Bitcoin blockchain. It is possible that these unfixed nodes will see block confirmations but those blocks will not be part of the longest chain so it is critical that no commerce continue on or after May 15th using a node that hasn’t been upgraded.

Release v0.8.1 of Bitcoin-Qt/bitcoind has been available since March 18th, 2013 and accommodates the May 15th 2013 hard fork properly. The fix has been backported to v0.7.3, v0.6.5, v0.5.8, and v0.4.9 clients as well.

- http://sourceforge.net/projects/bitcoin/files/Bitcoin/bitcoin-0.8.1
- http://bitcointalk.org/index.php?topic=199699.0 (Backports)

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letstalkbitcoin: Let’s Talk Bitcoin! is a show for users new...

Tue, 23 Apr 2013 23:44:00 -0700

letstalkbitcoin:

Let’s Talk Bitcoin! is a show for users new and old of Cryptocurrencies and the current king of them all, Bitcoin!

Listen to Episode 1 now at SoundCloud
Temporary URL: letstalkbitcoin.tumblr.com

[More …]

Covered is a fantastic discussion with Bradley Jansen of Freebanking.org in which regulation (including FinCEN’s guidance on Virtual Currencies) is discussed (beginning at about the nine-minute mark).

The podcast may be downloaded as an MP3.

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Oleg Andreev: How to keep your bitcoins safe

Thu, 11 Apr 2013 19:31:42 -0700

Oleg Andreev: How to keep your bitcoins safe:

oleganza:

This is a decent article describing the importance of taking measures to protect your bitcoins.

Many people spread a lot of FUD about speculative bubble, government intervention, potential backdoors in code and scalability issues in the future. But they never talk about real…

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Jeffrey Tucker - What Bitcoin Is Teaching Us

Wed, 10 Apr 2013 01:09:34 -0700

Jeffrey Tucker - What Bitcoin Is Teaching Us:

bitcoinnews:

Jeffrey Tucker (@JeffreyATucker), editor of Lassez-Faire Books and past editorial vice president of the Ludwig von Mises Institute, posts how deflationary currency brings a change to what we know about money. Excerpts:

“None of us in living memory has had experience with a currency that rises in value. The emergence of Bitcoin — a digital currency that has grown in purchasing power over time — has changed that experience dramatically.”
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“The 20th-century experience flipped our expectations for what money should do. Especially in the postwar period, the falling value of the dollar punished savings and rewarded spending. This is exactly what the Keynesian economists hoped for. They wanted money always circulating and never ‘hoarded.’ ‘Deflation’ was to be avoided no matter what.”
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“Bitcoin is often described as a ‘deflationary’ currency. This is exactly why Paul Krugman hates it so much.”
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“Here’s what beautiful about this experience: It doesn’t matter in the slightest what Paul Krugman thinks. It doesn’t matter how many economic experts Paul Krugman lines up to oppose Bitcoin. It doesn’t matter how many Nobel Prize winners denounce it and oppose it. That’s because Bitcoin is not a “policy” invented by elite and privileged intellectuals. It is a market-based currency, one created by an entrepreneur and chosen by market players.”
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“That is an essential postulate of the free society. When government gets hold of the money, freedom is in peril. When the market makes and manages money, freedom has a built-in reinforcement in half of every transaction. In short, just based on our experience with Bitcoin so far, we see the conventional wisdom of a century completely turned on its head. Fantastic!”

- http://lfb.org/today/what-bitcoin-is-teaching-us
- http://bitcointalk.org/index.php?topic=171577.0 (Further discussion of the article)

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Bitcoin Lied, Confirmed Transactions Died

Wed, 03 Apr 2013 14:02:00 -0700

Is there a lesson to be learned from the March 11th hard fork?

Bitcoin as a new technological and financial innovation might not have reached its current level of success had it not been able to make one specific promise: “Confirmed” transactions will never be reversed.

This isn’t an actual promise that is written anywhere but it is the widely followed practice of treating Bitcoin transactions that have reached the threshold of six block confirmations as being transactions that have attained this confirmed status. Once reaching this status the transaction is relied upon as being finalized and that the status can never change at any time in the future.

However last month, that presumption was false.

A customer of the payments company OKPay took specific, deliberate measures to effectively cancel a Bitcoin transaction after it had already confirmed. This transaction had a value worth over $10,000 USD at the time it was made. The transaction had confirmed with six confirmations and upon reaching that status OKPay then had delivered away, per the customer’s instruction, a $10,000 USD payment using another form of non-reversible funds.

Fortunately, in this instance, the customer did end up voluntarily returning the bitcoins and OKPay didn’t suffer much financial loss as a result but this illustrates the exposure to a risk that exists for those who accept Bitcoin for payment.

This risk that merchants, exchanges and individuals are exposed to is the double spending attack that comes as the result of either of two attack methods:

Brute force from a fractional amount of Bitcoin mining capacity combined with a bit of luck, or,
The overpowering force attained by matching or exceeding the entire sum of all existing Bitcoin mining capacity.

The latter is called the 51% attack because the attacker’s computational strength, once brought online, represents more than 50% of the total mining capacity network-wide.

These attacks can be successful because of Bitcoin’s decentralized architecture. A simplified way to describe Bitcoin is to equate it to being a ledger of value assignments.

A savings account at a bank might be described as being a ledger in the same manner where the ledger holds a record of all deposit and withdrawal transactions. However, with a bank account there are methods for the bank to reverse or cancel a transaction.

For example, if a check is deposited into a savings account but then the check bounces the bank would then later reverse the deposit transaction and might even instantiate a new transaction to assess a fee.

The Bitcoin ledger is designed to provide neither of these two capabilities to anyone, anywhere.

Bitcoin does this by using math to assess a relatively enormous cost for attempting to change the past record of the ledger transaction history.

When a transaction is included in a block in Bitcoin’s blockchain, and then additional blocks are built atop that block, only through the expenditure of a great amount of computational effort (and/or a significant amount of luck) can that historical record be rewritten. With each additional block extending the chain further, the amount of computational effort necessary to change the history becomes so extreme that any attempt to do so gets prohibitively expensive. Without an economically viable use case for performing such an attack, it is generally accepted that the threshold of six confirmations is sufficient to recognize a payment transaction as being settled.

Tens of millions of dollars worth of value are transferred daily now in which the recipients extend their trust based on the presumption that a confirmed transaction with six or more confirmations has reached its final, permanent status.

The March 11th Hard Fork

On that day at about 10:39 pm UTC a previously overlooked limitation in the Bitcoin client reared its head. Following that event some exchanges, merchants, and individuals were processing payment transactions unaware that part of the Bitcoin network wasn’t able to accept the historical record being produced. The Bitcoin blockchain had forked with one side after the split advancing relatively normally but the other side, using client software with the limitation, was following a different path of the blockchain and was advancing at a snail’s pace.

The fork was the result of new software — the version 0.8 Bitcoin-Qt/bitcoind client that had been released just a couple weeks earlier. The v0.8 client uses a different database engine and thus it was ignorant of the limitation imposed by a configuration setting used with all prior versions of the Bitcoin client. The new v0.8 client allowed a block to be built that prior versions of the client (pre-v0.8) couldn’t process.

Only a small fraction of the Bitcoin mining capacity was still using the pre-v0.8 client software however most merchants and exchanges had not yet switched over to v0.8. Many releases prior to v0.8 are still supported so a solution that wouldn’t exclude those users was needed.

Those using the v0.8 client were seeing transactions reported as having confirmed (with six or more confirmations) and at the time that was an accurate status. However unknown at the time was that this incident would be resolved through having a vast majority of mining capacity abandon the v0.8 client and then revert to a prior release (or to use an emergency patch hastily made available for v0.8 miners). This action would cause the confirmed status for those transactions to be meaningless — giving those exchanges, merchants, and individuals a false sense of security.

The defection by the miners was essentially a 51% attack as it was a conscious effort made to direct mining work to a forked branch that was not the blockchain tip that had the greatest height. However this was not done with malicious intent nor was it an attempt to defraud.

In the short term, much mining capacity is controlled and directed by a handful of mining pool operators. It took about ninety minutes before individual reports of trouble led to the realization that Bitcoin’s network had split. From there the Bitcoin-Qt/bitcoind development team began notifying some pool operators and exchanges as to the situation and others in the community delivered the alert through various informal communications channels including other IRC channels, Twitter, the BitcoinTalk forum and more.

Within a very short time frame some pool operators, including the largest — BTC Guild, concluded that the economic majority would not object to the pools abandoning the blockchain that was longest at the time in order for them to instead support the pre-v0.8 fork. The aim for this support was to cause that pre-v0.8 fork to gain a vast majority of mining capacity sufficient to quickly converge the chains causing that pre-v0.8 fork to become the new longest chain.

The presumption was that transactions that had become confirmed in the v0.8 side would also soon be included in the pre-v0.8 fork. But that would not be instantaneous nor was there a guarantee that it would occur for each and every transaction.

For about eight hours many transactions that had already confirmed on the v0.8 blockchain would not yet be included in blocks on the pre-v0.8 fork.

BitconTalk forum user “macbook-air” reported that after discovering this delay he created and broadcast an intentional double-spend transaction against OKPay to “void” his pior payment to them. That double spend transaction attempt made its way into a block, eventually, causing the original Bitcoin transaction (worth about $10K) to become forever invalid on the pre-v0.8 fork.

When the chains converged, the transaction that OKPay received and had seen as confirmed essentially then died. OKPay’s v0.8 client would then show the transaction with a 0/unconfirmed status and eventually the transaction would be purged. It would then appear as if the confirmed Bitcoin transaction worth over $10K USD had never occurred.

This was the first fork involving a confirmed transaction since an August 2010 incident — an event that had occurred before Bitcoin was being relied on for transactions of any significant economic value.

The Successful $10K USD Double Spend Attack

With Bitcoin using a peer-to-peer architecture, transactions made by a client node are communicated to only the peers that node happens to be connected to. Those peers each first verify the transaction is valid and then relay the transaction to the other peer connections. Within seconds most every Bitcoin client node in the world is aware of that spend transaction.

An attempt to broadcast a transaction that spends funds that have already been spent will not get relayed by that node’s peers because they will reject the transaction as a double spend. At least that’s the general design.

When a client node gets started or restarted it is ignorant of any transactions except those confirmed transactions in the blockchain it already knows about. When that node receives a transaction, it has no way of knowing if that transaction is being rejected elsewhere as a double spend and gladly adds that transaction to its memory pool for eventual inclusion in a block. With the Bitcoin-Qt client that transaction will be displayed as a 0/unconfirmed transaction. Normally this causes little problem because until a transaction has reached confirmed status, any merchants accepting payment on 0/unconfirmed (or anything less than 6 confirmations) are generally aware to not presume that the unconfirmed transaction is final.

A client node will hold a list of the transactions that have not yet confirmed but those transactions consume memory. This list of transactions are stored in what is called the node’s memory pool.

The tens of thousands of client nodes around the world are being run on computing hardware that ranges from enterprise-level server systems to the lowest end of the old spare laptops. To accommodate that range, the Bitcoin client purges unconfirmed transactions when valid newly arriving transactions would overflow the memory pool. This makes a node receptive to receiving, verifying, storing and relaying a double spend transaction that it previously might have rejected as being invalid.

Because nodes generally have only a few connections a particular node’s absent mindedness isn’t very harmful because that node’s peers will generally still know about the original valid transaction and will continue to reject the double spend.

When the mining pools and solo miners downgraded to pre-v0.8 clients or restarted with the emergency v0.8 patch, a large number of nodes started up around the same time and each started with a clean memory pool. This was a dangerous time for merchants and a forum post by a core member of the development team recommended that merchants stop processing transactions. For merchants and exchanges like OKPay that had already delivered value based on confirmed payment status, that message came too late.

The bitcoin client follows a protocol to protect against a number of denial-of-service attacks. Because of this, transactions propagate first with an initial transaction broadcast, and then only sporadically when the sending node realizes that some time has passed and the transaction has not yet been included in a block.

This gives a double spend attacker plenty of opportunities to repeatedly broadcast the alternate transaction in hopes that a transaction will reach a miner who will see the transaction as valid and then include it in a block. And that is exactly the approach macbook-air took — spewing the double spend transaction every ten seconds until either the original transaction or the double spend got included in a block. Within minutes of first trying, Macbook-air’s double spend was successful. The transaction that OKPay had seen as confirmed with six transactions was now invalid. The bitcoins OKPay had received were now gone.

Where’s The Flaw?

The bitcoin client evolves to protect against existing or anticipated threats. This unplanned hard fork scenario was not something impossible to envision however with the limited resources of a mostly all-volunteer development team, the risks and remedies for successful double spending in this type of situation might not have been given the proper attention deserved.

Even if this had been carefully thought through at one point in time, Bitcoin network activity changes over time. Recent scalability issues including both how blocks are now becoming full in increasing number as well as how transactions are being purged from each node’s limited memory pool sooner now are items that might not have been given proper weighting in any earlier studies of unplanned hard fork scenarios.

Should this same type of event occur today, some recommendations might be considered:

On startup of a node, allow the memory pool to be initialized first from a set of transactions. A set of transactions could have been prepared and made available to miners (or created by miners themselves) that included all transactions that existed in the soon-to-be-orphaned blocks, from where the fork began.
This is an emergency mode protection but since pool miners knew they were abandoning a chain in which merchants had already received transactions showing confirmed status this courtesy would have caused macbook-air’s later transaction to be seen as an invalid double spend.
Aggressively re-broadcast transactions from the abandoned chain, including those from that side’s memory pool. Essentially Macbook-air was more aggressive at broadcasting double spend transactions and won the “race” as a result.
It has not been publicly disclosed (and possibly something not even studied) why several hours after mining with the v0.7 client the miner that included Macbook-air’s transaction (again, BTC Guild) didn’t yet know of the previous transaction that OKPay had seen as confirmed on its blockchain, or if instead that transaction had been seen but later purged from the node’s memory pool.
The larger exchanges, merchant processors, and others might have the means and incentive to perform this added service to make sure transactions involving them get aggressively rebroadcast but that leaves vulnerable the individual merchants and traders. Perhaps a commercial service could provide this.
Re-evaluate whether six confirmations is enough. At the time the first alert was received on v0.8 clients, transactions in the soon-to-be-orphaned blocks had over a dozen confirmations. Perhaps merchants who deal in larger transactions and have no recourse against losses might wish to impose a confirmation threshold that has less risk. Requiring two dozen confirmations is something that could cause recognition of payments to be delayed for about four hours, but if OKPay had that policy they would likely have been alerted as to the problem long before sending out the USD funds that its customer had requested.
Lead developer Gavin Andresen was quoted as saying 24 hours (120+ blocks) is the threshold to be “100% safe”.

One thing to realize is that it doesn’t necessarily even take a software bug for a confirmed transaction to eventually become invalidated. In his paper Analysis of hashrate-based double-spending, Meni Rosenfeld describes how with just 10% of the hashing capacity of the Bitcoin network, one out of a thousand trials would cause a blockchain reorg for six blocks in which double spending of transactions with a confirmed status could be the result. With even greater hashing capacity, the number of trials needed decreases significantly.

Every party that accepts Bitcoin for payment has some degree of exposure to these double spending risks. The question about the risk isn’t being asked perhaps because no other payment systems are decentralized and the concepts of a “51% attack” and “race attack” are foreign and not easily explained.

It might be easy to dismiss the risk as with this very rare event there there were maybe only a few hundred transactions that were at risk anyway. And of those, there was just one successful double spend reported. This was the extent of the damage over several dozen months of continuous operation. But instead this might just have piqued the interest of those seeing for the first time a new attack vector and should this type of scenario ever play out again, the outcome could be losses that are much, much steeper.

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New Yorker's Maria Bustillos - The Bitcoin Boom

Tue, 02 Apr 2013 10:36:25 -0700

New Yorker's Maria Bustillos - The Bitcoin Boom:

bitcoinnews:

In one of her first contributions to NewYorker.com, Maria Bustillos (@MariaBustillos) excels with her introduction of Bitcoin for that site’s audience. Excerpts:

“[The fearmongering typical for most media coverage of Bitcoin] is a red herring, and has so far prevented the rational evaluation of the potential benefits and shortcomings of crypto-currency.”
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“Cash is also anonymous; it is also used in money laundering and illegal transactions. Like bitcoins, stolen cash is difficult to recover, and a cash transaction can’t readily be traced back to the source. Nor is there immediate recourse for the reversal of transactions, as with credit-card chargebacks or bank refunds when one’s identity has been stolen. However, I find it difficult to believe that anyone who has written critically of the dangers of bitcoin would prefer an economy where private cash transactions are illegal.”
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“‘I think if the U.S. government decided that Bitcoin was a bad thing and told me [to stop development of Bitcoin] I’d stop doing what I’m doing, quite frankly. But that wouldn’t be very effective […].’ [said Gavin Andresen] .”
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“In response to a question about his politics, Casascius’ Mike Caldwell had this to say:I am not an anarchist; I believe in the rule of law and a civilized society. But I also believe that unchecked power is a threat to the common good, and that anything that the public can do to challenge that power is a benefit to society. As an individual, if you accept bitcoin in exchange for your goods or your work, that is a vote for economic fairness’.”

- http://nyr.kr/14C8LEo
- http://bitcointalk.org/index.php?topic=164977.0 (Futher discussion of the article)

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Bloomberg TV's Sara Eisen - Bitcoin Fever

Thu, 21 Mar 2013 16:43:44 -0700

Bloomberg TV's Sara Eisen - Bitcoin Fever:

bitcoinnews:

Bloomberg TV’s correspondent and foreign exchange expert Sara Eisen (@SaraEisenFX) provides an update on Bitcoin for the Market Makers global audience.

- http://bloom.bg/11nEQiA
- http://bitcointalk.org/index.php?topic=155993.0 (Further discussion of the segment)
- http://www.reddit.com/r/Bitcoin/1aqgs6 (Reddit weighs in)

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News Roundup - FinCEN's Guidance Re: Virtual Currencies

Tue, 19 Mar 2013 12:22:00 -0700

News Roundup - FinCEN's Guidance Re: Virtual Currencies:

The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Dept. of Treasury, issued its first guidance brief for 2013 Monday and it addresses the Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies.

First the good news:

A person’s acceptance and/or transmission of convertible virtual currency cannot be characterized as providing or selling prepaid access because prepaid access is limited to real currencies.

Bitcoin is not a debt instrument nor is there any “backing” by a commodity or some promise that it can be be redeemed for value. Therefore it is not being recognized as a “real currency” by FinCEN. This helps Bitcoin avoid the regulations that specifically apply to “prepaid access” (formerly referred to as “stored value”) products.

More good news:

A user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB under FinCEN’s regulations.

This means a holder of bitcoins can spend those funds without any MSB registration requirement or reporting concerns regarding money transmission.

From there the guidance starts to get murky, or Murcky. Bitcoin Foundation’s general counsel posts his interpretation:

Patrick Murck: https://bitcoinfoundation.org/blog/?p=152

Following is the list of articles on this development:

Payments Source (Bailey Reutzel): http://bit.ly/ZQP5Wg
Bitcoin Magazine (Vitalik Buterin): http://bit.ly/148nx5M
FreeBanking.org (Bradley Jansen): http://bit.ly/ZqSXj1
BLOGDIAL: http://irdial.com/blogdial/?p=3488
TheNextWeb.com (Jon Russel): http://tnw.co/WBP2zW
Ars Technica (Timothy B. Lee): http://ars.to/XX0FT9
Forbes.com (Timothy B. Lee): http://onforb.es/YpshNb
http://bitcointalk.org/index.php?topic=154672.0 (Forum post: FinCEN addresses Bitcoin)
http://bitcointalk.org/index.php?topic=154754.0 (Forum post: I am a / “AMLCA”)
http://1.usa.gov/117bnWj (FinCEN FIN-2013-G001)
National Journal (Brian Fung): http://bit.ly/YIItbA
Wall Street Journal (Jeffrey Sparshott): http://on.wsj.com/Z4rF1T

Further articles will be added to the list as they are discovered. Feel free to post a replly with any that were missed.

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Aljazeera - Bitcoin Rises, by Nicolas Mendoza

Wed, 13 Mar 2013 06:30:59 -0700

Aljazeera - Bitcoin Rises, by Nicolas Mendoza:

bitcoinnews:

Nicolas Mendoza (@NicolasMendo) follows up to his May 2012 article in Al Jazeera with the more recent developments. Excerpts:

“What we have here is radically different from the current system where money creation is based on debt, politically motivated, surrounded by secrecy, inflationary, unilateralist, colonialist, and exploitative of powerless nations, etc. The flaws in the design of modern currency are at the roots of the social and ecological disasters we face today.”
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“An economy built on debt-based currency can only “grow”, the 2008 economic collapse showed us, by putting more people deeper into debt. Inevitably, this leads to a society where the many always owe more and more to the few, eventually making democracy a farce. Bankers, as Robert Fisk puts it, are the dictators of the West.”
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“The P2P money creation system that Bitcoin proposes is truly something else as it deflates the dark power of debt-based money in society; it allows envisioning a world where the wheels of debt are no longer at the origin of economic activity.”

- http://aje.me/YrpzWo
- http://bitcointalk.org/index.php?topic=152671.0 (Further discussion of the article)

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ALERT: Serious Bug in Bitcoin Client, Details To Follow

Mon, 11 Mar 2013 17:56:00 -0700

bitcoinnews:

There is a developing situation in which a bug in the Bitcoin client software is causing a blockchain fork. Those using Bitcoin-Qt v0.8 should not trust the transactions as being non-reversible even if the client shows the transaction having received six or more confirmations.

This latest on the situation may be monitored on the #bitcoin-dev IRC channel.

[The tl:dr on the bug … the v0.8 client software allows a larger transaction that the previous releases did not. As a result v0.7 clients aren’t accepting those blocks.]

[Upate: The original post on the BitcoinNews will include any updates.]

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Audio: Erik Voorhees on the Peter Schiff Show BitInstant’s...

Fri, 08 Mar 2013 14:09:00 -0800

Audio: Erik Voorhees on the Peter Schiff Show

BitInstant’s Erik Voorhees (@ErikVoorhees) was a guest on the Peter Schiff show, hosted by Thomas E. Woods (@ThomasEWoods).

The interview gives a general overview of Bitcoin, from a libertarian perspective, and concludes with Q&A with calls from the show’s listeners.

Runtime: 31 minutes.

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Jon Matonis - First Bitcoin Hedge Fund Launched

Fri, 08 Mar 2013 11:50:02 -0800

Jon Matonis - First Bitcoin Hedge Fund Launched:

bitcoinnews:

Forbes contributor and Bitcoin Foundation board member Jon Matonis (@JonMatonis) writes an update on BitcoinFund (from Malta), the first Bitcoin Hedge Fund. Excerpts:

“Institutional investors and hedge fund managers have secretly sought a regulated investment vehicle for bitcoin placements. Malta-based Exante Ltd. has the solution with their new Bitcoin Fund.”
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“Authorized and regulated by the Malta Financial Services Authority, Exante offers the Bitcoin Fund with an initial minimum subscription of $100,000 and a 0.5% upfront subscription fee.”
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“U.S. persons and U.S. institutions will not be able to access the fund directly.”
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“The fund charges an annual management fee o.5% of Net Share Value payable monthly in order to provide the sophisticated security and wallet management that one would expect with such large amounts at stake.”
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“Using Shamir’s Secret Sharing algorithm, the container password is then split into three parts utilizing a 2-of-3 secret sharing model.”
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“Exante intends to provide a two-way secondary market for the trading of fund shares [which will] provide shorting opportunities without having to own the underlying asset.”

- http://onforb.es/WyW6Q1
- http://bitcointalk.org/index.php?topic=150659.0 (Further discussion of the article.)

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MTGUSD Redeemable Code - The End Is Neigh

Fri, 08 Mar 2013 06:51:00 -0800

Mt. Gox today notified its customers via e-mail that the Mt. Gox redeemable codes used for transferring U.S. dollars (USD) and Canadian dollar (CAD) funds will no longer be issued beginning April 10th, 2013.

The message reads:

Generation of USD and CAD redeemable codes will not be possible due to legal issues.

The codes, sometimes alternatively referred to as vouchers or coupons, enable account-to-account (A2A) transfers between Mt. Gox customers. The codes have been popular for those trading over-the-counter as a method for exchanging between other payment systems such as Dwolla to or from a Mt. Gox exchange account.

For instance, after selling bitcoins on Mt. Gox a trader Bob might be looking to receive $100 of Dwolla funds quickly so that he can make a purchase where only Dwolla is accepted for payment. Alice has funds in her Dwolla account and is looking to transfer those funds into Mt. Gox for immediate credit. So Bob and Alice agree to trade. Alice sends $100 to Bob using Dwolla, Bob creates a $100 Mt. Gox redeemable code and sends that securely to Alice. Then Alice redeems that code into her Mt. Gox exchange account. When that happens, Dwolla only knows of a $100 transfer from Alice to Bob. Mt. Gox only knows of a $100 transfer from Bob’s account to Alice’s account.

Because the codes are pseudonymous, they function as a bearer instrument. In the example above, rather than redeeming Bob’s voucher code herself Alice could have later traded that redeemable code with any other party or the code could change hands multiple times even before being redeemed.

This may explain why “legal issues” were cited. When Seattle-based Coinlab transitions Mt. Gox’s customers from the U.S. and Canada next month, these redeemable codes would likely be considered as forms of “prepaid access” (formerly known as “stored value” instruments). In the U.S. an issuer of prepaid access is required to be licensed as a money transmitter — something Mt. Gox has not done and discontinuing this product means they likely won’t be applying for that status.

Mt. Gox isn’t the only organization to get caught up with these restrictions. Last week the State of Illinois issued a cease and desist order to payments provider Square for their prepaid access product (digital gift cards) which differ very little from Mt. Gox’s redeemable codes.

Mt. Gox will continue to offer redeemable codes for bitcoins (BTC) as well as for another dozen fiat currencies that the exchange offers for its customers funds (e.g., EUR, GBP, JPY, HKD, NZY and more).

Some merchants, such as Cinfu hosting, had been accepting the MTGUSD redeemable code as a payment method alongside other digital currency payment methods. These merchants could simply switch to another currency that is still supported (e.g., MTGEUR) however Mt. Gox’s U.S. and Canadian customers will likely be unable to hold wallets for any foreign currency.

Some exchanges, including Bitcoin-24.com and WeExchange.co, currently accept MTGUSD redeemable codes as a funding method. Other exchanges that previously used these tools no longer do. Exchange intermediary BitInstant, for example, now transfers funds directly to a specific Mt. Gox account rather than delivering a redeemable code to its cash-paying customers.

There are other issuers of USD redeemable codes, such as AurumXChange’s VouchX vouchers but no other issuers have taken any steps towards dropping support for the redeemable codes.

Mt. Gox had never shared publicly how much transaction volume occurred through these redeemable codes so the impact of them being discontinued is unknown. Perhaps the over-the-counter traders will be the only ones to notice.

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ADAM DRAPER: Boost VC Welcomes Bitcoin

Mon, 04 Mar 2013 17:32:43 -0800

ADAM DRAPER: Boost VC Welcomes Bitcoin:

adamdrap3r:

I am excited about Bitcoin. It’s exciting to watch a global digital currency get traction.

If you wish to learn more about Bitcoin, there is a great video, or read up here.

The primary advantages of Bitcoin are:

Speed and price. You can transfer money anywhere in the…

[Original: http://adamdraper.com/post/44563343164 ]

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Video: Bitcoin Symposium at NH Liberty Forum A discussion on...

Mon, 25 Feb 2013 22:46:00 -0800

Video: Bitcoin Symposium at NH Liberty Forum

A discussion on Bitcoin at the 2013 New Hampshire LIberty Forum, an annual gathering of voluntaryists and Libertarians, included panelists Erik Voorhees (@ErikVoorhees), Roger Ver (@RogerKVer) and Charlie Shrem (@CharlieShrem). There are 8-separate videos with each under 10 minutes in length:

http://www.youtube.com/watch?v=xkgc00ANETc (Part 1)
http://www.youtube.com/watch?v=giT7KT6i9rU (Part 2)
http://www.youtube.com/watch?v=NGMDwx5b6F4 (Part 3)
http://www.youtube.com/watch?v=irTcRUoC0cc (Part 4)
http://www.youtube.com/watch?v=YbLYmjXsydM (Part 5)
http://www.youtube.com/watch?v=MJCLCQ8zTC4 (Part 6)
http://www.youtube.com/watch?v=4y4Z-k4mJFU (Part 7)
http://www.youtube.com/watch?v=RAAjFF_Wwfk (Part 8)

It was at that forum that Jeffrey Tucker (@JeffreyATucker), publisher and executive editor of Laissez-Faire Books, used for the first time the Bitcoin ATM. He later featured that ATM in his post Top Alternatives to Paper Money.

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Guardian - Remittances Around The World The photo above...

Mon, 25 Feb 2013 06:58:00 -0800

Guardian - Remittances Around The World

The photo above accompanies a Guardian article featuring an interactive map that shows the remittance flows for the particular nation selected.

The ability to explore the map on a nation-by-nation basis (as shown above for Peru) is available only after clicking the “Leave Tour” button from the application.

Bitcoin, as a decentralized digital currency with no authorative source is beginning to gain some traction as a remittance payment method. Bitcoins are becoming fairly easy to acquire inexpensively in many areas (e.g., U.S., UK, Canada, and Europe) which correspond to areas where much of the remittance flows originate.

Since most remittance recipients use the funds for paying expenses and shopping, bitcoins aren’t (yet) quite useful to them and there are still just few methods to cash out bitcoins with a local exchanger. These methods are improving with independent exchange agents listed on LocalBitcoins.com now providing cash-out service in over 700 cities worldwide and the upcoming launch of BitcoinWireless which will let bitcoins be used to pay for mobiile phone service in more than 100 countries.

Bitcoin may have an even bigger impact for those who currently send remittances by enabling investment capital to flow quickly and cheaply to where the opportunities lie. If there is more work near a worker’s home then there is less need for that worker to live away from the family in order to provide for them. Knowledge workers are already the first to be able to work for a foreign employer without having to live abroad. And since bitcoin payments have no concept of borders, the employer can sent bitcoins to the employee at a lesser cost to both employer and employee. Increasingly these knowledge workers with foreign employers are requesting that their compensation be paid in bitcoins, and employers are increasingly willing to oblige.

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Bitcoin version 0.8.0 released

Mon, 25 Feb 2013 03:58:00 -0800

Bitcoin version 0.8.0 released:

A significant new release of the Bitcoin-Qt and Bitcoind clients from Bitcoin.org, v0.8.0, is now available for download.

This v0.8 release includes a number of new features, performance improvements and bug fixes and is the first major feature release since the v0.7 release about five months ago. This release was designed to improve performance and to handle the increasing volume of transactions on the network.

A subset of the improvements, features and fixes includes:

Compatibility with new security features in OSX 10.8 and Windows 8.
New, dramatically faster database platform for storing the blockchain (No longer is BDB used except for wallet.dat)
Parallel operation for improved performance on systems with multiple CPUs and multi-core CPUs.
“Bloom filtering” for supporting requests from lightweight peer nodes.
Fix for the “change address ordering” regression issue which impacted transaction privacy.

With a huge increase in the amount of transaction activity the Bitcoin network is receiving, previous versions of the Bitcoin.org client had been taking an unacceptable amount of time to synchronize the blockchain. This release will reduce the amount of time to reach the synced status to a level that should be acceptable for those with even the least capable computing hardware.

The first time v0.8 is ran the program will migrate the blockchain data and reindex, a process that can take several hours on lower end computing hardware. Proper shutdown from a previous version before installing this release is required.

While it is recommended to back up the wallet.dat before performing this upgrade, the update will not overwrite an existing wallet or blockchain database.

When performing a new installation (versus upgrading from a previous release), a file called bootstrap.dat may obtained as a torrent and placed in the Bitcoin data directory to speed the installation process.

http://bitcoin.org/releases/2013/02/19/v0.8.0.html
http://sourceforge.net/projects/bitcoin/files/Bitcoin/bitcoin-0.8.0
http://bitcointalk.org/index.php?topic=145184 (Announcement)
http://bitcointalk.org/index.php?topic=145386.0 (Bootstrap.dat thread)
http://gtf.org/garzik/bitcoin/bootstrap.dat.torrent

Alternatives to the Bitcoin.org client, now featured on the Bitcoin.org Clients page, have seen updates recently as well:

MultiBit: A secure, lightweight, international Bitcoin wallet for Windows, MacOS and Linux. No blockchain download required.
Armory (Alpha): An open-source wallet-managment platform for the Bitcoin network.
Electrum: A lightweight Bitcoin client, based on a client-server protocol. No blockchain download required.
Bitcoin Wallet: A standalone wallet for Android devices that uses simplified payment verification (SPV).

A review of various wallet options was recently updated by Bitcoin Magazine and is a good resource when choosing a wallet.

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jerrybrito: I was on NPR’s Morning Edition this AM talking with...

Wed, 06 Feb 2013 07:38:00 -0800

jerrybrito:

I was on NPR’s Morning Edition this AM talking with Cyrus Farivar about the legality of gambling using bitcoin. What I find telling is that the casino operators, who are making a tidy profit, are keeping everything in bitcoin and at no point converting to dollars or other currency.

(MP3 download)

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