BITCOIN NEWS EVRYDAY! From multiple sources.

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BTC China Lowers Trading Fees to 0.1%
Jon Southurst (@southtopia) | Published on February 24, 2014 at 10:01 GMT | BTC China, Companies, Exchanges, News

Chinese bitcoin exchange BTC China has announced it will lower trading commission fees from 0.3% to 0.1% for all trades executed after midday China time (4:00 am GMT) today, 24th February.

It will also retain its ‘maker-taker’ fee model, meaning those placing limit orders at prices set by them (market ‘makers’) will still be exempt from all fees, and actually receive a 0.1% rebate. The model is useful because it adds to market liquidity.

BTC China had previously reduced fees for withdrawal into Chinese yuan from 1% to 0.5% on 3rd January.

The company had been China’s largest and busiest bitcoin trader until December last year, when the People’s Bank of China (PBOC) placed a series of new restrictions on deposits to and withdrawals from exchanges via banks and third-party payment processors. Trading volumes at all exchanges fell together with bitcoin prices as traders rushed to cash out.

Market management

Since then bitcoin exchanges have jostled for market share with a series of innovations and interpretations of the rules, with some suggestions that true trading volumes were being manipulated to gain attention. Most exchanges are able to accept donations by channeling them through corporate bank accounts, and BTC China also offers a deposit-by-voucher system.

BTC China itself reduced trading fees to 0% in September 2013, before raising them to 0.3% in December in an attempt to mollify the central bank’s concerns that the market had become overheated and could cause disruption to the mainstream financial system.

They may not go any lower than the current model, though. BTC China CEO Bobby Lee admitted in January that the company would not have abolished fees altogether had it known the PBOC would react as it did, and said such 0% fee models benefited high-frequency traders and speculators over ordinary traders and bitcoin miners.

Besides ease of access, fees have offered another way for Chinese exchanges to compete. Rivals Huobi and OKCoin have maintained mostly 0% fee models even since the new restrictions.

Low trading fees brought in hordes of new traders and saw Chinese exchanges become wildly popular in 2013, probably even acting as a catalyst for bitcoin’s sudden value rise to record highs in the last quarter of that year.

Bitcoin value on Huobi and OKCoin was around the 3780 CNY ($620) mark at the time of writing, with BTC China marginally higher at 3801 CNY ($623).

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Bitcoin Core Development Falling Behind, Warns BitcoinJ’s Mike Hearn
Danny Bradbury (@dannybradbury) | Published on February 24, 2014 at 05:57 GMT | Analysis, Bitcoin protocol, Technology, Wallets

Say what you like about Google, but it isn’t an easy place to get hired at. The entrance interviews are notoriously tough, and it is a highly desired employer – which makes Mike Hearn’s departure all the more notable.

Hearn is an expert in low-level software development, who worked as a site reliability engineer at Google, and focused on account security and antispam. He has also been one of the leading lights in the bitcoin community, heading up the open source development team for bitcoinj, which is the Java implementation of the bitcoin protocol.

He is leaving in part because of his growing interest in and commitment to bitcoin. Hearn sees a challenge ahead for the virtual currency: the core development team is shrinking.

Honey, I shrunk the team

“The long tail has grown longer, but the heavy lifting and design work has been done by a handful of people. That’s quite concerning,” says Hearn, highlighting a few key players on the team. He uses the team’s page on Github, the open source code repository on which Github is hosted, to see who’s most heavily involved.

Gavin Andresen, the lead developer, is an obvious mainstay. Others include Philip Kaufmann, who does a lot of GUI development. Wladimir J. van der Laan also works on the front end.

“There are occasional fixes and things submitted by other people, but the bulk of the work is being done by Gavin and those guys,” says Hearn. “I am a bit concerned by the fact that we don’t have a lot of people turning up and doing really serious, useful work on the core.”

But then, that’s a general problem with open source projects. Most people are not paid, meaning that participation can be patchy, and burnout rates can be high. Andresen is paid a salary by the Bitcoin Foundation, and Jeff Garzik, another programmer who has been heavily involved with core development, is in his first year at crypto currency payment processor BitPay, which has allowed him to focus at least partly on the protocol.

Quality, not quantity

Garzik says that Hearn has long been worried about team size, but says it’s overemphasized. And statistics on Github may not be the easiest way to assess what’s happening.

Open source projects are a question of quality, not quantity, says Garzik. For example, some of the most important features for bitcoin develop over months, meaning that their activity won’t show up in the Git data.

He gives Gregory Maxwell as an example. Maxwell has ‘commit access’ on Github, which enables him to push in code changes.

“In terms of code output, Greg has produced very little. A pull request here, a few lines change there,” says Garzik. “Counting Greg’s commits or lines-of-code authored would rank him far below most other contributors, but we value his contributions very highly.”

Garzik has also been busy behind the scenes, he says, coding contributions outside the core bitcoin project.

But the fact still remains that bitcoin is going through a revolution. Engineers used to rule the bitcoin world, but since then, the money has moved in, and agendas have changed.

“The long tail has grown longer, but the heavy lifting and design work has been done by a handful of people. That's quite concerning.”

Barry Silbert, head of the Bitcoin Investment Trust, has predicted that we are entering the third phase of development, with venture capital companies piling in. Institutional investors on Wall Street won’t be far behind, he has said. With hundreds of millions of dollars now piling into the bitcoin economy, can the current development approach keep up?

It would help if some of them gave something back, complains Garzik. “In general, I am disappointed at the large number of bitcoin companies that contribute nothing back to the original open source project, the software that runs the network we all use.

Last week, Gavin Andresen implied as much in a missive on the bitcoin mailing list, when he told companies using the bitcoin core not to treat the core development team “as if we were a commercial company that sold you a software library”.

Hearn agrees, and adds that companies can fall foul of technical changes if they don’t stay actively involved in helping with core development.

“The fact that Gox was unaware of malleability entirely and then blamed the bitcoin software is perhaps a good example of a company that treated bitcoin as if it was a perfect black box, and became so disconnected they weren’t even reading the mailing lists or release notes,” he says.

Key developments

In the meantime, Hearn says, enhanced payments are one of the main thrusts for bitcoin development. This added feature, destined for the bitcoin client software rather than the core protocol, have been on the table for a while, but haven’t yet made it into a release. They promise an easier way to make payments than dealing with long addresses, and they will also include support for memos.

Some people have also been working on subscription billing in the payment protocol, he says – this feature is badly needed in bitcoin. There has been some initial design work on this, which he would like to see turned into working code.

Smart transaction fees are also high on the agenda. Transaction fees today are not dynamic enough, he says. Instead, they are based on a set of arbitrary rules set by a core development team. This needs to be changed, (and is).

Smart fees are an attempt to make the fees float, and to formalise some of the rules about when fees are paid, explains Hearn.

“It’s not very dynamic today. It’s just some magic numbers chosen by Gavin and so on. It’s very inflexible. The bitcoin dollar price moves, but the fees don’t. “And the second problem is that it’s centralized, because they’re just some magic numbers chosen by the developers, which is not very feasible in the long run.”

This didn’t make it into the latest version of the core protocol, however, which Hearn takes as another example of lag in a resource-constrained project, while the commercial bitcoin community powers ahead.

A new kind of wallet

There are other developments afoot in the bitcoin community, too. Hearn is busy implementing hierarchical deterministic (HD) wallets in bitcoinj.

Traditionally, bitcoin wallets are designed to generate completely random addresses, encrypting the private keys for the user. These addresses are impossible to remember, and so the bitcoin wallet must be backed up frequently. Each backup includes all of the key pairs.

Instead, HD wallets use a single random number (also known as the extended address, or the seed), which can be written down as a series of twelve words. The wallet can then use a standard algorithm to derive many public keys from the seed, in the form of a tree.

“The idea is that you can type in the same set of 12 words, and they will deliver the same sets of keys,” says Hearn. “With HD wallets, you can give me an extended address, and I can use that to derive fresh addresses. You only have to give me one piece of data, but I can generate new addresses from it each time.”

This carries several benefits, including the ability to share a wallet between different devices. The tree structure also allows the seed’s owner to share some groups of addresses derived from the tree, but not others.

The HD wallet standard was finalized at the Bitcoin Conference last May, and Hearn hopes to have the bitcoinj integration completed in March. The mathematics are complete, he says. The tough part is integrating it into the bitcoinj software itself.

One of the challenges with HD wallets is privacy. Simply branching from an extended address means that anyone can iterate their way through all of the possible addresses in the tree, meaning that they could tell which payments had been made to or from any of them.

Hearn raises an alternative posited by Peter Todd, called stealth addresses. These allow you to distribute one address that can be used to generate new ones, but makes it impossible for people to make a connection between them.

“It’s not really clear to me that this is going to work in its current form because it’s not really compatible with lightweight wallets, at least in the form that it’s been proposed” he says. However, it’s still in the design stage, so this may change in the future.

Other developments include the use of the Tor network by default in bitcoinj. Traffic sent through Tor is encrypted most of the way. he would like to see this happen by the end of March, when he is back from his vacation.

When that vacation ends, Hearn has something else up his sleeve. He’ll announce it shortly, and CoinDesk will be there to cover it.

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Bank-like Bitcoin Portal Neo Opens First Branch in Cyprus
Jon Southurst (@southtopia) | Published on February 24, 2014 at 12:32 GMT | Companies, Europe, News, Technology

The world’s first brick-and-mortar bitcoin deposit and financial services portal, Neo, opened the doors to its flagship branch in Cyprus at 10:30am local time today.

Neo is the ‘bank-like’ arm of bitcoin business twins Neo & Bee, with Bee serving as the payment processing network. Cypriot residents will have access to services “allowing them to interact with their money like they would with Euro deposits in any traditional bank”, including deposit, savings, business and merchant accounts.

If successful, Neo promises to engrave 24th February 2014 as a landmark date in bitcoin’s history. Economist, author, and bitcoin fan Tuur Demeester attended today’s launch and is hopeful it will set a precedent for similar bitcoin services everywhere:

“Bitcoin is a hero who gives financial autonomy back to the people, that’s the gist of Neo’s marketing campaign. This is a message that really speaks to the distressed population here in Cyprus, who are now realizing that not only can they use bitcoin to regain some essential personal freedoms, but also that they can turn this crisis into an opportunity.”

He continued: “I think we’re now in a period comparable to that of 1994-95, when companies like GeoCities, Yahoo, and Microsoft made the internet useful and easy to access for a broad segment of the population. In my view, Neo & Bee is making an admirable (and hitherto unprecedented) effort to bridge the gap from the geeky Bitcoin culture towards the general public.”

How Neo works

All customer deposits at Neo’s bank-without-a-bank are held in full reserve, in BTC. Customers may use either bitcoins or Euros, and can choose either Euro-pegged accounts with fiat value limits or ones that offer “full exposure to the bitcoin price level”.

This offers the public access to the benefits of bitcoin without needing to worry about wallet security, online service hacks, or even being technologically literate at all. Customers can consult face to face with service representatives.


neo

Neo will also help reduce the risk of those price-level exposed customers by offering time-locked accounts guaranteed to hold a certain amount of fiat value even if bitcoin’s value drops. For the company, there’s an advantage if the price rises instead.

Anyone can audit the company at any time and prove their funds are indeed being held in reserve, since Neo’s addresses will be available for inspection on the bitcoin block chain. Even if the company disappears, the bitcoins are still yours.

What Neo doesn’t do at this stage is lend money. Imagine a ‘physical bitcoin wallet’, or if you prefer, a bank that keeps your money safe and makes transactions simple (imagine!) and you have Neo & Bee.

About Bee

Bee functions like a bitcoin-based debit card system – offering merchant terminals and cards with EMV chip and PIN technology, with the added bonus of faster settlement processing times and lower fees. And, of course, no chargebacks.

Bee is technically a separate business entity but operates under the same umbrella as Neo. CEO Danny Brewster, who has personally invested €6m getting the business off the ground, described it to the Cyprus Mail as follows:

“Neo and Bee are two separate brands that fall under the same roof. Neo is a physical portal for people to get educated on the bitcoin technology. They can also buy bitcoins directly from us, but we won’t sell to them until we know they got the right understanding of the technology.”

Both Neo and Bee will comply with banking laws and regulations, but free from the influence of the EU Central Bank. The last part of that sentence should prick up plenty of ears in Cyprus, and it’s no accident the company chose it as the place to get things started.

The island nation has a history as a financial services center, but it was the 2012-13 Cypriot Banking/Financial Crisis that really ignited a desire for something other than traditional banking.

The crisis

The events of March-April 2013 have become infamous in the financial world.

Faced with widespread banking insolvency (a knock-on effect from Greece’s government debt crisis), Cyprus agreed to a bailout deal that would close the country’s second largest bank and planned a “bank deposit levy” of 6.7% for all accounts under €100,000 and 9.9% for those over.

Depositors at the closed bank would take a haircut of up to 40%. Local banks immediately suspended business to prevent a run. The deal, proposed by the International Monetary Fund (IMF) Eurogroup, European Commission (EC), and European Central Bank, was promoted as targeting wealthy foreign citizens of other countries (mainly Russia) using Cypriot banks for tax avoidance, but many around the world saw it as a harbinger of government confiscations to come as other Western world treasuries ran out of money.

The deal’s image wasn’t helped when news emerged that many of Cyprus’ wealthier depositors had been able to transfer money out of their accounts online through branches still open for business in the UK, leaving others to shake their fists at non-functional ATMs – or threaten to drive bulldozers through their windows.

Interest in bitcoin skyrocketed in Cyprus and around the world, driving prices to a record $266 average and even over $300 in China, and causing naysayers to scream “bubble!”. Though the value dropped shortly after, bitcoin’s status as a desirable asset and investment of serious value was sealed.

The future

Neo & Bee launched an IPO on bitcoin equities exchange Havelock Investments in September 2013, and it currently has a share price of 0.00328 BTC and a market cap of 9016.0102 BTC ($5.21m at today’s prices).


neo

While its services are available only to Cypriot residents at present, the company has big plans to expand throughout the European Union in future. Neo says there are also plans to open a second branch in Cyprus within a month.

Neo & Bee, a subsidiary of UK based company LMB Holdings, intends to make money through value spreads, a trading desk and simply by ‘going long’ on bitcoin – buying the bitcoins of merchants it services in a similar fashion to other existing payment processing companies like Coinbase and BitPay.

CEO Brewster also claims to be interested in other block chain-based applications like autonomous legal contracts and derivatives, and has a grand vision to turn Cyprus into a Silicon Valley-like incubation hub for bitcoin businesses.

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@ #85 - This is independent news from multiple sources. I don't chose news i post all i can find. On ur post i don't have real comment.

[MICRO]

Hong Kong to Get First Offline Bitcoin Store
Nermin Hajdarbegovic | Published on February 24, 2014 at 13:36 GMT | Exchanges, News

Hong Kong is about to get a rather unusual shop: an offline bitcoin store, launched by the Asia Nexgen Bitcoin Exchange (ANXBTC).

A 400-square-foot premises seems an unusual setting for the world of digital currency, but ANXBTC believes the move makes a lot of sense.

The exchange’s CEO Lo Ken-bon told the South China Morning Post that the biggest problem faced by bitcoin lovers in Hong Kong is that they simply can’t get a hold of them:

“So far, people have to put money in and trade it through an online exchange. Now, you can walk into the store, hand over your cash, and send the bitcoins to your digital wallet.”

Jumping through hoops

In order to buy bitcoins in the new shop, buyers will have to verify their identity and state their address – this is necessary to meet local anti-money laundering regulations.

There is another regulatory issue: Hong Kong views digital currencies as virtual commodities rather than currencies.

The Hong Kong Monetary Authority simply doesn’t want to deal with bitcoin, as it is not in its purview; therefore ANXBTC will have to operate the shop as a vending machine, with no exchange of money involved in its business.

That is to say, customers’ money will buy bitcoin the commodity, not bitcoin the currency.

This isn’t news to anyone who has been following developments in Hong Kong: the first Robocoin ATMs coming to Hong Kong are classified as vending machines too.

Regulation on its way?

Hong Kong hasn’t yet taken any drastic measures on bitcoin. Regulatory action does not appear very likely at this point, but the machinery of government may be about to slowly grind into action.

Hong Kong’s Customs and Excise Department is reportedly considering which government body is supposed to be investigating possible bitcoin regulation, the South China Morning Post has reported.

Furthermore, Hong Kong regulators issued a bitcoin warning earlier this year, saying that they are closely monitoring developments with regards to digital currencies and are cooperating with regulators in mainland China and the rest of the region.

However, since the new bitcoin shop is set to open on Friday, February 28th, we can assume that ANXBTC is fairly certain it will be able to operate in spite of any regulatory ambiguity in the near future.

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Penn State Students Launch Bitcoin Club with Grand Ambitions
Olivia Rudgard (@OliviaRudgard) | Published on February 24, 2014 at 14:36 GMT | Investors, Lifestyle, Mining, News

While many see cryptocurrencies merely as a means to personal gain via mining or investment, a group of students at Penn State University think that digital currencies can also offer a more philanthropic way of doing business.

To that end, Penn State University Bitcoin Club has been created by six ambitious young students with a strong positive vision for the future of bitcoin.

The club was co-founded by Patrick Cines and Ryan McCabe, both investors in bitcoin and litecoin, and who met on reddit.

McCabe has invested about $2,500, which he expects to make back over the next two months. In turn, Cines has spent $1,800 on an upmarket case for the miner in his dorm room, and says he has made a significant profit from mining – which he spends on computer gear.

The club isn’t about making profit, though, and the pair are keen to stress that it is not their aim to encourage new members into mining or investment. Instead, they have more philanthropic goals.

Encouraging bitcoin business

With their mix of business and tech backgrounds, they are joining a new generation of entrepreneurial bitcoiners using the digital currency for business development.

In the short term, their aims for the club include using bitcoin to help small businesses grow, said Cines:

“Small businesses are one of the cornerstones of America, so it would only be fair that we continue to support small businesses by helping them prosper.”

They plan to find help small businesses integrate bitcoin into their finances in order to expand revenue. Promoting the acceptance of digital currencies is also part of their plan.

“I think that, in the future, bitcoin will be further integrated into our society. It is only inevitable that we have a global currency to advance a continuing globalized economy,” said Cines. He added:

“As of now, a lot of regulatory agencies are cracking down on bitcoin. That’s why countries like the United States have to show the world that bitcoin should be viewed not as a threat, but an asset.”

Thinking big

The club’s not just about helping businesses, either. McCabe says they remain true to bitcoin’s idealistic roots: “You do have to have some sort of liberal mindset, because it is still a new thing that people don’t understand. You have to be open to new concepts.”

Penn

“As a long-term goal, we want to help other philanthropic organisations by donating bitcoin,” he added.

One of their aims is to eventually help support the annual Penn State ‘Thon’ – a dance marathon which last year raised $12.8m for the Four Diamonds Fund, a pancreatic cancer charity.

The pair are even converting their parents to bitcoin. McCabe convinced his dad to invest $1,300 in a mining computer at Christmas, which has already returned $550. “It’s making much more than the bluechips they’re invested in,” said Cines.

The pair are optimistic about the future. Cines has big dreams about where the digital currency might go next.

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Australian Government Tracks All Bitcoin to AUD Conversions
Nermin Hajdarbegovic | Published on February 24, 2014 at 17:00 GMT | Asia, Crime, News

The Australian government is keeping a close eye on bitcoin, but not on the regulatory front. Rather, it is tracking every conversion from bitcoin into Australian dollars, and vice-versa.

The government agency doing the snooping is the Australian Transaction Reports and Analysis Centre (Austrac). The centre is tasked with countering money laundering and terrorist finance, so it is only logical that it would track anonymous transactions.

Tracking bitcoin-related transactions

Austrac CEO John Schmidt told lawmakers that Australia collects data on all international fund transfers, including bitcoin conversions, ZDnet reports.

“At some point, a person will be purchasing bitcoin using Australian dollars, for example, and then if they are dealing in substances or services, will want to convert those bitcoins back into the legitimate currencies of where ever they are, so they can gain the benefit of them.”

This is where it gets interesting. Because the centre gets international transfer instructions, it is possible to identify transactions made by people purchasing bitcoins.

Schmidt added that most countries have the same capability as Australia, but it is unclear whether they use it. He added that some prosecutions have already resulted from intelligence collected by the centre.

The CEO argued that bitcoin is a commodity used to transfer value rather than a legitimate currency. When bitcoins are converted into AUD, Austrac can identify those transactions.

Bitcoin is not a threat, yet

Schmidt also issued a warning that if bitcoin gains more independence from fiat currency it will become more attractive to criminal organizations that need to channel money around. In that case, international cooperation will be necessary, as Schmidt points out:

“Because they will operate on servers in jurisdictions around the world, and use very sophisticated methods to move and hide their identities. It’s when you have the international cooperation [...] that is the answer to being able to stop that criminal behaviour.”

Interestingly, Schmidt pointed out that Austrac is still not able to quantify the size of the bitcoin market in Australia, but he doesn’t see it as a major threat. He pointed out that people are gambling on the prospective value of bitcoin rather than using it for transactions.

“At this point in time, when you consider all the existing threats we face from the criminal perspective, they are not top of the list,” Schmidt concluded.

My toughs: Jezzzz... This is bad .

[MICRO]

AB 129 Is Not California Law Yet… The Remaining Steps Before “Bitcoin Becomes Legal In California” And How You Can Help
Caleb Chen  24/02/2014 Posted 14 hours ago

A top post on /r/Bitcoin at the moment has quite the misleading title.  The specific document linked is merely the latest revision of the bill with analysis from the State Assembly’s Banking and Financial Institutions Committee and dates to 1/23/14.  The post has caused many to mistakenly believe that either the bill has become a law or the bill has been passed and is awaiting signing to become a law.  Both of which are quite untrue and reveal ignorance of political processes.

While I understand that Reddit is a worldwide community without general understanding of the American legislative process, we must make concerted effort to not promote misleading information and validate those whom call our forums and news sites a perpetual echo chamber.

california state bitcoin
California currently has a bill going through its system that would “legalize” Bitcoin… Image courtesy of JJKBACH
News sources that had taken the massively upvoted post at face value, such as The Examiner, have taken down their stories which claimed that California had passed a law legalizing Bitcoin, others have decided to simply amend their titles.  An example of proper reporting on this story is showcased by Bitcoin Magazine’s Brian Cohen, whom has also been campaigning against Bitcoin FUD for even longer than I have.

I want to take this opportunity to clear the air on AB 129 Lawful Money: Alternative Currency.

Where AB 129 stands as of 2/24/14

On 2/6/14 the California Senate Rules Committee referred AB 129 to the Senate Banking and Financial Institutions Committee which is currently chaired by State Senator Lou Correa.  I expect the Senate’s Banking and Finance Committee to vote unanimously (8-0) to allow the bill to re-enter the Senate floor, as their Assembly counterparts did back in January.

The summary of AB 129′s latest revision reads as such:

Summary: Specifies that current law which bans the issuance or 
          circulation of anything but lawful money of the United States 
          does not prohibit the issuance and use of alternative currency.
Important to note  is that Bitcoin is but one of the “alternative currencies” specifically mentioned in AB 129.  The bill, when it becomes law, will clarify the legal status of all kinds of alternative currencies; including “community currencies” such as “Santa Monica hours,” centralized alternative currencies such as Ripple, and even Coinye and Dogecoin.

For up to date information on AB 129 directly from the California Legislature please check this site.

The Remaining Steps

Senate Banking and Financial Institutions Committee:  Once the Senate committee OKs the bill to be presented to the Senate floor, the second hearing of the bill will occur.  A third hearing will be scheduled and analysis, which includes supporting and dissenting organizations, will be provided.

At the third hearing, there will be a role call vote.  AB 129 will need about 21 votes to make it to the next step, though the community is hoping for a unanimous decision from the State Senate as occurred in the State Assembly.

Once AB 129 has passed through the Senate it will then appear on Governor Brown’s desk for him to sign.  There’s no foreseeable reason why he would choose to veto this bill, which has zero fiscal implication and also such backing from the state’s Assembly members.

For a summary, again straight from the California Legislature, of how a bill becomes a law, please check this site.

How You Can Help

Everyone:

Don’t promote misleading headlines, Bitcoin and its community has grown up enough to say “NO” to these types of media blunders.  There’s already so much FUD and misinformation that appears in the media, and to add to it is an atrocity, to say the least.

If you’re in America, please stay to learn a little about Citizen’s Lobbying!

If you are a California resident, legal or not:

You should go to the California Legislature’s handy dandy website for identifying your State Assembly member and Senator.

Call, email, or snail mail your State Assembly member and thank him or her for their vote on AB 129; it’s likely that an intern will take your call but rest assured that your message will be cataloged and passed on up.

Redditor asciimo has graciously provided a template for a quick email that you can send to your Assembly member to recognize and encourage their support of AB 129

Dear Assembly Member [His or Her Name],

I just wanted to thank you for supporting AB 129, “Lawful money: alternative currency.” I am a technology worker who believes that digital currency such as Bitcoin is an important innovation that will improve the lives of many people. This bill affirms that sentiment, and helps to legitimize this new technology. I encourage you to learn more about Bitcoin, particularly its ability to hasten, simplify, and reduce the cost of transactions for goods and services.

Your constituent, [Your Name]

Call or email your State Senator and urge him or her to vote yes on AB 129; furthermore, urge both your Assembly member and your Senator to stay abreast of bleeding edge technology, such as Bitcoin.

If and only if you have time and commitment, call and schedule a face to face meeting!  It is an obligation for these representatives to talk to their constituents.  Usually, it is larger businesses and/or interests that take advantage of this but there is absolutely no reason why you can’t do it too.  That being said, do not walk into a meeting without at least a brochure to add salience to your message.  Don’t be too surprised if you are only able to meet with a staff member; but hey, that’s what the brochure is for.

[ponjava]

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


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

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

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

Such bad shibe.

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

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

Dear all,

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

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

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

So, to put this simply:

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

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

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

Don’t let this happen to you.

Best,

[MICRO]

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

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

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

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

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

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

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

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

The Mt. Gox saga

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

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

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

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

Price volatility

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

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

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

An optimistic conclusion?

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

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

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

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

[MICRO]

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

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

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

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

Speaking to the Journal, representatives from the FSA said:

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

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

Major financial agencies follow

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

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

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

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

The future of Mt. Gox

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

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

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

[MICRO]

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

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

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

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

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

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

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

Initial data

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

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


Screen Shot 2014-02-24 at 5.41.45 PM

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

Protecting your wallet from attacks

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

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

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

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



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

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

[MICRO]

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

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

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

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

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

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


Screen Shot 2014-02-24 at 11.59.17 AM

Why MindGeek matters

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

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

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

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

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

Trials begin

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

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


Screen Shot 2014-02-14 at 9.55.43 AM

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

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


Screen Shot 2014-02-24 at 11.56.25 AM

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

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

Purchasing

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

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


Screen Shot 2014-02-13 at 5.08.34 PM

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


Screen Shot 2014-02-14 at 10.41.27 AM

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

Impact

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

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

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

According to lifestyle blog TheRichest:

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

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

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

My toughs: Now this is some wonderful news

[MICRO]

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

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

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

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

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

Prices fall

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

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

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


Screen Shot 2014-02-25 at 12.26.16 AM

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

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

Bitcoin businesses brace for worst

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

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

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

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

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

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

[MICRO]

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

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

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

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


tradedisablemtgox

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

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

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

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

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

In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds. As part of the effort to re-assure customers, the following services will be coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner: Coinbase, Kraken, BitStamp, Circle, and BTC China.

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

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

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

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

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

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

[MICRO]

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

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


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

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

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

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

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

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

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

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

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

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

Seeking capital injection

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

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


coindesk bpi chart

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

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

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

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

High-profile responses

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

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

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

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

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



Rebranding process

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

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

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

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

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

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

Reducing liabilities

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

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

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

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

Mt. Gox becomes Gox

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

Note the timeframe (italics are for emphasis):

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

Management reshuffle

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

Mark Karpeles

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

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

Mounting evidence

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

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

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

[MICRO]

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

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

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

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

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

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

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

More harm than good

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

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

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

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

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

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

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

Bitcoin and the Deep Web

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

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

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

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

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

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

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

Legal trailblazers

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

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

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

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

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

Punishing the wrong people

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

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

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

Level-headed approach

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

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

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

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

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

Antiquated thinking

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

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

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

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

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

[MICRO]

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

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

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

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

Dear MtGox Customers,

 

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

 

Best regards,

MtGox Team

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

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

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

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

Regulators starting to take notice

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

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

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

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

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

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

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

[MICRO]

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

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

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

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

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

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

A new kind of exchange

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

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

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

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

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

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

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

How the exchange will work

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

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

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

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

A shift in strategy

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

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

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

Stemming the Mt. Gox fallout

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

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

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

[MICRO]

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