An Apology
This is a sprawling ugly mess. the keys to successful writing: purpose, structure, style, speling, focus and material have been ignored.
your interest in bitcoin may be tested.
our friendship too.
expect an involuntary gag reflex to kick in around 300 words. and then, if you keep reading, you’ll experience nausea, a slight fever, dryness of the throat, dizzyness, itchy rashes, severe muscle spasms, drooling. you know, like you had fish for dinner.
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TL DR: bitcoin good.
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The Grimness
Let’s start with the grimness. I don’t want to be accused of hiding the negative threads that are out there.
- Oracle of Omaha is nice and blunt about bitcoin: “Stay away from bitcoin. It’s a mirage” (paraphrase) okidoke.
- per Reuters: Mind your wallet! More than 140 types of malware are out there trying to invade your computer and get your coins. Cryptolocker, the extortion-ware that threatens to permanently encrypt your computer drives (rendering them useless) has attacked thousands, and of 40 bitcoin exchanges tracked in a recent study, more than 18 have evaporated (often taking customer funds with them). Most of them did say sorry though.
So yeah, Gox appears to have lost $500M in coins (altho it was just released that they may still have $150M of those), Buffett hates bitcoin and cybercriminals are targeting bitcoin users with sophisticated malware and phishing attacks.
And that’s not all folks!
A few of the other non-Gox shaped bumps in the road:
- Bitcoin exchange Poloniex loses 12.3% of its bitcoin reserves. So… all customer balances will be ‘temporarily’ docked 12.3% of their value. Owner claims they were hacked.
- Flexcoin, a bitcoin bank, shuts down after $600k in coins lost.
- Canadian Bitcoins loses $100k in coins. Here’s how, “scammer contacted a technical support agent at its now former web hosting service, Granite Networks, claiming to be owner James Grant. Using only the owner’s name, the thief was allegedly able to have the site reboot into recovery mode, allowing him to bypass all protections on the server.” NICE
- Bitcurex was also hacked, but seems to have come back to life. “The service was shut down to carry out repair works and implement the necessary improvements to our system. Our internal procedures prevented any further losses which were limited to between 10 and 20 percent of our operational Hot Wallet Bitcurex.” Ho-hum, only lost 10-20% of their hot wallet.
- Another exchange you’ve never heard of, CoinEX.pw, was hacked, “Long story short: Yes, our wallet server got hacked and all funds were withdrawn.” At least they’re honest :)
- Andreas on BTC-E (one of the four biggest exchanges) - I don’t know much about BTC-E but I would agree that it has very little transparency in ownership or controls. That should serve as warning
- Redditors think it’s shady too, “shady as fuck” to be exact
- But don’t worry about bitstamp, an audit, managed by Firestartr.co, a technology investment firm that no one has ever heard of, confirms that bitstamp is 100% solvent. Never mind that Firestartr has no known accounting/auditing expertise, if they say it’s solvent. It simply MUST be solvent! (Cryptographic proof of solvency/reserves can’t come soon enough - someone may have already pulled this off, see below)
- And a decent history of major bitcoin-related hacks by the folks at the Guardian
- The SEC is hot on the tail of a number of bitcoin-related entities: Investigating SatoshiDice acquisition and appears to be focusing on various crypto-equity-related deals/exchanges/etc….
- Blockchain.info had an extended (24hr+) outage. No customer funds were lost (bcs blockchain doesn’t hold your coins. or even your passwords), but blockchain is the number 1 wallet provider (with 1.5M+ users) and it was a blow to the community to have the service go down for such a long time. Blockchain promises a full post-mortem review in the coming days (disclosure: I’m an employee of blockchain.info)
- and! in a recent Wired poll, “62% of respondents believe Bitcoin is a scam, while 15% of male respondents believe Bitcoin is used to fund terrorism. Interestingly, 23% of respondents would be convinced of the legitimacy of Bitcoin if it could be used to buy a Big Mac” There you have it!
And let’s close this dark chapter with a series of very serious
WARNINGS
- Let’s start with America, where Florida regulators warn their citizens about bitcoin
- So do Texas Regulators, warning Texans that bitcoin is “very, very trendy” and not for those over 40. “An investment tied to digital currencies may be suitable for someone in their 20s, in their 30s. When you’re talking about a retiree’s nest egg, that may not be something they’d want to subject to this type of a risk.” and “In many ways, digital currencies operate as ‘online cash,’ only this type of currency is extremely volatile and can disappear the same way your money disappears when you lose your wallet,”
- Danmarks Nationalbank (the Danish Central Bank) compares Bitcoin to Glass Beads, My paraphrase of Coindesk’s paraphrase: Rather than functioning like money, bitcoins display the characteristics of commodities – that is, users attach value to them, not issuers or central banks. Yet, said the bank, bitcoins do not have intrinsic value like gold and silver, and they bear a closer resemblance to “glass beads” – an apparent reference to the beads that were traded in past centuries for gold, ivory and other commodities.
- Bank of Thailand: Bitcoin not illegal, but don’t use it. “Bitcoin is electronic data. Thus, it’s not considered a currency and can’t be used for payments, and [is] not considered legal tender like money. With no self worth, the value of such data varies based on the needs of the market. Bitcoin changes in value very quickly and it could became something of no value if none desired it.” Yes sir, electronic data! and don’t worrry bitcoin, I’ll always desire you!
- Icelandic regulators appear to hate bitcoin and their own national cryptocoin ((first of its kind) Auroracoin – airdrop scheduled for Mar 31)
- Bank of Israel: “recommend to members of the public considering the use of decentralized virtual currencies to understand their characteristics, to be aware of the unique risks inherent in their use, and to display heightened awareness and caution.”
- Central Bank of Jordan raises concerns and blocks financial companies from dealing in bitcoin
- Bank of Lebanon: to avoid dangers and losses that might result from using e-money, the central bank of Lebanon warns against purchasing, keeping or using e-money.”
- Bundesbank board member warns, bitcoin “highly speculative” and “Bitcoin users often assume that Internet payments with bitcoin are cheaper than international bank transfers or paying with a credit card. They forget, however, that the price of bitcoins fluctuates greatly, among other things. Ultimately, the losses can quickly become considerably higher than transfer or credit card fees.”
- That’s enough I think. though there are more. many more. I’m going to issue a warning too: Don’t buy bitcoin. Unless you can live with high volatility. and unless you’re willing to lose what you invest. all of it. and do your own due diligence if you’re going to buy. and also, know that if you do buy bitcoin, that you’re supporting a technology that is a direct competitor to existing financial instruments like the US dollar, equity/debt markets, and all forms of financial contracts. Your bitcoin purchases will be interpreted as a demand signal and will hasten the development of services that are based on distributed public ledger technology (basically, you’ll be spurring the creation of new competitors to traditional financial instruments and institutions, forcing them to evolve).
Take away: If you own any bitcoin, there’s a chance you’ll lose it all. (unlike the dollar, which, at a minimum, you’ll always be able use to pay your taxes :)
—-Comedic Intermission—-
Bitcoin on Conan O’Brien (not that funny imo, but a bitcoin sketch on Conan is a milestone of sorts. Waiting on LCK or SNL to throw out a bitcoin bit)
—-Such Attention. Much Media—–
mixing memes here, sorry.
- First the Silk Road closure
- Then spike in price in Nov/Dec.
- Then the price crash.
- And the recent implosion of Mt Gox (and the associated Karpeles Frappuccino obsession)
- And more recently, the Newsweek piece unveiling the true identity of bitcoin’s enigmatic founder, Satoshi Nakamoto
It’s high drama stuff. Everything from $500M lost (or stolen!) to CEO suicides. And don’t forget about the drugs (meet Molly, a very nice girl, pure too – delivered to your door). and the sex (SFW links).* This is stuff that the news media just can’t pass up.
And, in fact, they *are* eating it up. Every time I go to the gym bitcoin pops up on the CNBC screen at least once. The Wall St Journal has created a dedicated section, BitBeat, that covers bitcoin (Excerpt below). NYTimes regularly has
Point being: bitcoin awareness is reaching new levels. That may not translate to much in the very near term, but it certainly feels like this train is picking up speed and passengers. Compared to a year ago the difference is HUGE. And for every 1,000 people that are introduced to Bitcoin today, some of them will take the time to pull back the curtain and really understand it. and once you understand it, you believe.
it’s like seeing the face of god – nothing is the same afterwards.
from that point, depending where you allegiances lie, you’ll either be on the bitcoin bus or trying to blow it up.
some of the people getting on the bus are bankers, entrepreneurs, coders, journalists, people running retail businesses and they’re going to fuel the next wave of adoption of distributed public ledger technologies (like bitcoin).
And the Economist has, apparently, seen god too, the Economist weighs in on the recent trials and prospects for the future: “THE father has been found in time for his child’s funeral. That would appear to be the sorry state of affairs in the land of Bitcoin, a crypto-currency, if recent press coverage is to be believed…
In reality, things are rather different… Bitcoin’s best days may still be ahead of it—if not as a fully fledged currency (see article), then as a platform for financial innovation. Much as the internet is a foundation for digital services, the technology behind Bitcoin could support a revolution in the way people own and pay for things. Geeks of all sorts are getting excited—including a growing number of venture capitalists, who know a new platform when they see one.”
(I do recommend reading the entire Economist piece).
And the US Treasury is at least considering taking a knee at the alter, “David S Cohen, Under Secretary of the US Department of the Treasury, revealed that the Treasury is taking an interest in ensuring that the digital currency industry evolves in a regulated manner despite these concerns” (re money laundering, criminal activity, etc…)
Increasingly, the articles I’m seeing in main stream media evidence a clear understanding of bitcoin and distributed public ledger tech. That was not true even 3-4 months ago when the majority of the pieces on bitcoin by major news outlets were just riddled with errors and misunderstandings. The same is true regarding regulatory agencies (this is esp true of US-based agencies) – there’s a key recognition that distributed public ledger tech is a major breakthrough that can offer significant advantages over existing alternatives and that this core innovation should be allowed to evolve and thrive (while playing within standard banking rules to limit criminal activity, terrorism, etc…)
—-The Good Stuff—-
Let’s start with the Big One - Nas on Bitcoin: “This is what’s good” (the world is yours)
There’s a lot going on under this stormy surface, good things are brewing. Insured wallets are here (Xapo just got $20M in funding). Great article on multi-signature
I went to a meetup in LA last week. about 30 projects were presented. a dozen were pretty interesting, *many* startups are focused on securing coins and adding features to transactions (like multi-sig and zero-trust escrow services)
Bitcoin now getting a lot of public attention from major financial players:
An excellent bitcoin primer courtesy of our friends at Wells Fargo: Bitcoin 101
and… Bill Miller (former Chairman and CIO of Legg Mason Capital Management ($680B under management)) likes Bitcoin (2:25min), “I own bitcoin personally… We don’t own it in the fund, although when Bloomberg can get a quote on it and it can be securely stored, it’s a possibility. Bitcoin is an interesting intellectual and technological experiment and so investing in bitcoin or buying bitcoin is like making a venture bet, in the sense of, you don’t really know what is going to happen but the potential return is huge…. 100x your money.”
Fortress Investments declares $20m+ in bitcoin holdings to SEC (and they’ve also started a bitcoin-based hedge fund w/ Pantera ($150M))
And a vote of confidence from the giant vampire squid? Goldman Sachs issues a report on Bitcoin – (two relevant images from the GS report)
which implies this…
Ho hum: what’s $200B/yr in savings.
And the key quotes from the crack team of GS analysts: “We would argue that Bitcoin, and other digital currencies, lie somewhere on the boundary between currency, commodity and financial asset,” write Dominic Wilson, chief markets economist at Goldman Sachs, and Jose Ursua, a global economist with the firm. “Our best definition would be that it is currently a speculative financial asset that can be used as a medium of exchange.”
“On net, more than taking off as a widely-used alternative currency, it is much more plausible that Bitcoin eventually has a significant impact in terms of its innovation on payments technology, by forcing existing players to adapt or coopt it”
“Bitcoin gateway service providers such as BitPay and Coinbase, which enable merchants to accept bitcoin payments, typically charge a fee of about 1%. At face value, the annual net savings if all electronic payments were conducted in Bitcoin could potentially add up to over $150 bn in retail point of sale and $12bn in e-commerce fees per annum based on global 2013 purchase volume.”
“Using this math, merchants generating $1 million in annual purchase volume would save at least half in payment processing fees by accepting bitcoin, with small merchants even better off”
They also note that bitcoin volatility is 20x major currencies like the dollar or euro. I expect this will drop to 5x by this time next year.
and…
Even Eric Schmidt likes it! from the NYT: Eric E. Schmidt, the executive chairman of Google, is one believer in the integrity of the Bitcoin software. “I had a look at the code,” he said. “It’s very good. Very sound.”
Even Eric Schmidt I say.
A man with his hand on his chin. A man who wears glasses. and has graying hair. A man who is the chairman of google. he co-authored a book too.
A man like that couldn’t be wrong.
E R I C S C H M I D T !!!!
of Google
!
G O O G L E.
GOOGLE!
couldn’t be wrong. could he?
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And, not that it matters anymore now that Eric Schmidt, the pontiff of the technium, has declared Bitcoin’s soundness, but Max Levchin (founding CTO at PayPal) also likes bitcoin, ”it is beautiful. It is one of the more impressive pieces of [almost] pure math…. The fact that it’s a distributed ledger without a third-party trust system is awesome, and a fundamental breakthrough.”
and Saxo Bank apparently doesn’t hate bitcoin, “I wouldn’t say we’re taking a lead on it. I’ve taken a personal interest in understanding the space better. [...] We haven’t made that decision yet, but at least we’re not dismissing it out of hand for regulatory reasons or other reasons that banks would completely ignore it… I think it’s a bit of a paradigm shift. I was in Israel [recently] and they had this beautiful historical collection of coins, and it struck me that this model has been the same for several thousand years so that it might be time for something new to come by… At the end of the day, my general observation is that the private sector is a lot better at most things that the public sector, so why shouldn’t that also be the case with money?”
Bottom Line: I may just be petting my rabbit’s foot here, but I do believe we’re on the cusp of the 4th wave of adoption. This plane is about to take off.
—–Miscellany—–
- US Congressman Jared Polis, using the same logic, seeks to ban the US dollar, “I write today to express my concerns about United States dollar bills. The exchange of dollar bills, including high denomination bills, is currently unregulated and has allowed users to participate in illicit activity, while also being highly subject to forgery, theft, and loss. … The clear use of dollar bills for transacting in illegal goods, anonymous transactions, tax fraud, and services or speculative gambling make me wary of their use. Before the United States gets too far behind the curve on this important topic, I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.” Here here!
- SecondMarket seeks to open bitcoin fund to ordinary investors (via OTC). Basically a race between SecondMarket and the Winklevii. OTC route favored by 2ndMkt ismuch faster since it doesn’t require SEC approval. Expected to be live sometime in 4th quarter of 2014. 4min video on CNBC (pretty solid interview, Silbert has become a leading voice for bitcoin)
- and bitcoin is clearly not a threat to Western Union, bcs the CEO of Western Union regularly writes 3-part articles on Fortune/CNN addressing digital currencies: “The current digital currency narrative, while certainly attractive to entrepreneurs, venture capital, and the media, is extremely “First World” in nature. And a primary question remains — do such innovations, as we know them today, address the needs of consumers and businesses on both sides of an international transaction? In its current form, the answer is no, but there’s potential, and that is something I am watching with great interest.”
- and neither is bitcoin a threat to the current banking infrastructure, “Do banks normally write 25-page reports about non-threats that can’t possibly work? “Why marshmallows make terrible currency” by BofA.”
- Some significant hires at Coinbase (Amazon’s former director of biz dev/sales and Facebook’s former security director) – this is an ongoing trend where medium/high level tech execs leave an established player (where they cashed in) to join a promising start up in hopes of repeating the cycle.
- BitPesa update (10min) – it’s real, it’s moving forward, it’ll launch soon. BitPesa is a money transfer service (remittances) modeled on MPesa (mobile phone payment system that originated in Kenya)
- Bifubao (china-based exchange) claims to have created a user-verifiable wallet service (proof of reserves/your holdings, which would have avoided the Gox failure) – “Bifubao has implemented what it claims is a world-first ‘proof of reserves’ trust system – a verifiable guarantee that most or all bitcoins it holds are actually held in reserve. Bifubao’s system uses the ‘Merkle Tree’ technique originally proposed by bitcoin developer Greg Maxwell.” Code has been open-sourced so anyone in the community can implement/improve.
- Bitcoin core software update: 0.9.0. Overview from core developer Jeff Garzik
- NYTimes on how Hong Kong is angling to be the center of bitcoin in Asia. Backed up by Google Trends Regional
- First Bitcoin Game show, Take My Bitcoins, is on it’s way (Apr 3 premiere): ““Take my Bitcoins” will offer contestants a chance to win thousands of dollars worth of bitcoin every week. The show will be co-hosted by celebrities and gameplay will include various online activities, ranging from social media to chat rooms and live call-ins via Skype and Google Voice.” Watch the show at takemybitcoins.tv
- Also, Andreas Antonopoulus put together a fund to compensate Dorian Satoshi Nakamoto for the hassles he’s had to endure as a result of poor reporting/low journalistic standards. The fund is now over $25k – throw some coin his way here if you’re interested -
1Dorian4RoXcnBv9hnQ4Y2C1an6NJ4 UrjX
- There are a couple hundred countries in the world and some of them will lead the charge on bitcoin, it appears that the US will be one of them, but Cyprus and others that you might never guess will be busy experimenting, testing out various use cases and out of all these experiments we’ll start to figure out how to incorporate bitcoin into our lives at scale.
- From the conference in Austin last week, the first Distributed Autonomous Organization I’ve seen - http://rideshares.org/
- Nice graphic showing trade volumes for various cryptocoins
- The Rise of Video Game Economies. A nice 7min vid (PBS) that ties in nicely with Richard Garriott’s interview on Let’s Talk Bitcoin, about the future of bitcoin and cryptocurrencies in the game space
- The next halving (when mining rewards are cut in half) - 127 weeks, 3 days (Aug 2016)
- Mining power / difficulty is continuing to rise. I predicted 50TH/s by the end of the year, we already hit 39 earlier this month.
- and an update on ATMs: A few things (1) There’s been a wave of significant VC investments in half a dozen bitcoin ATM startups. (2) We’re starting to see major expansion in ATM roll outs, in the last six months we went from less than 10 bitcoin ATMs globally to more than 100. And that number will go well over 1,000 before the end of 2014. One example: Dubai. One company is rolling out 400 bitcoin ATMs there this year. 400! There are a lot of wealthy people there. it’s a high traffic tourist zone. and there are tons of foreign workers in Dubai who send remittances home. First one is rolling out in California. And the ATM Industry Associate just published a report titled, “An Introdution to Bitcoin ATMs”
- From WSJ’s BitBeat:
“For all the attention bitcoin gets from the press (i.e., us), fewer than 1% of people online have used bitcoin for purchases, a new study from Forrester/Bizrate finds, even as public awareness of it rises. But what matters, the report says, isn’t how many people are using it, but “what this digital currency represents for the future of global payments and commerce.” On that front, they see cyrptocurrencies as a very significant development.“Bitcoin as a brand may never reach mainstream consumer adoption,” writes the study’s authors, Denee Carrington and Sucharita Mulpuru. “However, incumbents in the global payments ecosystem should consider the emergence of Bitcoin and crypto-currencies more broadly as an early warning siren of more innovation to come — that will completely transform today’s payments systems.”Now, they’re not the first ones to says that, of course. But Forrester is a well-known market research firm, a publicly traded company on the Nasdaq exchange. This report, therefore, wasn’t written for consumers or journalists, and certainly not for the bitcoin faithful, but for corporate professionals. It’s one more bit of evidence that the big boys are taking digital currencies seriously.The report ain’t cheap, either. You can buy it online, for $499. There’s no indication you can pay in bitcoin”
Comment Sections: Always worth reading. And even if the wind is shifting for journalists and regulators, whichever groups can said to be represented by those making comments are still very much anti-bitcoin. See here. spend 2min scanning through these and you’ll be tapped into the tone of all the comments that pop up on bitcoin articles in MSM (CNN, Fox, CNBC, etc…) – it’s a thrashing. no doubt about it, the proles hate bitcoin.
*We’re still waiting for the rock ‘n roll though.
Proof that Dorian might be Dorian
and finally, a snapshot from the tumult in Turkey
but really finally: if you want to know more about multi-sig I recommend this two part video series
intro to the multi-sig vids: Just like the Wright brothers, on those first flights at Kitty Hawk, didn’t concern themselves that much with landing. And improvements like anti-lock brakes and seat belts help protect passengers in cars. Bitcoin is now in that ‘second phase’ where security is becoming massively important. Fortunately, because the currency is programmable, anything is really possible. Originally introduced into the bitcoin client a few years ago, multisignature addresses massively more secure than regular ones. Their adoption by all wallet manufacturers is coming. But, for you techies and voyeurs, we’ll jump inside the ideas of multi-sig and even program the stuff. Hope you enjoy.
that’s all folks. You made it to the end, YOU WIN!
