Tag Archives: Bitcoin

This Is What It’s Like To Be a Woman at a Bitcoin Meet-up via. @AriannaSimpson

The other night my good friend and fellow cryptoenthusiast Ryan Shea suggested we head to a new Bitcoin meet-up neither of us had been to before. I agreed to meet him there, and though the conversation was stimulating, much of the experience was pretty demeaning.

I walk in and a group of people are already sitting at a long table. I say hi and hover for a second, determining where to sit.

Entirely uninvited, and before I even have a chance to react, one guy proceeds to grab me by the waist and pull me into an awkward, grope-y side hug next to him on the bench. I’ve never met this man in my life. I try giving him the benefit of the doubt and make some quip about his being a friendly sort, but it gets uncomfortable pretty quickly when he puts his hand on my leg and leaves it there until I squirm uncomfortably.

Unsurprisingly, this type of treatment wasn’t specially reserved for me. The person who actually suggested the event to Ryan was another young woman (the only other woman at the event), a VC who was in town from San Francisco and was interested in checking it out for the first time.

The aforementioned groper knew Ryan vaguely from other Bitcoin events, and greeted their arrival with a warm, “Oh, nice to see you! I see you brought your girlfriend this time.”

When the two of them try to point out that a) they are not together and b) she was actually the one who had brought him, they are cut off with a swift, “Sure, sure, I just wanted to see what the dynamic was between you two.”

Apparently that’s code for “checking if you’re okay with me hitting on her,” as that’s exactly what he proceeds to do.

The guy sitting on the other side of me turns and introduces himself. Turns out, he’s the organizer and leader of the meet-up.

He asks: “So, how did you find out about this?”

I’m honestly not sure if he means the meet-up or Bitcoin in general, so I go with the latter and tell him I’ve been interested (okay, obsessed—my friend Sam Smith may or may not have nicknamed me Cryptoqueen) since mid-2013, which is when I started buying some.

He then starts to look at me like I’ve suddenly morphed into a unicorn. Literally: bulging eyes, mouth slightly agape, the whole nine yards. Apparently the expected response would have been that I was Ryan’s friend/girlfriend/sister who had somehow accidentally ended up there.

“Seriously? You mean you actually own bitcoins? You don’t look like someone who would even know about Bitcoin!”


It’s a reaction I’m familiar with — I usually get the same one when people hear I have a motorcycle and, no, it’s not a Vespa — so I just smile it off and start explaining my interest in the international implications of widespread Bitcoin adoption, especially in countries where currency manipulation by corrupt governments has caused rampant hyperinflation and a host of other economic woes.

I conclude the thought, and he (again, staring like I’m some sort of extraterrestrial creature) goes, “Wow. Women don’t usually say that type of things.”

I mean, how do you even respond to that?

Undeterred, I try to sidestep it and go on with my argument, concluding that what I am describing is “much more effective and efficient” than the current system.

“Well,” he says looking at me knowingly, “Women don’t usually think in terms of efficiency and effectiveness.”

A few minutes later he starts describing an app he is working on to someone else at the table. “You see, women don’t care about crypto currencies, so we don’t have to design for them.”

When I tell him he’s wrong, he smartly replies, completely in earnest, “Oh okay, cool, so if we start dating I can use the app with you!”

The irony here is that he actually meant these things as compliments. But what he was implying that the bar for women is so low that my entirely unremarkable comments put me lightyears ahead of the “average woman” (whatever that even means).

Anyone who knows me will attest to the fact that I’m pretty thick-skinned. My self esteem remained intact throughout the exchange; if anything, it made me more determined to learn.

I was not even made to feel unwelcome; these fellows were clearly thrilled at the presence of two women at the event. The problem lies in the conditions under which our company was desired. We were not treated as peers or individuals who might be able to contribute intelligently to the discussion. We were ogled and assumed to be someone’s girlfriend, or someone’s potential future girlfriend.

Was either of us mistreated? Technically, no. But the conditions under which our presence was accepted were such that from the moment we entered the room, the other attendees’ preconceptions put us at a distinct disadvantage.

Perhaps this would be a good time to recall Warren Buffett’s comment that one of the reasons for his great success was that he was only competing with half of the population.

Being underestimated can be a surprisingly effective tool in the appropriate context, but perhaps that’s just me being overly optimistic. I know many women, many of whom are far smarter than I am, who would have felt seriously out of place there. Would they go back to the next meet-up? I doubt it. If the organizer of the meet-up makes people feel so unwelcome, it sets the tone for the rest of the conversation.

I’m not bringing up these comments because my feelings were hurt, and the last thing I need is sympathy. I’m also not concerned that one particular guy thinks women couldn’t possibly know about Bitcoin, or that another grabbed at me. But unfortunately this is representative of a larger trend.

The current generation of hackathon organizers (largely led by the singular efforts of Dave Fontenot —hellllllyeah) is making a concerted effort to encourage the participation of women at their events, and while I’ve still gotten my share of off-color comments, the situation is gradually improving.

Since Bitcoin is still so new, we have the rare opportunity to get onboard before the ship has sailed, becoming knowledgeable before a vast majority of people have ever even heard of it. Learning about it now, instead of trying to play catch-up — as it often seems like women are in STEM fields, programming, or traditional finance — will surely reap great benefits.

I think my experience at the meet-up is worth sharing because Bitcoin lies at the heart of both finance and tech, two industries that carry tremendous weight and which have traditionally struggled to attract women. Given the events of the other night, this is hardly surprising.

I am undeterred and if anything will be even more proactive about attending these events. In my mind, it’s a little preposterous that if I want to do so, however, I have to be okay with being felt up and indirectly insulted.

If women fail to take an active interest in Bitcoin now, when it is still in its infancy and its potential is largely untapped, we will have yet another sector in which the gender is underrepresented and trailing. Bitcoin as a currency has the ability to revolutionize the banking and financial system, but the implication of Bitcoin as a protocol extend much further than that. I’ll write a post of my own on that soon, but in the meantime I recommend you check out Mark Andreessen’s excellent post on why Bitcoin matters.

Ladies, ignore the naysayers and get out to those Bitcoin meetups! If you want to attend a meet-up or chat crypto anytime, shoot me a line on Twitter.

Arianna Simpson lives in NYC and is interested in tech, entrepreneurship, and Bitcoin. This post was originally published on her website.

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If anything, Bitcoin is inflationary

Bitcoin fails as a form of “money” according to how economists look at money. This has lead many economists to conclude that Bitcoin will fail. What it really means is that economists need to change how they look at money.

The Internet is the history of disruptive innovation. The telephony system had evolved slowly for over a 100 years, then the Internet came along and changed everything. The old engineers, steeped in telcom lore, unwilling to challenge old assumptions, claimed that the Internet would never work. And, according to their principles, it doesn’t. For example, when I use Facetime with my brother who lives in Japan, there is a lot of “latency” or “lag” between when I say something and I see my brother react. That’s what the old telcom engineers warned us about: the “packet switching” nature of the Internet would cause unpleasant lag in telephone calls.

But did I mention my free video call, in high definition, from my iPhone in the United States, to his iPad in Japan? That this works at all, and so cheaply, is inconceivable according to old telcom principles. No matter how right the old telcom engineers were, they were still obsolete. Nobody cares about their old principles; the Internet is a whole new set of principles of free, world-wide, high-speed connectivity.

Old economists have the same problem as old telcom engineers. What economists say about Bitcoin is correct, after a fashion, but it’s obsolete.

For example, a major critique of Bitcoin is that there is a fixed supply (21 million coins), and thus can’t expand to accommodate demand. This causes the value of Bitcoin to rise (“deflation”). This in turn encourages hoarding (why spend the coin when it’ll buy twice as much tomorrow?). And this in turn causes the value to rise even further. This means nobody will be able to buy anything using Bitcoin because everyone else will be hoarding them.

That’s true for normal currencies, but not true for Bitcoin. The idea that hoarding money makes it unavailable only applies to physical money, because you can’t move it around and subdivide it. This doesn’t apply to electronic currency, because somewhere in the world you can always find somebody willing to part with a billionth of a coin so that you can use it to purchase something. Hoarding has no effect on the “supply” (sic) of money available for transactions.

Well, another reason hoarding is bad is because it causes volatility. As people hoard Bitcoin, a bubble forms, a sort of ponzi scheme driving up the value until the music stops, after which the price collapses. Such volatility makes it too impractical to use as money.

Again, volatility matters more for physical currency than electronic currency. Volatility is only a risk for the duration that you hold onto the currency. This matters, for example, if you need to save money to pay rent at the end of the month. But, in a fully liquid electronic system, such timing goes away. Instead of a monthly, weekly, or even daily wage, you could get paid once per second. The incoming pennies every second can then automatically be spent every second on rent, food, gasoline, and so on. Even in situations like Zimbabwe’s trillion-percent inflation, earning/spending electronic money on a 1-second timeframe means volatility doesn’t much matter.

Bitcoin’s timeframe is around 10-minutes for transaction, so volatility matters somewhat more. But here’s the thing: the amount payment processors charge for Bitcoin is less than what they charge for credit cards like American Express or Visa. The total risk associated with Bitcoin, including volatility, is still less than the total risk associated with other payment methods. And in any case, a recent study has shown that Bitcoin volatility has been steadily decreasing.

So we’ve proven that Bitcoin’s deflationary issues don’t matter, but here’s another thing: it’s not even deflationary.

The word “Bitcoin” can mean many things. It can refer to the coins (B⃦) themselves. It can refer to the “blockchain” (public ledger) that holds those coins. It can refer to the “bitcoind” software that most everyone uses to process the blockchain. It can refer to the “protocol” that the software implements. It can refer to the general algorithm that the protocol/software implements. It can refer to the general idea of “cryptocurrency without centralized control”.

If 21 million coins aren’t enough, somebody can simply fork the blockchain, starting a new one with another 21 million coins. Or, somebody can fork the software/protocol, creating a new currency with more than 21 million coins (and other useful properties, like shrinking the transaction window, or changing the proof-of-work algorithm). Or, somebody can come up with a wholly new cryptocurrancy vastly different than Bitcoin.

People have done all these things. There are a vast number of “Bitcoin” things running around.

For example, “Bitcoin mining” can now only be done by those who invested a lot of money in custom silicon chips (“ASICs”). It takes two years to create a new chip, so only enthusiasts who invested two years ago can profitably mine Bitcoins today. However, many forked Bitcoin variants use different mining incompatible with these chips. You can still mine these “alt-coins” (as they are called) using a desktop computer with a graphics card. I do this. I mine whichever alt-coin is more profitable at the moment, and then exchange them for true “Bitcoins” at the end of the day. Thus, I’m earning about 0.02 Bitcoin per day (about $10) through mining — but without directly mining Bitcoin. This demonstrates that more “coins” are being created than just the 21 million limit on Bitcoins.

Some of these alt-coins, namely Litecoin and Dogecoin, can be used to buy things online. For a payment processor, or online trading site, handling multiple types of coins is as easy as handling one. If Bitcoin is volatile and has a high risk premium, a buyer could easily switch to Litecoin, which might have a lower premium. If more people would use Litecoin, then that means fewer people would use Bitcoin, and that the value of Bitcoin would drop.

QED: Bitcoins are inflationary in the long run.

So it’s not about Bitcoin, but the entire ecosystem of alt-coins that needs to be evaluated for inflationary or deflationary tendencies. On the whole, the system is inherently inflationary (anybody can fork the system at any time), but it depends upon the willingness of payment processors and customers to use new kinds of coins.

We might find that it’s self-regulating as alt-coins are accepted or dropped from the system. New alt-coins might be created when the price of existing coins rises. Lesser alt-coins might stop being accepted when their price decreases. We might find a decade from now that the Bitcoin-ecosystem turns out to be more stable than national currencies.

What we see here is that old timers (the economists) are right on every principle, that a physical currency limited to 21 million coins would be inflationary, volatile, and unusable as money in the economy. But, they are ignoring how online currency changes those rules, and that Bitcoin isn’t a single currency, but an entire ecosystem. For economists to be right, they have to hold onto their immutable principles for old currencies and ignore all the innovation happening online.

Nobel Prize winning economist Paul Krugman opined back in 1998 that “by 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s”. After being mocked for that, he gave this rebuttal:

“I don’t claim any special expertise in technology… The issues about Bitcoin, however, are not technological! Everyone agrees that it’s technically very sweet. But does it work as money? That’s a very different kind of question.” — Paul Krugman, from Business Insider

But he’s wrong. That Bitcoin is technology has everything to do with whether Bitcoin works as money. It’s like old time telcom engineers who claimed that while they didn’t understand computer networking, they didn’t have to, because it was long distance transmission of data that mattered, regardless whether it was computer data or voice data.

Consider my claim that the Bitcoin-ecosystem is inherently inflationary. Let’s take that to the logical extreme and assume that anybody who has Bitcoin gets rid of them as fast as they can, as they would any inflationary currency. They only acquire Bitcoin if they can immediately spend them. If that’s the case, and assuming that Bitcoin accounts for 10% of the U.S. underground economy, then the value of Bitcoin comes out to one penny, or 1¢, or $0.01. It’s simple math, taking the $2 trillion underground economy (IRS estimate) and taking into account the 10 minute transaction window enforced by the Bitcoin protocol.

I arrive at this 1¢ value by technology, now explain it with economics. I’m pretty sure squaring the two will discover something new about the properties of money, all monies, that economists hadn’t considered before, at least, been able to convincingly prove. I predict that in 20 years (these things take time), some economists are going to win Nobel Prizes for their theories on cryptocurrencies.

The technology of decentralized cryptocurrency is here to stay. It’ll be used by those dissatisfied with existing currencies (namely, the underground economy unhappy with the surveillance mandate placed on existing money). Instead of poo-pooing this technology claiming it won’t work, the successful economist is going to be one that analyzes it, gathers data, and explains why it does work.

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Troubled Bitcoin exchange MtGox promises resumption of services “soon”

4 hours ago

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photo: Guardian/Guy Grandjean, James Ball
Summary:The outfit has apologized for freezing withdrawals and says it now has a workaround to avoid the “malleability issue” that makes certain implementations of Bitcoin services open to fraud.

The Tokyo-based Bitcoin exchange MtGox has apologized (PDF) for suspending the ability of its customers to get their money out and promised an end to the suspension “soon”.

MtGox said the people over at Bitcoin wallet service Blockchain.info had helped it develop a workaround for the so-called malleability issue that caused the withdrawal freeze. The workaround involves a new identifier to check whether transactions have been modified or not.

MtGox has always maintained that the problem is a bug in Bitcoin, while others have said it was in the outfit’s handling of the protocol. The exchange’s version of events got something of a boost when it emerged that there was a wave of fraudulent attacks stealing people’s bitcoins from various services, based on the malleability issue.

“With this new system in place, MtGox should be able to resume withdrawals soon. At the beginning we will do so at a moderated pace and with new daily/monthly limits in place to prevent any problems with the new system and to take into account current market conditions,” MtGox’s statement read.

The firm is also bringing in email notifications for each successful account access, as an extra layer of security. It said more details about the resumption of services would come out on Thursday at the latest.

The price of a bitcoin on MtGox is now just $330, compared with around $625 on less troubled exchanges.

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What Bitcoin Needs To Grow Up

Original URL ARTICLE: http://readwrite.com/2014/02/11/bitcoin-needs-to-grow-up-value-price#awesm=~ovGm9BdEjky2LA

The Bitcoin economy is as dramatic as a teen. What’s going to help it mature?

February 11, 2014 Hack

Every day, there’s a new Bitcoin fire to be put out.

Whether it’s a national government rejecting Bitcoin, a household-name business adopting it, or a new malfunction in a Bitcoin exchange or wallet, there’s always breaking Bitcoin news. And at this rate, the continual rollercoaster ride is less exciting than it is predictable.

Right now, it’s easy to see why so many governmental agencies, big businesses, economists and finance experts don’t take Bitcoin seriously. As long as Bitcoin’s value continues to violently rise and fall with each news story, they can afford to ignore the currency entirely.

Will Bitcoin overcome, or will it fizzle out in its own drama? I’ve pinpointed three areas where the Bitcoin economy needs to improve in order to shift out of its theatrical adolescence and mature into a currency that demands to be taken seriously.

Consumer Protection 

Bitcoin transactions are final and irreversible for a reason. It helps ensure that only one person owns the currency at a time, and verifies who that (pseudonymous) owner is.

But when you get into disputes, things get tricky. If you’re selling products to customers with Bitcoin, you need to be able to allow returns. And if you’re sending somebody a loan with Bitcoin, you need some way to arbitrate that they’ll pay you back.

If you use a credit card, you can call Visa or Mastercard if you don’t receive the goods you paid for. Who do you call with Bitcoin?

Since Bitcoin’s fixed transaction style cannot be changed, companies are innovating around it. An initial step is Bitrated, a company that is pioneering consumer protection for Bitcoin.

Bitrated works using escrow, which is basically the use of a third party to pay on your behalf. Instead of a customer sending her money directly to the merchant, it goes to Bitrated and is only released when the customer confirms she received the product.

Bitrated takes this concept one step further: Instead of sending the money directly to an escrow agent, the customer sends money to a multi-signature address, using the private keys for the agent, the customer, and the merchant. The money can only be spent if two out of the three parties approve.

Bitrated lets the merchant or customer who initiates the transaction select an escrow agent of their choice, and the agent’s fee is usually something like 0.1%. So even with consumer protection, Bitcoin wouldn’t lose the low fees that make it appealing.

“The groundwork for third party arbitration has existed for a long time, since [Bitcoin founder] Satoshi’s days,” said Nadav Ivgi, cofounder at Bitrated. “It just required someone to step up and build a system that implements it and is usable to the general public.”

The issue so far is that Bitrated is still very small. For Bitcoin to grow up, Bitcoin’s most prosperous merchants would need to begin advocating for consumer protection.

Fix The Glitch

Mt. Gox made a lot of Bitcoin users very angry this week—and tried to bring the entire cryptocurrency down with it.

The Bitcoin economy’s first and oldest exchange raised eyebrows and tempers when it made the decision to stop allowing customers to withdraw their own funds until further notice. Faced with bad publicity, it elaborated—it’s because of a fundamental bug in Bitcoin itself.

Transaction malleability, the bug in question, means that it’s possible to alter the details of a transaction to make it appear as if one occurred when it really did not. One anonymous redditor shared how he used the glitch and a little luck to steal 100 BTC (about $60,000) from an exchange. The redditor returned the money, but warned the glitch was still around at the “top exchange” he stole from. Since no other exchange has been experiencing issues with transaction malleability, other redditors are guessing he’s talking about Mt. Gox.

Gavin Andresen of the Bitcoin Foundation boldly responded that transaction malleability has been a known design flaw “since 2011,” and the problem was with Mt. Gox’s software, not with Bitcoin itself.

True enough, most other Bitcoin services, like popular wallet Blockchain and the aforementioned Bitrated, have designed their software to be invulnerable to the glitch. But that doesn’t mean the Bitcoin Foundation shouldn’t make an effort to fix it.

“The Bitcoin core development team has worked to limit transaction malleability,” Andresen wrote. “There is broad agreement in the community that this needs to be eliminated. Finding the best and most responsible solution will take time.”

It may have not been the smartest thing for Mt. Gox to blame a three-year-old glitch for its current problems, especially when nobody else is experiencing the issue. But “we’re working on it” isn’t an acceptable response from the Bitcoin Foundation, either. For Bitcoin to be taken seriously, it can’t just leave vulnerabilities exposed and expect people to work around them.

Lower Volatility, Higher Adoption

If you’re only reading the headlines, it would seem like Bitcoin drama is peaking. But whatever it may look like on a day-to-day basis, Andreas Antonopolous, Bitcoin expert and entrepreneur, says there is statistical data to prove Bitcoin is actually becoming less volatile all the time.

“Volatility as a metric, on a rolling average basis has been declining continuously for five years,” he said. “Each year, Bitcoin has less volatility as the volume and liquidity pool increase. The fact that media drama causes price fluctuations is not an objective measure of Bitcoin fundamentals.”

Even if it’s slowly improving, Bitcoin is still volatile enough that if you have $20 in Bitcoin today, it might be worth only $18 (or perhaps $25) tomorrow. This might hinder people from using Bitcoin to do things like pay their rent. Imagine if you received your paycheck in Bitcoin—you’d never know if it was enough to buy everything you need this month until you looked at the exchange.

Nearly everyone agrees on one thing that could accelerate Bitcoin’s stability: Higher adoption. Since Bitcoin is an opt-in currency, not one you have to use to pay your government taxes, it needs to make itself especially compelling, even essential, to consumers. Bitcoin could achieve this by solving problems no existing currency can solve.

We can already see seedlings of this in the way that Bitcoin lets users make donations to causes, no matter how controversial, without concern for a government’s watchful eye. Bitcoin also solves problems no other currency solves by allowing people to transfer money with minuscule fees. And God forbid you want to transfer money from your bank account on a Sunday with traditional currency. With Bitcoin, that’s A-OK.

But what really makes Bitcoin unique is the technology it’s built on. Even if Bitcoin doesn’t survive, the blockchain will. Before the blockchain, we could only transfer copies of digital data online. I could send you a file, but I’d have the same file myself. With the blockchain ledger, I send you the bona fide original, but I can even prove beyond a shadow of a doubt that I no longer own it myself.

Like the Internet, consumer PCs, tabletop copiers, and other disruptive technologies, it’ll be impossible to imagine our reliance on something like Bitcoin until it actually happens. The potential is there, but for Bitcoin to thrive, we’ll need to watch it occur.

Lead image by Jason Benjamin on Flickr


Thanks, But I’ll Trust Bitcoin’s Math Before The Media’s Orgy of Nonsense

The mainstream media’s orgy of technological illiteracy reached an all-time high today! SELL! (Sell your dinosaur media stocks, that is.)

“Bitcoin is under siege” — CNN Money headline 9 hours ago (Was the US dollar under siege when Bernie Madoff was first outed as a crook? Was broadband Internet under siege when ISP @Home went bankrupt?)

“A dangerous mistake lies at Bitcoin’s intellectual core”—Financial Times, 6 hours ago (and written by the former Federal Reserve examiner who is known as “Professor Bitcorn” within the Bitcoin community for not knowing how to pronounce a bitcoin—and for publicly offering up a bold prediction to any media outlet that will listen that Bitcoin will lose 99 percent of its value by June… the clock is rapidly running out on that prediction, but the good Professor’s fearmongering shows no signs of letting up!)

“The Glitch That Will Help Kill Bitcoin” —Bloomberg, 1 hour ago (An article which seems so singleminded in its approach and intellectually lazy that I’m not even going to link to it here, it doesn’t deserve your traffic. And part of it states “What kind of ‘experiment’ has a $14 billion market cap?” to give you an idea of the piece’s dishonesty. At time of the article’s publication, Bitcoin has a $7.9 billion market cap… talk about a straw man argument. The article also never identifies this “glitch” that will “kill” Bitcoin. Pretty intense judgment call from someone who has probably not sent or received a single Bitcoin transaction.)

And a MarketWatch article from three hours ago: “Bitcoin crash is gold’s gain,” the headline states, even though MarketWatch’s own live market data shows gold has only gained a paltry 1.3% today—and it’s a rather dubious claim to suggest that has anything to do with Bitcoin. A bit like saying, hey, I wore my black socks today—whenever I wear those socks, gold goes up!

Logical fallacies, basic misunderstandings of how Bitcoin works, fearmongering for traffic. Is this the 4th estate of American society or a freshman intro to journalism class?

The media is rapidly talking themselves out of any lingering shreds of legitimacy they might still have. The same people who told us for months Edward Snowden was a dangerous criminal selling our nations’ “crown jewels” to foreign powers—if spying on US citizens’ domestic call data in clear violation of the law and using rubber stamp secret courts to do so are our country’s “crown jewels,” we’re in some serious trouble as a society!

These same people now tell us Bitcoin is scary and we should have nothing to do with it. We’re supposed to trust them?

That’s right: Crush innovation, fellow Americans! (So that China, India, and other enterprising nations will come to completely dominate the cryptocurrency space within two years, putting American consumers and companies at a serious competitive disadvantage? That makes no sense.)

Bitcoin is an emerging technology that has Silicon Valley and high-paying American jobs written all over it. Literally all we have to do as a country and as a sector is not completely fuck this one up. Cryptographic currency is something that “sells itself”—not only is it decentralized, it doesn’t need advocates. It doesn’t need to sponsor stadiums and Super Bowls like the banks do.

The drastically lower transaction costs and settlement times within minutes instead of days—these are things that consumers and business owners find inherently attractive.

It’s the fact that you can send it back and forth so quickly — and that so many people already recognize it as currency—that’s what makes bitcoin so valuable. It allows us to participate in a most fundamental, powerful form of social media: transferring value.

A lone voice of reason in the mainstream financial press lately is David Morris at Fortune. He wrote this today:

“Though there is still the distinct possibility that some other cryptocurrency will out-innovate bitcoin itself, the basic cryptocurrency model solves problems for so many constituents that its eventual adoption is something of a fait accompli. It is vastly more efficient and secure for online payments than the current maze of credit cards and ACH systems, promising to reduce merchant fees and fraud losses. It allows true peer-to-peer payments, with near-zero costs. And it finally enables the micropayments model that has been dreamt of since the dawn of the Internet, opening up potentially huge new revenue streams for writers and other content creators.

We are sure to see more steps backwards and forwards before all of this comes to fruition. But five years from now, a few ethical faults, management catastrophes, and protectionist Hail Marys will barely merit footnotes.”

Given this airtight logic, I’m surprised the mainstream media continues to embarrass itself by lending a platform to people like Professor Bitcorn. In fact, when you look through the negative major hit pieces on Bitcoin, it is surprising how many of them use that individual as a sole or primary source.

Take, for example, “Bitcoin Is Not Yet Ready for the Real World,” an authoritative-sounding piece on The New York Times Dealbook blog authored by Professor Bitcorn that would have probably scared me away from digital currency if I hadn’t spent a large portion of the past year researching every aspect of it. (In the piece, he asks unbalanced leading questions such as “Is Bitcoin an innovative response to facilitate meaningful commerce or simply a designer currency for the criminally inclined?” Really? A designer currency for criminals?)

The media can always find cranks and doomsayers—there are no shortage of those people, on any subject matter.

I would challenge the editors and show bookers at America’s major papers and networks to do better. Book actual experts who spend their time with Bitcoin’s protocol day in and day out. People like Andreas Antonopoulos, or any business owner who actually uses and accepts Bitcoin, or any customer who has bought something with it, or the crop of (mostly) young entrepreneurs who are innovating more in a month than Professor Bitcorn’s beloved Federal Reserve innovates in a decade.

And it’d also be nice if the media points out that Bitcoin’s recent “market chaos” hasn’t—and won’t—cost taxpayers a penny.

Instead of a trillion dollar bank handout that didn’t prevent a single foreclosure and which led to years of red tape, Bitcoin’s own “banking crisis” is being resolved in a matter of hours—not months or years.

We’re seeing precisely what should happen with a decentralized system of capitalism: users are moving their Bitcoin away from firms they no longer trust, and to firms with the competence level required when running a 24/7 electronic currency exchange. The competent and honest will thrive, the incompetent will be driven out of business.

That sounds like a good thing to me.


You can follow me at https://twitter.com/d_seaman and find some of my other stuff at DavidSeaman.com.

Disclosure: I own some Bitcoin (BTC) and Vertcoin (VTC) at time of publication. This is not investment advice and no warranties or guarantees are provided.

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Bitcoin is acting like a real currency now: it suffers shocks but doesn’t collapse

Feb. 7, 2014 – 12:54 PM PST



Summary:Bitcoin took a fall after some bad news this week — but nothing like its notorious crashes of the past. Meanwhile, other currencies, including the lira and the peso, fell just as much.

The latest news from the Bitcoin world involves more allegations of theft and skullduggery, but this time there’s a twist: investors aren’t sending the virtual currency into a Justin Bieber-style free fall. Instead, Bitcoin is behaving more like an emerging market currency in the face of bad news.

In case you missed it, the price of Bitcoin suffered a jolt on Thursday night after a popular exchange stopped processing transactions. This comes on the heels of a string of other negative news: Apple booted the last Bitcoin app from its iTunes store; another money laundering arrest; and Russia’s decision to ban the currency outright. Oh, and Coinbase — the most mainstream Bitcoin service — confirmed that someone is robbing its customers’ wallets.

So what the outcome of all this? After trading at around $800 for over a month, the currency finally took a small swoon last night and, as of Friday afternoon ET, one bitcoin is selling for about $740 on Coinbase:

bc screenshot

The overall drop is over 10 percent in 24 hours, a significant amount to be sure. But the drop is nothing compared to Bitcoin’s usual wild swings. As the Washington Post noted this week, the currency has gone through at least four spectacular bubbles and crashes, in which its value plummeted more than 80* percent — but this isn’t happening anymore. Indeed, this week’s drop is just a hiccup in comparison.

Meanwhile, Bitcoin wasn’t only currency to stumble this month. Here’s what happened to the peso in Argentine, where President Cristina Kirchner has badly mismanaged the economy:

Screen Shot 2014-02-07 at 3.08.38 PM

And, if you want to discuss volatility, here’s what the Turkish lira has been doing in the last few weeks of a corruption scandal:


These charts show that while Bitcoin has troubles, so too do conventional fiat currencies that have been around for much longer. And while hackers and charlatans can damage Bitcoin’s reputation, they may be no worse for the money than corrupt and incompetent leaders who meddle with central banks for political purposes.

It’s too soon to say, of course, that Bitcoin has overcome its historical volatility — or even that it won’t blow away all together. But for now, it’s significant that the currency’s value is holding relatively stable in the face of a wave of bad news.

*An earlier version of this story stated that previous Bitcoin crashes amounted to 100 to 500 percent. This has been corrected as per comments below.


Bitcoin Beyond Money

This isn’t a currency. It’s a consensus network. This is the holy grail of distributed systems of the last 15 years. You can do so much more than currency. — Andreas Antonopoulos, Bitcoin OG

I’ve been following the Bitcoin saga for a while. Not because I’m interested in Bitcoin as an investment opportunity or even as digital cash — although it does encourage us to consciously think about what money is and how and why we use it.

The idea that money rests on belief makes some people uncomfortable. — Brett Scott, Heretic and Hacker of Finance

I understand where the uninitiated are coming from. “E-money”, nefarious nerd nü-money … I hear you.

But there’s more to Bitcoin than money.

What’s interesting about Bitcoin is the underlying technology.

This is a new paradigm.

Just as the internet decentralized communication, the Bitcoin protocol has the potential to decentralize decision making and replace outdated hierarchical systems.

Bitcoin is a technological innovation: purely disruptive in form and function. Arguments by economists that ignore the technology are worthless. — The Greater Promise of a Blockchain

The core invention of Bitcoin is a distributed consensus ledger that is not limited by or susceptible to the ambiguities of language — which is the basis of most law.

This is smart, self-executing law. Scalable in a way that makes hierarchy redundant.

Bitcoin is a system to replace a centralised banking intermediary (that we have to trust to accurately record electronic money transactions), with a decentralised intermediary that we don’t have to trust. That decentralised intermediary is a network of Bitcoin users. — How to explain Bitcoin to your grandmother

So. Replace the thing we have to trust with a thing we don’t have to trust? Yes.

Basically: Trust math. It is unfuckwithable.

[As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers.]

If you want to know more about how the Bitcoin protocol actually works I recommend reading Satoshi Nakamoto’s original paper and Michael Nielsen’s How the Bitcoin Protocol Actually Works. You can also contribute to a book about it here. And read about Distributed Autonomous Community (DACs).

Voila, a time-stamped, cryptographic-ledger, distributed over a decentralised peer-to-peer network: a technological marvel that can’t go away. — Tristan Winters

This is an invention. It cannot be uninvented. It will evolve. Don’t be Lars Ulrich about this.

In my simple brain, I can imagine using this type of distributed consensus for lots of things.

Consider ways we could replace kafkaesque systems with open systems, modernize adjudication, or implement local services for the unbanked and existing grey markets, for example. Or consider how Ethereum aims to transform law in the way Bitcoin is transforming finance.

Smart contracts combine protocols, users interfaces, and promises expressed via those interfaces, to formalize and secure relationships over public networks. This gives us new ways to formalize the digital relationships which are far more functional than their inanimate paper-based ancestors. Smart contracts reduce mental and computational transaction costs, imposed by either principals, third parties, or their tools. — Nick Szabo, Formalizing and Securing Relationships on Public Networks

To limit Bitcoin or a block chain to the existing paradigms of hierarchical governance is thinking too small.

I’m writing this because I’m bored with the majority of current Bitcoin conversations and I want to encourage more people — including plebs like me — to think about the kinds of truly radical inventions and innovations that are now possible.

/end rant


Further Reading

The greater promise of a blockchain

 — Wait a minute. Bitcoin’s not dead. Hold on. How does a computer protocol die anyway?

The invention of the blockchain

 — The greatest invention of Satoshi Nakamoto was not Bitcoin, but the blockchain, and its far-reaching implications are only just being…

via Liam Z

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