Crypto-currencies: The future is now

Post by **leterry60614** » December 19, 2013, 8:27 pm

And we thought China was the big player...
A new report from Wired magazine indicates that the FBI is now in control of two addresses, or wallets, holding bitcoin worth as much as $120 million. That total would make the law enforcement agency the second-largest bitcoin holder in the world behind only Satoshi Nakamoto, the currency’s inventor, who is thought to have mined one million bitcoin in the technology’s earliest days.

Post by **parrot** » December 22, 2013, 5:11 pm

An interesting piece about bitcoin mining at http://dealbook.nytimes.com/2013/12/21/ ... -mines/?hp

I was under the impression that the common man could get into the mining act....and I guess to an extent he still can. I still don't understand the concept behind the mining bit......it someone is trying to establish a crypto-currency, why make it into a game? And how does the common person compete with the likes of the individual in the article able.
Meanwhile the value is back up to the $660 range.

Post by **KHONDAHM** » December 22, 2013, 7:19 pm

It is interesting, indeed, and worth learning about while on the toilet with nothing else to do. One of my machines mines LiteCoins continuously. It's always on anyway, so I figured may as well put the GPU and CPUs to work. At today's and future difficulties, I expect it to mine maybe 2 LiteCoins (not BTC) in a year's time. That's about $60 at today's prices and I am technically mining at a loss (except that the machine would be on, anyway). It uses maybe +200b more electricity monthly with it constantly at 100% utilization (the mining software runs at subordinate priorities so no affect on normal use). But if the prices go up ridiculously, those 2 coins might be worth thousands or tens of thousands each. Who knows, right? A year ago today, nobody expected prices to be anywhere near where they are currently...

Post by **leterry60614** » December 22, 2013, 8:31 pm

Bitcoin mining isn't a game but a proof-of-work concept used in the validation of a buy or sell transaction. There are more details below from this great paper:
http://www.michaelnielsen.org/ddi/how-t ... ally-works

Proof-of-work
Suppose Alice wants to double spend in the network-based protocol I just described. She could do this by taking over the Infocoin network. Let’s suppose she uses an automated system to set up a large number of separate identities, let’s say a billion, on the Infocoin network. As before, she tries to double spend the same infocoin with both Bob and Charlie. But when Bob and Charlie ask the network to validate their respective transactions, Alice’s sock puppet identities swamp the network, announcing to Bob that they’ve validated his transaction, and to Charlie that they’ve validated his transaction, possibly fooling one or both into accepting the transaction.

There’s a clever way of avoiding this problem, using an idea known as proof-of-work. The idea is counterintuitive and involves a combination of two ideas: (1) to (artificially) make it computationally costly for network users to validate transactions; and (2) to reward them for trying to help validate transactions. The reward is used so that people on the network will try to help validate transactions, even though that’s now been made a computationally costly process. The benefit of making it costly to validate transactions is that validation can no longer be influenced by the number of network identities someone controls, but only by the total computational power they can bring to bear on validation. As we’ll see, with some clever design we can make it so a cheater would need enormous computational resources to cheat, making it impractical.

Post by **jackspratt** » December 22, 2013, 8:45 pm

For the time being I am happy just going to the ATM, putting on my 4 digit Pin code, and being certain of what I am going to get.
But I have always been fairly conservative with my money.

Post by **Laan Yaa Mo** » December 24, 2013, 12:31 am

I am a conservative like Khun Jack, in regard to money; however, Khundahm may be on to something although I am not quite sure what, but the thing does not seem to be in its death throes yet,

Even if Bitcoin fails, cryptocurrencies are here to stay

John Greenwood | December 20, 2013 8:00 PM ET

Despite its many advantages, Bitcoin's Achilles heel is its volatility. The almost daily fluctuations make it very difficult for businesses to have any certainty about their true costs. If customers pay in Bitcoin and the value suddenly drops, the company ends up the loser.

Is paper money headed for obsolescence, swept aside by the meteoric rise of Bitcoin? Is the controversial cryptocurrency the harbinger of a golden age of e-commerce, where all transactions are electronic, frictionless and not under the control of central banks? It’s not hard to come to that conclusion given some of the recent hype.

But there’s also plenty of evidence that the whole crazy phenomenon is a bubble about to pop, especially if you’ve been following developments in China.

Earlier this week, BTC China, the world’s largest Bitcoin exchange, set off alarm bells when it announced it will no longer be accepting deposits in yuan. In other words, no new customers.

The move came two weeks after the country’s central bank declared that the virtual currency has “no real meaning” and is “not legally protected,” reportedly an effort to cool rampant speculation that had spread across the financial sector. The Bank of China also banned the country’s lenders from doing business in Bitcoin.

Markets took it as a sign the world’s most populous country wants to steer clear of the currency. Reaction was swift. Bitcoin, which had been on a tear since the start of the year, rising 90-fold to more than $1,200 in early December, abruptly started to wobble. When BTC China dropped its bombshell on Dec 18, the downward trajectory steepened, with the value briefly slipping below $500.

Granted, the market has recovered since then but the episode has nonetheless cast a pall over Bitcoin’s future prospects, prompting several media reports lamenting its demise.

And since it’s essentially a financial system that competes with those run by conventional banks and government monetary authorities, it’s par for the course that such institutions might consider Bitcoin a competitor and take actions to try to stop its rise.

Still, it’s a bit early to declare the currency dead. The moves by China clearly changed the lay of the land but the market has been bubbling over for some time, over-due for a correction. Enthusiasts can take heart in the fact that this has all happened before, several times, yet the currency has survived. Over the past several years Bitcoin has come up against lots of hurdles, including the recent shuttering of the notorious Silk Road online market, one of the few places that actually accept the stuff. Many called it a death knell for Bitcoin but like the battery company bunnie, it just keeps on ticking.

George Frey/BloombergBitcoin was created four years ago by a person or group using the name Satoshi Nakamoto.
The brainchild of a mysterious Japanese software developer named Satoshi Nakamoto (conventional wisdom is he is fictitious), Bitcoin first came to media attention in 2008, morphing over the next few years from obscure fad to investment craze thanks to a loyal fan base of techies, hipsters, libertarians and criminals.

Key to its appeal is the fact that Bitcoin is entirely digital, controlled by a peer-to-peer network that ensures anonymity of users. And unlike conventional money, it isn’t managed by any government and indeed can’t be manipulated by governments or other outside forces, which helps explain the considerable following among libertarians and those looking to skirt government currency controls.

The currency is created by “miners,” computers set to perform complex tasks mathematically required for the maintenance of the system. For their efforts, miners are rewarded with new Bitcoins, but as the amount in circulation increases the difficulty of computations grows as well. In the early days miners could set themselves up with a fairly new PC but players now come equipped with custom systems with price tags in the thousands and the game has gone corporate. A Hong Kong company recently joined the fray with a system the size of a container, an entire liquid-cooled room packed with circuitry.

Critics complain that besides computers and illegal drugs there’s not that much that you can actually buy with Bitcoin, but that’s not a problem for many enthusiasts, especially when rising values meant that just owning the currency for a few days ensured a tidy profit.

But the real threat is coming from governments who worry that Bitcoin’s anonymity provides an easy route around money laundering rules and capital controls.

On Oct 2 the FBI moved in on Silk Road, the Amazon of the crime world, shuttering the operation and charging its owner with a raft of offenses including hiring a hit-man to knock off a former associate. They also seized the organization’s stash of 600,000 Bitcoins, meaning — bizarrely — the FBI is now holder of the world’s largest pile of Bitcoins.

The site had been one of the biggest Bitcoin markets so it’s closure had many observers declaring the end of the road for the currency, which of course it wasn’t as the value of Bitcoin quickly recovered.

But the truth is that the U.S. and other governments haven’t been so much negative on Bitcoin as they’ve been schizophrenic.

Last month the U.S. Justice Department weighed in, declaring that Bitcoin and other digital money can be a “legal means of exchange.” Speaking at a congressional hearing, a senior Justice Department official observed that “virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce.”

Bitcoin 101: The new gold or just a flash in the pan?

Canadian authorities have been reluctant to comment but a recent paper by economists at the Bank of Canada noted that virtual currencies have the potential to compete with national currencies in situations where the issuing state is in fiscal distress.

The European banking watchdog went a step further, warning earlier this month that Bitcoin leaves consumers exposed to huge swings in value and risks around lack of regulation.

Despite all this the phenomenon just keeps growing. One could argue that as in all bubbles, it’s very difficult even for regulators to step in and prevent calamity. Because like all bubbles the Bitcoin craze is fueled by seemingly unshakeable belief on the part of investors that prices can only go up.

The other factor at play, which is perhaps the reason the bubble hasn’t already popped, is Bitcoin’s growing appeal in developing countries whose financial systems are still wrapped in quantities of red tape, hindering the flow of commerce and the ability of people to move their wealth. That was one of the lessons from the experience in China, where the BTC China, the country’s first Bitcoin exchange formed just two years ago, shot from obscurity to the world’s highest volume trader in the currency.

China is a natural haven for virtual currencies, where growing numbers of well-heeled entrepreneurs are looking for ways to move their fortunes out of the country, beyond the reach of corrupt officials.

And it’s not just China. Cash-strapped governments around the world are increasingly looking for ways to boost revenue and their residents are bearing the brunt.

Given the recent actions of the Chinese, maybe the Bitcoin party is finally coming to an end. But the fact that it thrived for so long, evolving into an alternative form of money, existing alongside traditional government-backed currencies, proves that even if it doesn’t survive, virtual third-party currencies are here to stay. The next will be more robust, more user-friendly, and an even greater challenge for central banks and the currencies they watch over.

http://business.financialpost.com/2013/ ... e-to-stay/

Post by **rick** » December 24, 2013, 9:05 pm

Bitcoin mining - because it is so time/resource consuming, is now mainly done by Bot networks set up by criminal organisations/hackers. They use other peoples computers so it costs them nothing. Not economic to do it yourself.

Post by **KHONDAHM** » December 27, 2013, 4:17 am

rick wrote:Bitcoin mining - because it is so time/resource consuming, is now mainly done by Bot networks set up by criminal organisations/hackers. They use other peoples computers so it costs them nothing. Not economic to do it yourself.

No, this is not true. Botnets rely on CPU power. In the early days, when difficulty was low (<100k, for example), a botnet would have been effective. However, with the advent of subsequent technologies (GPU, then FPGA, and now ASIC), the difficulty is so high (1.2 Billion as I type this) that even the largest such botnet might only generate 2-3 BTC per month. Hardly worth the effort. Those botnets may be more effective at hacking personal computers and perhaps stealing whatever might be on them.

Post by **KHONDAHM** » December 27, 2013, 4:34 am

Update: The central bank of India recently issued a typical scare-monger statement warning about BTC dangers (all of which are also true about cash) and within two days, all the recently opened BTC exchanges closed up despite India not even having laws applicable to crypto-currencies. They are refunding all monies to customers. Small-scale exchanges are still operating for now.

This is interesting as it appears there is definitely a coordinated effort by most of the world's central banks to kill BTC using whatever mechanisms are available within each country. It's a "Rocky" scenario with BTC playing the title character - except in this version, Rocky is barely an adolescent. Still, everytime he gets knocked down, he gets right back up.

BTC price is $735 as I type this.

Note: I use Coinbase (USA) price which is more conservative than, say, the much bigger Mt. Gox (Japan) where it is currently $800.

Post by **KHONDAHM** » December 29, 2013, 12:00 pm

Bloomberg TV aired 25 segments as part of their "bloomberg 12 days of bitcoin" series. Very educational for the naysayers. It may be on their site, but you can also find it on YouTube if you search for "bloomberg 12 days of bitcoin". All 25 segments are also available on Bloomberg's NetFlix channel.

Post by **parrot** » December 31, 2013, 12:01 pm

Interesting bit coin read for anyone who has experienced credit card acceptance problems.

I'm all in favor of an easy to use 'currency' accepted everywhere....but I'm not keen on the value of that currency spiking and dropping at a moment's notice
http://www.washingtonpost.com/blogs/the ... feafdd1394

Post by **leterry60614** » December 31, 2013, 5:31 pm

2014 when visa extensions are delivered by drone and paid for in Bitcoins. Happy new year!

Post by **KHONDAHM** » December 31, 2013, 6:10 pm

Price stability has become the #1 gripe and hinderance to broader acceptance. Truth be told: the amount actually in circulation is far, far less than what has been mined this far. I recall somone putting it at @10% or less. Hoarded BTC was assumed to be somewhere around 80% with the remaining BTC mined to date either permanently lost or confiscated.

Once the price stabilizes, much of the hoarded BTC should enter circulation which adds liquidity and further price stabilization. When? I have no idea, but I would speculate 2015-ish. For sure after the block reward halves again. But hey...I have no idea, really.

Post by **Asiaphile** » January 2, 2014, 8:54 pm

The claim that Bitcoin transactions are much safer than your bank or transactions in Euros/dollars, etc, took something of a knock last week when a Bitcoin intended as a gift got mugged live on TV:

A Bloomberg TV Host Gifted Bitcoin On Air And It Immediately Got Stolen

Bloomberg TV's Matt Miller is currently experiencing the "12 Days Of Bitcoin," a series for the business news television station.
On Friday, Miller learned an important lesson. It was an experience that everyone should remember before they start moving their money into the digital currency.
While on air, Miller surprised Bloomberg anchors Adam Johnson and Trish Regan each with $20 worth of Bitcoin.
But as Johnson received the paper gift, he briefly exposed the QR code (see above). This act was effectively like sharing a bank account and PIN number.
Immediately, someone lifted the QR code and stole the $20.
Read more: http://www.businessinsider.com/bloomber ... en-2013-12

Post by **KHONDAHM** » January 5, 2014, 5:16 pm

If anything, the lesson learned for viewers was not to open and show the world your carefully and purposely wrapped secret key code on live high-definition TV. The safety of BTC played no part. That was pure wrecklessness.

The "thief" did offer to return the $20 after taking it as a warning to all. The theft received a LOT of coverage, so well-played. That $20 bought millions worth of awareness - thus making using/handling BTC safer for everyone.

BTC @$843 as I type this.

Post by **KHONDAHM** » January 5, 2014, 11:47 pm

NEWSFLASH!: Reggie Middleton introduces the first BTC derivative. People are paying attention.

The Future of Money is Here: BoomBust Zero Trust Digital Currency Contracts
http://boombustblog.com/blog/item/9188- ... -contracts

54% surveyed think BTC will go to (at least) $10k during 2014. BTC merchant acceptance increasing exponentially around the world. Wall Street is expected to step in this year - after which, the price will go hyperbolic before stabilizing somewhere in the upper atmosphere where birds don't fly...

BTC = $904 (Coinbase - USA)
BTC = $1006 (Mt.Gox - Japan)

Post by **KHONDAHM** » January 6, 2014, 12:29 am

I've been spending quite a bit of toilet time lately researching who is the Wizard of Oz (Satoshi Nakamoto). So far, the general consensus by people who should really know (i.e. mathematicians, cryptologists, etc.) seem to think the Wiz is either an incredible genius on par or smarter than Einstein or a working group within the NSA - because the NSA has the best cryptography minds in the world and does shadowy things like...blow up the global financial system.

Considering the timing of the introduction of BTC, the NSA is an interesting suspect. 2009 was just after the Obama administration took office and assessed the hopeless and dire economic situation. Perhaps Treasury acting in cahoots with the Fed, agreed the US debt situation was unsustainable and insurmountable. $14+ Trillion in new money was being/has been *poofed* into the system with no viable exit strategy just to maintain the farce of status quo. China was gaining ever more financial leverage and political influence as our #1 banker. Faith in the USD was rapidly declining, but there was no other globally accepted currency alternative. The renminbi was gaining popularity and that was certainly unacceptable to the US.

What better way to deal with it all than to surreptitiously blow everything up and start over with a decentralized deflationary currency which could absorb all the world's fiat currencies and create a truly global anti-hegemonic marketplace? It's a brilliant notion.

Think about it...in the end-game, given it's already wide global acceptance and physical distribution, the USD could well be the only fiat currency standing. It would be BTC (i.e. crypto-currencies) and the USD.

Post by **leterry60614** » January 7, 2014, 10:34 am

Beside its quote value Bitcoin's ecosystem fast growth is also fascinating to watch. This thread already mentioned bitpay, an app facilitating web payments in Bitcoin for web sites. There is also Kryptokit from a startup in Toronto. This app makes it easier to manage your Bitcoin wallet. Check it out

http://www.kryptokit.com

Post by **leterry60614** » January 16, 2014, 11:01 am

Could crypto-currencies have helped with

1. Currency market manipulations (allegations) from Citi and Deutshe banks
2. Continuing credit card data breaches like at Target on Black Friday?

I am convinced that decentralized, open exchange protocols have a big role to play in the near future.

Post by **leterry60614** » January 17, 2014, 10:59 am

More details released on Target's data breach. Credit card technology is definitely obsolete and could borrow from Bitcoin's exchange protocol.

Found this article in Reuters NewsPro. http://www.reuters.com/article/idUSBREA0F1N920140117