Category Archives: Bitcoin

What is Bitcoin Backed By?


Buy BitCoin !

Bitcoin and The Chinese power manufacturers

Wondering what bitcoin is backed by? The answer is nothing at all, but that’s actually not a bad thing. Like most modern currencies bitcoin is not backed by gold or other precious commodities. In a sense, bitcoin’s value is derived from our common belief that bitcoin has value. The same is true of the American dollar, the British pound, and the European Union’s euro, as well as nearly every other modern currency.

Historically speaking, up until August 15th 1971 most currencies were backed by a commodity, usually gold or silver. In fact, before the invention of paper money, most currencies were coins fashioned from precious metals. Further, following World War II and up until 1971, most of the world’s countries operated under the Bretton Woods agreement, currencies were backed by gold.

The Bretton Woods Agreement and the End of Commodity Backed Currencies

In order to understand the current system, it’s important to understand the old system. Under the Bretton Woods system, central banks would be able to trade gold amongst one another, and currencies would be tied to the value of gold, and pegged against one another. When an exchange rate is pegged, this means its value is set. So if the American dollar buys .75 British pounds, that is the value that it is set at. Most peg rates are actually adjustable peg rates, meaning that policy makers can adjust the value when needed.

The Bretton Woods system was designed to reduce the currency fluctuations seen in the 1920’s and 1930’s. During this period currencies were moving rapidly and uncontrollably, which caused international instability, and helped to worsen the Great Depression, and create the conditions that led to the outbreak of World War II. While the Bretton Woods system worked well for awhile, it eventually caused disruptions of its own.

The End of Bretton Woods and the Rise of Fiat Currencies

The Bretton Woods succeeded in creating stability in the years immediately following the second World War. By the end of the 1960’s, however, serious faults in the system were beginning to emerge. Among the biggest faults was that the U.S. dollar was too strong, which caused disruptions in international trade. For this reason, among others, governments decided to abandon the agreement, and to use “fiat” currencies instead.

Basically, a fiat currency is a free floating currency that is not backed by any sort of commodity. In the past, your dollars or other currencies would have been worth a certain amount of gold or another commodity. In practice, trading in dollars for gold was often highly restricted, still dollars were at least hypothetically worth a certain amount of gold.

Now, the dollar is no longer tied to gold. Of course, you can still buy gold with your dollars, but their values are independent from one another. Most major currencies are also not pegged to one another, but instead are allowed to float. Exchange rates can thus vary between different currencies. A few years ago, a euro could have bought about $1.4 American dollars. Now? A euro will buy only about $1.13 dollars.

Bitcoin is sort of a Fiat Currency, but So What?

Like the dollar and the euro, bitcoin and most other digital currencies are somewhat fiat. They are allowed to float in the market, and their value is determined by the market. In sense, you could even say that digital currencies and their value are determined by consensus.

Unlike traditional fiat currencies, however, there are several key factors that make bitcoin’s value potentially more reliable. First, bitcoins must be mined through computers, which requires an investment of time and money. As it becomes more expensive to mine bitcoins, it is likely that the value of the bitcoins themselves will slowly increase.

Second, while governments can increase their money supply at any given time, thus depreciating the value of individual currency units, bitcoin’s supply is tightly regulated, and the number of new bitcoins entering the market is slowing decreasing. Bitcoin is not subject to the whims of government officials or anyone else for that matter. It is a free and independent currency.

What “Backs” a Currency is Irrelevant, Perception is What Matters

Since the end of the Bretton Woods agreement, the idea that commodities are needed to back currencies has become irrelevant. Instead, public perception and economic policies are what matter. Money has value because we believe it has value. This is true of the dollar, the euro, the pound, and yes even bitcoin.

We can trade our money for goods. Many retailers now accept bitcoin as payment. In fact, when evaluating new “exotic” currencies like bitcoin, adoption rates, the ability to buy goods and services, established history, and community size are arguably the best indicators of a currency’s value. Are people using it to buy goods? Is the community itself large, sustainable, and established? For bitcoin, the answer to these questions is yes.

Many people think of bitcoin as more of an investment asset than a true currency. Part of the reason for is because bitcoin prices tend to swing somewhat dramatically. The value of all fiat currencies can swing also dramatically, however. This is true even for government-backed currencies, which are subject to the whim of government policies. The British pound, for example, has lost much of its value over the past few weeks following the Brexit vote.

In some cases, hyper inflation can even strike with money becoming nearly worthless. Consider Zimbabwe, where inflation got so bad a few years ago that the government started printing up 100 billion dollar bills. When the currency was phased out, 35 trillion Zimbabwean dollars equaled 1 American dollar. More recently, in April the IMF reported that Venezuela would suffer inflation of approximately 500% this year, and 1,800% next year. As this inflation unfolds, Venezuelan money will quickly lose its value.

More often than not, the rapid onset of inflation is caused by government mismanagement and the over-printing of money. This is why bitcoin aims to be government free. People create their own money through mining. Then, bitcoin is allowed to be freely traded in the market. Further, since the money supply itself is limited and already set, policy negotiations are no longer possible. So while it’s true that bitcoin isn’t tied to any commodity, and that it is dependent on our collection perception, like most modern currencies, the P2P currency is arguably a more reliable currency than government-backed fiat currencies.

Bitcoin Is Bigger Than Ever, And Here’s Why That Matters

The Bitcoin symbol.

The Bitcoin symbol.

The money you’ve been using all your life is backed by a government of some sort, and it exists in a tangible way. Bitcoin is neither tangible nor backed by anyone, but it’s still worth a great deal to some people. This digital currency began circulating on the internet in 2009 with each Bitcoin worth just a tiny bit of “real” money, but right now a single Bitcoin is worth more than $2,000. Bitcoin is fascinating from a technological standpoint, but it’s also fueling online crime and violence because of the anonymity it offers. Here’s how Bitcoin works and why you should care.

What is Bitcoin?

Bitcoin is what’s known as a cryptocurrency, a digital asset that exists only as data. You probably have money in the bank that is digital, but those digits equal physical currency. Not so with Bitcoin. Bitcoin also has no centralized regulation nor innate legal framework. As such, the value of Bitcoin is dictated entirely by the market, and the market is hot right now.

Bitcoin is stored in a digital wallet, which you can save locally on a hard drive or phone, or online with any number of Bitcoin exchanges. Saving your Bitcoins locally is like keeping all your money under the mattress. If something happens to the digital wallet, all your money is toast. Sending and receiving money is handled by pointing your Bitcoin client or web exchange toward a Bitcoin address, which every wallet has. A few minutes later, the Bitcoin will leave your wallet and show up in another. Websites that accept Bitcoin are rare, but they are out there. Spending it in real life is considerably more tricky, but again, there are a few system in place to manage it.

Is Bitcoin really anonymous?

Transactions are at the heart of Bitcoin — it’s powered by what’s known as a blockchain. You can view blockchain information for any wallet address, too. You don’t necessarily know whose wallet is whose, but you know what’s in them because it’s a public ledger. Perhaps you’ve heard about “mining” Bitcoin? That’s when you use a computer to crunch numbers for the blockchain. This is how transactions are verified, and in return you get some Bitcoin. It used to be easy to mine Bitcoins, but the difficulty increases substantially over time. Now, you need a server farm to earn much this way.

The blockchain info a WannaCry wallet.


The blockchain info for a WannaCry wallet with $41,000 in Bitcoin.

The “proof of work” model for the blockchain has been of great interest to organizations that want nothing to do with Bitcoin. A blockchain database is by its very design resistant to tampering and can be managed in a distributed manner. Both Senegal and Tunisia use blockchain-based national currencies. The Bill and Melinda Gates Foundation also hopes to use blockchain technology to help poor people without access to banking save and spend money.

How is Bitcoin involved with Ransomware?

So, Bitcoin could do a lot of good things, but you often hear about it in negative contexts. The anonymous aspect of Bitcoin has drawn cybercriminals to the digital currency. Ransomware attacks started occurring a few years ago as the price of Bitcoin shot upward, and the WannaCry ransomware made news just a few weeks ago. When your computer is infected with ransomware, it encrypts your important files and demands a Bitcoin payment to a specific address in exchange for the key. It’s not like criminals can ask you to wire some easily traceable money to their bank account, so Bitcoin is the perfect solution. After a few hops in the public blockchain, the money is essentially clean.



The WannaCry ransomware alert.

Bitcoin is very much the wild west of international finance. Security firms have reported that some cryptocurrency from ransomware attacks ends up in the hands of North Korea, which is barred from many traditional financial markets by international sanctions. The same has been said about terrorist groups and organized crime, which risk having assets seized in traditional banks. All those ransomware payments are just the tip of the criminal iceberg, too. Numerous Bitcoin exchanges have also been the victim of hacking and fraud, which has led to Bitcoins being stolen from users. That money is just gone—there’s no FDIC to refund people when Bitcoin is stolen.

What does Bitcoin mean for the economy?

Despite all these issues, Bitcoin is surging in part because more people are using it. Bitcoin fans believe steadfastly that it’s the future. Regular people are becoming interested in cryptocurrencies, but it’s still too complicated for mainstream adoption. If that ever happens, we could see a lot more highs and lows in the global economy as Bitcoin’s value swings. And it does… a lot.



The value of one Bitcoin over the last few years.

If you’d bought $1,000 of Bitcoin in 2010, you’d be worth $35 million right now. However, if you bought $1,000 worth of Bitcoin in early 2014, you’d have only had a quarter as much buying power a year later. Imagine being paid in Bitcoin, and then finding your money was only worth half as much a few days later. Economies with that kind of inflation are not stable, but Bitcoin has the advantage of operating alongside regular government-backed money. Almost no one has all their assets in Bitcoin.

Is Bitcoin going to last?

As a backdrop to all this, programmers are arguing over how best to manage Bitcoin going forward. There are calls to “hard fork” the currency, which could lead to two competing standards. That would cause even wilder swings in price. Whatever the long term ramifications of these decisions, Bitcoin (or whatever cryptocurrency it becomes) isn’t going anywhere.

South Korea is Becoming Bitcoin and Ethereum Powerhouse

South Korea is Becoming Bitcoin and Ethereum Powerhouse

South Korea is becoming a Bitcoin and Ethereum powerhouse in terms of trading volumes, liquidity and activity.

Over the past few months, South Korea’s three largest digital currency exchanges Bithumb, Korbit and Coinone have added support for Ethereum traders by integrating Ether. In a relatively short period of time, South Korea has become the largest Ethereum exchange market with a $335 mln daily trading volume and 38 percent market share.

In fact, the ETH/KRW pair processes more trades than the ETH/BTC pair, which used to account for over 50 percent of all Ethereum trading.

The largest Bitcoin exchange markets in the world

South Korea has also become one of the largest Bitcoin exchange markets in the world. Although South Korea is currently the fourth largest Bitcoin exchange market behind the US, China and Japan, a month ago, its trading volume and market share was larger than China and Japan and secured its spot as the second-largest Bitcoin exchange market for awhile.

South Korea is becoming a / powerhouse.

– Largest Ethereum Exchange Market
– 4th Largest Bitcoin Exchange Market

South Korean investors within the cryptocurrency market are very easily moved and influenced by the media. Ethereum’s recent Enterprise Ethereum Alliance deals with large conglomerates such as Toyota and JPMorgan have further validated the value of Ethereum to more local investors and have shifted the trend from Bitcoin to Ethereum.

Eyes set on altcoin

More importantly, because Bitcoin has become a conservative asset amongst other cryptocurrencies, investors in South Korea have started to look into altcoins such as Ethereum and Ripple that are supported by local exchanges.

Most South Korean exchanges are funded by multi-billion dollar corporations within the country. Korbit, South Korea’s second-largest exchange, is invested by SK Telecom, the largest telecommunications company in the country.

Therefore, when exchanges add support for cryptocurrencies such as Ethereum and Ripple, immediately, investors dive into altcoins. Particularly, investors that believe they missed Bitcoin’s rally invest in altcoins for large short and mid-term gains.

The demand toward Bitcoin has increased to the point where there always exists a huge arbitrage opportunity for overseas traders. Bitcoin is being traded in South Korea with a premium price of $2,800. That is a 21 percent premium over the global average price and other major markets such as the US.

While it is still possible to purchase Bitcoin outside of South Korea with other options such as credit cards to avoid premium rates, it is difficult to trade large amounts of Bitcoin without being flagged by anti-money laundering systems.

If the current growth rate of the South Korean Bitcoin and Ethereum exchange markets can be sustained over the next few months, South Korea could become a powerhouse for both the Bitcoin and Ethereum markets.

Is The World’s Largest Bitcoin Exchange Headed For A Mt. Gox-Style Collapse

Tyler Durden's picture

Could Bitfinex, the world’s largest, Hong-Kong based cryptocurrency exchange, be headed for a Mt. Gox-style collapse? It’s starting to look that way.

When Mt. Gox first halted customer withdrawals in February 2014, it waited more than two weeks to admit the truth to its customers: that hackers had stolen more than $450 million of their assets, leaving the exchange bankrupt and them holding the bag.  That hack effectively crippled the entire digital currency ecosystem, ushering in a two-year bear market that at one point carried the bitcoin price below $200, from what was then a record high north of $1,200 reached in November 2013.

So when another exchange engages in similarly shady behavior – withholding critical information about customer funds, or failing to produce audited financials despite promising to do so – it should prompt crypto traders to ask themselves why, with dozens, if not hundreds, of cryptocurrency exchanges operating around the world, they’re choosing to do business with this one.

That’s the question that customers of Bitfinex should be asking nearly two weeks after the exchange, once one of the world’s largest, first revealed that it had been cut off from sending outbound dollar-denominated wires to its customers.

Of course, halting customer withdrawals isn’t uncommon in the cryptocurrency world: All three of China’s largest exchanges suspended customer withdrawals in February. And last year, Kraken, one of the biggest U.S.-based exchanges, suspended withdrawals temporarily because of a glitch in its trading software.  But this freeze is particularly troubling because, like Mt. Gox, Bitfinex inexplicably decided to wait before informing customers of a critical problem. It also has implications that stretch beyond the bitcoin market, to another cryptotoken called tether that was launched by Bitfinex back in January 2015, and has since been dogged by allegations that it’s a scam.

The halt is already costing Bitfinex’s customers money. On Tuesday, bitcoins were going for $1,547 on Bitfinex’s platform, a premium of more than $100 over most of the other popular exchanges. Investors, apparently, feel that eating a 7%-8% loss is preferable to leaving their assets in Bitfinex’s care any longer.

Reddit users reported that wire transfers requested as early as March 9 were cancelled, and that the exchange offered only vague excuses as to why. It took the exchange until April 13, after it had filed a lawsuit against Wells Fargo & Co., whose correspondent banking division had effectively shut Bitfinex out of the global financial system, that the exchange disclosed the problem to its customers.

And while Bitfinex has repeatedly said it would make things right – it has promised to either establish a new banking relationship and to allow customers access to other fiat currencies  – only a handful of customers have been able to get their assets out of the exchange.

As part of the freeze, Bitfinex has established a moratorium on cashing in tether tokens held by its customers. These tokens were created by Bitfinex in 2015 to allow customers to exchange an asset that’s pegged to the dollar at a one-to-one ratio, allowing them to avoid costly wire transfers that must be processed through the banking system.

But the withdrawal freeze has put pressure on the tether market; for only the second time since they were introduced, investors are selling these tokens at a discount. The price of a single token has been languishing below the $1 level for more than a week.

More troubling still is that Bitfinex has so far refused to provide an audit of the fiat funds that allegedly backstop the tether float, despite promising that it would be “fully transparent and audited to demonstrate 100% reserves at all times” when it first launched the token.

This has lead some to speculate that the exchange could be commingling tether funds with other customer assets.

While evidence of this could cause irreparable damage to Bitfinex’s reputation, leading to a wave of withdrawals that could add further strain to its already thinning bitcoin reserves, as Twitter user @Bitfinexed points out, it’s not technically a violation of the tether terms of service.

Here’s an excerpt: “There is no contractual right or other right or legal claim against us to redeem or exchange your tethers for money. We do not guarantee any right of redemption or exchange of tethers by us for money. There is no guarantee against losses when you buy, trade, or redeem tethers.”

Given the preponderance of scams in the cryptocurrency market, investors who haven’t already, should probably take what’s left of their money and run, if they can of course.

Hackers use Mirai botnet to, slowly, mine bitcoins with IoT devices

Security researchers have unearthed code in a Mirai botnet enabling it to mine for bitcoins using IoT devices.

This is not fun for bitcoin guys
This is not fun for bitcoin guys

Researchers at IBM’s X-force found late last month the functionality in a variant of the ELF Linux/Mirai malware. The bitcoin attack started on 20 March, peaking on 25 March, but three days later the activity subsided.
What the researchers found in a sample of the code was the same Mirai functionality ported over from the Windows version but with a focus on attacking Linux machines running BusyBox. This software provides several stripped-down Unix tools in a single executable file, designed for digital video recording (DVR) servers.
The researchers said that BusyBox uses Telnet, which is targeted with a dictionary attack brute-force tool contained in the Mirai malware. “The DVR servers are targeted because many of them use default Telnet credentials,” said the researchers in a blog post.
While bots can perform flooding attacks using various protocols, the new variant has another add-on: a bitcoin miner slave. However, the researchers wondered how effective a bitcoin miner would be, given that many IoT devices lack the computation power needed to mine cryptocurrency.
“Given Mirai’s power to infect thousands of machines at a time, however, there is a possibility that the bitcoin miners could work together in tandem as one large miner consortium,” said the researchers.
While researchers haven’t figured out this capability, they another possibility. “It’s possible that while the Mirai bots are idle and awaiting further instructions, they could be leveraged to go into mining mode,” said Dave McMillen, senior threat researcher at IBM.
But he questioned how such a strategy would make any money.
“Almost four years ago, Krebs on Security discussed bitcoin mining bots; in that case, the compromised hosts were PCs. Mining bitcoins, however, is a CPU-intensive activity,” he said.
“How many compromised devices would it take to make the mining of bitcoin a viable revenue source for attackers? Wouldn’t attackers have better luck compromising a bitcoin exchange company, as has been the case numerous times in the past? It’s possible they’re looking to find a way to make bitcoin mining via compromised IoT devices a lucrative venture.”
Marco Hogewoning, the RIPE NCC’s external relations officer, told SC Media UK that for a larger enterprise that manages its own network, Deep Packet Inspection (DPI) could show bitcoin transactions in the destination or content of packets (though encryption might prevent this). “Looking for unnatural traffic patterns would be the best way to get a sense of whether something like this was happening,” he said.

“For a smaller business that might not manage its own network, the biggest indication would be computers or other devices suddenly becoming much slower. Monitor the device’s CPU or memory load if possible – mining for Bitcoins is incredibly CPU intensive and would typically be difficult to disguise – this also makes such an attack unlikely to target smaller IoT devices like webcams or thermostats.”
Andrew Tierney, security consultant at Pen Test Partners, told SC that unless the miner binary was extremely naive and used all CPU resource all of the time, it would likely go undetected. “IoT equipment doesn’t have the monitoring in place to allow things like this to be detected. There is no anti-virus, anti-malware, or firewall alerting, making it pretty much a sitting duck,” he said.
He said that organisations could mitigate such an incident happening to IoT devices in their networks by following five rules.
“Don’t expose IoT devices to the Internet; segment IoT from the rest of the network; change default passwords; update firmware; and get IoT equipment penetration tested to minimise exposure.
“The onus is still very much on the end user to take the steps necessary to secure these devices and prevent such incidents,” he said.

Out of the Spotlight, Bitcoin Gains Legitimacy

Mainstream perception of bitcoin, much like the crypto-currency itself, has been volatile. Starting last fall and gaining steam throughout the winter, bitcoin became one of the most buzzed about topics on the internet. It was a recurring subject on sites like Business Insider and TechCrunch. Mainstream media got in on the action as well — Newsweek relaunched their entire publication in March with a large, feature story on the search for bitcoin’s mysterious founder.

Then, as quickly as it had risen, the currency seemed to drop out of the public consciousness. During its time out of the spotlight, however, bitcoin has made significant progress towards mainstream acceptance, and may be poised for a second breakthrough.

You can see the rise and fall in public interest of Bitcoin below, as shown by Google search volume for the term over the last year:


Although search volume is higher year-over-year, it’s nowhere near the peak of November and December 2013, where it averaged over five million searches a month. This is likely due to a drop-off in general interest, and perhaps the loss of the “novelty factor” the crypto-currency once commanded.

Bitcoin transaction volume has followed a similar path. Here’s the average volume over the past 12 months, according to


During November and December, transaction volume regularly surpassed 300,000 bitcoins, and spiked over the 900,000 mark in March. Since April however, volume has remained relatively flat, settling at around 100,000.

This drop in public awareness and transaction volume though, doesn’t mean that Bitcoin is declining as a viable financial asset, or even alternative currency. In fact, Bitcoin is closer to achieving widespread acceptance than ever before.

One of the main barriers to entry with bitcoin has been the lack of acceptance among merchants. For interested consumers, there’s not much point in purchasing an asset that no one recognizes. Thanks to the efforts of bitcoin-wallet company Coinbase however, this is changing.

Last week PayPal announced a partnership with Coinbase that will allow merchants to accept the digital currency in place of USD. Merchants who use PayPal subsidiary Braintree for payment processing can immediately begin accepting bitcoin, with the option to convert the coins back into fiat currency once the transaction is complete. From a public relations standpoint, this is big news. PayPal is a widely trusted brand. Even if they won’t be backing such transactions directly (it appears the merchants who opt-in will bear the risk), opening their platform to bitcoin reduces the barrier to entry for curious onlookers. Put another way, it expands the pool of legitimate businesses that accept bitcoin, and makes them seem safer.

Along the same lines, bitcoin investors may have gained a safety net in the form of the first U.S. regulated bitcoin derivatives exchange. TeraExchange, a N.J. based company, has received the Commodity Futures Trading Commission’s stamp of approval to operate a bitcoin swaps exchange. This will allow investors to trade USD-denominated bitcoin swaps ranging from one day to two-year maturities. While derivatives can be confusing (to say the least) for those outside of the finance industry, the basic premise here is relatively simple. As Reuter’s explains:

The derivative allows clients to protect the value of their bitcoin holdings by locking in a dollar value, offering an insurance against the astronomical price swings that have plagued the computer-generated currency.

The CEO of TeraExchange, speaking to the Wall Street Journal, elaborated further, saying:

generally speaking, the products that trade without a hedging instrument tend to be much more volatile because there is no way to hedge risk without going back to the underlying product.

Bitcoin’s volatility has certainly played a large role in shaping its uncertain, risky image. A single bitcoin cost roughly $125 one year ago. Since then it has hit highs of over $1,100, and is now valued at approximately $470. Here’s a chart from Coindesk showing bitcoin’s price over the last year:


For an asset, those are large deviations. For a proposed currency, it’s even more extreme. Allowing investors to hedge their risk could help stabilize bitcoin’s price, and limit such fluctuations. The backing of the CFTC for a bitcoin-based financial product alone is a big move towards gaining legitimacy on the broader market.

The SEC is also weighing the viability of two proposed exchange-traded funds (ETFs) that track the price of bitcoin in USD. Such funds allow investors easier access to assets like bitcoin (or commodities) by allowing them to invest in the product through the stock market. One of the funds, called the Bitcoin Investment Trust, has existed as a private trust since September 2013. The other is headed by the Winklevoss brothers (of The Social Network fame), and has been under review by the SEC for 14 months. Given the recent approval of TeraExchange’s platform, and the acceptance of Bitcoin by major companies such as PayPal, it seems that both ETFs will likely be approved.

That means we’re at a point where over the course of the next six months, there could be multiple publicly traded ETFs, a large derivatives exchange, and popular, consumer-friendly ways to pay for goods, all using bitcoin. It’s a striking contrast to the image of bitcoin just a few months ago, when the currency was almost inextricably linked to the Silk Road drug market and shadowy, Deep Web activity.

Not all of these recent developments are exciting, or lend themselves to catchy headlines, but they are crucial for laying the financial groundwork for widespread bitcoin trading, and potentially adoption. If bitcoin continues to gain acceptance as a legitimate asset, it will be notable not only for its financial implications, but for the remarkable turnaround it will have made in public perception.

MIT Students Battle State’s Demand for Their Bitcoin Miner’s Source Code

MIT student concerned over Jurisdiction rights
MIT student concerned over Jurisdiction rights

Four MIT students behind an award-winning Bitcoin mining tool will face off against New Jersey state authorities in court today when they attempt to fight back against a subpoena demanding their source code.

The Electronic Frontier Foundation is representing 19-year-old MIT student Jeremy Rubin and three classmates in a remarkable case that stands out for the measure of aggression the state is using to obtain the code and identify anyone who might have tested the mining tool.

The case is reminiscent of a federal one that targeted Aaron Swartz after he was arrested by MIT police in 2011 for downloading more than 4 million scholarly journal articles from the JSTOR digital library, offered to MIT students, to make them more widely available. Swartz faced multiple charges for his activity and killed himself as he was preparing for trial. Although there is currently no indictment or pending criminal charges against Rubin and his friends, state authorities have indicated that they believe the researchers may have violated state laws. The case marks a disturbing trend among authorities to go after researchers, innovators, tinkerers and others who try to do cutting-edge projects to help the tech community, says EFF staff attorney Hanni Fakhoury.

“It’s a very broad subpoena that hints at criminal liability and civil liability,” he says. “For a bunch of college kids who put something together for a hackathon—they didn’t make any money, the project never got off the ground and now is completely disbanded—there are some very serious implications.”

The mining tool, known as Tidbit, was developed in late 2013 by Rubin and his classmates for the Node Knockout hackathon—only Rubin is identified on the subpoena but his three classmates are identified on the hackathon web site as Oliver Song, Kevin King and Carolyn Zhang. The now defunct tool was designed to offer web site visitors an alternative way to support the sites they visited by using their computers to mine Bitcoins for them in exchange for having online ads removed.

“We believe our utility for the end user comes in freeing up real estate on web pages,” King wrote about their program on the Node Knockout site. “Imagine a web where your amazon shopping cart doesn’t follow you around to every website you visit. We believe there should be more options than advertising for monetizing a website, and we believe we have a novel and non-intrusive solution. In this way, we provide utility to developers who can now include higher quality content on their websites, and utility to end users who are spared the wasted time in looking at ads.”

The clever design won the award for innovation in the programming competition.

“This is a very intriguing idea that could really transform online economics if it works,” one supporter wrote on the hackathon site. “There is a much broader discussion to have about mining bitcoins vs doing other useful tasks (e.g. a friendly form of mechanical turk).”

But the program never got beyond the proof-of-concept stage before Rubin and Tidbit, as an entity, were hit with subpoenas from the New Jersey
Jeremy Rubin
Division of Consumer Affairs just weeks after winning the award.
The state’s attorney general claims Rubin and his classmates violated New Jersey computer crime laws and demanded they hand over source code for their creation and any documentation related to the tool. Rubin was the only one named in the subpoena, Fakhoury says, because he registered the web site for Tidbit.

The authorities also demanded the names and addresses of any Bitcoin wallets used in association with Tidbit, the names of anyone whose computer was used for mining in the project and a list of web sites that may have run the code.

Fakhoury says that although Tidbit made the code available to download and embed on web sites, it wasn’t fully functional and no Bitcoins actually got mined through the Tidbit server.

Indeed, one person on the hackathon site said that although he embedded the code on a website and it looked like Tidbit was successfully mining Bitcoins, “the coins did not seem to show up in the account info dashboard,” he wrote. “Maybe there is a bug? (or is the dashboard not real time?)”

Rubin responded that they had not been able to finish implementing the dashboard before the hackathon ended, but they would eventually complete it.

The MIT community has rallied behind the Tidbit students in support of them and their efforts, in stark contrast to the school’s silence when Swartz was arrested.

MIT sent a letter to the New Jersey attorney general asking his office to withdraw the subpoenas, noting that such actions would have a “chilling effect on MIT teaching and research.” More than 800 people—students and faculty—have also signed letters of support in vain.

The EFF’s Fakhoury will argue in court that the attempt by New Jersey state authorities to target a Massachusetts resident like Rubin is unconstitutional and that the out-of-state authorities have no jurisdiction over him.

“While the state certainly has a right to investigate consumer fraud, threatening out of state college students with subpoenas isn’t the way to do it,” Fakhoury noted in a statement about the case. “As MIT students and faculty have warned, the fear that any state can issue broad subpoenas to any student anywhere in the country will have a chilling effect on campus technological innovation beyond Tidbit.”

He is also arguing that if the court does demand the students hand over any data, they should be given immunity. If not, the court would be forcing the students to relinquish their Fifth Amendment protection against incriminating themselves, since the documentation they provide may contain information that authorities could use to charge them under New Jersey’s anti-hacking law or under the federal Computer Fraud and Abuse Act.

Sierra Leone Group Diverts Bitcoin Campaign to Fight Ebola

CSC Asia Pacific Limited supports Ebola eradication by Bitcoin support
CSC Asia Pacific Limited supports Ebola eradication by Bitcoin support

An alliance of local African free-market pioneers that formed to promote bitcoin’s economic benefits has put its campaign on hold to join the fight against Ebola, the virus currently ravaging parts of West Africa.

The Sierra Leone Liberty Group (SLLG) is seeking to raise donations via bitcoin as a demonstration of the digital currency’s efficiency. In doing so, the group hopes to show how a grassroots organization can start to build a bitcoin ecosystem with limited resources.

The world’s worst-ever outbreak of Ebola began to spread through Sierra Leone, Guinea and Liberia in March of this year, and has since caused over 1,400 deaths, according to The Guardian.

All three countries are currently under a state of emergency with closed borders, major events canceled and whole regions quarantined. Treatments for Ebola are still experimental and none are in widespread use, so prevention is the only option available.

The situation highlights the very real problems Africa must confront before it can be concerned with issues like new forms of currency and even economic policy.

Local struggle, global appeal

In the face of the outbreak, the SLLG and its friends have turned their immediate attention to containing Ebola’s spread.

The group is asking for bitcoin donations from around the world to get funds directly to workers on the ground who need to buy supplies that include chlorine, cleaning equipment and protective gear such as rubber gloves, goggles and masks.

SLLG’s founder, Mustapha Cole, told CoinDesk of the difficulties confronting him and his fellow Sierra Leoneans:

“It is very hard to live in a society that [has] such a deadly virus […] especially when many of the renowned doctors in the country are also victims of the virus.”

Another SLLG spokesperson added that the sheer number of people who have died so far has led to extreme measures. Once an Ebola case is identified in a certain area, the entire area may be quarantined from two to 20 days. No-one may enter or leave, with locals depending on the government to provide food supplies.

Therefore it is imperative to contain Ebola’s spread by educating local townspeople on proper preventative methods and provide the necessary supplies to do so. This is SLLG’s key task.

Current bitcoin mission

The organization’s Facebook page shows pictures of the group distributing soap, disinfectant, and engaging in educational campaigns to teach people in small villages how to prevent infection.

SLLG’s donation drive joins other current campaigns to help stop Ebola and demonstrate bitcoin’s speed and efficiency at gathering funds in small amounts from around the world.

However, Sierra Leone’s current means of converting bitcoin into local currency and physical goods remain limited. SLLG’s American mentor, the writer and economist Dan McLaughlin, will receive and convert the bitcoins before wiring the funds to Sierra Leone via bank transfer.

“The big story is how [bitcoin] is developing from nothing, rather than how it is already a booming success,” McLaughlin told CoinDesk.

McLaughlin first met the Sierra Leoneans on one of his several trips to Ghana as an instructor at the Youth Liberty and Entrepreneurship Camp, and was impressed at how interested they were in economic liberty principles. From there, they founded the SLLG to spread the message in Sierra Leone, and the group is currently in the process of registering itself there as an officially recognized NGO.

Building a bitcoin ecosystem from scratch

Cole said the SLLG aims to promote “entrepreneurship, free markets, and sound principles that are the basis of any prosperous society”, adding:

“The Sierra Leone Liberty Group is a made up of men and women just like you, who intend to make Sierra Leone a better place to live. We believe that progress comes from personal productivity of individuals, but you can’t get different results by doing the same things.”

Cole says his wish is to learn more about bitcoin and help build his local community through its use, and has joined with other bitcoin enthusiasts in Africa such as ‘Bitcoin Lady’ Alakanani Itireleng of Bitcoin Botswana fame, and Philip Agyei Asare from Ghana.

Asare is assisting the SLLG to develop capacity using mobile technology, building the infrastructure from scratch. He also recently authored an article on the libertarian social network about bitcoin as a decentralized alternative to other ‘mobile money’ systems used in Ghana, like MTN Mobile Money, Airtel Money or Tigocash.

The ability to transfer money across national borders, avoid maximum fund limits and disconnect users from reliance on telcos and high-fee banks are bitcoin’s main promises, he said.

No silver bullet

From its beginnings, bitcoin has often been regarded by libertarian and free-market thinkers as a mechanism to liberate populations in the developing world from unstable local currencies, and provide a much-needed electronic payments network to millions with no access to mainstream banking services.

Others with direct experience in the region, however, have pointed out there are still many more pressing issues to overcome first, and it will be a while before bitcoin’s true impact can be felt.

Sierra Leone, on Africa’s west coast, is rich in natural and agricultural resources, but its economy has been hampered by fluctuations in commodity prices, corruption, and a decade-long civil war that lasted until 2002. It currently ranks 183rd on the United Nations’ Human Development index.

Disclaimer: Use your discretion when donating bitcoin to groups not directly connected to internationally recognized aid organizations. Ensure you send to the correct address and be confident the recipient group is using the funds for its stated purpose.

UK Lifeboat Service Now Testing Bitcoin Donations

Bitcoin and the royal navy
Bitcoin and the royal navy

The Royal National Lifeboat Institution (RNLI), informally known as the UK’s fourth emergency service, has announced it is trialling bitcoin donations.

The RNLI says it is the first major charity in the UK to accept bitcoin. It also happens to be one of the oldest charities in the country, as it was founded in 1824.

According to 2013 statistics, the charity’s 400-strong fleet rescue an average of 23 people per day. Since its inception, the RNLI has saved approximately 140,000 lives.

Connecting with new supporters

The pilot programme is already available online. The RNLI donations website now has a bitcoin section, complete with a wallet address and QR code.

The RNLI says it decided to run the trial because it wants to lead the way in accepting and benefiting from all forms of digital currency. It chose bitcoin as a well-established and widely-recognised digital currency.

Leesa Harwood, RNLI Deputy Director of Fundraising and Communications, said the charity has a long history of innovation in fundraising, having held its first street collection in 1891.

“Bitcoin is an innovative new kind of currency and we believe that accepting bitcoin will result in donations we may not otherwise receive, as well as connecting us with new types of supporters,” she said.

Harwood added:

“This is a pilot scheme and we are looking forward to seeing how it will proceed as part of our interest in cryptocurrencies and how they may work in the future. We will of course closely monitor how much money is donated. We already have safeguards in place to monitor donations, however we receive them.”

Harwood said that it is “likely” that the RNLI will start receiving digital currency donations at some point, hence the decision to form a project team to test the feasibility of accepting bitcoin.

Luke Willams, a member of RLNI’s bitcoin project team, told CoinDesk that the group has been investigating the use of digital currencies since early 2014.

Williams explains:

“We have a regular group that meets to discuss future trends that may impact the RNLI or opportunities that we should investigate. Bitcoin had been mentioned a couple of times and we concluded that at some point in the future we were likely to receive either a donation or legacy in a cryptocurrency.”

Williams added that the RNLI is currently holding its bitcoin donations, but it plans to convert them to fiat as soon as they reach a certain (undisclosed) amount.

Bitcoin for charities

Proponents have been advocating the use of bitcoin and other cryptocurrencies in fundraising strategies for years.

The comparatively low price of collecting bitcoin donations, the speed at which transactions can be carried out and the global reach of the bitcoin network all make the currency an attractive option for charities.

Leading bitcoin operators are doing their part to promote the use of bitcoin by charities and other non-profit organisations too. Earlier this week Coinbase announced that it will drop all fees for registered non-profit organisations using its platform.

Last month UK charity Comic Relief announced that it is investigating bitcoin donations, saying it plans to address the issue in the near future.

Cryptocurrencies have already been successfully used for a number of fundraisers. The dogecoin community helped the Jamaican bobsleigh team take part in the Sochi Winter Olympics. Cyrptocurrencies have also been used to support the Indian Olympic team, build water wells in Africa and to help Dorian Satoshi Nakamoto and Hal Finney.

However, the full potential of bitcoin fundraisers has not been realised yet, although many organisations like Sean’s Outpost have already done a lot of pioneering work in the field.