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The US Government Clamps Down on Ability of Americans To Purchase Bitcoin

The US Government Clamps Down on Ability of Americans To Purchase Bitcoin

Currencies / BitcoinJun 18, 2017 – 10:43 AM GMT

Currencies

You have to feel sorry for Americans. They are some of the most financially enslaved people in the world.

The bankrupt US government has been instituting capital controls for years now and have ensured that Americans can’t open a bank account nor even a bitcoin exchange account outside of the US through things like the Foreign Account Tax Compliance Act (FATCA) and just outright threatening to attack any bank or bitcoin exchange in the world who accepts Americans as clients.

This leaves Americans in the “land of the free” with very few options for bitcoin exchanges.

No exchange outside of the US will accept Americans as clients. They’ll accept North Koreans. Iranians. Russians. Chinese. Anyone… except for Americans.

And due to all the regulations in the fascist/socialist mixed US economy, it is incredibly hard to even operate a bitcoin exchange in the US.

While there are now a few other options, which we’ll discuss further below, until recently, there was only one option. Coinbase.

To be fair to Coinbase a lot of the issues with the exchange aren’t its fault directly. They are due to the myriad of rules and regulations that are strictly enforced in the US police state.

This has led to countless complaints about how difficult it is to open an account at Coinbase. Many have said that it is just as difficult to open an account at Coinbase as it is to open a bank account in the US… which usually requires a phone book stack of documents and needing to report in each morning with what you ate for breakfast.

And there have been countless reports of people saying that Coinbase closed their account without reason or notice. And many others have reported that their bank accounts have been closed once the bank noticed they were doing business with Coinbase.

Matters were made worse when late last year the IRS requested a John Doe summons as part of a bitcoin extortion-evasion probe, seeking to identify all Coinbase users in the US who “conducted transactions in a convertible virtual currency.”

After all, the thieves at the IRS expect to get their cut.

To add to that, the US federal government is pushing a bill called “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017” – which we talked about a few days ago.

This bill takes a further step to target bitcoin and wants to put any business which “issues” cryptocurrency under this umbrella of anti-money laundering regulations. Also, it will include bitcoin on the list of monetary instruments that must be reported when entering or leaving the US.

As you can see, trying to do anything related to bitcoin in the “land of the free” anymore is becoming more and more difficult. This combined with the SEC turning down a bitcoin ETF months ago has all but ensured that many Americans missed out on massive gains in the rise of bitcoin and other altcoins in the last year.

All in the name of protecting Americans, of course!

Lately, the site has also been plagued by technical issues as it is unable to handle the demand from customers.

There have been numerous website inefficiency and maintenance issues which rendered buy and sell orders useless for extending periods of time.

Plus there were extended periods of time when the site couldn’t be accessed at all, which left users unable to move their funds into other wallets. It’s worth noting as well that the majority of these instances occurred during periods of massive price movement which probably costs users millions in potential profits and losses.

As if all that weren’t enough to make its users furious, it just came out that Coinbase disabled the fundraising account being used to pay the incarcerated founder of the Silk Road, Ross Ulbricht’s defense attorneys.

Ross Ulbricht, for those who don’t know, was given numerous life sentences for having a website in the, need I say again… “land of the free.” Here was my recent interview with his mother on the massive injustice done to him.

This happened not long after Coinbase hired the former Silk Road’s federal prosecutor, Kathryn Haun.

Wait a sec… why in the world is Coinbase hiring US government criminals?

Many libertarians were going to give the boot to Coinbase after hearing this… but it turns out this prosecutor was the one who put the corrupt FBI agents who stole Ross’s bitcoin in jail.

So, she may not be totally evil. We aren’t passing judgement just yet.

And, yesterday, Ross’s account was enabled again:

So, Coinbase saved some face this time.

But, if they can’t somehow lessen their adherence to the millions of US government regulations and fix their site technically they will lose customers to competitors.

At this time we are only aware of two other bitcoin exchanges operating in the US that will allow users with American bank accounts to exchange fiat for bitcoin.

There is New York-based Winklevoss twin’s Gemini exchange and the San Francisco-based Kraken exchange.

We recommend Americans at least consider them as alternatives to Coinbase.

That’s just being prudent.

As always, though, ignore Mike the Health Ranger Adams on anything to do with bitcoin.

He recently put out an article entitled, “Bitcoin wallet COINBASE now seizing accounts of Americans… users rage against ‘total ripoff’ as their Coinbase accounts VANISH,” saying that Coinbase stole everyone’s money.

This, as usual from Mike, is completely untrue. Please stick to vitamins Mike… we got the cryptocurrency space covered over here.

You can tell Mike doesn’t understand what he’s talking about in his article because he refers to Coinbase as a “popular bitcoin wallet”. Of course, it provides users with different wallets for different currencies, but only an inexperienced user would refer to an exchange as a “wallet.”

Mike goes on to quote an issue Coinbase is having with Wyoming users saying Coinbase is stealing their money;

“Although we strive to provide continuous access to Coinbase services, Coinbase has indefinitely suspended its business in Wyoming and we regret that we cannot currently support services in Wyoming. You can find a further explanation of our account suspension policy here. We hope to restore service in Wyoming soon, so please check back again.”

While it is true that many users in the state of Wyoming experienced this issue, Coinbase hasn’t yet stolen the funds Mike, let’s not jump to conclusions. And, as I said earlier, this issue is caused yet again by the egregious labyrinth of laws in the “land of the free”, not by Coinbase.

It seems like lately Mike seems to be jumping at any opportunity to incite more bitcoin-based fear propaganda, maybe he’s upset he sold his bitcoin at such a low price level?

In any case, one thing is clear through all of this. As an American, it is becoming harder and harder to get access to bitcoin.

This should be a wake-up call to many. The US government is bankrupt. The US government is installing capital controls to ensure Americans cannot leave the country with their money.

And, they are making it harder and harder for Americans to convert their US dollars into bitcoin.

The writing on the wall is clear. And if you haven’t begun to get at least some of your assets outside of the US you should be running not walking to do so.

This is what every country on Earth does just before their currency hyperinflates into worthlessness or the government defaults. Just ask people in Greece. The government there has just decided they will begin taking people’s homes and the contents of their safety deposit boxes in order to keep the country from bankruptcy.

People like Peter Schiff have been warning people to stay out of bitcoin since it was $20. And now the Health Ranger is warning you to stay out of it too.

You have to wonder what is the motivation of these people who should be smart enough to know that we are on the verge of a collapse of the US dollar to warn people away from alternatives that could save them.

Cryptocurrencies have a lot of risks and we wouldn’t recommend anyone put all their assets into them. But we do recommend you begin to use them, put a small percentage of your assets into them and learn more about them.

For that I have created a free four-video webinar on the importance of cryptocurrencies which you can view HERE. And we’ll even send you your first $50 in bitcoin if you accept our offer to get more information in the videos.

To summarize, Coinbase has a lot of issues, but most of the issues are just because it operates in the US. It still, however, is the largest exchange in the US and does offer an excellent bitcoin ATM/debit card. And you can get $10 in free bitcoin if you signup using this link.

Americans can expect to have more and more problems as the US government bankruptcy and Federal Reserve hyperinflation of the dollar nears closer.

My advice is just to get out of the US for much freer places across the world where you can trade easily in bitcoin.

But, if you can’t, or won’t, you should be at least ensuring your assets are kept out of the easy reach of the world’s largest terrorist organization, the US government and the world’s largest extortion racket, the IRS.

Bitcoin is just one easy way to do that. You can find out more in my free four-video webinar here.

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

 

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.

Blockchain

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.

wcry_ransomnote-730x555

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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.

value

Coindesk

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.

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.

https://www.scmagazine.com/hackers-use-mirai-botnet-to-slowly-mine-bitcoins-with-iot-devices/article/650271/

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 Blockchain.info:

 

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 rubin.io
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 Liberty.me 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.

Bitcoin and FIAT money will be used long into the future…..

News for Bitcoin
News for Bitcoin

“Bitcoin and Fiat Money will be jointly used well into the Future” – Jase Leung, CEO Bitcoinnect

CoinTelegraph had the chance to interview Jase Leung, CEO of Bitcoinnect based out of Hong Kong. Their two-way Bitcoin ATM is the first machine that provides real-time purchases and sales of digital currencies in the region.

Their Bitcoin vending machines are currently operating in locations across Hong Kong and Macau. And given China’s stance on digital currencies, we were interested in getting a first-hand perspective on how a Bitcoin company maneuvers in such a regulatory gray area and gauging the demand for physical points of exchange in China.

Cointelegraph: Can you tell me about Bitcoinnect and why did you decide to start your company? What do you hope to achieve in the short term?

Jase Leung: Bitcoinnect is a HK-based Limited company established by a group of young entrepreneurs. We believe, without a doubt, that Bitcoin will be the currency of the future. Our company and our machine are named “Bitcoinnect” — Bitcoinnect aims to connect people around the globe through the usage of Bitcoin. The story of creation behind Bitcoinnect is one born out of the difficulty we experienced in getting our first coins.

In the earlier days, when there were not so many online trading platforms and Bitcoin vending kiosks, it was a big hassle to start trading Bitcoin. First, we needed to register a trading account online. Then we had to get the account verified. Finally, we had to deposit fiat to the account via bank.

It took us a week to get the account straightened out. Meanwhile, the Bitcoin price had already doubled. We had lost the investment opportunity because of all the paperwork and time involved in connecting our bank to the traditional online trading platform.

We started Bitcoinnect and engaged in the Bitcoin vending kiosk business because we aimed at physicalizing this online trading platform, putting them onto the street and closer to the people. Bitcoinnect provides an instant, convenient, secure and user-friendly crypto-currency trading platform and experience to the public.

Bitcoinnect cuts through all the red tape and delays associated with online platforms. Furthermore, with Bitcoinnect, everyone can easily buy and sell crypto-currency instantly via our machine – they do not need to wait for few days for the top-up or withdrawal of fiat.

In the short term, we expect to have 20 Bitcoinnect machines deployed in HK and Macau, and are aiming to reach this in our first year.

CT: How do your ATMs stack up against western competitors such as Robocoin and Lamassu?

JL: We are happy to see the growing array of choices of Bitcoin vending kiosks in the market, as it leaves end users and potential operators with different opportunities and introduces healthy competition into the market.

The Bitcoinnect software is highly adaptable, and can easily support additional currencies and services. In addition to Bitcoin, Bitcoinnect also currently supports Litecoin and Dogecoin. More currencies can be added to the machine depending on the market development and infrastructure. Our machine operators can always decide which currencies to be listed in their machines from their management backend. This gives more flexibility to our operators. They can adjust their machines to suit clients’ needs in their local markets.

Similar to other machines, Bitcoinnect combines KYC devices and software routines that enable compliance with any possible regulatory requirement that may develop in the future. Operators can implement the fingerprint scanner, EMV card reader, high definition camera and SMS verification system should it be deemed necessary.

Our operators can activate or deactivate any of the KYC devices, through the back end management system, so that they can decide from time to time what level of KYC measures they want and to comply with regulatory requirements in their local jurisdictions.

Mark rittmayer 12

Bitcoinnect is built on a traditional bank-grade ATM platform. Among other competitors, it has highest bank note capacity for cash deposits and withdrawals. Bitcoinnect can accept 2,200 bank notes and dispense up to 6,800 bank notes. The machine is capable of handling frequent and high volume transactions, without the hassle of replenishing the cash cassettes. All cash is stored behind bank-grade vaults with combination locks. Therefore, our operators can be very confident of the security of the machine and the cash inside.

Furthermore, all Bitcoinnect is managed via a comprehensive backend management system. Operators can remotely manage all their machines and keep track of cash flow and profit at anytime regardless of their physical locations.

CT: Have you experienced any pressure from the government or warnings against installing your BTC ATMs?

JL: We have taken a lot of effort to seek legal advice for running the business. Currently Bitcoinnect does not need any special license to be operated in HK and Macau, save for normal business registration which is needed for all kinds of business.

However, we have taken a proactive approach and communicated with the government authorities to seek their advice on our business. For example, the Monetary Authority of Macau issued a press release on 17 Jun 2014:

“…… [Bitcoin ATM operators are] prohibited from using the words, expressions or any other terms having or implying the idea of operating the business of a credit institution, including “ATM” , in the course of their business; ”
In view of the above press release, we thereafter adjusted our machine’s branding to reflect “Bitcoin vending kiosk” instead of “Bitcoin ATM”. We always do our best and require our operators to comply with the regulations and legislation in their jurisdictions, if there is any.

CT: How have you adapted to China’s decision to ban all third party processors affected your operations?

JL: It is observed that Bitcoin trading volume in China is perhaps the largest in the world. After China’s decision to ban all third party processors, it became more difficult for Bitcoin traders to buy and sell Bitcoin in China. But yet, after all these incidents, the trading volume of Bitcoin in China still continues its surge higher. It suggests that the suppressed demand of Bitcoin in China should be much larger than the current trading volume via online trading platform.

Since trading Bitcoin via Bitcoinnect does not involve any third party processor, we have in fact received quite a number of enquiries from China after the decision of the Chinese government. We are looking forward to having our Bitcoinnect launched in China very soon.

CT: Is there a stark difference between HK and mainland China? Are you planning to expand your operations outside of HK and Macau?

JL: Yes. We do not limit our operation in HK and Macau only.

As we have mentioned, the demand for Bitcoin in China is huge and we believe Bitcoinnect is a great solution to bringing access to Bitcoin to China. There are quite a number of differences between operating in China, HK and Macau. One obvious difference is population distribution. The population in China is more dispersed when compared with HK and Macau, so location planning is vital to ensure that Bitcoinnect can reach sufficient population, as operators’ profit is one of our primary concerns.

Also, we have to closely monitor the government policy, both in local and national scope. The legal systems in the Mainland China, Hong Kong and Macau are completely different and independent, so we have to stay alert on those differences when doing business among the three jurisdictions. Logistically, Mainland China has a much stricter and more complicated policy for importing and exporting goods, when compared to Hong Kong and Macau.

Video Bitcoin News

CT: As infrastructure support improves and more opportunities arise for the public to exchange and convert fiat and Bitcoin, do you foresee increasing or decreasing demand for physical ATMs?

JL: We are excited to see improved infrastructure for exchanging Bitcoin and fiat currency. We believe more Bitcoin applications will be prevalent in daily life in the near future. In our opinion, Bitcoin and fiat money will be jointly used well into the future, as each of them has their own uniqueness and cannot be replaced by one another in short period of time.

The demand for Bitcoin and fiat exchange will increase, and trading platforms will seek to have more physical locations to enhance their accessibility to cope with the demand. Therefore, we are of the opinion that the demand for the two-way Bitcoin vending kiosks will increase accordingly as well. Given our competitive advantages compared with our competitors, we strongly believe that Bitcoinnect will earn a leading position in the vending kiosk business.

Did you enjoy this article? You may also be interested in reading these ones:

Bitcoinnect brings myriad ATMs to Hong Kong and Macau
Inside Bitcoins Hong Kong Conference Aims to Spur Crypto Adoption in Asia

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