ENTERING THE AGE OF ICOs
Basics
Security
Value
Investment
Your Guide For Entering The World Of Bitcoin
How To Keep Your Bitcoin (And Other Assets) Safe
Understanding How Cryptocurrency Has Changed Everything
Building The Portfolio Of The Future
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Quality Software Development At Your Fingertips Run by blockchain veterans with expertise since 2013, Inwage sources top blockchain IT developers and developer shops for building out initial coin offerings and the blockchain projects behind them. Skip the hiring process by working with Inwage directly as your technical blockchain project managers or connect with workers directly via our unique vetting tools.
Visit Inwage.com
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Table of Contents
Volume 4
Issue 1
KEY Profile Basics Security Value Investment
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44
Bitcoin FAQ
How to Ensure Bitcoin Security
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46
What Is Bitcoin?
Wallets 101 5 Wallet Apps for Private Key Security
18 What Is Bitcoin Mining?
20 Genesis Mining: Trust, Transparency and Infrastructure
22 Bitcoin and the Blockchain 101
24 Why Bitcoin Has Value
26 Bitcoin: Why It Now Belongs in Every Portfolio
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49 Editor’s Review: Hardware Wallets
54 Po.et Aims to Transform Digital Content Management
61 From Bitcoin to Crypto Assets
62 Top 10 Cryptocurrencies
64 Taking the Qtum Leap
A Beginner’s Guide to Buying Bitcoins
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Macro Trends Driving the Price of Bitcoin
The Dollars and Sense of Bitcoin Payments
32 Bitcoin Regulation:
78 Confideal Is Making the Most of Smart Contract Technology
The Rules, If Any, Are Still Changing
40 Bitcoin India Leads an Emerging Epicenter for Digital Asset Services
42 7 Steps to Digital Security
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34 How to Use Bitcoin for Your Business
56 The Rise, Fall and Rise Again of Charlie Shrem
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Welcome to the Age of ICOs 74 Bitcoin in Botswana
80 How to Plan a Bitcoin Meetup
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Volume 4
Issue 1
Founder David F. Bailey
Publisher Calli S. Bailey Executive Editor Tyler Evans Editor in Chief Peter Chawaga Copy Editor DoEun Kwon Design Josh Dykgraaf Tommy Marcheschi Pat Riley Alexa Sullivant Jennifer M. Taylor Sales Chris Eley Bryce Wells International Operations John Riggins Circulation/Logistics Vanessa Krohn Contributing Writers Andreas M. Antonopoulos John Barrett Tuur Demeester Elliot Feeny Tony Gallippi Jeremy Gardner Brandon Green Rony Guldmann David Hollerith Martin Mushkin Diana Ngo Stephen Pair Kirk Phillips Giulio Prisco Jill Richmond Joseph Sahid Michael Scott Kyle Torpey Christopher Tozzi Aaron van Wirdum Erik Voorhees For a digital version of the magazine and to subscribe or order more issues, visit yBitcoin.com
Advertising Sales Office 615.454.4861 www.btcmedia.org yBitcoin is published biannually by BTC Media, LLC, 150 3rd Avenue South, Suite 1820, Nashville, TN 37201. Reproduction without the express written consent of the publisher is prohibited. yBitcoin is not responsible for unsolicited manuscripts, photography or art. yBitcoin is not responsible for errors and omissions in advertisements, sponsored content or editorial content. The information contained herein should not be construed as an endorsement of any company or individual, nor reflect in any way upon the products/ services they provide. yBitcoin does not knowingly accept false or misleading advertisements, sponsored content or editorial content, nor does the publication or its staff assume responsibility if such advertisements, sponsored content or editorial content appears in the publication. yBitcoin makes no warranties or representations and assumes no liability for any claims regarding services, products or claims made by advertisers. yBitcoin does not provide legal advice, is not a broker, seller or buyer of bitcoin, nor shall it be considered to be promoting or encouraging the purchase of or investment in bitcoin. Š 2017, all rights reserved.
*Sponsored executive profiles are either paid advertorial or written in close collaboration with the subject.
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From the Editor
Building on Bitcoin's All-Time Highs Peter Chawaga Editor in Chief
The early history of Bitcoin has been rife with speculation and expectation. Since its creation in 2009, every obituary for the cryptocurrency has been met with renewed life, and every price bubble has been met with a resettlement back to earth.
are actively using cryptocurrencies. Businesses from Wall Street to Main Street are looking to incorporate the cryptocurrency to increase efficiency and profitability, and meanwhile, individuals are buying in to bolster their own portfolios.
Those who have been around Bitcoin from the very beginning have seen it endure, growing steadily in value, as more investors around the world realize they want a part of it. Prices reached a fever pitch this year, eclipsing $4,000, and that rise brought the usual amount of speculation about sustainability, bursting bubbles and other shoes that would be dropping.
Through it all, yBitcoin is designed to be your guide. By answering fundamental questions about the inherent value of Bitcoin (see page 24) and providing how-to guides for buying and protecting it (see pages 28 and 42), this publication offers practical advice for those looking to break in. By profiling one of Bitcoin’s earliest devotees (see page 56) and reviewing some of the best tech on the market (see page 49), it will prove just as invaluable to those already swept up in the digital currency revolution.
This, of course, was not the first time Bitcoin’s price has surged (see our “Timeline” on page 12). But this price jump seems different than the others. Beyond reaching an all-time high, Bitcoin snagged headlines in mainstream news, seemed to bring up the value of other cryptocurrencies like ether along with it and even eclipsed the price of gold, long seen as a signifier of “traditional” value. It seemed as if these all-time highs were ushering in a new era for Bitcoin.
This is an exciting time for all of us in the cryptocurrency and distributed ledger space. Our publication seems to be growing right alongside Bitcoin, with new opportunities presenting themselves every day. Through it all, we want yBitcoin to be the go-to guide, the roadmap, for navigating these all-time highs.
And with this new era has come a wave of new investors looking to join the ranks. Some reports indicate that more than three million people
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TIMELINE 2008–2010
2011–2013
GENESIS
FIRST STEPS
The “Internet of Value” is spawned and a new age of financial and digital sovereignty arises.
Bitcoin is introduced to the wider world and attracts its earliest followers.
2008–2009
Satoshi Publishes White Paper Bitcoin’s seminal concept paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” is first published by the pseudonymous Satoshi Nakamoto. The white paper explains the technical and economic foundation of the trustless digital currency in detail.
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June 2011
First Great Bitcoin Surge
January 2009
Genesis Block Is Mined The original “genesis block,” the first block in the Bitcoin blockchain, is mined by Nakamoto. This is the only block that does not refer to an earlier block and, therefore, its bitcoin reward cannot be spent.
May 2010
First RealWorld Bitcoin Purchase Marking the first time bitcoin is used for a real-world trade, a programmer, Laszlo Hanyecz, pays a fellow forum user 10,000 BTC for two pizzas.
Following media attention, acceptance by the Foundation for Economic Education and the establishment of digital black market Silk Road, the first inflow of Bitcoin users occurs. As a result, the bitcoin price rises from about $1 to over $30. This is followed by a sharp correction, a pattern that is often repeated in the digital currency space.
January 2012
Bitcoin Enters Investment For the first time ever, a venture capital investment is made in a Bitcoin company: messaging and payment app Gliph gets funded $25,000.
March 2013
Bitcoin's First Split In possibly its largest ever error, the Bitcoin blockchain splits into two following an upgrade, with two halfs of the network each adding blocks. For six hours, there are effectively two Bitcoin networks operating at the same time.
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2014–2015
2016–Present
ADOLESCENCE
BITCOIN RISING
As early adopters of Bitcoin foster the cryptocurrency's development, mainstream acceptance remains elusive.
As Bitcoin gains notoriety and users, prices reach all-time highs and confidence in the new economic landscape grows.
April 2013
Bitcoin Investment Grows
January 2015
February 2014
Bitcoin exchange Bitstamp holds a $10 million investment round, making it the first ever startup to reach double-digits in the space. WIthin a year, Coinbase, Xapo, OKCoin, Circle, BitPay, Huobi, Bitfury, BitGo and KnCMiner all receive doubledigit funding.
Investment Reaches Triple Digits
Mt. Gox Fails After months of withdrawal issues, the world’s first and largest bitcoin exchange, Mt. Gox, implodes in spectacular fashion, claiming to have lost nearly a half billion dollars of the nascent cryptocurrency.
Investment in the Bitcoin industry continues to grow. Bitcoin wallet and exchange Coinbase raises a total investment of $106 million, a new record for a Bitcoin-focused company. 21 Inc. and Circle follow.
August 2015
March 2017
New York Introduces BitLicense
Gold Parity
In the first attempt at Bitcoin regulation in the U.S., the New York State Department of Financial Services begins issuing business licenses for virtual currency activities, treating the space’s commercial operators like regular financial operators.
One bitcoin finally reaches parity with one ounce of gold. Only two months later, the price of one bitcoin reaches that of two ounces of gold.
August 2017
All-Time Highs Bitcoin prices eclipse $4,000, marking alltime highs.
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Bitcoin FAQ By Kyle Torpey
It’s not unusual to have questions about the world of Bitcoin and cryptocurrencies. In an effort to clear things up, here are some answers to the most commonly asked ones.
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What Is Bitcoin? Bitcoin really refers to two different things: a decentralized financial network (Bitcoin) and the digital commodity created by that network (bitcoin). It is used to send funds around the world in seconds at almost no cost.
Who Started Bitcoin? Bitcoin was created by the pseudonymous Satoshi Nakamoto, although the origins of its underlying technology go back to the late 1980s. Nakamoto created Bitcoin by combining a variety of existing technologies.
Who Controls Bitcoin? Bitcoin is not controlled by a single entity. Instead, the nodes on the network verify that all of the rules, such as the rule that only 21 million bitcoins will ever be released, are followed. When everyone verifies the rules are being followed, there is no way for anyone to steal funds, cause inflation or otherwise create problems for the network. Having said that, the decentralized nature of the network also means rule-changing upgrades can be difficult to implement.
Bitcoin is not anonymous; it is pseudonymous.
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Where Do Bitcoins Come From? Much like gold, bitcoins are created through a mining process (see page 18) — albeit a digital one. Computer hardware is used to solve an extremely complex math problem about every ten minutes. The computer (or miner) that finds the solution to the math problem is rewarded with new bitcoins. The amount of new bitcoins created through this process is reduced by half approximately every four years.
How Do I Buy Bitcoins? Bitcoins are acquired in the same way as any other currency or commodity: by trading for them on the open market. Bitcoins can be bought through an online exchange, traded for cash or earned in exchange for labor.
How Do I Keep Bitcoins Safe? The safest way to hold bitcoins is on a device that is not connected to the internet. Hardware wallets are a popular option that create a physical barrier between a bitcoin wallet and an internet-connected device.
What Are Bitcoin Wallets? A bitcoin wallet is a piece of software that holds the private keys associated with a Bitcoin address and allows users to sign transactions with those keys on the Bitcoin network (see page 46).
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Is Bitcoin Anonymous?
What Is the Blockchain?
Bitcoin is not anonymous; it is pseudonymous. Every transaction can be viewed on the public blockchain, but a real-world identity is not necessarily attached to that. Use of Bitcoin can be more or less private depending on how it is used.
A blockchain is a record, or ledger, of digital events that is distributed among many different parties. It can be updated only by consensus of a majority of the participants in the system. And, once entered, information can never be erased. Bitcoin’s blockchain links blocks of Bitcoin transactions. A new block is “mined” every ten minutes and added to this chain. The blockchain represents the entire history of Bitcoin transactions; it is what makes it possible to tell who owns which bitcoins on the network (see page 22).
What Makes Bitcoin Valuable? Bitcoin has value because it is useful (see page 24). For the most part, Bitcoin transactions are most useful for those who are not served by the current financial system. Over time, bitcoin has become increasingly viewed as a mainstream store of value and its price relative to the U.S. dollar has risen.
Is Bitcoin Legal? It is still very early days when it comes to Bitcoin’s legal status around the world. Some countries, such as Bolivia and Ecuador, have banned the use of the digital currency outright, while others are writing legislation to attract Bitcoin-related businesses to their friendly jurisdictions. In the U.S., bitcoin has been treated as a currency and commodity, meaning most Bitcoin companies fall under existing laws and regulations. In the U.S., it is legal for individuals to buy, transact and sell bitcoins for personal use as long as capital gains taxes are paid to the IRS (see page 32).
Are There Other Types of Cryptocurrency? Since bitcoin was created, more than 1,000 alternative cryptocurrencies (known as altcoins) have been launched. None of these alternatives to bitcoin have achieved the same level of success as bitcoin up to this point.
What Does Bitcoin Mean for the Financial Industry? It is currently unclear what Bitcoin will mean for the traditional financial industry. Many banks and other legacy financial institutions are looking at upgrading their old systems to include many of the same technologies found in Bitcoin without removing their centralized control over money and payments.
Why Should My Business Care About Bitcoin? Bitcoin may eventually enable a payment system that combines the best aspects of cash and credit cards. While consumer use of Bitcoin was widely hyped in 2013 and 2014, most experts now understand that this is something that could take much longer to develop than originally anticipated. While the benefits of low transaction fees and no chargebacks are obvious to merchants right now, the immediate benefits for mainstream consumers are unclear.
Where Is Bitcoin Headed? Where Bitcoin is ultimately headed depends on who you ask. Bitcoin has been proclaimed dead by various figureheads in the media dozens of times, but it’s still here and has been hitting all-time highs in price. For now, it is clear that Bitcoin is useful to some people for either value storage or censorshipresistant transactions. In the future, microtransactions appear poised to serve as the next major use case. There are also upgrades for better privacy and more advanced smart contracts in the works and these developments will certainly be worth watching over the coming years.
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What Is Bitcoin? By Erik Voorhees
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The real magic of Bitcoin, the reason it’s so newsworthy, comes from the consequences of its existence.
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When most people hear about Bitcoin, whether for the first or the tenth time, they ask one simple question: “What is it?” Like an automobile, Bitcoin is technically advanced and can appear complicated, depending on how much you want to know about it. But also like an automobile, it doesn’t require you to be a technical expert in order to use it — and for it to change the way you interact with the world. Here’s what you need to know. Generally speaking, Bitcoin is two things: 1 ) A payment network (“Bitcoin”) 2) The currency unit used on that network (“bitcoin”) Thus, as both a payment network and the specific currency used on that network, you use “Bitcoin” to receive and send “bitcoins” from and to other people. To clarify, take a look at the relationship between PayPal and U.S. dollars. PayPal is a payment network, but not a currency. In contrast, the U.S. dollar is a currency, but not a payment network. You use the PayPal payment network to make transactions in U.S. dollar currency. The PayPal payment network is operated and centrally controlled by one company (PayPal Inc.), and the U.S. dollar is created and centrally controlled by one organization (the U.S. federal government). Here’s where things get important, revolutionary — and a little weird. The Bitcoin payment network, unlike anything else before it, is
decentralized. It is not controlled by any company or organization. That fact alone is its core “value-add.” Bitcoin's decentralization is why it's unique and revolutionary. The Bitcoin network is like file-sharing: it’s a network of computers that talk to one another, but nobody controls the network itself (there is no central server). The bitcoin currency unit is similarly not created or controlled by any central party. Bitcoins are created by the network itself over time in a process that distributes the new coins to those computers that are supporting and operating the network. The number of coins created in this way is limited according to a clear mathematical schedule. As of this writing, there are 16.3 million bitcoins in existence, and this will continually increase over time to a maximum of 21 million bitcoins many years in the future. Unless you care about how Bitcoin accomplishes this, the above is really all you need to answer the question “What is Bitcoin?” It’s a payment network and a currency used on that network, which are controlled by no central party. People control their own bitcoins. The number of bitcoins in existence is limited by the rules of the protocol. Perhaps the more important question is, “Why should I care?” While computer engineers and mathematicians might find Bitcoin’s technical details fascinating, most people don’t really have the time for those complexities — just as most people don’t spend time worrying
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about exactly how the internet works. We trust that it does, we enjoy its benefits and we know enough about it to use it. And while it’s true that Bitcoin permits financial transactions that have essentially zero cost and can occur instantly anywhere in the world, these consumer benefits are not really what’s important, either. The real magic of Bitcoin, the reason it’s so newsworthy, comes from the consequences of its existence. The fact that Bitcoin is decentralized, with no controlling entity, has fundamental implications. Because there is no central control, the power of the currency and its payment network belong entirely to the people who use it. And this power is tremendous indeed. Bitcoin enables any two people, anywhere on earth, to transact with each other freely. They cannot be censored. The only rules of their exchange are those they set between themselves. With Bitcoin, there is no third party presiding over the economic activity of the users. With Bitcoin,
you don’t need anyone’s permission when you make a financial decision. This means people can contribute to causes they believe are important, with no government agency or financial company able to cut off the payment flow. It means an entrepreneurial child can start an internet business before he or she is 18. It means a rural African farmer can receive payment for crops from a neighboring city, even with no bank account. It means a citizen of a tyrannical nation can hide their financial assets from seizure. It means the wealthiest and the poorest of the world now have the same authority over their money — beholden neither to banks nor bureaucrats. It democratizes finance just as the internet democratized speech and information. With Bitcoin, economic relationships are set and regulated by markets instead of politicians. By the individual, not the collective. The value of one’s savings now cannot be reduced through monetary debasement (i.e., inflation). Trade between individuals is now the business of only those individuals.
Certainly, some of these implications are controversial. Indeed, they will have a profound impact on human society, just as all great technological achievements do. A good way to think of it is that Bitcoin represents the separation of money and state — the ability to “practice one’s own economic behavior” without the permission of anyone else. It offers privacy in an age of surveillance, and honesty in an age of manipulation. So what is Bitcoin? It is a payment technology, sure. But more than that, it is a social and economic experiment. It is a project that, if successful, will change the relationships between humans on a fundamental level. Its implications have just barely been explored. Like any experiment, it can fail, but the genie is now out of the bottle. While this genie goes about its business, many things you take for granted will likely change. The changes will be beneficial, especially if you know something about them in advance. Remember the dawning of the internet. And educate yourself now on the phenomenon that is Bitcoin.
ABOUT THE AUTHOR Erik Voorhees, CEO of ShapeShift.io, is recognized as one of the world’s leading Bitcoin entrepreneurs. Voorhees passionately advocates for Bitcoin, which he considers among the most important inventions in history. As a featured guest on Bloomberg, Fox Business, CNBC, BBC Radio, The Peter Schiff Show Podcast and at numerous Bitcoin and industry conferences, he has asserted that “there is no such thing as a ‘free market’ when the institution of money itself is centrally planned and controlled.” His writings address “the human struggle for the separation of money and state,” with Bitcoin as the instrument by which the future will happen.
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What Is Bitcoin Mining? By Aaron van Wirdum
Bitcoin mining is not something average users really need to concern themselves with too much. If the platform works as intended, users should see their transactions confirmed and need not worry about how. Bitcoin mining embodies several of the beautifully balanced incentives that make Bitcoin such a revolutionary system. And it’s unfortunate that so many users are unaware of the process that produces bitcoins, as mining is one of the most ingenious and intriguing aspects of the system. It is, in many ways, Bitcoin’s backbone, simultaneously solving the “double spending” problem that could mean the same bitcoins are spent twice, making the underlying blockchain immutable and bringing new coins into circulation.
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The Role of a Miner Bitcoin mining is done by — who else? — Bitcoin miners. Theoretically, anyone can become a Bitcoin miner. Like many other Bitcoin users, miners verify new transactions and new blocks and forward these to connected Bitcoin nodes. They are part of the peer-to-peer network just like anyone else, and, from a network perspective, there isn’t anything to identify them as miners. But miners take on an additional task within the network. They use the transactions they receive to try and “mine” new blocks themselves. This system has them serving an important function for the network: If two conflicting transactions exist on the network because someone tries to cheat and spend the same bitcoin twice, the miner picks which of these transactions is confirmed and includes it in a block of verified data. The conflicting transaction is then rejected from the network. As such, mining solves Bitcoin’s double spend problem.
How It Works This mining of new blocks is a somewhat complex mathematical process, the details of which are beyond the scope of a primer guide. But in a simplified metaphor, it can be thought of as a unique type of lottery. Miners “guess” what the next block could look like. If they guess correctly, their block is accepted by the network. If they guess incorrectly, they can guess again and as often as they want.
However, each guess requires a tiny bit of computing, or hash, power to make. And because Bitcoin miners effectively compete against each other to be the first to find a new block, many try to guess as fast and as often as they can. This has naturally evolved into a sort of arms race over the years. Miners have increasingly optimized their computers to churn out a lot of hash power and spend a lot of computing energy doing so. This energy consumption is why Bitcoin mining is sometimes viewed as wasteful. But in actuality, this “wasted energy” offers the second great benefit to the Bitcoin network: it makes the blockchain tamperresistant and immutable.
Mining Immutability As a key property of the Bitcoin system, transactions that have been done in the past are practically impossible to undo. The only way for an attacker to potentially reverse an old transaction is to rebuild the entire blockchain that has been established since that transaction happened. This would also require the attacker to go through the whole “guessing game” and mine a whole new series of blocks from scratch. However, all of this “guessing” would require at least as much energy as has been invested by all of the miners since that transaction took place and potentially much more in order to overtake the original chain. Depending on how much hash power an attacker controls, this is
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either impossible or very expensive. Because this is impossible or prohibitively expensive, it’s safe to trust that older transactions will indeed not be reversed, making the Bitcoin blockchain relatively immutable. Of course, miners don’t invest all of this energy into finding blocks for charity. Each new Bitcoin block includes one special transaction. This transaction pays the miner in brand-new bitcoins that didn’t exist before, as well as transaction fees. And that is the third great benefit of Bitcoin mining: it’s how new bitcoins come into circulation, without the need of a central issuer.
Putting On a Hard Hat So, now that you understand what mining is, perhaps you want to become a miner and earn some new bitcoins yourself. That’s possible — but it’s not easy.
Back in the early days of Bitcoin, when the currency was hardly worth anything at all, anyone could mine bitcoins, even using a laptop computer. But this quickly changed when bitcoin gained real monetary value. Once miners realized that graphics cards could be dedicated to the task more efficiently, specialized mining farms emerged throughout 2010 and 2011. And since 2012 and 2013, Bitcoin mining has professionalized even further, as specialized chips and machines — known as “ASIC miners” — came to market. If you want to mine profitably, you will probably need one of these. It should also be noted that most Bitcoin mining today happens through mining pools. Instead of individual miners taking part in the peer-to-peer network, most of them actually bundle their hash power together through such a mining pool
and share any rewards they receive. This smoothes out the “luck factor” inherent in mining, so no one has to go without reward for months or years at a time. And last but not least, you will probably need relatively cheap (or free) energy; otherwise you are likely to spend more on your electricity bill than you will ever earn in rewards. Larger operations may also require a decent cooling system or a cold climate. And some basic technical skills to set the operation up and maintain it will come in handy, too. All of this is doable if you want to put in the time, money and effort, and if you have access to the right resources it could even earn you a nice profit. But keep in mind that you will be competing in a highly professionalized industry. Bitcoin mining is not free money.
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SPONSORED PROFILE
GENESIS MINING:
Trust, Transparency and Infrastructure Making a profit as a cryptocurrency miner, until recently, required an investment in dedicated mining hardware — and the time and expertise to acquire, configure and maintain it. But thanks to Genesis, you no longer have to own a mine to be a successful miner. You can basically rent someone else’s. Genesis Mining allows users to mine bitcoins and any other type of cryptocurrency using cloud-based infrastructure that relieves the onerous burden of buying all that equipment, finding a place to put it and paying for it all.
Krohn worked for several years in the finance industry and investment banking. Upon learning about Bitcoin, he quit his banking job and joined the cryptocurrency revolution. With the help of entrepreneur Jakov Dolic, the mining operation that Streng and Krohn established laid the foundations for the company that became Genesis Mining. Genesis focused initially on altcoin mining, but it added support for Bitcoin in late 2014. In December 2015, it added Ethereum contracts as well. As Genesis has grown its team, it has focused on hiring experts with a deep technical understanding of cryptocurrency mining and the hardware and software that underpin it. Toward that end, the company employs programmers and engineers who hail from diverse backgrounds but share one thing in common: cryptocurrency expertise. Genesis offers a range of mining services. Prices vary based on the hash rate that a plan supports, as well as the type of cryptocurrency users want to mine. Genesis supports hash rates starting at one million hashes per second and ranging up
DEEP CRYPTOCURRENCY EXPERTISE Genesis was co-founded in 2013 by Marco Streng. Coming from the mathematics field, Streng became involved with Bitcoin through his studies of emerging and self-organizing networks. He has been part of the Bitcoin community since its earliest days and has invested in several Bitcoin and blockchain startups to date. Streng co-founded Genesis Mining along with Marco Krohn, who also has a background in mathematics, as well as in physics and economics.
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to 15,000 gigahashes per second for fixed plans. Customers can also obtain custom plans, with pricing tailored for the specific hash rate they seek and the cryptocurrency that they wish to mine. All Genesis mining plans are based on cloud services, which eliminate the need for users to set up and maintain their own hardware. Genesis’s pitch to customers is that its cloud-based mining services save them from hardware purchasing costs, shipping costs, management overhead and the burden of having to run loud mining rigs that produce copious amounts of heat in their homes or offices. Not to mention the electrical bills that go with them. Genesis’s servers are spread across several data centers based in Europe, Asia and North America. The largest data center is in Iceland, where the company benefits from inexpensive geothermal energy sources. “Wherever we can locate cheap electricity, we try to create a data center and to offer our users the best cost/benefit ratio that’s possible for a mining operation,” said Paulo Fiorio, marketing manager for Genesis Mining. The company’s ability to obtain low-cost electricity enables it to sell mining services to users at a lower cost than most users would pay if they ran mining rigs in their own homes or offices. A COMMITMENT TO TRUST In contrast to many cryptocurrency mining companies, Genesis does not focus on a specific currency. It offers mining services for all of the major coin platforms: Bitcoin, Ethereum, Dash, Monero, Litecoin and Zcash. The company allows customers to mine multiple coins concurrently. This feature makes Genesis attractive for users seeking to build a diversified mining operation. The company boasts about a million users, making it the largest Bitcoin mining service in the world, Fiorio said. Genesis’s users include seasoned Bitcoin mining experts, as well as novices who are experimenting with cryptocurrency mining for the first time. Because Genesis delivers world-class mining hardware that requires virtually no setup or maintenance on the part of users, the company is able to cater to both the experienced and novice groups. Power miners get ultra-fast hardware at an affordable price, while mining newcomers benefit from the ease of use of Genesis’s mining service. Genesis seeks to set itself apart from fly-bynight Bitcoin and altcoin mining services through transparency and communication. “We show our faces and our facilities and we try to give peace of mind to our users by offering as much information as possible about our operation,” Fiorio said. He added that this makes Genesis “different from other companies in this sector,” who sometimes raise trust issues with users.
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The company promises to be “traceable and transparent” and “to be present and active on different forums and at conferences.” In addition to maintaining an ongoing presence in cryptocurrency circles, the company has launched campaigns to raise Bitcoin awareness with the general public. It challenged President Donald Trump during his campaign by warning that cryptocurrencies could stifle his efforts to shut off trade with Mexico. Taking the phrase “to the moon” literally, it sent a 3D-printed bitcoin and a bitcoin wallet into space using a weather balloon. It launched an advertising campaign trolling JPMorgan Chase CEO Jamie Dimon, a loud-spoken critic of the cryptocurrency, with billboards in Miami. Genesis Mining is notable for the size of its user base, the large geographic scope of its mining infrastructure and its focus on transparency and openness. In an industry where it can be difficult to associate mining companies with real faces, and where entities can sometimes disappear overnight with no explanation, Genesis’s multi-year track record and public engagement stand out.
Marco Streng Co-Founder / CEO
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Bitcoin and the Blockchain 101 Underlying Technology
If any buzzword has garnered even more attention than “Bitcoin” over the past few years, it has been “blockchain.”
Increasingly leading a life outside of cryptocurrency, the blockchain hype has been bent and formed into all sizes and shapes. Open or private, permissioned and permissionless, many with their own consensus algorithms, and some even developed or supported by well-known companies in the technology and finance sectors. But the concept of a blockchain originated, of course, with Bitcoin. And unbeknownst to many adopters, Bitcoin’s original blockchain provides advantages that no alternative system does. To understand why, let’s first look at what a blockchain actually is.
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The “block” aspect of a blockchain refers to blocks of data. In Bitcoin, these blocks are bundles of currency transactions, as well as some additional information about the block itself, like the time at which it was mined. Each of these blocks is “hashed,” meaning that it’s scrambled and condensed into a compact and seemingly random string of numbers. And this string of numbers is then included in the next block. This next block is in turn hashed as well, and this hash is included in the block after that. This links all blocks together, creating a chain. All of these blocks are shared over a network of computers, which all verify the integrity of a new block and its contents, and reconstruct the blockchain from it. Since all of these computers apply the exact same protocol rules, they all reconstruct the exact same blockchain. As such, the entire Bitcoin network reaches consensus over the state of the blockchain, a state which is updated about once every ten minutes as a new block is found (for more, see our guide to mining on page 18). Crucially, this consensus is reached without the need for a central intermediary. Bitcoin’s decentralized nature — in which tens of thousands of peers reconstruct the blockchain themselves — helps make the blockchain relatively censorshipresistant. Furthermore, the network doesn’t only achieve consensus every ten minutes. It also ossifies the history of consensus. Because the unique identifier of each block — the hash —
is included in the next block, all blocks are not just linked, but also ordered chronologically. In Bitcoin, changing what older blocks look like, by removing transactions, for example, is impossible. Due to specific mathematical requirements, the changed blocks would be entirely rejected by the system. The only way to rewrite history, therefore, is to create a whole new chain of blocks. And that is where Bitcoin really outshines all competing blockchains.
The Original Blockchain In many blockchains, it isn’t actually that hard to create whole new blocks and potentially rewrite history. But in Bitcoin, due to a requirement called “proof of work” and the fact that bitcoin is the most valuable of all cryptocurrencies, creating new blocks is very computationally expensive. It requires dedicated hardware, a certain expertise and, most of all, lots and lots of energy. To change history, then, requires an attacker to reinvest all of the energy that has been invested in Bitcoin’s blockchain from the point in history that needs to be changed. Depending on how much hash power a potential attacker has available, this is either very expensive or downright impossible. The costs involved in changing the data is what makes the Bitcoin blockchain the most robust, immutable and chronologically sound chain of transaction data the world has ever seen. It’s a historical ledger of all transactions that ever took place.
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The Blockchain — Beyond Bitcoin Interestingly, this doesn’t have to end with transaction data. As a global, censorship-resistant consensus system, Bitcoin’s blockchain potentially allows for much more. Transactions don’t really have to be used solely to transfer bitcoins. Instead, special software can be connected to the Bitcoin blockchain that interprets this basic transaction data a bit differently. As a simple example, a fraction of a bitcoin — potentially worth less than a cent — could represent something else entirely. Perhaps that fraction of a bitcoin can represent stock in a company. Or a piece of gold locked up in a safe. Or even a U.S. dollar in a bank account. Whoever then owns the “colored coin,” as this fraction of a bitcoin is called, has a claim on the underlying property. And as long as other participants recognize the claim, the Bitcoin blockchain — with its unique properties — all of a sudden carries much more than just bitcoins: it carries stocks, gold or dollars. There are many other unique properties that continue to prove that Bitcoin’s blockchain is a standout player, even as the concept of blockchain technology takes off in countless industries. The Bitcoin blockchain as a global, censorshipresistant and immutable consensus database is a very powerful tool. And much like the internet itself, it is working today, ready and free to be used by anyone.
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Why Bitcoin Has Value A journey through the history of trading, currency and the inherent need for digital money.
By David Hollerith
Since the dawn of civilization, people have found ways to satisfy their needs. Society itself arose from the discovery that forming groups and dividing labor made meeting our needs easier.
When these early groups grew into larger communities, they developed a more intricate process for exchanging goods. The first marketplaces emerged as forums for bartering where people who produced a single good could attain a diverse number of other goods. Though bartering improved life, the early marketplaces had their limits. If on the same day that a fisherman came to market seeking wheat, but no farmer desired fish, the fisherman would have to conduct a complex series of trades to acquire something he could trade for wheat. In each transaction, the fisherman could be expected to lose a percentage of his fishes’ original value, and he must be able to understand the exchange rate of every good with respect to all other goods. After a long day of fishing, this situation would not be ideal.
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Our concept of trade needed to be further refined. Improvement came in the idea to use a single good as an intermediary, the introduction of currency. Using currency saved time and effort and it would enable trade to work on a greater scale. By agreeing on a single intermediary good, two is the maximum number of exchanges anyone in the marketplace would ever need to make. This meant that there would be only one exchange rate for every good that held value: its cost in currency. However, selecting a good to serve as an intermediate currency wasn’t simple. For instance, dirt would not make a good currency. A decent currency needed to be something durable, easily divisible and transportable. By this criteria, coins were settled upon as early currency. But even these had their limits. When trading on an extremely small or large scale, their material size and weight could be problematic. While bringing a wheelbarrow’s worth of silver coins to a market is a better alternative than doing the same with fish, it still has flaws.
Banking on Value Banks were introduced as a means of securing wealth in exchange for fees and accreditation. Instead of withdrawing wealth to purchase something, people traded their banknotes for the goods they wanted. Without a doubt, the use of paper currency brought convenience. However, it also presented bankers with the opportunity to invest their clients’ deposited wealth for additional profit. This worked as
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Bitcoin ... is a digital currency made possible by a pioneering technology that presents people with a fundamentally better method of trade.
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long as not all of a bank’s clients withdrew their money at the same time. If that did take place, the number of banknotes that had already circulated throughout the system would be rendered worthless and the system altogether would collapse. To prevent such a catastrophe, European nations legalized the act of bankers lending more credit than what they possessed, as long as the banks followed regulations set in place by each nation’s governing body. Central banks were created for this explicit purpose. They are typically the only banks that have the right to issue legal tender, thus controlling and regulating the value of each country's currency. In 1971, U.S. President Richard Nixon chose to “leave the gold standard.” The Federal Reserve, the country’s central bank, would no longer permit new dollars to be redeemed for their value in gold or silver, something their existence had always been predicated on. Without material backing, the American dollar became what is called a “fiat currency,” one that has been declared legal tender by a government, though not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand, instead of relying upon the actual value of the material the money is printed on. Today, only about 8 percent of the United States’ dollars in circulation are paper. While paper money has its advantages, debit, credit cards and other forms of digital payment like Venmo and PayPal offer better incentives and efficiency.
But as we continue to improve the speed with which we communicate and share information across the internet, the prevalent electronic bookkeeping methods are beginning to lag behind in the privacy, security and speed they offer. Currently, any verified financial transactions are made possible through a trusted third party like governments, banks, accountants and notaries. While this method predominates at the moment, it is riddled with added costs, transaction delays and security breaches. Primarily, this method gives significant power and authority to trusted third parties.
Entering the Modern Era Bitcoin isn’t just an unregulated transaction system. It is a digital currency made possible by a pioneering technology that presents people with a fundamentally better method of trade. The Bitcoin software is enabled by a network of computers participating in collective bookkeeping or “verification” and it is decentralized, meaning it is not controlled by a central party. The network is hosted on a digital ledger, the blockchain, open to anyone who joins (see page 22). Every piece of information, including time, amount, senders and receivers, surrounding a transaction is verified by hundreds of participating computers. The complex mathematical process in which participating computers race to verify and maintain transactions on the ledger for a reward of bitcoins is called mining (see page 18). The mathematical principles that are involved in the mining process ensure that
all participating computers must automatically and continuously agree on every transaction. This process can be thought of as having a virtual and trusted third party present at every digital transaction. Many see Bitcoin as a long-dreamedabout replacement not just for our outdated financial system but for the whole concept of money. In the relatively short time that Bitcoin has existed, its foundational value has come from technological features that make it more transparent than any other transactional system. The caveat: to transact in the Bitcoin system, one must use the designated bitcoin currency. Therein lies the second — and potentially greater — level of Bitcoin’s value. As a commodity, Bitcoin’s value runs according to the strength of the network. The more people who use the technology, the more valuable the currency becomes. It’s an economic concept inherent in adopting most comprehensive technologies. The internet, for example, increased in the diversity of information it contained and the communication opportunities it presented as the number of its users grew. Thinking back to society’s earliest markets, currency first emerged as an intermediary out of the need to improve trade speed, costs and efficiency. What Bitcoin shares with the earliest forms of money, such as gold and silver, is that there is a finite supply. Even for those who don’t see Bitcoin superseding our current monetary system, the technology still demands the question: What should the money of our time look like?
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Bitcoin: Why It Now Belongs in Every Portfolio by Tuur Demeester
A technology is called “disruptive” if it creates a new market that first disturbs and then displaces an earlier technology. Bitcoin has the potential to be such a technology and much more. The fact that it can disrupt the largest and most interconnected marketplace in the world — that of money, banking and finance — makes it perhaps the most promising investment opportunity of our age. Unlike our current, increasingly unstable and unpredictable financial system, Bitcoin has critical 21st century technologies at its very core. The digital currency and clearing network is open source, mobile, peer-to-peer, cryptographically protected, privacy oriented and native to the internet. The fusion of these technologies allows for a level of security and efficiency that is unprecedented in the world of finance. These are some of the areas in which Bitcoin-based technologies can directly compete: • The $5.72 trillion annual market for card payments • The $1.9 trillion annual e-commerce market • The $580 billion annual remittance market • The $3.2 trillion hedge fund market • The $7.8 trillion gold market • The $1.2 trillion cash market • The $21 trillion offshore deposit market
Achieved Growth Bitcoin’s potential is not going unnoticed. After it had been praised
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by tech moguls such as Bill Gates (“a technological tour de force”) and Gmail founder Paul Buchheit (“Bitcoin may be the TCP/IP [Transmission Control Protocol/Internet Protocol] of money”), the money started speaking. Bitcoin saw investment by top venture capital (VC) brass such as tech entrepreneurs Marc Andreessen and Fred Wilson, LinkedIn co-founder Reid Hoffman and PayPal co-founder Peter Thiel; by billionaires such as former eBay President Jeffrey Skoll and Li Ka-shing (by many reports the richest person in Asia); by iconic executives such as former Citigroup CEO Vikram Pandit, Blythe Masters of Digital Asset Holdings and former Reuters CEO Tom Glocer; and recently by large-cap companies such as Google, Qualcomm, NYSE, Nasdaq, USAA and NTT DOCOMO, a $75 billion Japanese phone operator. In addition, several academic and government heavyweights have affiliated themselves with Bitcoin companies: Larry Summers (ex-Treasury Secretary and former World Bank chief economist), James Newsome (Commodity Trading Futures Commission and New York Mercantile Exchange) and Arthur Levitt (U.S. Securities and Exchange Commission). The core value proposition of this network is the fact that, in the words of IBM executive architect Richard Brown, “Bitcoin is a very sophisticated, globally distributed asset ledger.” What Brown and others are getting at is that Bitcoin will, in the future, be able to serve not only as a decentralized currency and payment platform,
but also as the backbone for an “internet of property.” This entails a decentralized global platform on which companies and individuals can issue, buy and sell stocks, bonds, commodities and a myriad of other financial assets. The effect will be to remove much of the current bureaucracy and barriers to entry that exist, presenting a huge opportunity for the world’s 2.5 billion unbanked people. Which raises the question: Why Bitcoin and not some other digital currency? The answer may lie in the network effect. Of all the digital currencies, Bitcoin is the one with the highest adoption rate and the strongest security. The combined computing power of the Bitcoin mining industry serves as a protective firewall around the payment network. To give an idea of its size, as 21 Inc. CEO Balaji Srinivasan has pointed out, “All of Google today would represent less than one percent of mining.” In short, no other digital currency is as secure as Bitcoin. This attribute alone attracts more capital, which in turn makes the network even more secure and performant. So, how much of this potential has already been realized? From the inception of Bitcoin in 2009 until January 2011, its market capitalization grew to $1.5 million. From there, it rocketed to $145 million in January 2013, spiking to over $10 billion in January 2014. Since then, it has recently reached a value of over $65 billion. Despite significant price fluctuations, year-on-year adoption trends point upward: as of May 2017,
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Potential Pitfalls However, these scenarios are far from sure things. Bitcoin faces several risks going forward. These include: • The emergence of a much better digital currency that steals its market lead • An undetected bug in the system • A hard fork (what happens when some nodes in the network start running a Bitcoin software upgrade that is incompatible with previous versions) causing the Bitcoin payment network to split in two • A sustained attack by an organization with substantial financial resources, such as a government
$6,860
$11,500
$44,000
$500,000
$800,000
How serious a risk do these challenges pose? A better currency is possible, but experience shows that disruptive protocols — such as a Simple Mail Transfer Protocol for email and TCP/IP for internet — have proven to be very resilient once adopted by a critical mass of the population. As with any software application, the discovery of bugs may destabilize the system, but the open-source nature of Bitcoin allows for many eyeballs to help track problems and for many minds to help figure out a solution. A hard fork creates competition between two versions of Bitcoin, and after a period of fear and doubt, eventually the value will flow to the version deemed most useful by its users. In other words, not a long-term threat. An organized attack on the network is possible but expensive, and there are many potential defense mechanisms: miners can refuse suspicious transactions or raise fees, vulnerabilities in the code can be fixed and so forth. From the perspective of the government, approaching the robust, decentralized Bitcoin network with an outright ban is near impossible. Therefore taxation, regulation and acceptance seem the more likely outcome. In any case, it is becoming exceedingly clear that digital currencies are here to stay. Bitcoin does not appear to be a fad or bubble, nor merely a one-off hedge against gold. With a risk-reward proposition this attractive, holding a small percentage of bitcoins in one’s portfolio as a speculation on increased adoption may be one of the wisest investment decisions of our age.
$3,500
there were more than 14 million bitcoin wallets. Investments in the Bitcoin ecosystem are taking off rapidly. In 2013, just over 40 VC deals were made that raised a total of $96 million. That number nearly quadrupled over 2014, with $335 million invested. For 2015, despite a softening VC climate, Bitcoin and blockchain startups raised a total of $490 million, an increase of 46 percent. In Q1 of 2017, VC firms invested $107.5 million into blockchain technology infrastructure. Additionally, initial coin offerings are on track to raise $1.7 billion in 2017. The value of bitcoins in circulation has been rising steadily. This can be explained mostly by the fact that it is a scarce commodity (the maximum supply is capped at 21 million) with rapidly growing utility. The future value of bitcoin could grow exponentially were it to replace the remittance market, become the global e-commerce currency or become the new form of offshore deposits.
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2
3
4
5
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Value of Bitcoin in Potential Transaction Scenarios If the following scenarios occurred and accounted for all of Bitcoin’s transaction volume, the price of a single bitcoin would spike, demonstrating the digital currency’s potential for growth: 1
Gold holders divest 1 percent into bitcoin: $3,500
2
Bitcoin replaces the remittance market: $6,860
3
Bitcoin becomes the global e-commerce currency: $11,500
4
25 percent of black market transactions are conducted in bitcoin: $44,000
5
Bitcoin replaces reserve currency: $500,000
6
Bitcoin replaces offshore deposits: $800,000
ABOUT THE AUTHOR Tuur Demeester is founder of the cryptocurrency-focused economic research firm Adamant Research. He first discovered Bitcoin on a research trip to Argentina and started recommending it as an investment at $5 in January 2012.
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A Beginner’s Guide to
BUYING BITCOINS by Diana Ngo As Bitcoin’s value rises and more people around the world become interested in investing, brand-new users are still plagued by a fundamental question: How can I buy bitcoins? That’s why we’ve included this handy “Beginner’s Guide to Buying Bitcoins.” This step-by-step instruction manual should provide everything a new user needs to know to get started with their investment. But before moving too far, it is crucial that new users keep in mind that safety is imperative. Since cryptocurrencies are still in a regulatory gray area throughout the world, consumers need to conduct due diligence and their own research before using a service and depositing money anywhere. With that disclaimer out of the way, it’s time to get started.
2. Choose a Bitcoin Exchange 1. Choose a Bitcoin Wallet Choosing a good bitcoin wallet is one of the most important aspects of using the platform. Without a wallet, you cannot, technically, have bitcoins. But finding a good and secure solution isn’t an easy task, as it often comes down to a choice between safety and convenience. There are many different wallet options out there and even more questions you need to ask yourself in order to find the right one. But making the right choice about where to store the private keys attached to your bitcoins is an important first step. (See page 46 for everything you need to know about making the right choice.)
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With a wallet selected and set up, users will be ready to assess the different payment options for purchasing bitcoins. Many choose to do this through bank transfers or with credit cards, and this will mean selecting a bitcoin exchange. But before sending funds anywhere, users will need to do their own research and ensure that they are doing so safely. It is advised that they dig into these five elements: the exchange’s fees, payment methods, ease of use, security and customer service. • Fees: Some exchanges are very transparent about their fees while others are less so. It’s important to look into this before depositing money anywhere.
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• Payment methods: Payment methods that are often proposed include bank transfers, credit cards, PayPal and cash. Most places will accept either one or two of those methods. • Ease of use: Don’t try to use a decentralized exchange if you are still new to Bitcoin. Choose a service that accommodates beginners. Some are very user-friendly while offering more advanced features for experts. • Security: Bitcoin exchanges are known to get hacked, so it is crucial that you check whether a service follows security best practices. These include providing proof of coins in cold storage and offering and encouraging customers to use two-factor authentication, among other methods (see page 44). • Customer service: Some exchanges are very fast to respond to customer queries, while others may take days to get back. At some point you will have to interact with support, so it is important to choose a service that is responsive. Renowned and reputable bitcoin exchanges include U.S.-based Coinbase, Kraken and Gemini; Bitstamp from Luxembourg; and CEX.IO from the U.K. All of them accept credit cards and bank transfers. If you are not based in either the U.S. or Europe and want to trade in your local currency, you can look for domestic or regional bitcoin exchanges. BTCC and Huobi, for instance, are two Chinese exchanges that offer yuan pairs. BitOasis, which is based in Dubai, serves the Middle East and North Africa.
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Purchasing bitcoins with cash will guarantee you the highest levels of anonymity.
Other services include Paxful and WeSellCrypto. Advanced users can use Bitsquare, a decentralized bitcoin exchange that lets you trade directly with others in a relatively anonymous manner. Meanwhile, purchasing bitcoins with cash will guarantee you the highest levels of anonymity. This can be done using a bitcoin ATM or physically meeting with someone and swapping your cash for their bitcoins. But keep in mind that not all bitcoin ATMs are anonymous, as some require ID submission. To find nearby bitcoin ATMs, check CoinATMRadar, an online website that lists all the devices available worldwide as well as their locations, features and fees. One research option for person-to-person exchanges is LocalBitcoins, which will allow you to find sellers in your area who are willing to sell their bitcoins for cash. Fees associated with cash transactions are generally higher than buying via an exchange platform by bank transfer. Moreover, for large transactions, using cash can be quite inconvenient, as well as risky.
3. Choose a Payment Method Those preferring to utilize PayPal or cash to purchase bitcoins will have several providers to choose from. Due to a fear of reversible transactions and “charge-backs,” few sites offer the ability to buy bitcoins via PayPal. Nevertheless, and despite the high fees involved, PayPal remains a convenient method. LocalBitcoins, an online marketplace and over-thecounter exchange platform, is the most popular option for purchasing bitcoins via PayPal. However, the biggest drawback is that most sellers will require you to have a community reputation and previous purchase history. This allows them to minimize the risk that bad actors will reverse the PayPal transaction while keeping the bitcoins obtained.
4. Welcome to Bitcoin! Following these steps, as well as conducting your own research as necessary, should usher you into the world of bitcoin ownership. As you become more comfortable in the space, reassessing the payment and storage methods that are right for you will become necessary. With bitcoin now in hand, you have taken the first step to embracing the digital currency revolution.
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The Dollars and Sense of Bitcoin Payments By Tony Gallippi and Stephen Pair
Bitcoin is a digital currency and a global payment network that is growing in popularity every day, offering unique advantages to businesses in a wide range of industries. But does it make sense for your business to accept bitcoin? Let’s explore why it may.
Credit Cards: Designed for an Offline World Credit cards were never designed for the internet. These lovely pieces of plastic with magnetic stripes were popularized in the 1950s (though the magnetic stripe was not added until the 1970s). These cards still work well 60 years later when paying in person, but they don’t work well for paying online. Customers expect a seamless payment experience — they don’t want to fill out credit card information forms for every purchase. Merchants are still being hit by multiplepercentage-point processing fees for the cost of securely settling customer payments through the multiple antiquated layers of the card network. And the costs of the security failures of this system have the most impact on online businesses. Online payment fraud continues to hit record highs year after year and it shows no signs of slowing down. “Friendly fraud” is also increasing, as consumers learn how to abuse the chargeback system. When an online merchant ships merchandise to a shopper, that merchant assumes a risk for up to 90 days. If the payment is disputed by the cardholder at any point during that time, the merchant is usually forced to reverse the
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payment and pay a penalty fee. Merchants bear the cost of this fraud, and ultimately this cost is passed back to honest consumers in the form of higher prices. As businesses use the internet to meet demand from consumers around the world, this weakness is sapping time and money from the online economy, one that should have a payment method of its own.
Bitcoin: The Solution for Online Payments Bitcoin was invented in 2009, making the most of everything we know about the internet and online security. It’s a payment system designed specifically for internet purchases from the ground up. While credit card companies spend countless resources trying to make their outdated products work better online, they'll never be able to match the simplicity and security of Bitcoin. Bitcoin works like cash for the internet. It’s sent from person to person in a push transaction, not drawn from accounts by third parties. It uses cryptography to provide proof of ownership, bypassing the traditional multiparty routing and authorization processes that transmit sensitive customer information. With this native solution for payment security, Bitcoin functions without a chargeback mechanism like the one today’s card system is built on. Customers and merchants alike are protected from fraud and its costs. If your business accepts a large number of payments over the internet, accepting bitcoin might make sense for you. Here are three
areas of online payments on which accepting bitcoin can have the most impact.
Macropayments: Between $1,000 and $10,000 Credit cards make payments between $1,000 and $10,000 more difficult. At this scale, interchange fees of up to 3 percent on card transactions can quickly add up. These macropayments are also at a higher risk of fraud. When criminals obtain stolen credit card information, they try to buy the most expensive things they can find before the cards get deactivated. Merchants selling items in this price range are at the forefront of the battle against payment fraud. For merchants like precious-metals giant JMBullion.com, Bitcoin already provides a muchneeded solution.
International B2B Payments Businesses that need to receive payments from international clients are often hit with elevated interchange rates, which vary from country to country and can easily be over 5 percent per transaction. In many of the world’s fastest-growing economies, businesses may not have access to card networks at all. Wire transfers can be received from more countries, but they are inefficient solutions. Bank wires rely on a large network of corresponding relationships, leading to unpredictable costs and transfer times to simply get money from point A to point B. Senders and recipients end up with little or no information as to the delays and fees incurred along the way.
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Bitcoin changes that. There is tremendous potential for companies to offer Bitcoin as a payment option for their international receivables. It’s faster, lower-risk and costs less than any other payment method. We’ve already seen traction — Bitcoin billing already makes up more than 10 percent of transactions run through one Bitcoin payment processor, and those B2B payments are 25 times the size of average consumer Bitcoin payments. If your business has international clients, then accepting bitcoin also might be worthwhile for you.
Payment Disbursements Businesses don’t just need a new way to accept payments. Many times, they need to issue payouts as well. Some businesses have large fleets of affiliates, consignment sellers or vendors that need to get paid their revenue share on a regular basis. Traditional bank transfers work well if you need to pay a batch of payments in the same country (for example, a domestic payroll).
However, these traditional transfers break down when businesses need to send batches of small payments internationally. Those small international payments are very costly to send via bank transfer. Plus, the banks and their routes can be different in every country, and making a mistake in a transfer instruction can lead to delays. Bitcoin payments operate on the same network worldwide, with a direct point-to-point access to any internet-connected device on earth. Marketplaces, affiliate networks and app stores can pay their users directly, frequently and cost-effectively with Bitcoin. Imagine a rideshare driver getting paid after every ride, or an app store developer getting paid after every download.
Getting Started With Bitcoin Payments Integrating Bitcoin payments into your business is a fairly simple process. If you have a small business or online store, you can start accepting bitcoin in just a couple of
hours. Billion-dollar enterprises take a little longer. Most Bitcoin payment gateways allow you to set your prices in your local currency. More important, they can settle incoming bitcoin funds in your local currency and local bank account. This way, the rise or fall in the price of bitcoin doesn’t affect the price of your product or service. A partnership with a payment processor can essentially eliminate any risk with Bitcoin. In fact, due to the lower cost of accepting bitcoin payments and the publicity it can bring as a byproduct, your business has more to gain than to lose. And you’ll be joining the more than 100,000 merchants worldwide who already accept bitcoin. Even as Bitcoin matures in its growth as a technology, the opportunities for merchant adoption remain wide open. It is expanding the possibilities for online commerce well beyond the limits of traditional payments. Is your business ready?
ABOUT THE AUTHORS Tony Gallippi is the co-founder and executive chairman of BitPay, the global leader in Bitcoin payments. He has over 20 years of experience in sales and marketing, and holds a bachelor’s degree in mechanical engineering from the Georgia Institute of Technology. Stephen Pair is the co-founder and CEO of BitPay. He has 20 years of experience building software systems in the financial and telecommunications industries.
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Bitcoin Regulation: The Rules, If Any, Are Still Changing By the MushkinLaw.com Bitcoin Law Team Martin Mushkin, Joseph Sahid and Rony Guldmann
When it comes to cryptocurrency,
each country can set up its own regulatory system or choose not to. The status of regulations will change based on where you are in the world, sometimes dramatically. But the battle to establish regulations that are reasonable for all parties can be viewed through the lens of the United States, where the state and federal governments often compete over rules, where one of the world’s most popular exchanges has tussled with the U.S. Securities and Exchange Commission (SEC) and recent steps have been taken to consider Bitcoin in a new financial class. In the U.S., the principal federal agency dealing with regulation of cryptocurrencies is the Financial Crime Enforcement Network (FinCEN). If a cryptocurrency is the asset of a fund being sold to the public, it may be classified as a commodity. If derivatives or futures are involved, the SEC or the Commodity Futures Trading Commission (CFTC) may have jurisdiction. In addition, every one of the 50 states, plus the District of Columbia, Puerto Rico and the U.S. territories, has the right to set up its own regulatory framework. While the key to all of these regulations is whether a cryptocurrency exchanger is handling other people’s money, the regulatory framework still requires that the careful Bitcoin user look at the federal law and the law of every state in which he or she anticipates doing business.
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The OCC Proposing Fintech Banks There is no unified approach. Some states provide no framework for regulation, while Hawaii requires that cryptocurrency wallet vaults maintain fiat reserves equal to the value of the virtual currency that they maintain. New York has a remarkably comprehensive and expensive system of regulations. As the federal and state governments compete with one another over which has the right to legislate in the space, the U.S. Treasury’s Office of the Comptroller of the Currency (OCC) has emerged with a potential roadmap forward. In December 2016, the OCC proposed that it license fintech companies. Under the OCC’s special licenses, these would become national banks that deal with financial technology products. Presumably, existing entities licensed by the OCC could apply to enhance their lines of business to cover fintech instruments. And any new fintech “banks” would need to apply as well. Cryptocurrency wallet vaults and cryptocurrency exchanges would presumably be licensed as fintech banks and their principal regulation would be via the federal OCC. That would mean that they would not have to negotiate licenses with 50-plus different jurisdictions. To apply to the OCC, they would have to submit extensive, detailed business plans; show adequate provision for adverse exigencies; meet capital
and bonding requirements; have experienced management; have in place Know-Your-Customer/ Anti-Money-Laundering (KYC/AML) systems and meet a host of other requirements. They might still have to register with the states where they do business, but in a very simplified fashion. Hopefully, the regulators would leave room for small companies to be licensed. In March 2017, the OCC published its “Comptroller’s Licensing Manual Draft Supplement for Evaluating Charter Applications From Financial Technology Companies.” In April, the Conference of State Bank Supervisors brought a court action maintaining that the OCC is not legally authorized to set up a fintech bank licensing system. Like other competing regulators, New York State’s superintendent of financial services has criticized the OCC’s attempt to preempt the field. New York, one of the world’s financial centers, is in a strange position to complain as it regulates some 2,000 entities. With more than 45 New York “BitLicense” applications having been submitted since the summer of 2015, when its cryptocurrency regulations became effective, by December 2016, it has only passed on around ten. It finally licensed Coinbase, one of the most popular Bitcoin exchanges, in January 2017. One could expect more streamlined responses in this millennium.
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Coinbase: A Case Study in Exchange Regulation The IRS did a survey of the 129 million to 149 million tax returns filed in 2013 through 2015 and found that barely over 800 returns showed any cryptocurrency transactions. According to the IRS, Coinbase has 5.7 million customers, most of whom are in the U.S. It is also the largest wallet vault in the U.S. So, in November 2016, the agency served a subpoena to Coinbase, requiring it to turn over all of its customers' records of cryptocurrency transactions from 2013 through 2015. Coinbase refused to comply with the subpoena. In March, the IRS petitioned the U.S. District Court to enforce it. Coinbase is registered with FinCEN and the court papers in “U.S. vs. Coinbase” indicate the parties have been talking. Transactions in excess of $10,000 per day by a single customer and transactions that look like subterfuges to avoid the $10,000 threshold must be reported to FinCEN. And transactions involving $3,000 per day must be recorded. The IRS, it appears, cannot just walk across the hall of the Treasury Department to its sister agency, FinCEN, and get the information it wants. The FinCEN records are the place to start.
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As the federal and state governments compete with one another over which has the right to legislate in the space, the U.S. Treasury’s Office of the Comptroller of the Currency (OCC) has emerged with a potential roadmap forward.
The Winklevoss Bitcoin Trust: Steps Toward Regulation Things can get complicated. Cryptocurrencies can be classified as currencies, commodities or securities, depending on how they are used. In 2013, an affiliate of Winklevoss Capital Management LLC filed a registration with the SEC for the Winklevoss Bitcoin Trust, an exchange-traded fund (ETF). The proposed fund would have invested only in bitcoin and the stock it issued would be redeemed only in bitcoin. For purposes of the fund, its holding of bitcoin would be considered a commodity. The interests it issued would certainly be a security, and regardless of how it would be
paid for, the payment would be a form of money. The registration did not go smoothly and it has not yet become effective. In June 2016, the Bats BZX Exchange, Inc., a registered securities exchange, filed a petition with the SEC to change the BZX’s rules so that the securities issued by cryptocurrency-based ETFs could be listed and traded on the BZX. In March 2017, the SEC’s Division of Markets and Trading disapproved the proposed regulation, stating that the markets for bitcoin are unregulated and could not be properly monitored. Then in April, the SEC granted a petition to reconsider the division’s disapproval. The results of that reconsideration are still pending ...
ABOUT THE AUTHORS Martin Mushkin was an SEC senior trial attorney, has published extensively and has been listed in Who’s Who in American Law. Joseph Sahid is a litigator handling commercial and financial disputes, was a partner at Cravath, Swaine & Moore and is listed in Who’s Who in American Law. Rony Guldmann works in a variety of litigation transactional matters. The authors are the Virtual Currency Team at MushkinLaw.com, located in New York, Connecticut and California, which concentrates on corporate finance, business regulation and litigation. Prior results do not guarantee a similar outcome.
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How to Use Bitcoin for Your Business By David Hollerith
IT APPEARS THAT BITCOIN HAS ARRIVED IN BUSINESSES BIG AND SMALL. Nasdaq recently reported that over 100,000 businesses, including industry leaders like Amazon and Tesla, have begun accepting cryptocurrencies as methods of payment. That number is growing by the hundreds every day. And giant corporations aren’t the only ones to embrace the world of digital currency. A recent study of 2,823 small business owners in the U.S. conducted by merchant-focused technology company Womply uncovered that 11 percent of American small businesses plan to accept new payment methods like mobile and digital currencies such as bitcoin by the end of this year. And it makes sense. Powered by blockchain technology, Bitcoin inherently reduces friction in transactional systems. Increased adoption of digital currency by business owners also addresses the operational stresses that they feel the most: a lack of time and money. Bitcoin possesses unique advantages for businesses, chief among them being the absence of transactional fees afforded by its decentralized nature. Other features that are particularly well-suited for Main Street include Bitcoin’s freedom from chargeback fraud, the instantaneous verification and rapid settlement of transactions, and the protections against identify theft provided by pseudonymity. Given these advantages and others, Bitcoin has great potential as a tool to solve pressing business problems.
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Transactions with the cryptocurrency can be verified and settled in a fraction of the time, usually from one hour to one day.
Entering the World Stage
Catering to the Unbanked
Whether a business conducts international transactions for consumer purchases or for compensating employees abroad, using Bitcoin to optimize international financial transactions is one of the most effective ways to utilize the advantages of digital currency. The current banking infrastructure performing traditional international transactions between sender and receiver is inefficient and expensive. In most international transactions, senders and receivers are unaware of the number of banks within the chain between them. This is an issue as each corresponding bank adds another percentage fee for its service in wiring money. The fee is split between sender and receiver, with the sender usually paying the greater amount. This current system isn’t necessarily corrupt, it is just inefficient at the expense of its users. NerdWallet, a personal financial website, surveyed more than a dozen banking institutions and found that on average, $10 was charged for incoming international wires and $42 for outgoing international wires. As the founder and president of Bitwage, a blockchainpowered international wage payment and payment processing company, Jonathan Chester has a good sense of the difficulties that businesses face when trying to send and receive money abroad. “When you think about international payments, you might think of workers sending a remittance home to a family member in Mexico, payroll for call center employees in the Philippines or a large invoice payment to a manufacturer in China,” he said. “Those are interesting scenarios, but Brazil turns out to be one [country] that had some surprising obstacles. Paying developers there can cost 4 to 8 percent of a paycheck and take up to 15 days.” As Chester pointed out, extra time is another big inefficiency problem that stems from a system that transfers each transaction through multiple correspondent banks. “It isn’t unheard of for wire payments to simply vanish,” Chester warned. As an alternative, Bitcoin merchant processors offer lower fees for international payments, or perhaps none at all. Transactions with the cryptocurrency can be verified and settled in a fraction of the time, usually from one hour to one day. With most businesses looking to keep costs down wherever they can, becoming a Bitcoin merchant processor is an appealing option. Additionally, using Bitcoin for international payroll can be a big help to businesses with foreign employees whose poor or volatile national currency might cause loss of revenue through currency exchange fees.
Businesses that use Bitcoin are also granted the profitable opportunity of catering to the unbanked. The unbanked designation — referring to those who for one reason or another do not have access to a traditional bank — covers a larger cross-section than some might think. In 2014, the World Bank reported that 2 billion people in the world fell into this category. These can include workers from developing countries without adequate banking or businesses that banks refuse to work with due to a level of risk or legal uncertainty in their industries, such as marijuana growers or gambling purveyors. “Unbanking can also be good for consumers or companies that desire to retain a level of anonymity,” Chester added. “Not necessarily from the government but perhaps from those who can view their social media profiles.” Though it’s always important to know who your customers are, a capacity to transact in Bitcoin opens a business to a broader customer base who have otherwise tapered currency options. It should be no secret that another demographic that overlaps with the unbanked is Bitcoin users. By using, offering and accepting bitcoin, a business can automatically establish trust with users who will undoubtedly reciprocate that support with patronage.
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Improved Security A 2016 study from research consulting firm Javelin Strategy & Research found that e-commerce websites spend more than 7 percent of their total annual revenue combatting fraud. The problem that businesses face when they accept credit cards or PayPal payments is that these payments are delayed and can be reversed after the point of sale. This can ble a fraudulent request for a return or refund, a type of fraud known as a chargeback, in which a transaction is disputed by the cardholder in an attempt to regain the transaction dollar amount while retaining the product or services rendered. Bitcoin payments are irreversible and secure, meaning this type of fraud is no longer possible to commit. Consumers also enjoy improved security because Bitcoin transactions will not use their personal information.
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Bitcoin payments are
irreversible and secure … … Bitcoin transactions will not use their personal information.
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Payment Processing Options With the advantages of embracing Bitcoin apparent, the next matter will be involving it in the processes of your business. Fully understanding how Bitcoin and other blockchains work can involve a steep learning curve. Fortunately, integrating digital payments into your business will not. Once business owners decide how they want to accept bitcoin, integration is a simple and free process. Setting up the payment process should take small businesses and e-commerce stores only a few hours. But larger businesses may require more time; the tech retailer TigerDirect (which no longer accepts bitcoin) integrated Bitcoin payments into its system over the course of four days. Businesses that accept direct payments simply have customers send bitcoin to their wallet by scanning a QR code. Of course, they will first need to procure that wallet and it’s recommended that, like a bank account, a wallet be set up to serve strictly for business purposes. If a business plans to hold bitcoin as an asset, it is its responsibility to convert bitcoin to USD to cover securities expenses. Holding bitcoin will also mean that the business is responsible for accounting capital gains and assuming the risk of the digital currency’s price volatility. Because bitcoin’s price remains volatile, almost every business will elect for indirect payments. Indirect payment is a way for businesses to reap the benefits of Bitcoin without being left exposed to its volatility. Indirect payment involves using a Bitcoin payment processing company. When a customer pays in bitcoin, the payment processor service accepts the bitcoin on behalf of the merchant, converts it directly to a different,
designated currency, and then sends the obtained amount back to the business’s bank account. In indirect payment, the bitcoin is immediately converted into something else so that the rise or fall of bitcoin doesn’t affect the price of the product or service that is offered. For this process, the payment processor will typically charge a fee of about 1 percent per transaction. Payment processors offer an array of services to make bitcoin use more effective, from the aforementioned bitcoin-to-currency settlement to sales and accounting integration. Each payment processor has a different service model, so it is important to shop for the one that best fits your business needs. Companies like BitPay and Coinbase walk new users through the entire process and offer customer service once a business is set up. While most processors send daily settlements to businesses in their designated currency, many allow businesses to receive a mix of their designated currency and bitcoin, depending on preference. It is crucial to remember that once a business receives bitcoins from a transaction, it becomes that entity’s responsibility to report capital gains. If a business receives all of its transactions in another designated currency, no additional reporting is required. Before making these choices on the type of payment, payment processor and preferred currency for bitcoin transactions, it’s a good idea for business owners to discuss with their accountants before making any changes to their settlement. If your organization keeps these rules of thumb in mind, it is possible to reap incredible benefits from the use of Bitcoin. It’s time to bring your business into the digital currency revolution.
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SPONSORED PROFILE
Bitcoin India Leads an Emerging Epicenter for Digital Asset Services
India is prime Bitcoin territory. For its population of over a billion, of whom an estimated 250 million are unbanked, blockchain-based digital assets such as bitcoin and ether have always offered a pathway to increased financial inclusion and a greater role in the global economy. But following the demonetization of its currency last year — an unprecedented move that wiped out 86 percent of India’s cash — the popularity of digital, mobile wallets have surged. Bitcoin India, an exchange and digital asset wallet service provider based in what is now one of the world’s most rapidly growing economies, strives to provide the easiest and most secure digital currency value-added services for Indian consumers and merchants.
A Complete, Full-Service Platform Bitcoin India is the world's largest platform for buying and selling digital assets for Indian rupees. As both an exchange and a digital asset wallet, Bitcoin India offers a place to securely store, send and receive digital assets like bitcoin with minimal fees, one that can process digital asset payments to any merchant. For miners, Bitcoin India owns and operates a global mining pool and also provides hosted mining services and “PickAxe” Mining Packs with weekly payouts.
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“The launch of ‘PickAxe’ — Bitcoin Mining Packs — marks the beginning of a new blockchain-based digital assets era: one of privacy, through zero-knowledge and transactional transparency,” the company announced. As a full-service provider, Bitcoin India also offers mining hardware that is hosted in its data centers. The company’s offerings feature Bitmain’s flagship miner, the Antminer S9. “Bitcoin India is growing each quarter, with 100-plus employees now,” said Bitcoin India CEO Sykam Reddy. “It’s the one-and-only startup from India providing these types of products and services under one umbrella, the types of tools that every person requires in the crypto space, such as a full-stack digital asset exchange and trade platform, digital asset wallet services, a merchant payment gateway, club membership, mining services and a mining pool.” Unlike many of the startups emerging from the country, Bitcoin India has an active presence on social media. The company’s Bitcoin India Club, launched in February, is almost a social network in itself, with membership perks including support, prizes, referral commissions and even stickers and T-shirts. Other membership benefits include 100 GH/s mining hash power for one year, assistance with stuck transactions and international debit cards.
“Since the inception of Bitcoin India, we’ve started adding the world’s most popular digital assets — through Bitcoin, Ethereum, Litecoin, DASH, Bitcoin Cash, Ripple, NEM, IOTA, Monero and Dogecoin — to our portfolio,” said Reddy. “And we are now in the process of adding over 20 more digital assets that will be available very soon.” Bitcoin India is focused on making its offerings widely available to a country that increasingly relies on mobile technology to communicate, work and live. “We have web, Android and iOS apps available for users,” said Reddy. “We accept Indian rupees on both the web and mobile applications. Now, merchants can accept digital assets through our app and receive rupee deposits daily.”
Fueling India’s Growth Bitcoin India has established itself as a one-stop shop for digital asset users in India, an emerging ecosystem that seems poised to play an important role in the future of the blockchain-based world. It’s worth noting that the Indian government is considering a proposal to introduce its own fiat cryptocurrency similar to private cryptocurrency, such as bitcoin. According to sources familiar with the matter, the proposal was discussed by a committee of government
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Sykam Reddy, Bitcoin India CEO www.bitcoin-india.org
officials, and the panel found the idea of setting up and running blockchains for financial services a potentially useful one. This new fiat cryptocurrency would be managed by the Reserve Bank of India (RBI) and may be called “Lakshmi.” The Indian government is not alone. In fact, governments and central banks all over the world are gradually warming up to the idea of leveraging the unique advantages offered by blockchain technology — namely, low-cost transactions permanently recorded in tamper-proof distributed ledgers — to modernize their financial systems. That will take time and the governments are unlikely to support important features that make Bitcoin and other digital assets appealing to end-users, such as mining and near-anonymous, paperwork-free transactions. Therefore, Bitcoin, Ethereum and at least a few other digital asset platforms are likely to continue to prosper in India. As cybersecurity becomes paramount, blockchain technology seems to have piqued interest among state governments as a technology to protect sensitive data. In the Indian state of Andhra Pradesh, Chief Minister N. Chandrababu Naidu has said that the government would allot $15.6 million to create a separate startup fund for budding entrepreneurs who can develop blockchain-based applications to
store government documents on a decentralized database. “Our trading platform is a true exchange where the users can set their own price to buy and sell digital assets,” explained Reddy. “Currently, we have exchanges for bitcoin to
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Currently, we have exchanges for bitcoin to Indian rupee, ether to bitcoin and ether to rupee markets, and we are in the process of adding another 30 or more markets soon.
Indian rupee, ether to bitcoin and ether to rupee markets, and we are in the process of adding another 30 or more markets soon.” As Bitcoin India continues to serve the growing market and maintain its own growth, Reddy will focus on giving back to those in need. “While we grow, we are giving back to society,” he said. “We’re providing to charities that aid victims of natural disaster through the Bitcoin India Foundation. We’ve also adopted many government schools located in rural locations in Andhra Pradesh and have been providing needed items like shoes, belts, ties, books, chairs, drinking water and computers to create digital classrooms for a brighter future. Recently, we were able to help a 13-year-old little champ get treatment for his severe blood disorder.” That fundraising campaign exceeded its target of 1.5 million rupees, equivalent to $23,000. The Bitcoin India Foundation is described as an independent, private philanthropic foundation dedicated to assisting the underprivileged in India, particularly children and youth. Bitcoin India’s philanthropic efforts are all part of its commitment to playing an integral and responsible role in its community. Whether it serves Indians through digital asset exchanges or assistance for the needy, Bitcoin India’s star is rising.
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7 Steps to Digital Security by Kirk Phillips, CPA, CMA, CFE, CBP
From casual Bitcoin users to high-profile businesses relying on the digital currency, there is always one common thread: the threat of hacking. Digital identity management best practices are critical for anyone in the world of cryptocurrency in order to protect security and privacy. To help ensure personal identities remain safe and to provide peace of mind against outside access to funds, Bitcoin users should follow these seven steps.
1. Choose a Platform Select a password management system such as LastPass, create an account, activate two-factor authentication and start adding websites and login credentials. Businesses should create an enterprise-level account with an admin console for managing users. Think of this as your go-to dashboard.
2. Add Sites Once the password manager is set up, you can easily add sites by logging into an account as you normally would and clicking and saving when prompted. You can add sites manually with the URL, site nickname, username and password. Spreadsheet imports are also available.
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3. Test Sites Always go back and test-click a website after saving it to your password manager, whether you save sites one at a time or by importing a list. When you create new accounts, the password manager saves the new account URL and not the login URL. Log out of the site, then save and copy the correct login URL into the site profile.
4. Delete the Old List Old habits are hard to break, so delete password spreadsheets after you import. Lingering password files are ripe for hacking. If you can’t part with the old spreadsheet, attach it to a secure note in your password manager.
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5. Create a Unique Email Email is the golden thread that weaves your entire digital identity together, and unfortunately, most folks use the same email and the same or similar passwords for all of their accounts, from social media to financial and Bitcoin accounts. Email serves a communication role and a username role, but these two roles should be separated by use of two different emails. For example, use a random password generator to create an email prefix such as 3rxyHk4p98@ gmail.com. Then swap the email on each site with the new email the next time you log in. It will be easier to change accounts one by one instead of turning it into a major all-at-once project.
6. Change Passwords Hackers can use the digital equivalent of brute force against an easy-to-remember password, especially if they already know your email. Change all of your passwords to the maximum password length allowed by your respective websites using the random generator provided within the password manager. Password resets should be done in conjunction with the new email resets described above. If you can’t remember the password, then it’s harder to break. If you use a password manager, you no longer have to remember passwords.
Use one email for communications and a different stealth email for logins. 7. Secure Bitcoin Wallets Bitcoin-related sites may require special attention beyond standard login credentials. Sometimes a passphrase, a group of random words, is required to access your bitcoins. If you lose the passphrase you lose your bitcoins, period, so it must be handled very carefully. In some cases, risk management dictates keeping passphrases and private keys in a safe rather than in a password manager. There are many other advanced techniques beyond the scope of this article, but these strategies will significantly reduce risk for people who would otherwise keep login credentials in a spreadsheet or use the same email and password for everything. The average person conducts 25 logins per day. One minute of fumbling per login can add up to more than two-and-a-half workweeks wasted every year just logging into websites. Enjoy some security peace of mind with your newfound time instead.
ABOUT THE AUTHOR Kirk Phillips is an entrepreneur, Certified Public Accountant (CPA) and a Certified Bitcoin Professional (CBP) obssessed with Bitcoin as a tool to disrupt existing business models and transform accounting. Author of The Ultimate Bitcoin Business Guide, an inspirational reference for entrepreneurs and small- to medium-sized businesses, he weaves risk management into business process outsourcing, crypto-business consulting and education. He can be reached at TheBitcoinCPA.com.
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How to Ensure Bitcoin Security
By Andreas M. Antonopoulos
Bitcoin allows anyone to be their own bank. If that sounds like a potential scenario for chaos, it’s only because you haven’t yet heard of the great lengths to which Bitcoin users can go to ensure the security of their “one-person banks.” By following a handful of basic security guidelines, Bitcoin users can achieve a level of security to protect their money that is beyond the capabilities of the banking world as we know it. The truth is that banks are barely able to keep accounts secure. Although banks promise to make deposited funds available upon request, none of them could actually withstand a run in which all depositors decide to simultaneously withdraw their funds. In that respect, bank funds are just an abstract reference to value. The funds they protect are just numbers in a ledger, while the actual money is out on loan to the banks’ borrowers. Bitcoin is different. Once bitcoins are sent to your address, you control them entirely; you maintain them, and when you want to use them for a purchase, they are there for you. With Bitcoin, possession provides 100 percent of control. But with this great power comes great responsibility. Having the keys to unlock a bitcoin is equivalent to possessing a chunk of precious metal. Which means if you misplace it, have it stolen or mistakenly send the wrong amount to someone, you would have as much recourse as if you dropped cash on the sidewalk and didn’t notice until you got home. Bitcoin is different enough from anything that has come before that we need to think about its security in a novel way, too. However, Bitcoin has capabilities that cash, gold and bank accounts do not. A bitcoin
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wallet, containing the private keys necessary to access bitcoins, can be backed up like any file. It can be stored in multiple copies, even printed on paper for hard-copy backup. A backup of Bitcoin keys is as good as possession of the original keys. You can’t “back up” cash or precious metals. Banks can recover funds for you, but only at their own discretion. And they can also confiscate funds, adding a risk that doesn’t exist in Bitcoin. So, what should end users do to secure their bitcoin wallets?
Do Not Store Money on an Exchange Many people purchase their first bitcoin from an exchange, where they can trade their country’s currency for bitcoin or other cryptocurrencies. However, keeping your currency on an exchange is dangerous because exchanges can and do get hacked. An exchange is just that, a place to exchange cryptocurrency. It’s not a safe place to store your savings. With traditional investments, a brokerage house buys, sells and manages the assets for its clients. With digital assets, there is nothing to manage. There are no prospectus, no dividends, no management. They simply facilitate the exchange between two parties. As soon as you complete the trade, move your cryptocurrency (and cash for that matter) off the exchange and into a wallet you independently control. This is as simple as creating a new wallet and withdrawing the cryptocurrency to an address controlled by that new wallet. Remember: Your Keys, your bitcoin. Not your keys, not your bitcoin.
Choose a Wallet for Which You Control the Keys One indication that you control the keys is that the wallet asks you to make a backup when you receive the first incoming payment. The most secure device most people possess is their smartphone. For new users, a mobile wallet is the best choice, balancing ease of use and security. Examples of mobile wallets that allow you to control the keys: iOS: Airbitz, breadwallet, Copay, Jaxx, Mycelium Android: Airbitz, Copay, Jaxx, Mycelium, Samourai
Back Up Your Keys Today, most bitcoin wallets will prompt new users to create a backup of their keys. Sadly, many people skip this step, which can lead to loss if a device is misplaced or stolen. Backing up can be as simple as using a sheet of paper to write down 12, 18 or 24 backup words (mnemonic words) displayed by your wallet and storing them in a secure, fireproof and tamper-evident location such as a home safe or bank vault. Some wallets don’t use mnemonic words but still provide a backup feature; check their websites for details. Regardless, before you back up, be sure you’re in a secure environment, away from prying eyes and cameras. Your backups are your keys.
Balance the Risk of Loss and Theft While most users are rightly concerned about the threat of theft, loss is an even bigger risk. Data files get lost all the time, but if they contain bitcoin, the loss is much more painful.
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Some users further protect their backups with encryption, passphrases and PINs, but more is not always better. In the effort to secure their bitcoin wallets, users must be very careful not to go too far and end up losing the bitcoins instead. In the summer of 2010, a well-known Bitcoin awareness and education project lost almost 7,000 bitcoins. In an effort to prevent theft, the owners had implemented a complex series of encrypted backups. In the end, they accidentally lost the encryption keys, making the backups worthless and losing a fortune. Like hiding money by burying it in the desert, if you hide it too well you might not be able to find it again. Balance the risk. Bitcoin has capabilities that cash, gold and bank accounts do not. A bitcoin wallet, containing your keys, can be backed up like any file.
Use Two-Factor Authentication Many first-time users will use a webbased wallet or online service as their Bitcoin bank. Unfortunately, this has led to a rash of thefts from Bitcoin users, almost all due to compromised desktop computers. Hackers will install trojans and keyloggers looking for access to well-known Bitcoin sites. As soon as users log on, their own computer will compromise the account and surreptitiously transfer all of their money to another Bitcoin address. Once stolen, there is no recovery, as Bitcoin transactions are not reversible. The most effective defense against this attack is using what is known as a “two-factor authentication scheme” (2FA) or using a smartphone application to generate onetime codes. Google Authenticator and Authy are two
such services worth looking into. Many wallets now incorporate 2FA as a standard feature, be sure to use it.
Spread the Risk Would you carry your entire net worth in cash in your wallet? Most people would consider that reckless, yet Bitcoin users often keep all of their bitcoins in a single wallet. Instead, users should spread the risk among multiple and diverse bitcoin wallets. The prudent user will keep only a small fraction — perhaps less than 5 percent — of their bitcoins in an online or mobile wallet as “pocket change.” The rest should be split between a few different storage mechanisms, such as multisignature and hardware wallets.
Use Physical Storage or Hardware Wallets Bitcoin keys are nothing more than long numbers, sometimes displayed as a series of words. This means that they can be stored in a physical form, printed on paper or etched on a metal coin. Securing the keys then becomes as simple as securing the physical copy of the Bitcoin keys. A set of Bitcoin keys that are printed on paper is called a “paper wallet,” and there are many free tools that can be used to create them. Paper wallets are not backups of your online keys, they are new keys, generated securely offline and used specifically to store bitcoins offline. This type of storage is sometimes referred to as “cold storage.” Another way to store bitcoins securely is through hardware wallets. These hardware wallets allow nonexpert users to attain an almost foolproof level of security. Unlike a smartphone or desktop computer,
a purpose-built bitcoin hardware wallet has only one function: to hold bitcoins securely. The devices don’t run general-purpose software and have simple interfaces that work to limit opportunities for compromise. These devices range in cost from $25 to $220 and are available for purchase online.
Use Multisignature Wallets Multisignature, or “multisig,” is a powerful feature that was added to the Bitcoin protocol in 2012. Like a bank’s safe deposit box, where two keys are simultaneously used to unlock a single box, Bitcoin’s multisig feature allows users to secure their bitcoin using multiple keys. Unlike a bank’s safe deposit box, which offers limited configurations, Bitcoin can currently support up to fifteen total keys with any configuration of required signers. Currently the most popular multisignature configuration is "2-of-3," where you hold two keys and a wallet provider or another third party holds the third. The most popular configuration for businesses is "3-of-6," where three executives in a company each hold one key, two keys are stored at different off-site cold storage locations and the last is held by a third party for recovery purposes only. In summary, Bitcoin is a new and complex technology. The industry has grown considerably over the past eight years, demonstrating an incredible rate and breadth of innovation. Over time, we will develop better security tools and practices that are easier to use by nonexperts. For now, Bitcoin users can employ many of the tips above to enjoy a secure and trouble-free Bitcoin experience.
ABOUT THE AUTHOR Andreas M. Antonopoulos is the author of Mastering Bitcoin (published by O’Reilly Media), considered by many the definitive technical guide on Bitcoin, and The Internet of Money, a book for everyone about why Bitcoin matters. He is currently writing Mastering Ethereum, due for publication in early 2018. He is an expert in security and distributed systems, an entrepreneur and a coder. He can be contacted on Twitter @aantonop or at http://antonopoulos.com.
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Wallets 101 While digital currency in itself is not a new concept — for instance, most U.S. dollars were already digital even before the invention of Bitcoin — a money purely based on cryptography is. Something truly unique about Bitcoin is that within its protocol, “ownership” is not based on the rule of law, or user accounts, or even identity. It is solely based on math. More specifically, Bitcoin addresses, the strings of seemingly random numbers and letters, can have bitcoins attached to them. These bitcoins can be spent if someone proves to know another seemingly random, but mathematically corresponding, string of numbers and letters: the “private key.” Whoever owns a private key owns the corresponding bitcoins. So, needless to say, these private keys are very important — and potentially valuable — sets of letters and numbers. If you own any bitcoins, you need to keep your private key safe. Private keys are typically stored in bitcoin “wallets.” Today, wallets come in all sorts of shapes and sizes, on all types of different platforms. Different kinds of wallets can store keys in different ways, often specifically designed for particular use cases. The kind of wallet you will want to use depends on the type of Bitcoin user you are.
Choosing Your Wallet If you don’t plan on using your bitcoins for regular payments, but instead plan to store them safely as a long-term investment or savings, you could consider a paper wallet. These are pieces of actual paper that have private keys printed on them. If generated securely (which, it should be noted, is easier said than done), paper wallets have a great advantage in that the keys are not stored on a computer at all. This means your wallet cannot be
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hacked into or otherwise digitally compromised. Of course, you will need to take good care of the paper wallet itself as it is not protected from being physically stolen, lost in a fire or otherwise destroyed by real-world elements. It is possible to make copies of the piece of paper as backups and store these elsewhere. If you do want to use bitcoins for payments but also require topnotch security for your private keys, purchasing a hardware wallet is a good option. Hardware wallets are devices specifically designed to sign Bitcoin transactions, but not much else, which should make them impossible to hack into. Hardware wallets do typically need to be used in combination with some other wallet, and this often requires some level of trust, because hardware wallets do not validate all of Bitcoin’s protocol rules. But, at least, the hardware wallet keeps private keys safe. Alternatively, if you do want to partake in the Bitcoin network without a real need to trust third parties at all, a full node wallet is the way to go. These wallets are the only wallets that keep track of the entire Bitcoin blockchain and fully validate all transactions themselves. Many argue that this is really how Bitcoin is supposed to be used, as you, for example, don’t need to trust anyone else to tell you what your balance is or whether an incoming transaction is valid. The downside is that a full node can be a relatively heavy load for your computer to handle. Getting started with a full node requires that you download and verify well over 100 gigabytes of blockchain data, which will likely take over a day even with newer computers. That’s why there are more userfriendly and accessible options as well. Known as “light clients” or “simple payment verification (SPV) wallets,” most mobile wallets and
some desktop wallets don’t verify the entire history of the blockchain and therefore don’t need to download all of its data. Instead, they require only transaction data that’s directly relevant to you. This has some slight trust implications, as you are to some extent trusting whomever is providing this data, or Bitcoin miners, or both, while privacy typically suffers as well. But it is much easier to get started with and to use one of these wallets, and since you hold on to your own keys, your money should be safe barring any hacks. An even more accessible option is web wallets. Web wallets themselves come in different flavors, for which trust is the main differentiator. Some web wallets are relatively safe, as they let you generate your keys on your own computer and store them in your web browser. This is not really recommended for large amounts, as it is easier to hack than many alternatives. But it is very quick and easy, and probably fine for smaller amounts and day-to-day spending. And finally, there are custodial wallets. Typically a type of web wallet, and often a de-facto part of a Bitcoin exchange, custodial wallets hold on to the Bitcoin private keys for you. In these cases, you are not at all protected by the security offered by the Bitcoin system itself. Rather, you are fully trusting the service that offers the wallet. Most dedicated Bitcoin users likely utilize a combination of the above options, similar to how many people have a savings account, a checking account and some cash in their pockets. Where your savings account (say, a paper wallet) may be best for holding serious funds that are meant for long-term storage, the cash in your pocket (say, a web wallet) is meant for daily purchases.
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5 Wallet Apps for Private Key Security As our security guides (pages 42 – 45) have stressed, protecting your private keys is paramount to protecting your bitcoin. So we've compiled the top wallet apps for doing just that.
1 Bitcoin Core (Full-Node Wallet) Bitcoin Core is a direct descendant of the original Bitcoin codebase left behind by Satoshi Nakamoto. Often considered Bitcoin’s “reference implementation,” it is currently the full node and can be used as a wallet. Bitcoin Core’s codebase is extensively tested and reviewed and it is probably one of the most secure and private ways of using Bitcoin. However, since Bitcoin Core developers don’t typically focus on the wallet first, it does have fewer features than most other wallets. On top of that, Bitcoin Core can be relatively resource-intensive to use.
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Electrum (Mobile, Desktop and Paper Wallet)
GreenAddress (Mobile and Desktop)
Electrum is one of the oldest and most widely used light wallets. It relies on a unique, hybrid client-server model in which regular users run the servers. Arguably, it offers slightly more privacy than many other wallets since users do not share their Bitcoin addresses with the whole world or even a specific company, but only with a random server somewhere. (Though you can also point your wallet to a specific server, including your own.) Electrum may also be the best option for generating a paper wallet. The software then generates a private key seed for you to print out. This is a bit more secure than some of the online paper wallet services out there.
GreenAddress, a wallet produced by blockchain technology provider Blockstream, is perhaps the most feature-rich wallet available on the market today. It is often the first wallet to adopt new features and it offers multisignature protection of funds with two-factor authentication. This means that your bitcoins are actually protected by multiple private keys. As such, your funds should be safe even if your wallet is compromised, while at the same time there is no need to trust GreenAddress with your bitcoins.
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Copay (Mobile and Desktop)
mSIGNA (Desktop)
Copay is the wallet developed by Bitcoin payment processor BitPay. It is probably one of the most userfriendly mobile wallets available and is specifically designed to streamline a typical payment process. While it doesn’t include too many fancy features, Copay does offer multisig protection of funds. And, it does what it needs to do: it lets you spend and accept bitcoins without too much trouble. Well suited for smaller, day-to-day amounts.
mSIGNA is an advanced, enterprise-level wallet offered by Ciphrex that can either be used in combination with your own full node or someone else’s. It supports easy backups, multisignature transactions, offline storage, multidevice synchronization and encrypted electronic and paper backups. It may not be the easiest wallet to use, but if your company relies on Bitcoin payments or you are a sophisticated user, mSIGNA is a good option.
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Editor's Review: Hardware Wallets
By Peter Chawaga
Hardware wallets are the go-to choice for many seasoned Bitcoiners looking to secure their troves. They are preferred over desktop and software wallets by some users because they remain unconnected to the internet and cannot be hacked or rooted like other devices. And as the industry grows, there are increasingly more sleek, sophisticated and diverse hardware options out there. To help sort through the solutions, we contacted some of the leading hardware wallet providers in the space and got our hands on their latest wares.
The Ledger Nano S “Vires in numeris.” It’s a Latin phrase meaning “strength in numbers” that courses throughout the Bitcoin ecosystem. It’s meant to evoke the power that Bitcoin holds over fiat currency, securing value through hashes and community authentication. It’s also emblazoned on one side of the Nano S, the latest hardware wallet from Ledger. The Nano S is aptly named as it clocks in at the size and weight of a standard jump drive (98 millimeters long when fully extended and a mere 16.2 grams in weight). The Nano S itself is secured by a four-digit PIN, chosen by the user upon first connecting it to a computer through USB. The Nano S will be wiped if three incorrect PIN entries are made. The device then provides a 24-word recovery passphrase (you’ll want to write this down), and this is what protects a user’s wallet and the bitcoins it contains. Setup was seamless and I configured the Nano S in a few minutes. Navigating the Nano S is a matter of two buttons, one for left, the other for right and both at once to confirm a selection. The OLED display prompts users in bright blue and will double-check transactions, but much of the critical information, like account balances, is accessed through a connected device. The Nano S only signs transactions and must be used in combination with another wallet. The Ledger Wallet
app, a Google Chrome extension, allowed me to transfer a modest amount of bitcoin from another wallet app (for a fee, of course). The Ledger Wallet interface is straightforward and intuitive to use, but offers a few more customizable features than many other wallets. Users can select their language and region, require up to six confirmations to send cryptocurrency, opt for high transaction speeds with high transfer fees or slow transactions with low fees, and toggle between different blockchains (being a bit of a purist, I went with the Bitcoin blockchain, but Bitcoin Cash, Bitcoin UASF and Bitcoin SegWit2x were also options) and blockchain explorers. The Nano S boasts compatibility with other software wallets and cryptocurrencies. Ledger claims that the device supports 15 different cryptocurrencies, with more coming soon. With integration of
MyEtherWallet, the Nano S allows users to store ERC20 tokens. A quick test with BitGo, a multisignature wallet (see page 46), confirmed ease of crossover, but users will want to consider utilizing Ledger’s own wallet if they’re looking for a seamless experience. Overall, the Nano S is easy to use and appears secure (please note that I am a humble editor, not a cybersecurity expert, and that users are responsible for their own financial well-being). At $69 retail, you get Apple-inspired packaging, a lanyard keychain, a USB cable and two small cards of introductory language. The plastic drive, encased in stainless steel as it is, hardly seems crunch- or fire-proof, but proper storage of the recovery passphrase should keep bitcoins accessible in case of destruction. To avoid losing their investment in the device itself, however, users will want to keep the Nano S somewhere safe.
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KeepKey KeepKey markets itself as “the simple Bitcoin hardware wallet,” and upon unpacking the device, it’s apparent that is more than just jargon. The wallet is a sleek, sharply angled black rectangle, lacking any unnecessary bells and/or whistles. Unpacking the black paper box that holds the KeepKey (another black box itself), users will find a woven nylon micro-USB cord, a card for recording the forthcoming recovery passphrase and a warranty/ compliance sheet. The necessary instructions for setting up the KeepKey can be found on its box. I downloaded the requisite Google Chrome plugin, called “KeepKey Client,” and plugged the wallet into my computer. Bright, clear and colorful text appeared on the wallet’s surprisingly large screen to let me know setup was going well. However, no navigation actually
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takes place through the KeepKey or its inviting, 79.5 millimeter screen. While there is a circular navigation button on the KeepKey’s top-right side, users will need to interact exclusively with their computers in order to access the device, transfer cryptocurrency onto or off of it, and to change preferences. In this way, the KeepKey acts more like an external hard drive than an iPod. During setup, however, a user will interact with the device itself. I was prompted to choose a PIN code for the KeepKey, and a digital PIN pad appeared with scrambled numbers (a three-by-three box but without the order of numbers you might be accustomed to on your local ATM or push-button telephone). After choosing the PIN, the numbers scramble to random points on the box again, forcing one to memorize the actual numerals, not just their locations. The KeepKey then provided a 12-word recovery passphrase, necessary for protecting a user’s private keys.
To transfer bitcoin onto the KeepKey, it provided me with a handy QR code on the device itself and the Chrome app simultaneously. This made for a quick and simple transfer from a BitPay desktop wallet. KeepKey can also be used to secure dash and litecoin transfers and has its own Ethereum beta. Beyond KeepKey Client, the device is compatible with the cryptocurrency exchange ShapeShift (which recently announced its acquisition of the wallet provider) and purports compatibility with the Electrum, MultiBit and Mycelium wallets. At 38 millimeters high, 93.5 millimeters wide and 12.2 millimeters thick, the KeepKey is not well-suited for carrying around every day. It is heavy and it’s unlikely that a user won’t notice if it falls out of their pocket. But I’ll be keeping my KeepKey, which retails for about $100 when in stock, somewhere safe at home.
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TREZOR The TREZOR is shaped something like a car key, save the metal rod at the end. Instead, this is where a USB port connects the device to a user’s computer, and from there, its most distinguishing feature is found. The TREZOR differentiates itself most notably from other hardware wallets through the TREZOR Wallet, its web interface. While users can download a Chrome extension to allow the device to communicate with their computers, they also have the option to run TREZOR Bridge, a standalone daemon running as a background process. The Bridge allows for seamless access and navigation of the TREZOR, appearing much more like an independent website than a cumbersome computer add-on. Upon setup, users create a PIN, choosing anything between four and nine digits through a scrambled number pad, and then they are
provided with a 24-word recovery passphrase, to be written down on two cards provided along with the device. The TREZOR also comes with four stickers, a brief user’s manual, a lanyard and a USB cord. All of this is packaged in a double-safety-sealed and glued box, requiring a sharp tool for opening. The TREZOR also comes with a one-year warranty for business use and a two-year warranty for consumers. Commencing startup, I was asked to install firmware and was promised that I would be warned if this did not come from SatoshiLabs, the software/hardware security company that specializes in Bitcoin applications. Once the TREZOR was set up, it was simply a matter of navigating a dropdown menu on its website to choose between BTC, BCH, DASH, LTC, ZCASH, ETH and ETC. TREZOR has a partnership with MyEtherWallet, and in order to transfer ether and ERC20 tokens onto the device, users must go through that interface.
The device has two small buttons used for navigation and a surprisingly detailed display screen, able to prompt the user with text as well as simple graphics. The TREZOR’s screen packs an impressive punch, allowing users to upload a blackand-white background image of their choosing, making the device more personal and interactive than most others on the market. At 12 grams, the TREZOR is very light, almost concerningly so, and users will want to make sure that they tether it to something heavier or risk it slipping away. Despite its stature, the manufacturer claims it to be water-resistant and “extremely durable,” making its light weight more of a carrying concern (and for some, an advantage) than a longevity one. Retailing at $106.50, the TREZOR is on the higher end, but it may be worth the cost for those interested in its distinguished features.
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Capture the Value of Your Next Big Idea Introducing a new way to monetize, manage and share your intellectual property, backed by blockchain technology.
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SPONSORED PROFILE
Po.et Aims to Transform Digital Content Management In a world where copying digital content is a simple matter of a few keystrokes, confirming ownership and original authorship is more than difficult. Po.et, a media startup launched in 2016, is using the blockchain to meet this challenge.
The Po.et platform allows content creators, publishers and consumers to share creative works efficiently, without worrying about plagiarism, misattribution and other widespread challenges associated with traditional digital content.
Building a System Po.et’s solution for managing content ownership and attribution is elegantly simple. Po.et provides a universal ledger, built using the Bitcoin blockchain, on which creative works can be registered. Registrations are timestamped and available for anyone to view. Because they are recorded on the blockchain, they can’t be reversed or erased. Po.et is a tool that makes it much easier to tell whether or not content is authorized for publication, giving creators and publishers help in the fight against the use of unauthorized creative assets. For their part, content consumers can use Po.et and the blockchain to trace the origins of digital content with certainty. Those who have produced or published digital content — many of us in the age of online photo portfolios, blogs and streaming music services — will know how transformative Po.et’s approach to content management promises to be. Traditionally, when an author writes a blog post, or a company releases digital content, the original
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content creators and owners have to rely on the goodwill of others to ensure proper attribution and reuse of the content. There are no strong barriers to prevent unauthorized copying or republication, and tracking infringement is difficult. With Po.et, these challenges become a thing of the past. The Po.et distributed ledger provides an open, immutable repository for registering metadata to confirm content authorship and ownership. Content attribution and ownership can be determined automatically using the blockchain, thereby minimizing the risks of misattribution or unauthorized republication.
At the same time, Po.et provides a solution for automating payments based on content production, publication and distribution. Rather than submitting payments and invoices manually, content producers and publishers can use the blockchain to detect automatically when content has been created or published, then process payments accordingly. Po.et will also serve as a dynamic content marketplace, one that connects freelance creators with publishers, who can discover and license their work. This opens up a huge opportunity for those looking to earn income from their creative assets and the companies that can use them.
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Building a Team Po.et was conceived in the fall of 2016 by a group of media entrepreneurs and blockchain disruptors. Po.et was incubated by BTC Labs, BTC Inc.'s venture studio (BTC Inc. owns yBitcoin). Seeking a more streamlined approach to publishing content and handling invoicing, BTC Inc.'s editorial staff turned to the blockchain to expedite the process. The idea that led to Po.et was born. “BTC Inc.'s media business had a problem,” said Max Bronstein, Po.et’s media and strategy lead. “Specifically, the editorial staff had a hard time sourcing and publishing content at a consistent pace. Since the success of their business was contingent on ad revenue, it was imperative that they publish captivating content that kept readers returning to their publications.” The Po.et foundation was established as a Singapore-based non-profit in early 2017 to support the development of the Po.et platform and fund the ongoing project. Po.et also joined BTC Labs, an incubator for blockchain-based media technologies. The Po.et Authenticator App, the tool that Po.et provides for authenticating content, launched in beta in March. “The Po.et Foundation is the overseeing body that will do everything in its power to further develop
the Po.et protocol into a universal digital asset registry used by content creators, publishers and brands all around the world,” Bronstein said. “This will include sourcing and investing in entrepreneurs building exciting applications on top of the protocol and fostering lively Po.et communities around the world.” In July 2017, Po.et raised $1 million from angel investors and partners. This funding was followed in August by an additional $10 million, which Po.et raised through Bitcoin and Ethereum purchases via its first token sale. The sale featured the Po.et platform's native token, POE, which has appreciated substantially since then and is now trading on several popular exchanges.
Building a User Base Po.et’s current operations are driven in large part by its partner program, which is designed to familiarize the blockchain community with Po.et while helping to provide crucial feedback to Po.et developers about the platform. Bronstein said that the platform currently processes about 40 articles per day. The partner program launched in summer 2017 and currently includes Bitcoin Magazine, Distributed, Let’s Talk Bitcoin, Crypto Insider, CoinSpeaker and The Merkle. While most of Po.et’s current content creators, publishers and partners operate in the Bitcoin or
blockchain markets, the company’s vision and ambitions extend further. Po.et is actively recruiting partners in other segments of the media industry, Bronstein said, and is already working with Blink, a content studio whose clients include nonblockchain companies like Google and The New York Times. To increase the Po.et platform’s reach, developers are also creating an application programming interface (API) to support integration with mainstream content management system (CMS) platforms, such as WordPress, in order to enable easy access to the Po.et platform for anyone using popular CMS systems. Po.et uses the Bitcoin blockchain as the backbone of its content management network. Although the Po.et Foundation is based in Singapore, Po.et operates globally. “Our partner base is pretty distributed and we wouldn’t have it any other way,” Bronstein said. The full launch of the Po.et Authenticator App is scheduled for November 2017. Po.et developers also plan to implement a number of additional features, such as version control and support for images and video on the Po.et platform, which is currently compatible only with text. As the world’s reliance on digital content continues to grow, the rise of Po.et is poised to become integral to the future of media.
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The Rise, Fall and Rise Again of Charlie Shrem By Jill Richmond
How an early Bitcoin advocate rode the ups and downs of digital currency. And came back to do it again. It wasn’t so long ago that Bitcoin was truly obscure, relegated to hardcore crypto-geeks existing on the fringes of the internet, non-state anarchists and hard-line libertarians. Out of those depths rose a quiet Yeshiva student from Brooklyn who would embrace a unique opportunity, accessing his disdain of middlemen, love of computers and an esoteric interest in Austrian economic theory to create one of the first successful retail Bitcoin enterprises. By the time he was 21 years old, Charlie Shrem had become one of the first Bitcoin titans.
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Shrem’s startup, BitInstant, allowed ordinary people to easily purchase bitcoins from retailers like 7-Eleven or Walmart. Within months of starting the company, Shrem was one of the most high-profile Bitcoin evangelists, traveling and speaking globally about the cryptocurrency and gaining a reputation as a Bitcoin superstar. His face graced the likes of Bloomberg and Forbes. Then, in 2014, when returning from speaking engagements in Amsterdam, he was arrested at John F. Kennedy International Airport on charges that he plotted to sell more than $1 million in bitcoin to users of the Silk Road. That moment changed the trajectory of his life. It resulted in time at a high-security federal prison camp in Pennsylvania and, now, a second chance and a commitment to his core pioneering efforts by joining Ethereum co-founder and friend Anthony Di Iorio in making digital currencies more accessible to the masses at Jaxx.
Humble Beginnings Shrem entered his college years with a newfound precociousness and an edgy libertarian streak. He was also a gifted, self-taught computer programmer — one who could engineer code as his whims and vicissitudes dictated. Unlike many bright kids in their 20s who head to Silicon Valley, he stayed in New York and paid his own way through Brooklyn College. “I didn’t know what a VC was, I didn’t even know what it stood for,” Shrem said. “If you had asked me where San Jose was, I would have told you it was somewhere in Mexico.” Growing up in an ultra-Orthodox Jewish community in Brooklyn, Shrem was an outlier at Yeshiva, an institution for Torah study. He was a difficult student, one who had undiagnosed attention-deficit issues. “The religion wants you to question for the sake of a better learning experience, but not for the sake of questioning,” he explained. As Shrem entered high school, he focused more on the audiovisual club and less on Talmudic study,
building a side hustle that charged neighbors $50 an hour to fix their electronic equipment. In his senior year of high school, his older cousin enlisted him to apply this electronic savviness to address an operational dilemma at his company. Shrem would help him get rid of the wholesale electronic inventory that the company couldn’t sell at bottom-bargain prices. Shrem built a website that offered singleitem daily deals to online shoppers, a predecessor for the Groupon bonanza. Shrem’s first startup, Daily Checkout, was born.
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The company was soon processing millions of dollars’ worth of transactions a month, struggling to keep pace with the skyrocketing demand for Bitcoin services.
A Perfect Storm Looking back, it was the perfect combination of wherewithal, timing, foresight, a disdain of intermediaries and shrewd economic observations that made Shrem a central character in Bitcoin’s foundation. He can trace his ascension from gifted entrepreneur to critical figure in the early history of cryptocurrency to three pivotal moments. First came a newfound appreciation for the Austrian school of economics. While at Brooklyn College, Shrem became interested in the philosophy and challenged a professor with Keynesian leanings to embrace the ideology (he would later return to debate with the professor about the value of Bitcoin). While in school, Shrem explored agents, utility and value in a new way. He noted that a pure sense of market efficiency and the law of diminishing marginal utility became a major influencer in his economic stance. Second, while working fulltime building Daily Checkout and traveling, Shrem developed a disdain for unnecessary middlemen. He was raising money for two Israeli nonprofits focused on supporting victims of war and terror attacks. Along with classmates, he raised $70,000 to provide a prosthetic leg via PayPal, but found that the funds were frozen by the agency for 180 days in order to verify the status of the nonprofits. “I put up the money on my own and waited a half a year for the money to be released,” Shrem said.
“This was on a small scale. Imagine what happens if your government does this.” And third, perhaps most critical, Shrem finally came across Bitcoin while in an Internet Relay Chatroom. At that point, Bitcoin was still just a white paper penned by a mysterious figure called Satoshi Nakamoto. Shrem downloaded the Bitcoin software and a Norwegian friend sent him a few thousand BTC. It was his first step down the rabbit hole.
Gaining Momentum On June 13, 2011, a digital entrepreneur named Gareth Nelson posted an idea to the digital message board BitcoinTalk. At that time, there was no easy retail solution for utilizing bitcoin. On major exchanges like Mt. Gox, it could take as long as six days to buy and sell the digital currency. Nelson saw a way to speed this process up by fronting the balance and collecting a small fee for the trouble, enabling customers to receive bitcoins on the same day they made a purchase. There would be no risk, he explained, because Bitcoin transactions are irreversible. All he needed was some startup capital. “PM some more info,” Shrem wrote back. “I could work with you.” Shrem decided to go all-in, providing $1,000 from his savings and $10,000 he borrowed from his mother. He and Nelson began BitInstant, a platform that allowed people to buy up to 400 bitcoins at a time. It was
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modeled after DailyCheckout, with no inventory and no risk. With bitcoin prices stable, the company could float $10,000 at any given time. Despite a successful launch, BitInstant quickly ran out of startup capital and needed to scale. Shrem met with potential investors to remedy that, but encountered some early skepticism about Bitcoin. “I met one of the first investors in Snapchat and he laughed me out of the building,” he said. “Everyone laughed or thought what I was doing was not legit.” While speaking about BitInstant on an online talk show, Shrem attracted the attention of Roger Ver, a staunch libertarian who would become known as “Bitcoin Jesus” for the number of startups he has seeded. After a pair of detailed email exchanges and a 20-minute Skype call, Ver wired Shrem $125,000 in exchange for 15 percent of BitInstant.
The Rise of BitInstant With Ver joining the team full-time and the addition of another early Bitcoin investor in Erik Voorhees, BitInstant grew to enable bitcoin purchases at nearly one million retail locations. The company was soon processing millions of dollars’ worth
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of transactions a month, struggling to keep pace with the skyrocketing demand for Bitcoin services. The sheer volume of traffic repeatedly brought the website down. While the stress involved with BitInstant’s meteoric rise was undoubtedly a strain on Shrem, he appeared to be a pivotal leader in the burgeoning cryptocurrency space, a regular on the virtual currency speaking circuit, traveling to London and South America. He moved from his parents’ basement to an apartment in Midtown Manhattan and opened a showy bar on the ground floor called EVR. Bloomberg Businessweek had him on its list of “Bitcoin Millionaires.” And then on March 18, 2013, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network issued specific guidance addressing decentralized digital currencies like bitcoin, requiring registration in all 50 states. BitInstant was now operating illegally without a money transmitter license and it was shut down overnight. The necessary money transmitter licence would have cost BitInstant nearly $20 million to $30 million, according to Shrem. He worked to try to raise the necessary capital and kept his staff on the payroll as long as
he could to allow them to find other jobs, but it was a losing battle. “We were going to shut down and then start up again,” he said. But that dream would never materialize. On January 26, 2014, upon returning from a speaking engagement at a conference in Amsterdam, Shrem was arrested at JFK International Airport, accused of conspiring to sell over $1 million worth of bitcoin to users of Silk Road, a dark web marketplace selling illegal wares. “From that moment on, my entire life changed,” Shrem reflected. “Likely for the better.”
All-Time Lows According to Shrem, the case against him came down to fewer than a dozen emails he exchanged with a customer called “BTCKing” who was buying bitcoins on BitInstant with large amounts of cash. BTCKing was a reseller, someone who bought bitcoins and resold them at a markup. His customers, however, were users of Silk Road. According to the complaint, on January 17, 2012, BTCKing tried to deposit $4,000 in cash on BitInstant in a single day. By then, awareness of forthcoming money transmitter
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laws was growing within the Bitcoin community and a new attitude of caution was taking hold. BitInstant was registered as a money transmitter for certain states with the federal government, which meant that anything over $3,000 had to be reported. In addition, BitInstant officially refused deposits over $1,000, although it occasionally broke this rule. Shrem raised alarms, copying the CEO of TrustCash, BitInstant’s cash processing company, on an email banning BTCKing from using the service permanently. “We have all your deposits on record, your picture from bank security cameras,” Shrem wrote. “Any attempt at a new transfer will result in criminal prosecution.” But BTCKing was doing thousands of dollars in transactions a week, and for a small exchange like BitInstant, it was difficult to cede that business. Shrem decided to message him privately with a more subdued tone. “No problem, in the future please have your customers respect our $1,000 limit,” he wrote, according to court documents. “Your email address is banned, but you can use a different one.” According to an IRS investigation, the man behind BTCKing was Robert Faiella, a 52-year-old living in Florida who had never registered with any financial authorities. Soon, Faiella was doing $20,000, $30,000, $40,000 in a single week. “I always take care of you, we even know which orders are yours,” Shrem told him. As Faiella brought in more and more money, Shrem started offering him discounts. By October 2012, Faiella had bought more than $1 million worth of bitcoin through BitInstant. It turned out to be a revenue flow that was too good to be true. The cash processing and Silk Road accusations led to an indictment for Shrem on April 10, 2014, on charges of “operating an unlicensed money transmitting business, money laundering conspiracy and willfully failing to file suspicious activity reports with banking authorities.”
On September 4, 2014, Shrem pleaded guilty to a reduced charge of aiding and abetting the operation of an unlicensed money transmission business, and on December 19, 2014, he was convicted of the charge. He was ordered to forfeit $950,000 and was sentenced to two years in prison. On March 30, 2015, he surrendered himself to authorities and subsequently entered the Lewisburg Federal Prison Camp in Pennsylvania.
A New Direction He was released from prison in mid-2016. Prison, however, did not dampen his fascination with how people buy things and the decentralization of finance. “A lot of bartering took place in prison,” he said. Shrem is still adamant in his belief that economic freedom means ultimately moving money with the absence of intermediaries. Many in the tech community embraced Shrem when he was released from prison, and he is using the opportunity to continue the work he started in college. “[I returned] with a much bigger appreciation for freedom and it allowed me to consult for many projects and come back onto the circuit during a really interesting time,” he said. In May 2017, Shrem announced that he would be joining Jaxx, a
cryptocurrency wallet that does not require any identity verification or onboarding, owned by the blockchain company Decentral. He is returning to a community that he helped to found, one that has grown exponentially since he was last involved. “I’ve been given a second chance to do it right the second time,” Shrem said. “Going into this altcoin boom, I see the demand.” As the company’s full-time director of business and community development, Shrem will manage partnerships, advance the integration roadmap and join CEO and Founder Anthony Di Iorio (a long-time friend) in promoting the Jaxx brand and vision to the community. In short, he is returning to his evangelist roots. “I have always been attracted to Jaxx and Decentral’s mission to build the universal blockchain interface for the masses,” Shrem explained. “Jaxx is helping to advance the entire ecosystem by providing users with a simple way to control their digital assets. I’m convinced this multi-platform, multi-asset command center will do for blockchain technology what the browser once did for the internet.” With the benefit of a new perspective, Shrem is ready to take the next step in the new Bitcoin world that he helped pioneer.
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From Bitcoin to Crypto Assets By Jeremy Gardner
In 2009, an anonymous programmer or group of programmers using the pseudonym Satoshi Nakamoto released an open-source software that introduced an entirely new paradigm for asset creation and distribution. Bitcoin was born, and after nearly a decade, that software, the framework for the world’s first cryptocurrency, has been tweaked and copied to form hundreds of new cryptocurrencies — decentralized, digital tokens that are not controlled by any single entity. For those interested in creating their own cryptocurrencies, copying the codebase is the easy part. Gaining and maintaining value of the currency, and therefore a market share, is the real challenge.
Building on Bitcoin According to CoinMarketCap.com, as of press time, over 370 cryptocurrencies have eclipsed the $1 million market capitalization point and nearly 200 have a market capitalization of $10 million, while only a handful have a cap over $1 billion. Despite the broad growth, Bitcoin still dominates the crypto-asset market, hovering around 50 percent of all market capitalization. The unique proposition of a cryptocurrency is fairly straightforward: to provide a financial incentive and reward for verifying transactions in a blockchain network (see page 18). In the early years of this industry, when someone wanted
to change or improve part of the software, they would have to make a new cryptocurrency to embody the change. However, if each innovation results in another cryptocurrency, and that innovation is then improved upon by the next cryptocurrency, then the former will likely lose its value with the latter taking its place in the market. This is why many new cryptocurrencies fail; innovation tends to outpace the adoption of the technology being innovated upon. A handful of computer scientists saw promise beyond these new alternative implementations of digital money and instead envisioned an ability to issue tokenized real-world assets on top of a blockchain. These additional tokenized assets would allow cryptocurrencies to be validated and backed by something beyond the intrinsic value of demand for the currency. New blockchain platforms such as Nxt, BitShares and the Bitcoin blockchain metalayer once known as Mastercoin, now known as Omni, were built. These allowed for the creation of tokens such as Tether, a U.S. dollar–paired blockchain asset built upon Mastercoin.
AppTokens, DApps and New Value Creation What followed these token-enabling protocols was an even more ambitious attempt to create a “Bitcoin 2.0” or “smart contract” blockchains. From this, blockchains such as
Ethereum, Lisk and Qtum have been born. What these smart contract blockchains do differently than cryptocurrency and token-focused blockchains is enable decentralized applications (abbreviated as “DApps”) in addition to real-world tokenized assets. Examples of DApps include Augur, a decentralized prediction market platform, and Golem, a distributed computing system, both of which exist on the Ethereum blockchain. Although decentralized applications are built upon other blockchains, they often require their own assets in order to create a provably honest consensus or incentive mechanism that replaces a central authority. These assets are known as application tokens, or “apptokens” for short. These tokens are usually distributed through token sales or ICOs (initial coin offerings), in which anybody owning cryptocurrency can participate. Such offerings often raise well over a million dollars in a matter of a few days, or sometimes minutes, and often raise exponentially more. Each of these developments is part of a seismic shift in how value is created, represented and transmitted. The full ramifications of this shift will not be felt immediately. In fact, it may take years before they are fully felt. But when they are, and they surely will be, the perception of what value is will be forever changed.
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Top 10 Cryptocurrencies By Kyle Torpey
The world of cryptocurrency is bigger and more diverse than many realize. Ever since the introduction of Bitcoin, other digital innovators have taken the guiding principles of decentralized money and developed their own versions. Each of these currencies offers their own pros and cons, potentials and failings. As a guide to this new world, here are the top 10 cryptocurrencies, for now at least.
1. Bitcoin
2. Ethereum
Bitcoin is undoubtedly the gold standard of cryptocurrencies. It was, after all, the first one ever created and it still has the largest total valuation and market capitalization. The undergirding Bitcoin blockchain is also the only one to gather a substantial number of users who aren’t simply speculating on the price of its associated token. Due to Bitcoin’s success, it has become somewhat difficult to make significant changes to the base protocol layer. This is viewed as both a positive and a negative. While having the protocol rules almost set in stone is helpful for making it a digital gold standard, it also makes it difficult to add new features to the protocol and could implement a ceiling on Bitcoin’s future.
Ethereum is a blockchain-based platform for the development of advanced smart contracts. “Smart contracts” may have been stretched into a buzz term in the blockchain ecosystem over the past couple of years, but Ethereum is definitely the most advanced platform available for the future of these sorts of tools. In many ways, Ethereum is the polar opposite of Bitcoin. Instead of opting for a slow, stable development process, Ethereum leans toward a “move fast and break things” approach. The clearest example of this ideology is the hard fork that reversed the collapse of The DAO, a smart contract built on top of Ethereum.
3. Litecoin
4. Bitcoin Cash
Although it wasn’t the first alternative to Bitcoin ever created, Litecoin was the first altcoin (“alternative coin,” that is) to gain any significant traction. Created by Charlie Lee, the director of engineering for digital asset exchange Coinbase, Litecoin has been promoted as the “silver to Bitcoin’s gold.” The idea is that the lower-security, lowervalue cryptocurrency can be used for smaller-value payments. It’s somewhat unclear what the value of Litecoin may become if Bitcoin is able to develop some secondary layers for lower-value transactions.
When the Bitcoin blockchain forked last summer by those concerned about its ability to scale, a new digital currency was created. Bitcoin Cash is in some ways a clone of Bitcoin, but with the built-in capacity to handle additional block sizes. Those who held bitcoin before the split were gifted an identical amount of the new cryptocurrency. After a slow start when first introduced, Bitcoin Cash gained momentum in its early going. But questions still linger around its ability to maintain this steam in parallel with the original cryptocurrency.
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5. Monero
6. Zcash
7. Dash
Monero is a privacy-focused cryptocurrency that uses ring signatures (a type of digital group signature that can be performed by any member in a user group of possible signers that each have keys) to obscure the identities of the sender and recipient in a transaction. The altcoin also masks the amounts involved in each transaction. The main advantage of Monero when compared to other privacy-conscious altcoins is that it uses old, wellestablished cryptographic concepts. There are concerns, however, around Monero’s ability to scale to accommodate many more users.
Zcash is an ambitious, privacyfocused altcoin that uses advanced cryptography to provide true anonymity. Due to this sophisticated cryptography, it can take several minutes to sign a private transaction. The Bitcoin blockchain records all of the participants in its transactions but Zcash’s blockchain records only the fact that a transaction took place, without additional detail. Another significant differentiator for Zcash is the fact that 10 percent of its mined coins are reserved for its primary stakeholders. Much like Monero, Zcash’s privacy features also make scalability a difficult proposal.
Like Monero and Zcash, Dash originally launched as a privacyconscious altcoin. Since then, it has focused on adding many different features, such as a governance system, to attract new users. At this point, it is unclear if Dash’s features actually work. Many of the privacy-focused features have been criticized by Blockstream CTO Greg Maxwell and Monero developer Riccardo Spagni, who make claims that the features are non-functioning. For this reason, Dash is generally viewed as existing in a class lower than its privacy-focused peers.
8. Ethereum Classic
9. Dogecoin
10. Peercoin
Ethereum Classic emerged following the split in the Ethereum community after the collapse of The DAO. The Ethereum Classic community takes the “code is law” mantra that was originally popular among Ethereum enthusiasts. Ethereum Classic also has a hard cap on the total supply of tokens that it will release.
Dogecoin started out as a joke, but at one time it was processing more transactions per day than Bitcoin. This altcoin carved out a niche of its own as the currency-of-choice for online tipping and charitable donations. The community around the currency is much more important than any of its technical details. People use Dogecoin because it’s fun.
Although not very popular today, Peercoin paved the way as the first cryptocurrency based on proof-ofstake, an algorithm that chooses the creator of each block deterministically, based on the wealth, or stake, of each account. This move has been copied by many other altcoins over the years, with Ethereum trying to figure out how to implement proof-of-stake for its blockchain.
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SPONSORED PROFILE
Taking the Qtum Leap
But there are some interim steps and tools needed for the journey. If you follow blockchain and cryptocurrency news, you will have read about the issues with blockchain scalability, and the need for working layers on the blockchain that allow developers to create functioning real-world solutions. To enter the future, the so-called public blockchain space must have the capacity and functionality that will support the enormous number of new blockchain transactions that the future will bring. One global player that’s helping to meet this need and spark blockchain technology’s jump into the future is Qtum (pronounced “Quantum”).
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At its core level, Qtum is fostering a unique intersection between the advantages of Bitcoin Core, an account abstraction layer accommodating multiple virtual machines like the Ethereum Virtual Machine, and a Proof-of-Stake (PoS) consensus protocol. The Qtum blockchain works according to an “Unspent Transaction Output” (UTXO) model, ensuring consistency in transactions and the reorganizational security of tokens. A smart contract virtual machine is layered on top of the Qtum blockchain, providing developers with a best-of-bothworlds architecture for the construction of decentralized mobile applications and other blockchain-based ventures.
Given the exponential growth taking place in the blockchain space since it was first developed as the platform that enabled Bitcoin, the world of distributed applications is now poised for its next major leap forward. That leap will take blockchain technology into the real-world realm of business applications that are actually in use every day.
As a smart contract solution, Qtum incorporates PoS validation for transactions — an approach that is less computationally expensive than the prevailing Proof-of-Work validation model employed by Ethereum. All of this supports Qtum’s efforts to fuel a world-class platform on which decentralized applications for the business world — such as telecommunications, healthcare, social networking and the Internet of Things (IoT) — can be built. According to Qtum co-founder Patrick Dai, the project’s blockchain model was originally inspired by the rivalry between proponent developers of the world’s most active blockchain communities.
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“We wanted to illustrate efficient scalability and compatibility between blockchain technologies,” said Dai, who is spearheading the project’s push along with co-founder Jordan Earls. Earls is tasked with leading Qtum’s team of almost two dozen developers. “Ultimately, we want to make smart contracts easier to write, more efficient and safer with our x86 virtual machine,” Dai continued. “I believe this will be paramount for widespread adoption, especially for financial applications.” Dai said that he originally discovered blockchain technology while studying for his master’s and Ph.D. degrees at the Chinese Academy of Sciences. “I was working on some projects while in school and also at Alibaba as a product manager,” he said. “Upon learning about it, I knew I had to drop out and leave Alibaba because there was so much long-term potential in this industry.”
Qtum’s Acceleration Forward The Qtum Foundation, headquartered in Singapore, is the decision-making arm that fosters project development. The project raised $1 million through a network of angel investors. To bolster Qtum’s financial positioning, the foundation raised $15.6 million in its token campaign. The foundation also announced the launch of Sparknet, the first public test of its innovative blockchain platform. A second testnet was then launched in the summer of 2017. Qtum has made several other leaps forward as well. It joined the
Chamber of Digital Commerce, the world’s leading trade association representing the digital asset and blockchain industry, as an executive committee member, among companies like IBM, Microsoft and BNY Mellon. Earls was appointed co-chair of the chamber’s Smart Contract Alliance, an initiative dedicated to promoting the acceptance and use of smart contract technologies. Meanwhile, Dai made the Chinese edition of Forbes’ “30 Under 30” list, Qtum also became a founding member of the Trusted IoT Alliance and the project saw its token reach the top of the ranks on CoinMarketCap, the leading cryptocurrency evaluator. The project also joined ACCESS, the Singapore Cryptocurrency and Blockchain Industry Association. “The Qtum team continues to execute and build what can be one of the most exciting and innovative railroads in the blockchain ecosystem,” said Matthew Roszak, a Qtum angel backer and the co-founder of distributed ledger leader Bloq.
Igniting the Future According to Dai, several decentralized applications (DApps) are building on the Qtum platform. Among these applications are a peer-to-peer mobile streaming platform and a prediction market. He noted that, while these applications are geared to the Chinese market, the Qtum blockchain will appeal to a global audience, accessible to all developers.
self-aware component called the decentralized governance protocol (DGP). This is considered to be the first decentralized governance protocol and PoS consensus mechanism for smart contracts along with the first smart contract platform for mobile devices. “Ignition is just the start for Qtum,” Dai said. “We are turning on the engines to accelerate the industry into the next era.” And Qtum is poised to continue this momentum into the future, with specific plans for next steps. “The big trends will be writing smart contracts in other languages besides Solidity and more real-world implementations of smart contracts,” Dai said. “This is why we are focusing on our x86 VM and making sure our platform is practical to use.” He added that the project’s vision over the next 6 to 12 months is to have lightning networks running on Qtum, allowing for cross-chain atomic swaps, and its x86 virtual machine. “The blockchain technology industry is moving and innovating incredibly fast,” Dai concluded. “I believe that over the next 12 to 18 months enterprises will realize the power of our technology and the revolution we have started by combining these existing technologies with their own.”
This year, Qtum launched a state-of-the-art platform that allows smart contracts to be used on mobile phones. Known as “Qtum Ignition,” it features a self-regulating, self-modifying and
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Welcome to the Age of ICOs By Elliot Feeny and Brandon Green
A new model of funding for startups that makes the most of the new world of decentralization has emerged, a model called initial coin offerings (ICOs). ICOs function as crowdfunding presales that greatly reduce the barriers to entry for both investors and businesses alike (similar to Kickstarter). Instead of stocks, though, these innovations offer cryptocurrency-based tokens to the public, specific to their own initiative. These tokens can serve a myriad of purposes that vary depending on the platform they are created for. In exchange for tokens, businesses generally receive either bitcoin or ether and use the raised funds to pay out their team and cover future expenses. This new model of funding has been a smashing success thus far, with companies like Aragon, a platform for creating autonomous businesses, raising $25 million in less than 15 minutes, and Brave’s Basic Attention Token meeting its crowdfunding goal of $35 million in 24 seconds. Despite this initial success, it is critical for potential investors to do their due diligence and weigh the potential risks associated with such a new model with the apparent rewards.
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Questions About Regulation “There is not yet a right answer to the question ‘Are ICOs legal?’” said Peter Van Valkenburgh of Coin Center, a nonprofit organization focused on policy issues facing cryptocurrencies. “Anyone who tells you otherwise, unless they are a judge, is cutting corners, making assumptions and they are probably a bad lawyer.” ICOs are in a legal gray area. Most tokens are not quite securities, not quite currencies, and many claim not to be of an investment nature at all. Tokens and cryptocurrencies don’t fit any traditional asset class. As you might expect, this fosters a great deal of uncertainty. “ICO is still an ill-defined category,” said Van Valkenburgh. “It’s a trendy new term used to describe a menagerie of very new things (tokens, cryptocurrencies, etc.) and activities (pre-sales, pre-mines, etc.).” In the U.S., the process for determining whether a transaction is considered a security is called the “Howey test.” The U.S. Securities and Exchange Commission (SEC) uses this test to determine what is and is not a security and it’s not entirely clear how that would be applied to ICOs. The SEC did find that the native token crowdsale of The DAO (a defunct, decentralized investment fund) met its definition of a securities offering, suggesting that the SEC might make similar determinations for other ICOs. But it’s not entirely clear where regulators will end up. The lack of regulatory clarity surrounding ICOs, particularly in the U.S., is unsettling to many and has forced innovators in this space, like Blockchain Capital, to blacklist unaccredited U.S. investors and launch their crowdfunds from places like Switzerland and Singapore, where governments have already ruled that digital currencies are not securities. The democratic access to investment that ICOs foster is reflected in the variety of projects that people choose to fund and participate in. Here are some of the projects that have been supported in the past, as well as a few that are coming up in the near future:
Decentralized Blockchain Platforms ETHEREUM Perhaps the best-known ICO, although at the time it was considered just a crowdsale event, is Ethereum, which raised over $18 million in late 2014. The Ethereum blockchain is a distributed smartcontract platform fueled by ether, its native digital currency. Ethereum’s inventor and co-founder, Vitalik Buterin, explained the concept best. “Ethereum does not intend to be a Swiss Army knife protocol with hundreds of features to suit every need,” he said. “Instead, Ethereum aims to be a superior foundational protocol, and allow other decentralized applications to build on top of it instead of Bitcoin, giving them more tools to work with and allowing them to gain the full benefits of Ethereum’s scalability and efficiency.” Ethereum’s ICO was monumental for a couple of reasons. It was one of the first successful ICOs in the space and laid the groundwork for how many of them have worked since. It also created the Ethereum blockchain platform, upon which many of the following decentralized applications (DApps) and projects are being built.
GOLEM Golem aims to create a distributed, global supercomputer using blockchain technology. On the official Golem Project blog, CEO Julian Zawistowski described Golem as “Airbnb for computers.” What Golem offers to its users is the opportunity to rent “unused CPU/GPU cycles and get paid in cryptocurrency,” thereby creating “a decentralized network powering true cloud computing.” In November of 2016, Golem launched an ICO that it denoted as a “crowdfunding campaign” and raised 820,000 ether. At the time of the ICO, 820,000 ether was equivalent to about $8,600,000. At the time of this writing, that ether was worth nearly $165,000,000. In exchange for 1 ether, investors received 1,000 Golem Network Tokens (GNT). The token itself will be used as the medium of exchange for computing power on the network.
QTUM Qtum (pronounced "Quantum") is a Turing-complete blockchain stack with smart-contract capability. Its biggest innovation is the implementation of a proof-of-stake protocol, as opposed to the energyintensive, proof-of-work protocol employed by the Bitcoin and Ethereum blockchains. Qtum has released only a testnet thus far, but it concluded its crowdsale in March 2017. The crowdsale raised over $15 million in five days. Early-bird investors received 115 QTUM in exchange for 1 ether. That funding will be used to finish the development of the mainnet and other future upgrades.
Investment Platforms THE DAO The DAO was the most successful crowdsale of all time, although the author of the white paper and lead developer of the smart contracts, Christoph Jentzsch, doesn’t describe it as an ICO. “The DAO was not an ICO,” he said. “It was the creation of a decentralized autonomous organization, similar to a company. There was no seller; the contributors stayed in control of their funds. It was comparable to a large joined [bank] account.” In other words, The DAO basically sold ownership of itself to the masses and simply raised ether by doing so. That ether, in turn, would have been used to fund future projects that DAO token holders deemed investment-worthy. The vision behind The DAO project, though ultimately derailed by a smart-contract vulnerability, was to create an autonomous corporation. People who purchased DAO tokens would get to vote on how The DAO would allocate resources and what projects and contracts it would take on or fund. As Jentzsch put it, “People sent ether to the contract and received DAO tokens, which gave them voting power about what to do with the ether.” Ideally those token-holding investors would then have gotten a portion of the profits, a dividend, from The DAO’s successful ventures.
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DIGIX Digix DAO was Ethereum’s first major decentralized autonomous organization and first on-chain crowdsale. Digix uses two tokens to operate, DGX and DGD, but only DGD was offered in an ICO. A DGX token is an on-chain proof of ownership of 1 gram of 99.99 percent LBMA-standard gold that is secured by Digix. DGD entitles its owner to quarterly rewards from DGX transaction fees. The Etherscan of the DGD crowdsale indicates they raised 465,135 ether at a valuation of $5.5 million. At the time of this writing, that ether was valued at over $100 million.
Media Tokens KIK Kik recently entered the digital-asset arena with the announcement of their own token, Kin. This announcement may signal the transition of digitalasset tokens into mainstream commerce. Kik currently claims a base of over 300 million users, a figure that includes 40 percent of American teens. Even though Kik has such a large user base, it has been difficult to monetize their digital services and therefore innovate at a competitive level with social media
Crackdown in China In early September, Chinese regulators declared ICOs illegal, issuing a major blow to the country’s token sales as well as to worldwide investment and digital currencies. The move was likely in response to the plethora of failed ICOs that have been launched alongside the successful ones. Even though it is difficult to say how this regulation will affect the long-term outlook for coin offerings around the world, at the time of press, it appeared to be a significant obstacle to international investment but not one that would put a full stop to the burgeoning rise of ICOs.
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giants like Facebook and Twitter, who get much of their revenue through advertisements. “As a result, it’s very hard for all these digital services to monetize,” Ted Livingston, CEO of Kik, explained in a recent interview. “Those that do, these giants then turn to a copy-andcrush strategy where they take all the ideas from the players, copy it and use their much larger resources to crush the other competitors who do make it.” The Kin token itself will ideally be used in a multitude of ways by different companies, including Kik, all aiming to create a digital interactive environment based on the currency. According to the Kin white paper, there are already foreseeable uses of the token in the Kik app. These include establishing VIP chat groups that require an entrance fee (payable in Kin); allowing premium, usergenerated content to be accessed using Kin; and allowing users to highlight their messages in groups for a fee. Kik plans to sell 1 trillion Kin during its ICO event.
PO.ET Po.et, short for “Proof of Existence 2.0,” is a shared universal ledger and platform designed to record ownership and metadata for digital creative works. Po.et lets users generate an immutable ownership certificate for digital content, track and license content on the web and on the blockchain, discover new content and verify the authenticity and authorized use of all available content. Po.et is an evolution of proof of existence, the first use case of a blockchain that was nonfinancial in nature. According to Po.et’s business development lead, Konstantin Richter, “Po.et connects creative content to a global ownership database, putting creators in charge of their source data. Po.et can serve as a system of record, as a notary to attribute license payments and to facilitate multiple different payments across different license models, territories and content formats.” Po.et is a platform and a utility that will eventually enable developers
to utilize the Po.et catalog for new services, thus adding value to the Po.et token and the network itself. The crowdsale, held in August of 2017, met its fundraising goal of $10 million. The Po.et team released 50 percent of its 3,141,592,653 tokens to the public in their crowdsale, with the rest allocated to the Po.et Foundation, angel investors, partners and the founding team. Po.et is akin to Mediachain, a Spotify acquisition. Although there is a lot of corporate interest in blockchain applications, Po.et is predicated on the fact that opensource communities are the future of blockchain innovation.
BRAVE Brave is a new blockchain-based browser started by Brendan Eich, the inventor of Javascript and former CEO of Mozilla. According to its website, “Brave aims to transform the online ad ecosystem with micropayments and a new revenuesharing solution to give users and publishers a better deal, where fast, safe browsing is the path to a brighter future for the open web.” In the spring of 2017, Brave had a crowdsale for their native Basic Attention Token. This token will be used for micropayments between advertisers, publishers and users. The token gained a lot of support before its crowdsale, evidenced by it reaching the fundraising goal of $35 million in less than 30 seconds.
A Word of Caution The hype around ICOs is real and growing. While the next big thing could be around the corner, the possibility of failure for any endeavor in the digital-asset world is real. Because of this, it is important to treat these opportunities with cautious optimism. Study the different ICOs carefully before reaching a decision on whether or not to invest. Many times, knowing and understanding the team behind the project is more important than the idea that is being introduced.
This article was previously published on BitcoinMagazine.com.
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Visit verady.com for more information on our upcoming ICO
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Macro Trends Driving the Price of Bitcoin By Diana Ngo
Created in the wake of the 2008 global financial crisis, Bitcoin has always been tied to the world’s major economic developments. From commercial unrest to newly discovered digital freedoms, major changes around the world are often reflected starkly in the value of bitcoin. While global headlines influence the economy in many ways, the changing dynamics of the world’s economy have generally meant growth for the digital currency. Bitcoin gained 126.2 percent in 2016, beating out all other currencies (digital and otherwise) against the U.S. dollar. It passed the $1,000 mark in the first days of 2017 and hit the $1,500 mark by spring. By the summer, it had eclipsed $4,000. To get a full picture of how Bitcoin has influenced and been influenced by major headlines, it’s worth taking a look at the macro level.
an increased interest in bitcoin and other digital currencies. In January 2016, the biggest fall in the Chinese yuan in five months caused mayhem in global markets and sparked fears among foreign investors. The currency dropped by over 5.6 percent by the end of 2016, and in May 2017 it reached its lowest value against the dollar since 2008. This, in tandem with bitcoin’s rise in value, makes the digital currency an appealing alternative in China. Bitcoin also allows those in China, who face capital controls that limit the amount of cash they can move overseas, to invest in an alternative currency. All told, these factors are changing things in China. By the time of this writing, the country’s currency has grown to account for more than 90 percent of the world’s bitcoin trading activity.
1. Yuan Risks in China
2. Demonetization Drive in India
In China, drops in the yuan and expectations that this will continue have substantially added to the demand for asset diversification and
In a bid to curtail a thriving shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activities and terrorism, the
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government of India announced in November 2016 the demonetization of all 500 and 1,000 rupee notes. These bills amounted to 86 percent of the total cash in circulation. The immediacy of the announcement and the prolonged cash shortages in the weeks that followed created significant disruption throughout the country’s economy. It also made bitcoin an appealing alternative store of value. During the weeks that followed the announcement, signups and sales volumes for bitcoin increased on several India-based exchanges. Zebpay, for instance, added 50,000 new users in November 2016, higher than its typical monthly average of 20,000 new users. Coinsecure registered a 300 percent increase in signups during that same month. For Unocoin, trading volumes doubled to about 300 bitcoins a day. As a result of the increased demand, the premiums paid for rupee-denominated bitcoin widened. In mid-November, one bitcoin was worth about 55,700 rupees, or $865, on Unocoin.
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3. Instability in Venezuela Once Latin America’s top-performing economy, Venezuela has experienced the worst economic crisis in its history. With a volatile exchange rate and inflation set to rise 720 percent in 2017 and over 2,000 percent in 2018, according to the International Monetary Fund, people are struggling to meet their daily needs and quickly turning to Bitcoin as a way to buy essential goods and a safe alternative to protect their savings. Bitcoin mining has become an increasingly popular undertaking in Venezuela, where statesubsidized electricity is so cheap that it’s practically free. Though the practice isn’t illegal, the Venezuelan government began a crackdown on miners in 2016, depicting the activity as subversive and linked to money laundering and cybercrime. In February 2017, Venezuela’s largest bitcoin exchange, Surbitcoin, was forced to temporarily suspend operations when its bank account at Banesco was revoked. According to Rodrigo Souza, who runs the trading platform, the move came in anticipation of a nationwide crackdown of Bitcoin use in the country. Despite the restraint, Bitcoin has surged in popularity in Venezuela. While there are no official statistics on adoption and usage in the country, according to Surbitcoin, the number of Bitcoin users surged from 450 in August 2014 to 85,000 in November 2016. On LocalBitcoins, an over-the-counter bitcoin trading platform, bitcoin trading volume grew by over 2,000 percent, rising from about 35 bitcoins per week in January 2016 to as many as 736 per week in April 2017.
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Venezuela, where
country. In April 2017, Japan passed a new law recognizing Bitcoin as a legal method of payment following months of debate. The ruling brought bitcoin exchanges under antimoney laundering and “know-yourcustomer” rules, categorizing it as a kind of prepaid payment instrument. The new law requires digital currency exchanges in Japan to obtain a special license, which has requirements for finances and asset management structure per the country’s Finance Ministry. While the requirements can be onerous, they mark a newfound legitimacy as well.
state-subsidized
5. The First Bitcoin ETF
Bitcoin mining has become an increasingly popular undertaking in
electricity is so cheap that it’s practically free.
4. Favorable Jurisdiction in Japan In May 2017, news broke that more than 10 Japanese companies were to launch exchanges for bitcoin and other digital currencies amid growing demand and favorable new rulings. Bitcoin trading volume in yen soared during the week of the announcement. The following day, the yen was responsible for more than half of the world’s bitcoin trading volume. Bitcoin’s value rose 17 percent that week and reached an all-time high of $1,560. The increase followed normalizing, if relatively strict, oversight in the
Despite a world that is seemingly growing to embrace Bitcoin, macro trends don’t always play favorably for the digital currency. For instance, when the U.S. Securities and Exchange Commission (SEC) rejected the bitcoin-based exchange-traded fund (ETF) proposed by Cameron and Tyler Winklevoss in March 2017, bitcoin prices tanked 18 percent. The decision to turn down the ETF, which would have significantly improved the liquidity of bitcoin, caused the price to plummet to below $1,000. Though price had broken $1,300 in anticipation of approval, they fell steeply when that did not occur. Market optimism returned in April 2017 when a notice of petition to review the SEC decision was accepted. Bitcoin price rose 16 percent in the week that followed. Should the fund gain approval, it would attract a flood of investor cash that could hit $300 million, according to investment bank Needham & Co.
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Bitcoin in Botswana Alakanani Itireleng — the “Botswana Bitcoin Lady” — and her crusade to boost cryptocurrency and blockchain adoption in Africa.
By Michael Scott
As Bitcoin becomes a larger part of traditional business portfolios, its power to provide new economic access and improve the quality of life in developing countries should not be overlooked. Bitcoin’s digital and decentralized nature makes it a perfect tool to enable those who have no access to traditional banks or live in countries without stable currencies with an opportunity to build personal wealth. It’s an opportunity being seized by a Bitcoin evangelist named Alakanani Itireleng, known to many as the “Botswana Bitcoin Lady.”
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To the People Itireleng’s interest in Bitcoin began years ago, when it was still a fledgling economic gamechanger that was largely undiscovered. She was looking for ways to supplement her income online in order to pay for a heart and lung transplant needed by a son with hypertrophic cardiomyopathy. Though she was unable to raise the money in time to save her son, she saw Bitcoin as a way to improve things in her home country. “I studied up on it and took what I learned to the people,” she said. “This led me to later open the Satoshicentre in order to focus on blockchain and Bitcoin education in Botswana.” Through the Satoshicentre, Itireleng’s educational foundation, she organizes local Meetup groups and leads an eager cadre of young developers working on blockchain technology, in addition to providing coding lessons to kids. Though she is an advocate for technological advancement throughout Africa, her efforts are largely centered in Botswana, a landlocked country in the southern part of the continent possessing a desert and delta landscape replete with an abundant animal habitat. It is one of Africa’s most stable countries and home to the continent’s longest continuous multiparty democracy. Botswana is also the world’s largest producer of diamonds, a trade that has long bolstered the country’s economy but is largely controlled by the government. Although it boasts one of the fastest-growing economies in Africa, Botswana has had its share of socioeconomic problems and remains one of the most sparsely populated countries in the world. Economic reliance on natural resources and fundamental health problems like that experienced by Itireleng’s family persist. At one point, the country had the world’s highest rate of HIV/AIDS infections. The Satoshicentre has become the cornerstone of Itireleng’s vision and efforts for her native country. It provides a home base for startups pursuing advancements in blockchain technology, fintech and cryptocurrency. Its goal is to serve as
an incubator that helps plan, develop and execute sustainable businesses in collaboration with other international, technology-based centers. It hopes to provide mentorship and sponsorship for those who want to change life in Africa and around the world through these technologies. According to Itireleng, Satoshicentre activities are intended to educate the masses as well as developers who have a desire to understand blockchain technology and the potential that Bitcoin brings. Her personal mission is to see Botswana become the epicenter of tech innovation on the continent. In a step toward fulfilling that mission, Itireleng organized the Botswana Blockchain Summit at the University of Botswana in Gaborone, the country’s capital city, along with collaborator Kesego Tumisang, a member of the Google Developer Group Gaborone. Under the theme “Bitcoin & Blockchain: The Only Chance for Africa to Empower Her People,” the free summit attracted 150 people from across the continent. Immensely passionate about her work, Itireleng is capable of rattling off an endless set of solutions that
blockchains could offer for persistent problems in Africa, in addition to the economic ones being tackled by Bitcoin. Issues of land registration, for instance, are a major problem throughout the continent. “There are always disputes when a family member dies and the land is not properly registered,” Itireleng explained. Many Africans also lack birth certificates, an issue that Itireleng sees as solvable with the type of blockchain technology that undergirds Bitcoin. “Blockchain technology could really come in handy because there [are] simply no proper systems for managing these day-to-day issues,” she said. “Record-keeping is very poor. Many of us have no record of where we were born. I’ve personally never seen my birth certificate.” Moreover, the booming remittance industry in Africa is seen by some as a perfect segue into efforts to attract major seed investments for Bitcoin startups in Africa. With two-thirds of Africa’s citizenry remaining unbanked, the importance of Bitcoin is clear.
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Spreading Continental Adoption Beyond Botswana, interest in Bitcoin is also growing in places like South Africa, Kenya, Zimbabwe, Ghana and Nigeria. Many of these countries are seeing an infusion of exchanges and startups in the crypto space as they recognize the importance of digital currency in fostering cross-border trade and payments. To this point, it has been reported that over 1,000 merchants are now accepting bitcoin in South Africa alone. Moreover, a solid digital infrastructure is coming together throughout the continent, further fueling progress for the digital currency movement. Telecommunication freedom in particular has boosted the level of internet capacity and connectivity that are vital for progress. Statistics from the GSM Association, a trade organization that represents the interests of mobile operators worldwide, indicate that over half of the population of Africa now has a mobile connection, with smartphone usage on the continent having doubled to nearly 226 million. Despite these promising advancements, Itireleng said that the biggest barrier to Bitcoin acceptance in Botswana and throughout Africa continues to be fear. In particular, she said that it has been non-Bitcoinrelated Ponzi schemes that keep many Africans dubious of cryptocurrency. “The biggest barrier is skepticism,” she said. “Moreover, people just don’t want to hear the words ‘digital currency’ because, to them, that means cybercrime. All of this makes it really hard to penetrate the market.” This skepticism is a challenge, but one that emboldens, rather than daunts, Itireleng. “Whenever people have been bombarded all of their lives with negative stories, it takes time to get them to feel comfortable,” she explained. “They often tell me that they are afraid of technology … that that is ‘English people’ stuff. It takes time for people here to grasp things before they’ll put their foot in. So I tell them that we should begin first with our toes.” With this approach, slow and steady progress is being made. Just this year, a private medical facility in
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Gaborone began accepting bitcoin as a form of payment for treatment. Led by Dr. Donald Ariisa, Sharada Clinic is the only health center in the entire country that accepts the cryptocurrency.
Inspiring Others Though firmly rooted in her home country, Itireleng’s work has inspired similar efforts throughout Africa. One of her biggest fans is Philip Asare, founder of the Dream Bitcoin Foundation in Ghana. Launched in January of 2014, the foundation’s efforts are part of a broader push toward greater use and adoption of cryptocurrencies as an alternative form of payment in the country. Asare first encountered Bitcoin while in college, but he paid little attention to it until he graduated. It was around this time, he said, that he met Itireleng through a mentor of his. Ghana, with a population of around 27.4 million, is a land richly endowed with natural resources like diamonds, bauxite, manganese ore and oil. But the country is best-known for its vast deposits of gold, which has led to it being the continent’s second-largest producer of the precious metal. Over 90 percent of the country’s total mineral exports are in gold, representing nearly 50 percent of its revenue. Through the Dream Bitcoin Foundation, Asare is championing Bitcoin, a form of digital gold that could diversify the country’s economy and empower more individuals with access to a store of value.
Since its inception, the foundation has held two successful regional Bitcoin events in Ghana: a twoday seminar at Kumasi Polytechnic Institute with about 240 participants and “CoinFest Ghana,” which provided education to students and young entrepreneurs regarding the fundamentals of individual liberty, private property rights, free markets, law, limited government and economic freedom. Asare said that Itireleng’s work in founding the Botswana Blockchain Summit and the Satoshicentre inspired him to join the cause and create similar events. “Since we first met, we’ve been like brother and sister toward our businesses,” he said. “We share ideas together a whole lot.”
Toward the Future Although hurdles remain, those whom Itireleng has reached through her work in Botswana and beyond make her optimistic about Africa’s ability to adopt Bitcoin and blockchain technology as solutions to many of its persistent problems. When asked about the future, Itireleng expressed hopefulness, and there is no doubt she is doing her part to ensure that dream becomes a reality. “We are doing our best to drive progress via the Satoshicentre,” she said. “Our hopes are high as we continue to advocate Bitcoin’s potential to revolutionize all aspects of life in Botswana, across the African continent and the world.”
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Confideal Is Making the Most of Smart Contract Technology SPONSORED PROFILE
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In the case of a dispute, should the opposing parties be unable to come to a resolution, they can advise a qualified arbitrator within the platform who will anonymously judge and resolve the dispute.
Confideal is a new project that helps realize one of distributed ledger technology’s most vital attributes. It allows individuals and businesses to create safe, fast and anonymous smart contracts powered by the Ethereum blockchain.
“We are a dedicated group of developers and entrepreneurs with a wide range of experience and expertise, with a clear vision ahead of us and a proven track record behind us,” claimed Confideal CEO Petr Belousov, CTO Andrei Baibaratsky and front-end developer Egor Khromov. “We at Confideal are all passionate about blockchain technology and the potential it holds for a free and global market, and fully committed to changing the world for the better.”
MAKING CONTRACTS SMARTER Confideal recently announced the launch of a smart contract constructor that simplifies the contract creation process. The application allows users to explicitly set the terms of a transaction and acts as an impartial escrow agent. After creating a contract with a user-friendly interface that permits entering the name of the contract, the text of the agreement, payment,
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due date, the wallet address of the counterparty and, optionally, a down payment and a penalty for breach of contract, the user signs and pays for the contract, plus fees. When the contract has been signed by both sides, the payment is sent to an escrow smart contract, which is launched on the Ethereum blockchain, where it is stored forever. If both parties agree that the contract has been completed, the payment goes through. Otherwise, the parties can proceed with a pre-arranged settlement, or escalate the dispute to the arbitration process built in the Confideal platform. “The Confideal platform provides users with pre-written smart contracts removing the need for any form of programming skills,” the company stated in its announcement. “In the case of a dispute, should the opposing parties be unable to come to a resolution, they can advise a qualified arbitrator within the platform who will anonymously judge and resolve the dispute.” Compared to the traditional ways of contracting, Confideal offers
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Petr Belousov, Confideal CEO
solutions that are permanently and securely stored on the blockchain in a tamper-proof way. Launching a Confideal contract requires the presence of funds that have been agreed upon, after which the money can be moved only according to the terms of the contract. Fast and cheap cryptocurrency transactions reduce unnecessary oversight procedures and remove the possibility of a payment cancellation due to an external decision. As opposed to some other blockchain-based solutions, Confideal allows anyone to deploy smart contracts on the Ethereum blockchain by leveraging its platform with a full stack of tools to create, maintain and fulfill contracts, as well as to resolve disputes by hiring arbitrators. No computing skills or staff are required. In fact, Confideal allows third parties such as law firms, lawyers and mediators to settle disputes between users. Arbitrators are motivated by the fees paid for resolving disputes, up to 10 percent of a contract’s value. “Confideal is an anonymous service, which allows you to carry out
quick, cheap and safe international transactions without participation of third parties,” stated the company.
GAINING CAPITAL After raising $650,000 in a funding round prior to its initial coin offering (ICO), Confideal is preparing to launch the ICO for its “CDL” token. It is to begin on November 2 and end on November 22. During the ICO, the Confideal team hopes to raise at least 70,000 ETH (equivalent to more than $17.5 million at the time of this writing), and the ICO will be capped at 100,000 ETH. CDL and ETH will be initially supported on the Confideal platform, and the addition of other cryptocurrencies is being planned. These days, after many failed and/or underwhelming token sales, some savvy investors are suspicious of ICOs, and rightly so. To reassure prospect investors, the Confideal team insists that their project has great advisers and supporters, and even more importantly has a fully functional test version of the product available.
“It is necessary to develop the ecosystem, add new functions and conduct marketing activities in order to raise awareness about the service,” concluded the team. “Confideal has the opportunity to become a standard, widely used tool for making safe deals and our ICO is the next logical step toward the realization of this goal.”
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Confideal is an anonymous service, which allows you to carry out quick, cheap and safe international transactions without participation of third parties.
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How to Plan a Bitcoin Meetup By John Barrett
T
HE recent rise in the price of bitcoin is creating a buzz around the world. People from all walks of life are hungry for more information about Bitcoin, how to get started and what to do with it. As the host of the podcast Bitcoins and Gravy, I have a lot of experience with the challenge of getting unfamiliar family members, friends and co-workers to understand the power of Bitcoin. Luckily, there is Meetup, the social networking website that facilitates offline gatherings. It’s the perfect solution for taking the largely online fan base and organizing real-world discussions that help advance the technology and promote education. As an organizer of the “Nashville Bitcoin Meetup,” which boasts nearly 250 members and monthly events in Music City, I have found the website to be a tried and true solution. Here are a few tips to help you start a successful group of your own.
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Get the Word Out
Socialize
For any Meetup group to be successful, you’ll need to get your name out there and attract new members. A wide variety of social media platforms are available to help you get the word out about your new group. As you gain momentum, make sure to ask for help from other members. It doesn’t have to be a one-person show.
Make sure each Meetup has a social aspect. Usually this means good conversation with refreshments provided by the organizers. To grow your group, create a sense of community from the onset and at every Meetup. Socializing leads to sharing ideas, solving problems and building things together. I’ve found that building friendships is a better approach than evangelizing. You definitely don’t want to come across as cultish or desperate for recruits.
Scout a Location Choosing a good Meetup location can be challenging, especially when it comes to Bitcoin. Users don’t always live in the same neighborhoods and finding an easily accessible location, such as a group-friendly restaurant, coffee shop or pub, is key. Some groups hold their meetings at the public library and many college campuses offer public meeting areas. (Note: Make sure your venue has adequate parking.)
Finalize an Agenda Have a well-thought-out agenda for your Meetups. Maybe it’s nothing more than an hour of sitting around and talking about developments in the Bitcoin space. In fact, that’s usually what we do at our events — share stories and exchange ideas. Some Meetups bring in speakers to talk about specific topics or provide tutorials. Other groups hold a “Satoshi Square,” where people meet to buy and sell bitcoins using their mobile wallets. Be creative, make it fun and be welcoming to everyone.
Ask for Tips Once your group is established, don’t be afraid to ask members for bitcoin tips. People are usually happy to tip a few hundred Satoshis toward Meetup costs such as refreshments, guest speakers, advertising or possibly a venue fee should your group require a large space. Make sure to always use the same Bitcoin tipping address so that everyone can see the coins coming into and out of the same wallet. This transparency builds trust among members and encourages ongoing donations.
Don’t Be a Boss Bitcoin is all about decentralization, so do your best to organize your Meetup in a way that gives all members equal power. Working together on equal ground will make for a fun and successful Bitcoin meetup.
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