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Introduction: This program continues our exploration and analysis of the online cryptocurrency bitcoin. (We have previously explored this in FTR #‘s 760 and 764. In addition, we recommend a penetrating essay by “Pterrafractyl” on the bitcoin phenomenon, upon which we have drawn in this broadcast.)
In recent years, much attention has been devoted to the increasing economic concentration and resulting social inequality in this country. The 1% versus everybody else is a common element of awareness and discussion.
Originally envisioned as a way around the shortcomings and pitfalls of the contemporary economic and fiscal landscape, bitcoin is proving to be a very bad “cyberpenny,” indeed.
In addition to the numerous, almost endemic scams and gambits to which this unregulated currency is subject, bitcoin is already turning out to lend itself to exactly the kind of concentration of ownership that is characteristic of the mainstream economy decried by bitcoiners.
As is the case with the “tape painting” and other scams that characterize bitcoin, the already pronounced concentration of ownership of this “fiscal panacea” are built in to the very technological landscape and nature of bitcoin.
Increasingly, various groups of “miners” are dominating the bitcoin landscape. Not surprisingly, the largest accumulation of bitcoins appears to belong to the mythical “Satoshi Nakamoto,” who is credited with developing the cryptocurrency.
If bitcoin were to achieve the acceptance hoped for by its advocates, the enormous carbon footprint required to “mine” the currency would make it a threat to the global environment.
The program also notes the increasing degree of overlap between the milieu of bitcoin and that of Edward Snowden and our investigation into his activities.
Central to the analysis is the comparison of bitcoin to gold–presented as negative by the brilliant economist Paul Krugman and a positive by Julian Assange, Edward Snowden and Ron Paul, as well as the bitcoiners.
Program Highlights Include: Examination of an hypothesis that the mythical “Satoshi Nakamoto”–creator of bitcoin–is, in fact, a European-based consortium (consistent with our hypothesis that the creator is a group of individuals working for Lantiq); the increasing concentration of bitcoins in two syndicates; the prospect that Ghash.io–the largest of the bitcoin mining syndicates–is growing so large that it threatens the very operating premise of bitcoin; the probability that higher transaction fees will undermine the very premise of bitcoin; similarities between bitcoin and the gold standard; review of Eddie the Friendly Spook’s advocacy of a return to the gold standard (a “barbaric relic” according to John Maynard Keynes); Ron Paul’s opinion that bitcoin could threaten the dollar; the European Central Bank’s view that bitcoin is the expression of the Austrian School of Economics (favored by Ron Paul and Snowden); the arrest of a prominent bitcoin promoter for money laundering in the Silk Road case; review of apparent Silk Road developer Ross Ulbricht’s affinity for Ron Paul, bitcoins and the Austrian School; the possibility that NSA surveillance might be involved in the Silk Road case; Julian Assange’s fondness for bitcoin and statement that he and bitcoin’s creators share common ground; Asange’s fopndness for gold as a medium of exchange; Hans Hermann-Hoppe disciple R. Cody Wilson’s “Dark Wallet” scheme (which would allegedly make it impossible to trace bitcoin operations); review of Max Planck Institute attempts at making Internet communications immune to surveillance; the Max Planck Institute’s association with the Underground Reich.
1. In FTR #760, we advanced the hypothesis that the actual originator of bitcoin may well be three employees of Lantiq, a spinoff of Siemens/Infineon AG and Bain Capital offshoot Golden Gate Capital. A recent post in International Business Times opines that “Satoshi Nakamoto” is actually a European-based cell, possibly from the financial sector.
As the mystery surrounding the identity of Satoshi Nakamoto, the creator of the digital currency Bitcoin, continues to grow, it is believed that the ‘inventor’ could infact be the creation of a computer collective, IBTimes UK understands.
Josh Zerlan, the Chief Operating Officer of Butterfly Labs and a person familiar with the Bitcoin network, has said it is highly likely that Nakamoto could be a group of people working the financial sector.
Speaking to IBTimes UK on the sidelines of a Global Bitcoin Conference in Bangalore, India, Zerlan said: “One of the prevailing theories, I think has credibility, is that it was some group of people from financial sector that created this. They released it and stepped back and let it go. So, Satoshi Nakamoto is a group of people, I think, is a reasonable possibility.”
When quizzed where the group of people might be based, Zerlan indicated they could probably be from the European continent.
However, Zerlan from Butterfly Labs, which is involved in supplying hardware for mining Bitcoins, conceded: “Nobody knows who he really is. The name ‘Satoshi Nakamoto’ is more like John Smith in English. So, it’s kind of a generic name.”
He added that the recent speculation that Nakamoto could be the Japanese blogger and programmer Nick Szabo does not seem plausible, considering the style of writing. . . .
2. The mythical “Nakamoto” owns the largest aggregation of bitcoins.
“Who Owns the World’s Biggest Bitcoin Wallet? The FBI” By Robert McMillan; Wired; 12/18/2013.
. . . This honor is thought to belong to bitcoin’s shadowy inventor Satoshi Nakamoto, who is estimated to have mined 1 million bitcoins in the currency’s early days. His stash is spread across many wallets. But it does put the federal agency ahead of the Cameron and Tyler Winklevoss, who in July said that they’d cornered about 1 percent of all bitcoins (there are 12 million bitcoins in circulation).
In the fun house world of bitcoin tracking, it’s hard to say anything for certain. But it is safe to say that there are new players in the Bitcoin world — although not as many people are buying bitcoins as one might guess from all of the media attention.
Satoshi stores his wealth in a large number of bitcoin addresses, most of them holding just 50 bitcoins. It’s a bit of a logistical nightmare, but most savvy Bitcoin investors spread out their bitcoins across multiple wallets. That way if they lose the key to one of them or get hacked, all is not lost. . . .
3. “Pterrafractyl” highlights an important consideration for us: Here’s an interesting fact about the concentration of power in the bitcoin mining market and the risk of “selfish mining” (which we spoke about in FTR #760.):
If you go here you can find a charge of the “hashrate distribution” that shows the relative amounts of the total hashes (hashes are calculated as part of the mining process). Notice how two guilds, BTC Guild and GHash.IO, control well over 50% of of the total mining processing power. Situations like this are a huge potential problem for how bitcoin is supposed to work. But, in a way, this is a symbol of bitcoin’s potential populism in that a guild consists of THOUSANDS of users all working together. So at least when the BTC Guild and GHash.IO take over the mining market the proceeds would be going to a large number of people and not just some handful of super-miners. Except it may not be quite that clean because, as of April of this year, the top 10 users in the BTC Guild accounted for half of the entire guild’s processing power and would therefore get about half of BTC Guild’s the proceeds and it’s unclear why a situation like that that wouldn’t still be the case today.
“Getting Started with Bitcoin Mining”; The Bitcoin Beginner Blog; 4/4/2013.
. . . . BTC Guild is the largest mining guild, both in terms of the number of Blocks found and the sheer amount of processing power it can bring to bear. Since the start of this year, it’s found nearly one third of all Blocks added to the Block Chain.
It’s worth nothing that there’s a distinct “upper class” to BTC Guild. The top 10 users accounting for almost half of the pool’s entire processing power (which means they get almost half of all payouts).
For payouts, you can choose Pay-per-Share (PPS) or Pay-per-Last-N-Shares (PPLNS). Which one you choose changes whether or not transaction fees are included in the payout, and what the pools’ fee percentage is. . . .
4a. In addition to the BTC Guild, another “mining consortium” (Ghash.io) is getting so big that its activities are perceived as threatening the viability of bitcoin itself.
A doomsday scenario that has long been dismissed by bitcoin’s biggest boosters is now a clear and present danger. At 3am ET this morning, a single bitcoin mining collective known as Ghash.io reached 45% of the computing power of all global bitcoin miners, just six points short of the 51% that would be required to break bitcoin by arbitrarily manipulating the record of future transactions upon which it rests. The result could be, at minimum, “double spending” of existing bitcoins, which would render the currency effectively unusable.
To put this in context: Imagine that tomorrow, a single corporate entity gained the ability to clone all of its dollars, and then immediately went on an asset buying spree. To say that it would undermine trust in the US dollar would be an understatement. That’s what could happen to bitcoin.
Update: Ghash.io has issued a press release on the potential for it to launch an attack on bitcoin. The mining pool says it is taking steps to make sure that Ghash.io never reaches 51% of the world’s bitcoin mining capacity, “as it will do serious damage to the Bitcoin community, of which we are part of.” Ghash.io also said that they will temporarily stop accepting new independent bitcoin miners in their pool, and will allow existing members of Ghash.io to mine bitcoins through other pools.
Update 2: Bitcoin magazine has weighed in, asserting that the success of Ghash.io is indicative of a larger problem in bitcoin: nearly unprecedented centralization of the mining upon which the currency’s security depends.
Update 3: Bitcoin entrepreneur Henry Brade weighs in on Ghash.io’s proposed solution, and finds it wanting. Quartz’s Ritchie King weighs in: No, bitcoin isn’t about to be taken over by a massive cartel.
Popular discussion boards devoted to bitcoin are freaking out about this possibility, and every post on the homepage of, for example, the portion of Reddit devoted to bitcoin is currently devoted to the dangerous rise of Ghash.io . . . .
4b. “Pterrafractyl” notes another factor that may very well promote concentration of bitcoin ownership: “The CEO of Butterfly Labs makes an important point: As the rewards for bitcoin mining drop off to zero (by ~2040), the transaction fees are going to be the only thing financing bitcoin mining. And at that point, “miners will gravitate towards transactions with higher fees attached to them, which will be processed before those with smaller rewards”. How that tension between cheap transactions and the profit-maximizing desire of corporate miners gets resolved is a pretty big ‘unknown’ for a transaction platform that’s making low-transaction fees a key selling point. Especially when the system is also set up to incentivize the creation of mining cartels that could collude to ensure high wait times for lower fees. The much-feared “51% attack” isn’t the only threat posed by a bitcoin oligopoly.”
Note that 4–yes 4–bitcoin mining consortia control 75 percent of the bitcoin market!
“The Future of Bitcoin: Corporate Mines and Network Peering?” by Rich Miller; Data Center Knowlege; 1/24/2014.
What’s the end game of the Bitcoin mining arms race? Miners are building ever-more powerful hardware and larger data centers, trying to stay a step ahead of their rivals and keep pace with “the difficulty” – algorithm changes that make it progressively harder to earn new bitcoins.
Some Bitcoin watchers believe the network will ultimately shift from mining for new coins to a model based on transaction fees, which could accelerate a shift of Bitcoin hardware into data centers and the creation of peering networks to manage fees, just as current peering agreements seek to reduce network transit costs.
The long-term outlook for Bitcoin is important for the data center industry, where some leases can run from three to 10 years. The emergence of Bitcoin has seen the cryptocurrency soar in value, accompanied by rapid advances in the hardware required to successfully capture new coins. The Bitcoin protocol is designed so that these rewards will become harder to earn and will shrink over time. That means that the economics and business models of bitcoin could shift over the life of a data center lease.
Fees and the Future
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Over the past two years, gaining block rewards has become progressively more difficult, forcing miners to upgrade their hardware from CPUs to GPUs and then FPGAs (Field Programmable Gate Arrays) and finally specialized ASICs (Application Specific Integrated Circuits) optimized for bitcoin data-crunching. As the hardware has become more expensive, many enthusiasts have been priced out of the mining market.
Princeton University computer science researchers Ed Felten, Joshua Kroll and Ian Davey have studied the bitcoin reward system and foresee a shift ahead.
“At present, the mining reward seems to be large enough, but under the current rules of Bitcoin the reward for mining will fall exponentially with time,” the Princeton team wrote in a recent paper on Bitcoin economics. “Transaction fees, which are voluntary under the current rules, cannot make up the difference. The only way to preserve the system’s health will be to change the rules, most likely by either maintaining mining rewards at a higher level than originally envisioned, or making transaction fees mandatory. The choice is likely to drive political disputes within the Bitcoin community.”
Researchers from Microsoft and Cornell have also explored this scenarioand outlined refinements that would be needed to make incentives work in a shift to transaction fees.
The bitcoin community is “debating that (shift),” said Emmanuel Obiodun, founder and CEO of Cloudhashing, which leases computing power to customers. “It’s becoming more expensive to mine coins. But transaction fees are very low right now, and have very small profit margins. For now, there’s still a lot of upside in bitcoin mining.”
One Vision of a Fee-Based Future
The future of mining was a hot topic at the Inside Bitcoins conference in Las Vegas in December, where Josh Zerlan, Chief Operating Officer of Butterfly Labs, gave a presentation on the future role of transaction fees.
“In the future, there will not be much incentive to mine (for block rewards),” said Zerlan. As rewards become harder to achieve and the growth of bitcoin leads to more transactions, Zerlan says that fees will need to increase to ensure that miners continue to support the network. As this happens, miners will gravitate towards transactions with higher fees attached to them, which will be processed before those with smaller rewards.
If bitcoin gains wide acceptance as a payment platform or even as a currency, the growth of fees will present several challenges, Zerlan said.
“If you’re a large company, you have a problem (with paying transaction fees),” he said. “The solution is to maintain a large mining farm in your data center to process your own transactions for free, and your customers’ transactions for free. You can also earn extra income to processing others transactions.”
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Distributed vs. Centralized
As we noted yesterday, a shift to professional data centers and cloud computing platforms would make the bitcoin network more efficient. But there’s also a built-in cultural challenge: much of the bitcoin community remains wary of efforts to centralize the network.
Earlier this month bitcoiners raised alarms when Chinese mining pool GHash.io was gaining 45 percent of new coins – approaching the level where a single participant could undermine the network by controlling a majority of its power (known as a “51 percent attack”).
The growing power of mining pools – consortiums organized to combine the mining power of individuals – has been a concern for some time. This week the four largest mining pools (GHash.io, BTC Guild, Eligius and Slush) held a combined market share of 75 percent of the network’s power, as measured by computing hashrate.
“We’ve already centralized the mining system,” said Zerlan. “There are already large pools to control a large percentage of the mining. Centralization of mining will be a good thing.”
Zerland believes the Bitcoin community can adapt to the tradeoffs of a more centralized infrastructure. “It creates a more desirable target, but I think that’s something we have to manage,” he said.
5. Because bitcoin mining requires the long-term running of super computers, which in turn, require the use of massive amounts of electricity. As a result the carbon footprint of serious mining is alarming and, if perpetuated over a period of time, will exacerbate the “greenhouse effect.”
“Bitcoin Has a Dark Side: Its Carbon Footprint” by Michael Carney; PandoDaily; 12/16/2013.
Bitcoin may be making a few people wealthy, but it’s killing us all. The crypto-currency that’s caught the world by storm has a dark side: its carbon footprint.
At today’s value of roughly $1,000 per bitcoin, the electricity consumed by the bitcoin mining ecosystem has an estimated carbon footprint – or total greenhouse gas emissions – of 8.25 megatonnes (8,250,000 tonnes) of CO2 per year, according to research by Bitcarbon.org. That’s 0.03 percent of the world’s total greenhouse gas output, or equivalent to that of the nation of Cyprus. If bitcoin’s value reaches $100,000, that impact will reach 3 percent of the world’s total, or that of Germany. At $1 million – which seems farcical but which may not be out of the realm of possibility given the artificially limited bitcoin supply – this impact rises to 8.25 gigatonnes, or 30 percent of today’s global output, and equivalent to that of China and Japan combined.
Bitcoins aren’t mined from the earth’s crust like most physical commodities – although at least that leaves tangible evidence of its environmental impact. Rather, they are “mined” by computers solving a set of complicated computational problems. These problems are designed to get more difficult over time, until the year 2140 when the 21 millionth (and final) bitcoin is mined. Early in bitcoin’s existence, it was feasible to run a successful mining operation with a standard PC. Now the task requires custom mining rigs that can run orders of magnitude more processes per second. . . .
6. Paul Krugman notes that bitcoin mining and the gold standard–termed by John Maynard Keynes “a barbaric relic”–have similar characteristics.
Edward Snowden is an advocate of returning to the gold standard, something that would devastate the global economy.
We are seeing an increasing degree of concurrence between the milieu of Edward Snowden. Like gold bugs, Snowden political idol Ron Paul, the Ludwig von Mises Institute and Snowden himself, the bitcoin advocates exist in the perpetual fear of hyperinflation, a reality that has failed to materialize and is historically rare.
“Bits and Barbarism” by Paul Krugman; The New York Times; 12/22/2013.
. . . . The second money pit is a lot stranger: the Bitcoin mine in Reykjanesbaer, Iceland. Bitcoin is a digital currency that has value because ... well, it’s hard to say exactly why, but for the time being at least people are willing to buy it because they believe other people will be willing to buy it. It is, by design, a kind of virtual gold. And like gold, it can be mined: you can create new bitcoins, but only by solving very complex mathematical problems that require both a lot of computing power and a lot of electricity to run the computers.
Hence the location in Iceland, which has cheap electricity from hydropower and an abundance of cold air to cool those furiously churning machines. Even so, a lot of real resources are being used to create virtual objects with no clear use.
The third money pit is hypothetical. Back in 1936 the economist John Maynard Keynes argued that increased government spending was needed to restore full employment. But then, as now, there was strong political resistance to any such proposal. So Keynes whimsically suggested an alternative: have the government bury bottles full of cash in disused coal mines, and let the private sector spend its own money to dig the cash back up. It would be better, he agreed, to have the government build roads, ports and other useful things — but even perfectly useless spending would give the economy a much-needed boost.
Clever stuff — but Keynes wasn’t finished. He went on to point out that the real-life activity of gold mining was a lot like his thought experiment. Gold miners were, after all, going to great lengths to dig cash out of the ground, even though unlimited amounts of cash could be created at essentially no cost with the printing press. And no sooner was gold dug up than much of it was buried again, in places like the gold vault of the Federal Reserve Bank of New York, where hundreds of thousands of gold bars sit, doing nothing in particular.
Keynes would, I think, have been sardonically amused to learn how little has changed in the past three generations. Public spending to fight unemployment is still anathema; miners are still spoiling the landscape to add to idle hoards of gold. (Keynes dubbed the gold standard a “barbarous relic.”) Bitcoin just adds to the joke. Gold, after all, has at least some real uses, e.g., to fill cavities; but now we’re burning up resources to create “virtual gold” that consists of nothing but strings of digits.
I suspect, however, that Adam Smith would have been dismayed.
Smith is often treated as a conservative patron saint, and he did indeed make the original case for free markets. It’s less often mentioned, however, that he also argued strongly for bank regulation — and that he offered a classic paean to the virtues of paper currency. Money, he understood, was a way to facilitate commerce, not a source of national prosperity — and paper money, he argued, allowed commerce to proceed without tying up much of a nation’s wealth in a “dead stock” of silver and gold.
So why are we tearing up the highlands of Papua New Guinea to add to our dead stock of gold and, even more bizarrely, running powerful computers 24/7 to add to a dead stock of digits?
Talk to gold bugs and they’ll tell you that paper money comes from governments, which can’t be trusted not to debase their currencies. The odd thing, however, is that for all the talk of currency debasement, such debasement is getting very hard to find. It’s not just that after years of dire warnings about runaway inflation, inflation in advanced countries is clearly too low, not too high. Even if you take a global perspective, episodes of really high inflation have become rare. Still, hyperinflation hype springs eternal.
Bitcoin seems to derive its appeal from more or less the same sources, plus the added sense that it’s high-tech and algorithmic, so it must be the wave of the future.
But don’t let the fancy trappings fool you: What’s really happening is a determined march to the days when money meant stuff you could jingle in your purse. In tropics and tundra alike, we are for some reason digging our way back to the 17th century.
7. We learn that the European Central Bank views bitcoin as rooted fundamentally in the Ludwig von Mises/Friedrich von Hayek theoretical construct.
The ECB (European Central Bank) has produced the first official central bank study of the decentralized cryptographic money known as bitcoin, Virtual Currency Schemes. Ignoring for a moment the ECB’s condescending and derogatory use of the virtual currency phrase and scheme phrase, the study produced at least one landmark achievement.
In claiming that “The theoretical roots of Bitcoin can be found in the Austrian school of economics,” the ECB forever linked Bitcoin to the proud economic heritage of Menger, Mises, and Hayek as well as to Austrian business cycle theory. This recognition is also a direct testament to the monetary theory work of Friedrich von Hayek who inspired many with his 1976 landmark publication of Denationalisation of Money.
Bitcoin fully embodies the spirit of denationalized money as it seeks no authority for its continued existence and it recognizes no political borders for its circulation. Indeed according to the report, proponents see Bitcoin as “a good starting point to end the monopoly central banks have in the issuance of money” and “inspired by the former gold standard.”
Economists from the 19th and mid-20th centuries can be forgiven for not anticipating an interconnected digital realm like the Internet with its p2p distributed architecture, but modern economists cannot be. From their own conclusions (on page 48) which inaccurately lump Bitcoin together with Linden Dollars, here is what the modern-day economists at the ECB are still not getting:
1. ECB concludes that if money creation remains at a low level, bitcoin does not pose a risk to price stability. This is incorrect on two levels. One, the creation of new bitcoin is capped at 21 million with eight current decimal places so it grows through adoption and usage rather than monetary expansion. And two, as with gold, silver, and other commodities having a monetary component, price stability is a function of the market not central planners;
2. ECB concludes that bitcoin cannot jeopardize financial stability due to its low volume and limited connection with the real economy. Conversely, bitcoin will tend to increase financial stability and overall soundness. Bitcoin’s connection with the real economy is only a concern for the regulated and taxed economy, whereas bitcoin independently may thrive in the $10 trillion shadow or “original” economy. Besides, with its repeated market interventions, no one has done more to jeopardize financial stability than the ECB itself;
3. ECB concludes that bitcoin is currently not regulated and supervised by any public authority. It would be more accurate to say that State-sponsored regulation is largely irrelevant because of the inherent design properties of a peer-to-peer distributed computing system. But happily, this is still a conclusion that I can agree with and recommend that it remains the case;
4. ECB concludes that bitcoin could represent a challenge for public authorities, given the legal uncertainty and potential for performing illegal activities. While public authorities will certainly be challenged by the introduction of a monetary unit that cannot be manipulated for political purposes, bitcoin in some cases does have the ability to provide tracking capability that far exceeds that of national cash or money substitutes. What authorities will find most troubling though, with bitcoin, is that money flows between individuals and businesses will no longer be exploitable for purposes of unlimited identity tracking and unconstitutional ‘fishing expeditions’
8. Ron Paul’s enthusiastic views on bitcoin:
“Ron Paul: Bitcoin Could Destroy the Dollar” by Jose Pagliery; CNNMoney; 12/4/2013.
Imagine a world in which you can buy anything in secret. No banks. No fees. No worries inflation will make today’s money worth less tomorrow.
The digital currency Bitcoin promises all these things. And while it’s far from achieving any of them — its value is unstable and it’s rarely used — some have high hopes.
“There will be alternatives to the dollar, and this might be one of them,” said former U.S. congressman Ron Paul. If people start using bitcoins en masse, “it’ll go down in history as the destroyer of the dollar,” Paul added.
It’s unlikely that Bitcoin would replace the dollar or other government-controlled currencies. But it could serve as a kind of universal alternative currency that is accepted everywhere around the globe. Concerned about the dollar’s inflation? Just move your cash to bitcoins and use them to pay your bills instead. Tired of hefty credit card fees? Bitcoin allows transactions that bypass banks. . . .
9. Julian Assange is a big advocate of bitcoin. The WikiLeaks milieu is inextricably linked with the Snowden operation.
In June of 2011 the founder of WikiLeaks, Julian Assange, was holed up in Norfolk, England, awaiting word on his possible extradition to Sweden for rape charges, which he denies. While there he took a rather interesting house guest, Google Chairman Eric Schmidt, who interviewed Assange on tape for his forthcoming book The New Digital Age, due to be published, April 23.
WikiLeaks today published the “majority” of a “verbatim” transcript of the five-hour-long conversation, including the first time Schmidt ever heard of Bitcoin, and an ensuing lesson from Assange that we would have loved to have seen for ourselves.
Incidentally the “cypherpunks” Assange said are at the genesis of Bitcoin, are a group he himself is often associated with, and also happens to be the name of his book.
The actual origin of Bitcoin is still quite a mystery, with its mysterious inventor, Satoshi Nakamoto, still unknown, though the New Yorker claims to know the person’s identity. . . .
. . . . Assange:OK, Bitcoin is something that evolved out of the cypherpunks a couple of years ago, and it is an alternative... it is a stateless currency.
And very important, actually. It has a few problems. But its innovations exceed its problems. Now there has been innovations along these lines in many different paths of digital currencies, anonymous, untraceable etc. People have been experimenting with over the past 20 years. The Bitcoin actually has the balance and incentives right, and that is why it is starting to take off. The different combination of these things. No central nodes. It is all point to point. One does not need to trust any central mint. If we look at traditional currencies such as gold, we can see that they have sort of interesting properties that make them valuable as a medium of exchange. Gold is divisible, it is easy to chop up, actually out of all metals it is the easiest to chop up into fine segments. You can test relatively easily whether it is true or whether it is fake. You can take chopped up segments and you can put them back together by melting the gold. So that is what makes it a good medium of exchange and it is also a good medium of value store, because you can take it and put it in the ground and it is not going to decay like apples or steaks. . . . .
10a. One of the most prominent “bitcoiners” has been charged with money laundering in connection with the Silk Road conspiracy. Charlie Shrem’s Bitcoin Foundation received backing from the Winkelvoss twins, who also helped start Facebook.
The vice chairman of the Bitcoin Foundation, a trade group promoting the adoption of the digital currency, has been charged by U.S. prosecutors with conspiring to commit money laundering by helping to funnel cash to illicit online drugs bazaar Silk Road.
Charlie Shrem, who had financial backing from the Winklevoss twins and is well known as one of the bitcoin’s biggest global promoters, was arrested on Sunday at John. F. Kennedy International Airport in New York, the U.S. Attorney’s Office in Manhattan said on Monday.
Shrem, who was also charged with operating an unlicensed money transmitting business, appeared in U.S. District Court in Manhattan on Monday and was released on $1 million bond. . . .
10b. Ron Paul/Ludwig von Mises devotee Ross Ulbricht is the apparent kingpin of the Silk Road network. His brand of libertarianism would subject people to some very “unliberating” things, such as getting their bank accounts hacked.
In another apparent dovetailing of the Snowden/bitcoin stories, it has been theorized that NSA may have been involved in the takedown of Ulbricht. One wonders if “team Snowden” may help to obtain the freedom of Citizen Ulbricht.
“Eagle Scout. Idealist. Drug Trafficker? by David Segal; The New York Times; 1/19/2013.
. . . . What few friends realized is where his philosophical quest had brought him. At Penn State, he was becoming a dedicated libertarian. He joined the school’s Libertarian Club and wore a Ron Paul for President shirt to classes. Mr. Ulbricht was quoted in the school’s newspaper, The Daily Collegian, saying of Mr. Paul, “there’s a lot to learn from him and his message of what it means to be a U.S. citizen and what it means to be a free individual.”
. . . . By the time Mr. Ulbricht left Penn State, his views had taken on a vehemently anti-tax tone. A friend in Austin said Mr. Ulbricht’s politics at the time were more “hard core” than his own. . . .
. . . . Ross Ulbricht and Dread Pirate Roberts have other similarities, including a fondness for the Ludwig von Mises Institute, part of the Austrian School of Economics, which was celebrated by Mr. Ulbricht on his Google+ page and by D.P.R. in Silk Road pep talks. . . .
. . . . What is unclear is how the feds knew where the servers were. Presumably, they were rented in some faraway corners of the globe — Iceland, Latvia and Romania are likely, according to experts who have studied the I.P. addresses. But the official vagueness has provoked speculation in academic circles and among security specialists. Was the National Security Agency involved? Did this process involve breaking laws, or violating constitutional rights?
That issue will be at the heart of Ross Ulbricht’s defense strategy, says Joshua L. Dratel, his lawyer, whose clients include a Guantánamo detainee.“It’s called the fruit-of-the-poisonous-tree doctrine,” Mr. Dratel explained. “If you think of the acquisitions of evidence as a chain, if you find one bad link, everything on the other side of that link is suppressible.” . . . .
. . . . A “services” section with 159 offerings included a tutorial on hacking automated teller machines. More than 800 listings offered “digital goods,” such as hacked Netflix accounts, and 169 listings in “forgeries,” including driver’s licenses and car insurance records.
Anyone with minimal computer literacy could access this superstore of criminal mischief. Users needed only to install software for Tor, a network that hides I.P. addresses and bundles communications in layers of encryption. . . .
11. In 764, we highlighted R. Cody Wilson, a bitcoin advocate who explicitly endorses the anti-democratic philosophy of Ludwig von Mises disciple Hans Hermann-Hoppe. (Hoppe, like Palantir CEO Alex Karp, has been heavily influenced by mentor Juergen Habermas.)
R. Cody Wilson is working on something called “Dark Wallet,” which will theoretically enable the circumventing of monitoring of bitcoin transactions. Ultimately, this will further the interests of intelligence services, terrorist milieux and malefactors of any kind.
In past programs, we have visited with the brilliant Lucy Komisar, who has done work on offshore. Dark Wallet, in particular, and bitcoin in general, is viewed by its proponents as a kind of “virtual offshoring.”
Bitcoin may be the world’s first decentralized, stateless digital currency. But in the eyes of at least one group of anarchists, the Bitcoin community has been getting a little too cozy with the establishment. And they want to bring the cryptocurrency back to its anti-regulatory roots.
On Thursday a group of libertarian Bitcoin developers calling themselves Unsystem launched a crowdfunding campaign to raise money to code a new Bitcoin “wallet” they’re calling Dark Wallet. Like any Bitcoin wallet, Dark Wallet will store a user’s Bitcoins and interact with the Bitcoin network, allowing the owner to spend and receive the currency. But unlike other wallets, Dark Wallet is designed specifically to preserve and even enhance the properties of Bitcoin that make it a potentially anonymous, tough-to-trace coin of the Internet underground.
“If Bitcoin represents anything to us, it’s the ability to forbid the government,” says Cody Wilson, Dark Wallet’s project manager. (If Wilson’s name sounds familiar, he’s also the creator of the world’s first fully 3D-printable gun, another project designed to show how technology can undermine government regulation.)“DarkWallet is your way of locking out the State, flipping the channel to one beyond observation.”
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Bitcoin has already served as a powerful tool for the so-called “dark web”– the lawless, anonymity-enabled corners of the Internet alluded to in some parts of Wilson’s video. Bitcoin’s most recent moment in the spotlight came with the shutdown of the Silk Road, the Bitcoin-based anonymous online marketplace for illegal drugs that generated hundreds of millions of dollars worth of sales in its 2.5 years online; The FBI seized another $28.5 million in stored bitcoins believed to belong to the site’s now-arrested alleged owner 29-year-old Ross Ulbricht just last week.
Bitcoin enabled the Silk Road by acting as a trustworthy form of payment that didn’t require any real names. Though all Bitcoin transactions are publicly visible within the Bitcoin network, they’re only linked to pseudonyms, and users can anonymize the coins further by sending them through a Bitcoin laundry that mixes up users’ bitcoins with those of other users to make them harder to trace; Silk Road automatically mixed the coins of all its users.
But Dark Wallet would go further towards making Bitcoin a truly untraceable form of digital cash. The wallet creators plan to include a feature called “trustless mixing” according to Amir Taaki, one of Unsystem’s founders and a longtime Bitcoin developer. Rather than hand a user’s bitcoins off to a typical Bitcoin laundry service that must be trusted to send back another more anonymous bitcoin, trustless mixing bundles together a collection of Bitcoin transactions and simultaneously sends them to new Bitcoin addresses that are also controlled by the same users; Since no one watching the transactions can see whose coins went where, the technique erases any ownership-identifying traces on the coins, while also avoiding the problem of trusting a third-party service to sufficiently mix the coins and not to simply steal them.
The software, which is intended to be a browser plug-in for Chrome and Firefox, would automatically coordinate the process with other users over the anonymity service Tor or similar services to further hide users’ identities. The process could even be reduced to an anonymizing “toggle switch” that would enable users to launder their coins on command, says Taaki. “You buy the bitcoins in a normal exchange, switch this on, and it slowly anonymizes them for you in the background,” he says.
Dark Wallet would also aim to solve another potential privacy problem with Bitcoin that arises from wallet software “announcing” transactions to the Bitcoin network from a tell-tale IP address. By broadcasting the messages from a proxy address or over the Tor network, Taaki says that Dark Wallet could prevent anyone from tracking a user based on those transaction announcements.
Wilson and Taaki see Dark Wallet in part as an answer to Bitcoin’s increasing adoption by users and developers with more mainstream, government-friendly views. In the video above and in their writeup of Dark Wallet on Unsystem’s website, they directly attack the Bitcoin Foundation, a non-profit group that has sought to engage with governments and use lobbying tactics to compromise on potential regulation of Bitcoin. “Many prominent Bitcoin developers are actively in collusion with members of law enforcement and seeking approval from government legislators,” reads one portion of the Dark Wallet text. “We believe this is not in Bitcoin user’s self interest, and instead serves wealthy business interests that make up the self-titled Bitcoin Foundation.” . . . .
12. Bitcoin users have relied on the TOR network, to a considerable extent. Because TOR is not as secure as advertsed, some have avoided using it. Now the Max Planck Institute is researching the development of a more secure operation, that might permit drastic proliferation of the types of ills that appear inherent in the bitcoin concept.
. . . . This month’s reports, based on documents leaked by Edward Snowden, didn’t say whether the NSA was doing so. But a 2012 presentation marked as based on material from 2007, released by the Guardian, and a 2006 NSA research report on Tor, released by the Washington Postdid mention such techniques.
Stevens Le Blond, a researcher at the Max Planck Institute for Software Systems in Kaiserslautern, Germany, guesses that by now the NSA and equivalent agencies likely could use traffic correlation should they want to.“Since 2006, the academic community has done much work on traffic analysis and has developed attacks that are much more sophisticated than the ones described in this report.” Le Blond calls the potential for attacks like those detailed by Johnson “a big issue.”
Le Blond is working on the design of an alternative anonymity network called Aqua, designed to protect against traffic correlation. Traffic entering and exiting an Aqua network is made to be indistinguishable through a mixture of careful timing, and blending in some fake traffic. However, Aqua’s design is yet to be implemented in usable software and can so far only protect file sharing rather than all types of Internet usage. . . . .
13. We have discussed the Max Planck institute in past posts and programs. (It was originally called the Kaiser Wilhelm Institute and was funded by the Rockefeller Foundation, in considerable measure.) A major epicenter of Nazi science, it was the academic foundation for Josef Mengele’s ghastly Auschwitz experiments on twins.
In the 1950 Madrid circular letter crafted by the Nazi government in exile, we find reinforcing argument that the Max Planck Institute remained an epicenter for scientific and technological development for the Underground Reich. The entire text of the Madrid circular is available on pp. 209–232 of Germany Plots with the Kremlin.
We note that Juergen Habermas, mentor to both Hans Hermann-Hoppe and Palantir CEO Alex Karp was head of the Max Planck Institute for 12 years. We seriously doubt that any “anti-fascist” would be allowed to head such an institution.
Germany Plots with the Kremlin by T.H. Tetens; Henry Schuman [HC]; 1953; p. 231.
. . . . Though we are powerless at present, we have nonetheless never permitted ourselves to be disarmed spiritually and scientifically. German scholars are working unremittingly in Germany as well as abroad on great scientific plans for the future. Favorable circumstances enabled us to keep alive the great research organization of the Kaiser Wilhelm Institute through a change of name. First-class scientists are working in the fields of interplanetary navigation (“Raumschiff fahrt”), chemistry and on cosmic rays. Our scientists, unhampered in their work, have sufficient time and are planning day and night for Germany’s future. It is the German spirit (“Geist”) that creates modern weapons and that will bring surprising changes in the present relationship of forces. . . .
side 1 & 2 are the same (side 2)
@TC,John, Tom–
OK, the error is fixed. Both sides 1 and 2 of 770 are good to go.
Thanks! (Haste Maketh Waste!)
Best,
Dave
There’s a ‘civil war’ of sorts taking place within the bitcoin community between the Wall Street-friendly folks that want to turn it into a regulated, fully-legal entity vs the crypto-anarchists and Libertarians that form the base of the bitcoin and want bitcoin to liberate humanity from the tyranny of central banking and fiat currency. Its the suits vs the kooks! So something worth watching once the smoke clears is what happens to the concentrated bitcoin holdings of all those big, early investors that hold a huge % of the total bitcoins that will ever exists, many of whom are presumably hardcore philosophical backers of the Libertarian economics. If the suits end up winning and bitcoin turns its back on destiny could that be the event that finally encourages some selloffs by the concentrated core of quasi-anonymous bitcoin barons:
Don’t forget, in the cryptocurrency civil war, you don’t have to choose between the suits and the kooks. You can, and should, choose the underdog:
Dogecoin wins the cryptocurrency battles one superior meme at a time so it’ll be extra interesting to see what dumping deflation in the hope of cutting down long-term transaction fees does do Dogecoin’s meme-magic. Either way, it’s a long war.
As the MtGox debacle is demonstrating, dangerous mistakes can be rather costly. But as the article below points out, technical mistakes like the MtGox bug are relatively easy to fix. There are bigger bugs in bitcoin and they aren’t simply coding errors
If you check out the comments to this article there’s fun little history lesson in the comment written by David D. Friedman, the crypto-anarcho-capitalist son of famous unperson Milton Friedman and father of Seasteader-in-chief Patri Friedman. The comment is a reminder that the organized far-right and associated thinktanks have been pining for private currencies for quite a while:
The cato piece about competing private currencies that David Friedman linked to was written in 1982. And sure enough, it’s only 32 years later and we’re almost living in cryptocurrency nirvana! Let’s hope his other paleo-libertarian futurist predictions are just as accurate.
And the hits keep coming! Bitcoin is now suffering a massive denial-of-service attack, but with a twist: Someone’s botnet is applying the same “transaction malleability” technique that brought down MtGox, but instead of just hitting MtGox this bot network is malforming all sorts of bitcoin transactions simultaneously! As a consequence, we’re learning that it wasn’t just MtGox that needed to update their software:
So it doesn’t look like this latest attack is going to result in the actual loss of bitcoins like what took place on MtGox (because MtGox had an automated system that got tricked). But it does look like a number of bitcoin exchanges are going to be rendered unusable until they get this fixed, including major exchanges like Bitstamp. And who knows how many other kinds of bitcoin-related software will have to be updated too.
The exchange operators are probably correct, however, that a fix shouldn’t be too hard to implement over time and that this doesn’t spell the doom of bitcoin. It’s just been a really really bad couple of weeks. But this latest denial of service attack sure is ominous coming just a day after the MtGox reminded the world that this vulnerability exists because it’s a reminder that bitcoin’s vulnerabilities aren’t limited to the the theoretical vulnerabilities inherent in its distributed architecture (like the 51% attack or selfish-miners attack). There’s also the vulnerabilities that might randomly arise simply through improper implementation of software that’s running on top of the bitcoin software.
MtGox’s problems, and now Bitstamp’s problems, arose primarily due to flaws in their software and protocols. And the same could be true for any other exchange in the future or any other bitcoin app. You can defend against theoretical vulnerabilities but trying to identify and correct random bugs in future version of bitcoin-related software or just plain old human error isn’t really possible. This is why the irreversibility of bitcoin transactions could become a growing problem.
So today’s attack is likely just another temporary annoyance for the bitcoin industry, but just imagine, in the future, if multiple popular bitcoin exchanges get hit by something causing bogus transactions but on a much larger scale. There’s no clear way to reverse an event like that so could something like that kill bitcoin? Pretty please?
http://venturebeat.com/2014/02/12/new-jersey-slaps-mit-bitcoin-hackers-with-subpoena-and-theyre-fighting-back/view-all/
New Jersey slaps MIT Bitcoin hackers with subpoena — and they’re fighting back
February 12, 2014 10:02 AM
Eric Blattberg
The MIT students behind Bitcoin mining program Tidbit won the “most innovative” award at a recent hackathon.
But they will soon face a ruling from another kind of judge: one employed by the state of New Jersey.
In early December, a few weeks after the hackathon, the New Jersey division of consumer affairs issued a subpoena to 19-year-old Tidbit developer Jeremy Rubin. The subpoena demanded he turn over everything related to Tidbit: all versions of the source code, all Bitcoin wallets associated with Tidbit, all agreements and communications with third parties, the name and IP addresses of everyone who mined Bitcoins using Tidbit, and so on. It explicitly asked for “all documents and correspondence concerning all breaches of security and / or unauthorized access to computers” by Tidbit.
(Disclosure: I’ve known Rubin for several years through mutual connections, though we’ve never maintained regular contact.)
The student hackers bill Tidbit as an alternative to display advertising: With Tidbit, websites could let their visitors help them mine Bitcoins instead of serving up ads. While there are other remote mining solutions, Tidbit is the first project that seeks to replace advertising revenue with Bitcoin mining.
New Jersey hasn’t accused Rubin or Tidbit of a crime, but the language in the subpoena reads much like the state’s computer fraud act, which carries some stiff penalties.
Last year, New Jersey alleged that E‑Sports Entertainment (ESEA), a competitive gaming company based in New York, embedded malicious code in its anti-cheating software. The software reportedly enabled ESEA to monitor 14,000 subscribers’ computers and also hijacked their computing power to mine Bitcoins worth around $3,750. Following New Jersey’s investigation, the company agreed to a $1 million settlement to avoid a prolonged legal battle.
Several of the formal written requests posed to Rubin suggest the state believes Tidbit may similarly violate consumers’ rights.
A proof of concept
As for the information New Jersey is demanding from the team, it isn’t going to get the bulk of it, because most of it doesn’t exist.
A bit about Bitcoin
Bitcoin is a digital “cryptocurrency” that exists outside central financial institutions. Every Bitcoin transaction is automatically transcribed on the “block chain,” a shared public ledger supported by a worldwide network of Bitcoin miners. In exchange for their computational power, miners sometimes earn blocks of Bitcoin, although those chances grow slimmer as the network of Bitcoin miners grows.
Tidbit remains a proof of concept: No one has ever used the program to mine Bitcoins or any other virtual currency.
Although 98 percent of Tidbit’s infrastructure is in place, it isn’t ready for production use, according to the developers. They intentionally left out the final interaction (with Bitcoin pooling service P2Pool) while they worked on a set of terms and conditions. That’s why they were so surprised when New Jersey came knocking.
“We were served right before finals,” Rubin told VentureBeat. “I think what was hardest is that I, and perhaps most MIT students, just want to build, make, and tinker towards a better future.”
Faced with a daunting legal challenge, a stressed Rubin sought help from the Electronic Frontier Foundation (EFF). The technology law nonprofit readily agreed to assist Rubin and his peers.
“These are college kids, and they’ve got this thing hanging over their heads,” Hanni Fakhoury, an EFF staff attorney representing Tidbit, told VentureBeat in an interview. “During the middle of their finals, they had to take time off to deal with the subpoena.”
After negotiating a few extensions, Rubin’s lawyers filed an official complaint in late January. To quash the “unconstitutional” subpoena, Tidbit is taking New Jersey to court.
Bitcoin mining through the browser
Tidbit instructions
Tidbit instructions
Rubin and three classmates initially developed Tidbit in 48 hours for Node Knockout 2013, a Node.js programming competition held November 11 to 13. With a snippet of embedded code, Tidbit could enable websites to tap into visitors’ computers and borrow CPU cycles to mine Bitcoin. In exchange, the sites would remove display advertising for those who opt-in.
“We’re hoping that Tidbit can completely replace ad revenue,” wrote Tidbit developer Oliver Song on the Node Knockout site late last year.
Tidbit uses the Stratum protocol, which would enable websites to get paid based on total work contributed to the mining pool rather than total Bitcoins mined. But in its current form, Tidbit still isn’t very economical: If people ran Tidbit for a full day, they might each generate around a cent in revenue for a website, but their personal electricity costs would be much higher.
To improve Tidbit’s performance, Song said the team wanted to integrate WebGL and run computations on the graphics processing unit (GPU). He also proposed support for cryptocurrencies that are easier to mine, like Litecoin. An early December email sent to the Tidbit mailing list (and obtained by VentureBeat) confirmed Litecoin support as a key goal for the beta release, which the team had planned for early February.
New Jersey complicated those plans.
Tidbit vs. New Jersey
Rubin v. New Jersey
With help from the EFF, Tidbit has moved to quash the subpoena in New Jersey state court. Tidbit’s representatives argue the state has no personal jurisdiction over Rubin because he’s not a New Jersey resident, and Tidbit has no direct involvement in New Jersey — the source code isn’t stored there, and it’s not targeting New Jersey consumers in any way. New Jersey has no right to regulate out-of-state Internet activity, said EFF staff attorney Hanni Fakhoury.
“This is one of those rare circumstances where the common sense explanation also matches the legal argument,” he told us.
Not surprisingly, New Jersey disagrees.
“The state feels confident that its issuance of a subpoena in this matter will be found to be entirely legitimate, for reasons that will be detailed in its forthcoming opposition to Tidbit’s motion to quash,” Neal Buccino, a spokesperson for the New Jersey division of consumer affairs, told VentureBeat. He declined to comment further, citing the ongoing nature of the investigation.
If the court upholds the subpoena, Rubin’s lawyers have requested he receive protection under the fifth amendment, which states the no one should be compelled to be a witness against himself in a criminal case.
“He should be given immunity from criminal prosecution because the state is basically asking him to incriminate himself,” said Fakhoury.
The court is expected to set a hearing for late February where the judge will make a determination. In the meantime, Rubin and his peers are trying to focus on their studies.
“Dealing with this subpoena has put an undue amount of stress on me and my colleagues,” Rubin told us. “To have our progress be hindered by such a subpoena definitely hurt our team morale.”
Rubin declined to comment on whether they intend to move forward with Tidbit. Fakhoury seems to think they’re interested in forming a startup, however.
“I would imagine that they’d want to make this something more formalized,” he said. “After all, they won an award at the hackathon for a reason. But everything is going to basically be on hold until the subpoena is dealt with.”
Fakhoury feels confident that Tidbit has “presented the best argument,” but noted that it’s impossible to predict a judge’s determination. “Any lawyer who will give you his chances is a bad lawyer,” he said.
Phishing for evidence
Even if the subpoena is dismissed, the Tidbit case represents a worrying disparity between the tech community and government regulators. With its investigation, New Jersey is trying to protect its populace, but Tidbit never even launched a functional product.
The court should — and likely will — declare this subpoena unconstitutional and unenforceable, as Rubin’s lawyers have requested. But that won’t erase the time and resources it cost Rubin and his classmates, who should have been working toward that beta release, not battling a state regulator.
The subpoena and accompanying interrogatories issued to Rubin demonstrate that the people working for New Jersey’s division of consumer affairs have made little effort to understand what Tidbit’s software actually does. With their broad demands, they’ve placed the burden of the investigation on some college students — and they’ve done so before the students’ software is even fully functional.
Let’s hope the New Jersey court is smarter than the consumer affairs division.
Awwwwwwww...Silk Road 2.0 just got hit with the same “transaction malleability” attack that took down MtGox and Bitstamp, losing all the coins in escrow. Or at least that’s what’s being claimed. Others aren’t so sure. Either way, Silk Road 2.0 just got looted
Bitcoin: so bad even the real world looks good in comparison:
One of the fun things about the collapse of MtGox is that we don’t really know if the bitcoin world became more or less unequal because we don’t how many different parties were exploiting the “transaction malleability” bug. Was it just one person or a free for all? The 850,000 stolen bitcoins dwarf the 144,000 bitcoins the FBI seized from Silk Road and are a pretty substantial chunk of the ~12 million bitcoins in circulation so far. Might we have a new bitcoin prince of thieves somewhere out there?
Wheels within kleptomaniacal wheels:
Here’s one more reason why Wall Street should be pretty excited about getting into the bitcoin business: shared values:
Here we go again:
“A staunch person who believes in the gold standard says bitcoin is valueless and ultimately a Ponzi scheme, and people who didn’t dig gold but really got bitcoin would say that this is ridiculous, it’s just a dumb metal...We don’t need to fight. We can coalesce.” That quote from the article below inadvertently captures the essence of the situation
Interesting times for Bitcoin: The cryptocurrency plunged to $275 over the weekend before bouncing back over $300. And at one point a seller put in a sale order to 26,000 bitcoins, dropping the price from $317 to $300 in two seconds:
Leveraged-buyers to the rescue? That’s how BTC Solutions CEO Adam O’Brien saw it (he might be biased) Still, it is somewhat notable that we had a single seller tank the market, but only temporarily while buyers swarmed. Does that mean Bitcoin may have found its price floor? Perhaps. And it’s possible that the big seller was also buying on the dip too as O’Brien suggested. Although, if you make inferences based on the “26,000 bitcoin” size of the sale, that big seller may not be in the market for more bitcoins:
Was the the FBI the secret seller of those 26,000 bitcoins it seized last year? Well, they auctioned off 30,000 bitcoins seized by Silk Road back in June (with Bitcoin enthusiast Tim Draper buying all of them) but there was a lot more where that came from given the FBI’s 144,000 haul. So who knows, maybe it was FBI or some other random seller that chose 26,000 just for fun (or maybe to psyche out the market). Either way, the ongoing concentration of bitcoin wealth combined with the emergence of bitcoin buying on margin means it should be very interesting to see where Bitcoin goes from here.
This isn’t exactly the best news for Bitcoin populists: KnCMiner, one of the largest manufacturers of specialized bitcoin mining machines, is pulling out of the hardware sales business due, in part, to a drop off in buyers. Instead, KnCMiner is going into full-time mining for itself. As the company co-founder says below, “We’re seeing a complete change in the industry...It’s accelerated out of the garage and the homes, to the small businesses, to the large data centers, and now you’ve got to have a mega data center for it to be profitable”:
Remember e‑Gold, the early attempt at creating a digital gold and silver backed currency? Well it’s back and this time it’s state-backed! Well, not precisely. But it looks like Texas Governor Greg Abbott just signed into law an attempt to create a privately operated Texas-backed gold depository intended to rival the Federal Reserve Bank of New York’s vault. The idea is that depositors will be able to write checks against their accounts to other gold accounts which could, in theory, allow these accounts to act as a metal-backed currency to challenge the dollar. At least that’s what the bill’s backers are hoping for:
Oh boy this is going to be interesting. So private “depository agents” (gold dealers) can accept gold on the state’s behalf, set up accounts, and virtually move gold deposits around the system (in effect, creating e‑gold). But they won’t have to actually move their gold to a super-guarded giant gold vault somewhere in Texas. No, these same private entities will be allowed to set up their own depositories and store the gold there:
And, again, these deposits are all state-backed, but they’ll be held in private depositories scattered all over Texas. Depositories that will presumably be full of gold from all over the world if this scheme takes off. The people of Texas had better hope the contents of the private depositories are fully insured. The full faith and credit of the golden state of Texas just might depend on it.
Also, if you’re looking for a place to park your cash, gold is an obvious option, but have you considered investing in high-performance power tool manufacturers? Maybe you should.