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Bit[coin]burg II

Dave Emory’s entire life­time of work is avail­able on a flash dri­ve that can be obtained here. (The flash dri­ve includes the anti-fas­cist books avail­able on this site.)

COMMENT: Fol­low­ing our posts on Silk Road and Bit­coin, we explore the phe­nom­e­non of bicoin against the “shut­down” milieu of the GOP, itself inex­tri­ca­bly linkd with the ele­ments sur­round­ing and pro­mot­ing Edward Snow­den. Review­ing pre­vi­ous points of infor­ma­tion:

Alleged mas­ter­mind of the Silk Road online clan­des­tine funding/merchandising net­work, Ross Ulbricht is a devo­tee of Ron Paul and the Lud­wig von Mis­es school of social and eco­nom­ic the­o­ry.

Exem­pli­fy­ing the appar­ent­ly well mean­ing but mis­in­formed young cit­i­zens attract­ed to Paul and the von Mis­es school, Ulbricht appears to exem­pli­fy the adage that “The [Silk?] road to Hell is paved with good inten­tions.”

Ron Paul is a hard­core fas­cist, joined at the hip with Nazi and white-suprema­cist ele­ments. The Lud­wig von Mis­es insti­tute is explic­it­ly anti-demo­c­ra­t­ic and is joined at the hip with the neo-Con­fed­er­ate move­ment, which jus­ti­fies African-Amer­i­can slav­ery and ratio­nal­izes a future seces­sion by the South­ern states.

Indica­tive of Ulbricht’s super­fi­cial­i­ty is his state­ment that; “Just as slav­ery has been abol­ished most every­where, I believe vio­lence, coer­cion and all forms of force by one per­son over anoth­er can come to an end. . . .” 

In addi­tion to the von Mis­es Insti­tute’s jus­ti­fi­ca­tion of African-Amer­i­can slav­ery pri­or to the Civ­il War, Wal­ter Block (and aide to Ron Paul and a Lud­wig von Mis­es Insti­tute schol­ar) has craft­ed what he calls “vol­un­tary slav­ery.”

We view “vol­un­tary slav­ery” as the ulti­mate col­lat­er­al­ized debt oblig­a­tion.

Alone among sov­er­eign nations, Ger­many has rec­og­nized bit­coin as legal ten­der, fol­low­ing on the the­o­ry of Friedrich von Hayek of the Autri­an school of eco­nom­ic the­o­ry, dis­sem­i­nat­ed from (among oth­er insti­tu­tions) the Lud­wig von Mis­es Insti­tute.

Cred­it for cre­at­ing this vir­tu­al cur­ren­cy is gen­er­al­ly giv­en to one Satoshi Nako­mo­to. An arti­cle at Fast­com­pa­ny hypoth­e­sizes that three indi­vid­u­als named Neal J. King, Charles Bry and Vladimir Oks­man are the true orig­i­na­tors of bit­coin. (Lis­ten­ers are emphat­i­cal­ly encour­aged to read the entire linked arti­cle to flesh out their under­stand­ing of Adam Penen­berg’s argu­ment.)

Of more than pass­ing inter­est under the cir­cum­stances is the fact that all three of the hypo­thet­i­cal cre­ators of bit­coin work for a com­pa­ny called Lan­tiq.

Lan­tiq is a Ger­man-based firm that has evolved from Siemens. Siemens spun-off Infi­neon A.G. (a semi­con­duc­tor firm). Then Infi­neon and Gold­en Gate Cap­i­tal cre­at­ed Lan­tiq.

Gold­en Gate Capi­tol was formed by alum­ni of Bain Cap­i­tal, Mitt Rom­ney’s firm.

In addi­tion to links to the death squad-man­i­fest­ing El Sal­vado­ran jun­ta of the 1980’s, Bain has links to the milieu of the late bil­lion­aire, Howard Hugh­es, as well as the milieu of Bebe Rebo­zo’s bank­ing oper­a­tions. The lat­ter appears to have had links to the Bor­mann cap­i­tal net­work.

If we were going to express this in bib­li­cal phrase­ol­o­gy, it would go some­thing like this: “And so Siemens begat Infi­neon. And Bain Cap­i­tal begat Gold­en Gate Cap­i­tal. Infi­neon did lie with Gold­en Gate Cap­i­tal. And thus did Infi­neon beget Lan­tiq.”

Among the points to be con­sid­ered here are:

  • Siemens func­tions as some­thing of a quar­ter­mas­ter for Ger­man intel­li­gence-the BND, the suc­ces­sor to the Rein­hard Gehlen spy out­fit. It is inex­tri­ca­bly linked with BND, as well as with the Bor­mann net­work.
  • With Lan­tiq hav­ing evolved direct­ly from Siemens, Lan­tiq’s pos­si­ble con­nec­tions with BND should be care­ful­ly weighed.
  • Lan­tiq’s links with Gold­en Gate Cap­i­tal, run by alum­ni from Mitt Rom­ney’s Bain Cap­i­tal, war­rants con­sid­er­a­tion that both Lan­tiq and GGC may be Under­ground Reich, Bor­mann enti­ties.
  • We have not­ed that Infi­neon A.G. is a lead­ing pro­duc­er of TPM chips, which were cit­ed by the Ger­man press as a back­door source for NSA snoop­ing. We won­dered if that TPM back­door might actu­al­ly be a BND back­door?
  • Neal J. King has denied Penen­berg’s mus­ings. He may, of course, be doing so hon­est­ly. IF, how­ev­er, bit­coin’s devel­op­ment was in con­junc­tion with BND, denial would be pro for­ma intel­li­gence method­ol­o­gy.
  • “Tech­no-Lib­er­tar­i­ans” have sug­gest­ed that bit­coin might be an alter­na­tive to the dol­lar as the reserve cur­ren­cy of choice. Their views echo Ronald Rea­gan’s state­ment that “Gov­ern­ment isn’t the solu­tion to your prob­lems. Gov­ern­ment is the prob­lem.”
  • The dol­lar’s sta­tus as a reserve cur­ren­cy has been under crit­i­cal review as a result of the “shut­down cri­sis,” pro­voked by the same polit­i­cal forces engener­ing Eddie the Friend­ly Spook’s “op.”
  • Bit­coin has been sub­ject to some of the same wild swings in val­ue as main­stream cur­ren­cies.
  • Those swings in val­ue appear to have been delib­er­ate­ly engi­neered by what one observ­er terms “the shark squad.” It is unclear who they might be. One won­ders if the shark squad might be Ger­man, per­haps the BND. The manip­u­la­tion of bit­coin is ille­gal in for­mal cap­i­tal mar­kets. Those machi­natins are, to an extent, rem­i­nis­cent of the maneu­ver­ing that occurred on 11/22/1963 and on 9/11/2001.
  • Peter Thiel is a big fan of bit­coin.

“World to Wash­ing­ton: ‘Real­ly?’ ” by Serge Schme­mann; The New York Times; 10/20/2013.

Some of the more alarmed and out­raged voic­es rose from Chi­na, the coun­try hold­ing the largest share of Amer­i­can debt. One com­men­tary from Chi­na that attract­ed atten­tion in Europe was by Liu Chang of Xin­hua, the offi­cial Chi­nese news agency, who called not only for the diver­si­fi­ca­tion of Beijing’s huge dol­lar hold­ings, but for a “de-Amer­i­can­ized world.” That, he wrote, would include “new inter­na­tion­al reserve cur­ren­cy that is to be cre­at­ed to replace the dom­i­nant U.S. dol­lar, so that the inter­na­tion­al com­mu­ni­ty could per­ma­nent­ly stay away from the spillover of the inten­si­fy­ing domes­tic polit­i­cal tur­moil in the Unit­ed States.”

From Athens — where an Amer­i­can default could have turned an unend­ing eco­nom­ic cri­sis into cat­a­stro­phe — Nikos Kon­stan­daras wrote in the dai­ly Kathimeri­ni that Aristo­phanes, the mas­ter of ancient Greek com­e­dy, “would have loved the idea of a group of law­mak­ers exploit­ing their posi­tion to abol­ish the state they are sworn to serve. For Greece’s ancient trage­di­ans, the vain indif­fer­ence, the igno­rance of dan­gers caused by our char­ac­ter and actions, was famil­iar mate­r­i­al.” The ques­tion, he added, was whether Amer­i­ca is “the scene of com­e­dy or tragedy.”

When the deal was reached in Wash­ing­ton last Wednes­day, the world exhaled. But nobody believed it was over. “There is noth­ing more tem­po­rary than the defeats and vic­to­ries in Wash­ing­ton,” wrote Le Figaro, the Paris dai­ly. Even if civ­il ser­vants are back at work for now, “America’s finan­cial cred­i­bil­i­ty is dam­aged and its demo­c­ra­t­ic sys­tem has revealed to the world its gap­ing block­ages.”

The ques­tions abroad will con­tin­ue; answers, how­ev­er, are hard to find.

“The Fed­er­al Gov­ern­men­t’s Reactin to Bit­coin Is an Acknowl­edge­ment of the Dol­lar’s Vul­ner­a­bil­i­ty” b Peter Fer­rara; Forbes; 8/25/2013.

EXCERPT: The Sen­ate Home­land Secu­ri­ty and Gov­ern­ment Affairs Com­mit­tee has pri­vate alter­na­tive cur­ren­cies in its crosshairs.  The Chair­man, Sen­a­tor Tom Carp­er (D‑DE) and Rank­ing Mem­ber, Sen­a­tor Tom Coburn (R‑OK), sent a joint let­ter to sev­en fed­er­al agen­cies last week ask­ing for feed­back and pol­i­cy pro­pos­als for reg­u­la­tion of vir­tu­al cur­ren­cies, like Bit­coin.

Bit­coin has surged in val­ue and pop­u­lar­i­ty recent­ly as it has come to be embraced by more users across the plan­et.  In a world of gov­ern­ment fiat cur­ren­cies, Bit­coin is an admirable inno­va­tion.  But in a sense it extends the cur­rent cur­ren­cy frame­work, as opposed to rev­o­lu­tion­iz­ing it.  It was cre­at­ed out of less than thin air when cybergeeks who saw it as a nat­ur­al pro­gres­sion of the mod­ern web spec­i­fied the cre­ation and dis­tri­b­u­tion of the new cyber­cur­ren­cy in a paper post­ed on the Inter­net in 2008.  The vir­tu­al cur­ren­cy was then launched into oper­a­tion in 2009. . . .

. . . . The econ­o­my is already bare­ly grow­ing, if infla­tion is cur­rent­ly mea­sured cor­rect­ly.  If the Fed fur­ther desta­bi­lizes the econ­o­my, the dol­lar will prob­a­bly fur­ther decline, as who will want to buy dol­lars to invest in a declin­ing econ­o­my only con­tin­u­ous­ly threat­ened with even high­er tax and reg­u­la­to­ry bur­dens?  But if the Fed redou­bles on its cur­rent poli­cies, the dol­lar will prob­a­bly decline fur­ther under the threat of even­tu­al infla­tion.  Who will want to hold dol­lars under this increas­ing­ly nar­row­ing conun­drum?  That is when the world may turn to some­thing dif­fer­ent.

It is not Bit­coin that will arise as the alter­na­tive glob­al reserve cur­ren­cy, because as dis­cussed above, it has no inher­ent val­ue either, so it is sub­ject to wide swings in mar­ket val­ue too.  The real threat to the dol­lar is a dif­fer­ent, pri­vate, alter­na­tive cur­ren­cy that can arise, that is based in real com­modi­ties with inher­ent val­ue. . . .

“The Anti­so­cial Net­work” by Paul Krug­man; The New York Times; 4/14/2013.

Bitcoin’s wild ride may not have been the biggest busi­ness sto­ry of the past few weeks, but it was sure­ly the most enter­tain­ing. Over the course of less than two weeks the price of the “dig­i­tal cur­ren­cy” more than tripled. Then it fell more than 50 per­cent in a few hours. Sud­den­ly, it felt as if we were back in the dot-com era.

The eco­nom­ic sig­nif­i­cance of this roller coast­er was basi­cal­ly nil. But the furor over bit­coin was a use­ful les­son in the ways peo­ple mis­un­der­stand mon­ey — and in par­tic­u­lar how they are mis­led by the desire to divorce the val­ue of mon­ey from the soci­ety it serves.

What is bit­coin? It’s some­times described as a way to make trans­ac­tions online — but that in itself would be noth­ing new in a world of online cred­it-card and Pay­Pal trans­ac­tions. In fact, the Com­merce Depart­ment esti­mates that by 2010 about 16 per­cent of total sales in Amer­i­ca already took the form of e‑commerce.

So how is bit­coin dif­fer­ent? Unlike cred­it card trans­ac­tions, which leave a dig­i­tal trail, bit­coin trans­ac­tions are designed to be anony­mous and untrace­able. When you trans­fer bit­coins to some­one else, it’s as if you hand­ed over a paper bag filled with $100 bills in a dark alley. And sure enough, as best as any­one can tell the main use of bit­coin so far, oth­er than as a tar­get for spec­u­la­tion, has been for online ver­sions of those dark-alley exchanges, with bit­coins trad­ed for nar­cotics and oth­er ille­gal items.

But bit­coin evan­ge­lists insist that it’s about much more than greas­ing the path for illic­it trans­ac­tions. The biggest declared investors in bit­coins are the Win­klevoss broth­ers, wealthy twins who suc­cess­ful­ly sued for a share of Face­book and were made famous by the movie “The Social Net­work” — and they make claims for the dig­i­tal prod­uct sim­i­lar to those made by gold­bugs for their favorite met­al. “We have elect­ed,” declared Tyler Win­klevoss recent­ly, “to put our mon­ey and faith in a math­e­mat­i­cal frame­work that is free of pol­i­tics and human error.”

The sim­i­lar­i­ty to gold­bug rhetoric isn’t a coin­ci­dence, since gold­bugs and bit­coin enthu­si­asts — bit­bugs? — tend to share both lib­er­tar­i­an pol­i­tics and the belief that gov­ern­ments are vast­ly abus­ing their pow­er to print mon­ey. At the same time, it’s very pecu­liar, since bit­coins are in a sense the ulti­mate fiat cur­ren­cy, with a val­ue con­jured out of thin air. Gold’s val­ue comes in part because it has non­mon­e­tary uses, such as fill­ing teeth and mak­ing jew­el­ry; paper cur­ren­cies have val­ue because they’re backed by the pow­er of the state, which defines them as legal ten­der and accepts them as pay­ment for tax­es. Bit­coins, how­ev­er, derive their val­ue, if any, pure­ly from self-ful­fill­ing prophe­cy, the belief that oth­er peo­ple will accept them as pay­ment.

How­ev­er, let’s leave that strange­ness on one side, along with the pecu­liar “min­ing” process — actu­al­ly a process of com­plex cal­cu­la­tion — used to add to the bit­coin stock. Instead, let’s focus on the two huge mis­con­cep­tions — one prac­ti­cal, one philo­soph­i­cal — that under­lie both gold­bugism and bit­bugism.

The prac­ti­cal mis­con­cep­tion here — and it’s a big one — is the notion that we live in an era of wild­ly irre­spon­si­ble mon­ey print­ing, with run­away infla­tion just around the cor­ner. It’s true that the Fed­er­al Reserve and oth­er cen­tral banks have great­ly expand­ed their bal­ance sheets — but they’ve done that explic­it­ly as a tem­po­rary mea­sure in response to eco­nom­ic cri­sis. I know, gov­ern­ment offi­cials are not to be trust­ed and all that, but the truth is that Ben Bernanke’s promis­es that his actions wouldn’t be infla­tion­ary have been vin­di­cat­ed year after year, while gold­bugs’ dire warn­ings of infla­tion keep not com­ing true.

The philo­soph­i­cal mis­con­cep­tion, how­ev­er, seems to me to be even big­ger. Gold­bugs and bit­bugs alike seem to long for a pris­tine mon­e­tary stan­dard, untouched by human frailty. But that’s an impos­si­ble dream. Mon­ey is, as Paul Samuel­son once declared, a “social con­trivance,” not some­thing that stands out­side soci­ety. Even when peo­ple relied on gold and sil­ver coins, what made those coins use­ful wasn’t the pre­cious met­als they con­tained, it was the expec­ta­tion that oth­er peo­ple would accept them as pay­ment.

Actu­al­ly, you’d expect the Win­klevoss­es, of all peo­ple, to get this, because in a way mon­ey is like a social net­work, which is use­ful only to the extent that oth­er peo­ple use it. But I guess some peo­ple are just both­ered by the notion that mon­ey is a human thing, and want the ben­e­fits of the mon­e­tary net­work with­out the social part. Sor­ry, it can’t be done.

So do we need a new form of mon­ey? I guess you could make that case if the mon­ey we actu­al­ly have were mis­be­hav­ing. But it isn’t. We have huge eco­nom­ic prob­lems, but green pieces of paper are doing fine — and we should let them alone.

“Bit­coin’s Vast Over­val­u­a­tion Appears Par­tial­ly Caused by (Usu­al­ly) Ille­gal Price-Fix­ing” by Rick Falkvinge; Falkvinge.net; 9/2013.

EXCERPT: . . . . In secu­ri­ties trad­ing, the expres­sion paint­ing the tape is used for any trad­ing activ­i­ty that is intend­ed to manip­u­late the trad­ing sta­tis­tics (price, vol­ume, oth­er met­rics) rather than to exe­cute a trade. It is high­ly ille­gal, jail-time ille­gal, in all civ­i­lized parts of the world. The expres­sion comes from the ancient price tick­er tape, and how it could be “paint­ed” with false data.

I’m going to illus­trate how this Shark Squad has oper­at­ed recent­ly to fix the price in lur­ing oth­er traders of their mon­ey and hik­ing the price. (While lur­ing oth­er traders of their mon­ey is part of the game, there are legal and ille­gal ways to do so. Insid­er trad­ing, for exam­ple, is one of the bet­ter-known ille­gal ones – our legal frame­work gen­er­al­ly fights hard to cre­ate a lev­el play­ing field for all traders.) The squad is a small team of col­lab­o­rat­ing traders.

In Step 1 of the cycle, the shark squad makes a large buyup, caus­ing prices to sky­rock­et. Illus­trat­ed here, the buyup at 10:00 Euro­pean time on Thurs­day Sep­tem­ber 12, 2013, from USD 135 to 145.9, an instant 8‑percent increase. This caus­es a lot of down­ward-bet­ting traders to flush out.

In step 2, the shark squad revers­es this trend by caus­ing a slow pull­back, caus­ing those who bought in greed to sell off in pan­ic as the mar­ket has reversed and caus­ing more stop loss­es to trig­ger and peo­ple to sell to the squad‘s bids. Note that I write caus­es a pull­back – this is not a nor­mal mar­ket pull­back. Let’s look at the big pic­ture first as dis­played by the site bit­coin­wis­dom, which dis­plays much more detail than most sites. You can see the pull­back over Thurs­day lunch-to-after­noon (blue box, right half), and there is also a dis­play of the cur­rent order book (yel­low box) and the recent trans­ac­tions (red box) which we will look at short­ly. Note how the recent trans­ac­tions in the indi­cat­ed red box are all red, red, red, indi­cat­ing a mas­sive sell­off – there’s nobody buy­ing at all on cur­so­ry inspec­tion, only sell­ing, and a lot of sell­ing.

How­ev­er, let’s take a clos­er look at the minute details of the recent trans­ac­tions in the bot­tom right cor­ner, dis­play­ing time, price, and amount of the last bit­coin trans­ac­tions:

Do you see a pat­tern here? All the trans­ac­tions are for exact­ly one bit­coin, and the trans­ac­tions are spaced exact­ly five sec­onds apart. This pat­tern can con­tin­ue for hours, a claim ver­i­fi­able by check­ing the MtGox trans­ac­tion his­to­ry. This is not mar­ket trad­ing; this is one (1) auto­mat­ed process intend­ed to give the illu­sion of many dif­fer­ent play­ers pan­ic-sell­ing. Fur­ther­more, let’s take a clos­er look at the order book:

Do you see the num­bers below and to the left of the cur­rent big red price? That’s the bid order book. That’s the cur­rent buy orders. Note how the cur­rent­ly exe­cut­ing buy orders are at 7–8 bit­coin each, placed just 0.0001 (!) bit­coin apart in price, evad­ing detec­tion on most sites. This is coor­di­nat­ed with the sell­ing per­son. Those buy orders keep replen­ish­ing as the sales orders keep tick­ing one bit­coin per five sec­onds; they are coor­di­nat­ed. This is one per­son in the Shark Squad sell­ing to anoth­er per­son in the Shark Squad, to give the illu­sion of mar­ket down­ward pres­sure and sell vol­ume.

Both of these activ­i­ties – split­ting an order to give the illu­sion of many trades, and trad­ing with­in a group to give the appear­ance of increased vol­ume and a cer­tain mar­ket direc­tion – are con­sid­ered paint­ing the tape and high­ly ille­gal. (I’m going to stop writ­ing “usu­al­ly ille­gal” now, as it’s ille­gal in prac­ti­cal­ly all coun­tries where you can read this.)

So, how can I state with cer­tain­ty that the sell­er and buy­er are con­spir­ing? Based on only this screen­shot, the evi­dence could be improved, but hav­ing watched the mar­ket at this lev­el for some two months and seen how these kind of buy and sell orders fol­low each oth­er very close­ly, it’s obvi­ous there is talk­ing and coor­di­nat­ing with­in a team ded­i­cat­ed to fab­ri­cat­ing a mar­ket impres­sion. Nor­mal­ly, you would need to see how they moved in lock­step to iden­ti­fy this coop­er­a­tion, but it’s par­tic­u­lar­ly vis­i­ble in this snap­shot. (Besides, the vis­i­ble order-split­ting is enough to con­sti­tute tape-paint­ing entire­ly on its own.)

Here’s the kick­er, then: we have observed that the buy orders being exe­cut­ed – the ones with 7, 7, 7, 7, 7, 8, 8, etc. bit­coin at the moment at a price of 137.64xyz – belong to this shark squad. What hap­pens when a trad­er sees the (false) image of a mas­sive sell­off going on, and sells in pan­ic? Well, he’s sell­ing his bit­coin into those buy orders to the shark squad, at the price they have set. Here, the price is 137.64. So the obvi­ous ques­tion is, what hap­pens next? Well, a fab­ri­cat­ed price hike, of course, trick­ing oth­er traders to buy those same bit­coin at high­er prices from the coor­di­nat­ed shark squad. We’ll be return­ing to when and how that hap­pens in step 4.

In Step 3, the shark squad puts up an enor­mous bid­wall – so large it’s effec­tive­ly a lid on the mar­ket – and lure oth­er traders to sell into it, intend­ing to sell the bought bit­coin at a high­er price after the next fab­ri­cat­ed hike. There is plen­ty of fake trad­ing going on into these bid­walls as vis­i­ble in step 2. We can also see that this lure is effec­tive – look at the trans­ac­tion his­to­ry of bit­coin around these walls, and you can eas­i­ly find trades of hun­dreds of coins amid the fake trad­ing. Or per­haps it’s the shark squad sell­ing to itself again with the trans­ac­tions in the hun­dreds. Hard to know – most like­ly a mix of in-group trad­ing and oth­ers being lured to sell. In any case, unsus­pect­ing traders are sell­ing into the shark squad‘s bid­walls. These lure­walls are eas­i­ly iden­ti­fi­able in the close-up mar­ket his­to­ry, as well as when they were removed:

In Step 4, final­ly, the price is hiked to new highs and the shark squad begins offload­ing its booty at high­er prices, and the cycle repeats with them trad­ing in-between them­selves to give the appear­ance of mar­ket activ­i­ty. That price hike hap­pened at 15:25 Thurs­day, Euro­pean time, up to 145 USD for this cycle, as also vis­i­ble in the image above.

This cycle has repeat­ed very vis­i­bly at least five times in the past weeks, and like­ly since much ear­li­er in a vari­ant ver­sion:

This – this ille­gal activ­i­ty – is very trou­bling for the bit­coin ecosys­tem. . . .

“Dark Wal­let: A Rad­i­cal Way to Bit­coin” by Michael del Castil­lo; The New York­er; 9/24/2013.

EXCERPT: . . . . Wil­son believes Bit­coin should remain the back­bone of a sep­a­rate econ­o­my that under­mines the government’s abil­i­ty to col­lect tax­es and to con­trol the val­ue of currency—not be sub­sumed into the main­stream econ­o­my.

“The state is basi­cal­ly allowed because we have all cho­sen to use these cer­tain insti­tu­tions to chan­nel our activ­i­ty and com­merce,” he told me. “But when we are enabled, through alter­na­tive means and tech­nolo­gies, to chan­nel our com­merce as we will, chan­nel our pro­duc­tion as we will, the state sim­ply dis­ap­pears.”

Not every­one agrees, of course, that soci­ety would ben­e­fit from the dis­ap­pear­ance of gov­ern­ments. Wil­son used the Lib­er­a­tor to make the point that the gov­ern­ment shouldn’t reg­u­late the flow of infor­ma­tion; he wants to use Bit­coin to help build an econ­o­my out­side of the government’s reach.

But his ide­ol­o­gy, tak­en to its log­i­cal con­clu­sion, would also leave ser­vices like roads, libraries, fire fight­ing, and polic­ing in the hands of the pri­vate sector—whose inter­ests may not be aligned, Wilson’s crit­ics argue, with those of the pub­lic at large.

Wil­son knows that he could see blow­back for his stance against the foun­da­tion: as a self-described “cryp­to-anar­chist,” per­haps he shouldn’t be so con­cerned with who is or isn’t deter­min­ing the currency’s future. And if the U.S. gov­ern­ment attempts to reg­u­late the cur­ren­cy, which seems like­ly, Wil­son will also find him­self once again in direct oppo­si­tion to the gov­ern­ment. . . .

“For­mer Pay­Pal CEO Signs Off on Bit­con” by Sam Bid­dle; Val­ley­Wag; 5/16/2013.

EXCERPT: Before he was one of the most pow­er­ful VCs in the world, Peter Thiel cre­at­ed Pay­Pal, which deals in real dol­lars and boomed accord­ing­ly. If you think this might make him wary of unreg­u­lat­ed inter­net fun­ny mon­ey, you’re wrong: $2,000,000 wrong.
Thiel’s Founders Fund just wrapped a $2 mil­lion round for Bit­Pay, which helps oth­er com­pa­nies accept Bit­coin payments—namely for things “like elec­tron­ics, pre­cious met­als, and oth­er low-mar­gin prod­ucts,” says TechCrunch.

The cash infu­sion comes only a week after Fred Wil­son led a $5 mil­lion round in anoth­er com­pa­ny that does pret­ty much the exact same thing, and at a time when the most pow­er­ful Bit­coin exchange in the world is get­ting its ass kicked by the US gov­ern­ment. [This is a ref­er­ence to Silk Road–D.E..] . .











3 comments for “Bit[coin]burg II”

  1. Absolute­ly stun­ning: Bit­coins for polit­i­cal assas­si­na­tion. More at link:


    “Dark Web” Expos­es $75,000 Bit­coin-Based Boun­ty For Bernanke’s Assas­si­na­tion
    Sub­mit­ted by Tyler Dur­den on 11/18/2013 11:32 ‑0500

    As Silk Road emerged from the “dark-web”, oth­er sites have appeared offer­ing ser­vices that are frowned upon by most. As Forbes reports, per­haps the most-dis­turb­ing is “The Assas­si­na­tion Mar­ket” run by a pseud­ny­mous Kuwa­batake San­juro. The site, remark­ably, a crowd­fund­ing ser­vice that lets any­one anony­mous­ly con­tribute bit­coins towards a boun­ty on the head of any gov­ern­ment official–a kind of Kick­starter for polit­i­cal assas­si­na­tions. As Forbes reports, NSA Direc­tor Alexan­der and Pres­i­dent Oba­ma have a BTC40 boun­ty (~$24,000) but the high­est boun­ty — per­haps not entire­ly sur­pris­ing — is BTC 124.14 (~$75,000) for none oth­er than Ben Bernanke. San­juro’s rai­son d’e­tre is chill­ing, “as a few politi­cians gets offed and they real­ize they’ve lost the war on pri­va­cy, the killings can stop and we can tran­si­tion to a phase of peace, pri­va­cy and lais­sez-faire.”

    Via Forbes,

    As Bit­coin becomes an increas­ing­ly pop­u­lar form of dig­i­tal cash, the cryp­tocur­ren­cy is being accept­ed in exchange for every­thing from socks to sushi to hero­in. If one anar­chist has his way, it’ll soon be used to buy mur­der, too.


    For now, the site’s rewards are small but not insignif­i­cant. In the four months that Assas­si­na­tion Mar­ket has been online, six tar­gets have been sub­mit­ted by users, and boun­ties have been col­lect­ed rang­ing from ten bit­coins for the mur­der of NSA direc­tor Kei­th Alexan­der and 40 bit­coins for the assas­si­na­tion of Pres­i­dent Barack Oba­ma to 124.14 bitcoins–the largest cur­rent boun­ty on the site–targeting Ben Bernanke, chair­man of the Fed­er­al Reserve and pub­lic ene­my num­ber one for many of Bitcoin’s anti-bank­ing-sys­tem users. At Bitcoin’s cur­rent rapid­ly ris­ing exchanges rate, that’s near­ly $75,000 for Bernanke’s would-be killer.


    Sanjuro’s gris­ly ambi­tions go beyond rais­ing the funds to bankroll a few polit­i­cal killings. He believes that if Assas­si­na­tion Mar­ket can per­sist and gain enough users, it will even­tu­al­ly enable the assas­si­na­tions of enough politi­cians that no one would dare to hold office. He says he intends Assas­si­na­tion Mar­ket to destroy “all gov­ern­ments, every­where.”

    “I believe it will change the world for the bet­ter,” writes San­juro, who shares his han­dle with the name­less samu­rai pro­tag­o­nist in the Aki­ra Kuro­sawa film “Yojim­bo.” (He tells me he chose it in homage to cre­ator of the online black mar­ket Silk Road, who called him­self the Dread Pirate Roberts, as well Bit­coin inven­tor Satoshi Nakamo­to.) ”Thanks to this sys­tem, a world with­out wars, drag­net panop­ti­con-style sur­veil­lance, nuclear weapons, armies, repres­sion, mon­ey manip­u­la­tion, and lim­its to trade is firm­ly with­in our grasp for but a few bit­coins per per­son. I also believe that as soon as a few politi­cians gets offed and they real­ize they’ve lost the war on pri­va­cy, the killings can stop and we can tran­si­tion to a phase of peace, pri­va­cy and lais­sez-faire.”


    Like oth­er so-called “dark web” sites, Assas­si­na­tion Mar­ket runs on the anonymi­ty net­work Tor, which is designed to pre­vent any­one from iden­ti­fy­ing the site’s users or San­juro him­self.


    As for tech­ni­cal­ly prov­ing that an assas­sin is respon­si­ble for a target’s death, Assas­si­na­tion Mar­ket asks its killers to cre­ate a text file with the date of the death ahead of time, and to use a cryp­to­graph­ic func­tion known as a hash to con­vert it to a unique string of char­ac­ters.


    “I am a cryp­to-anar­chist,” San­juro con­cludes. “We have a bright future ahead of us.”

    Read more here...

    Of course — this will like­ly be anoth­er rea­son for TPTB to ban bit­coin...

    The reporter con­tact­ed the Secret Ser­vice and the FBI to ask if they’re inves­ti­gat­ing Assas­si­na­tion Mar­ket, and both declined to com­ment.

    Posted by Swamp | November 18, 2013, 10:15 am
  2. Read more: http://www.businessinsider.com/the-history-of-bitcoin-theft-2013–11#ixzz2l7aB7ywn

    If Bit­coin Is So Secure, Why Have There Been Dozens of Bit­coin Bank Rob­beries And Mil­lions In Loss­es?
    Jim Edwards Nov. 17, 2013, 8:38 AM 22,940 64

    One of the most pow­er­ful myths about Bit­coin — the encrypt­ed, inde­pen­dent online cur­ren­cy that’s become a huge trend in recent months — is that Bit­coin is “secure.”

    Bitcoin.org, the semi-offi­cial voice of the Bit­coin com­mu­ni­ty, says “the whole sys­tem is pro­tect­ed by heav­i­ly peer-reviewed cryp­to­graph­ic algo­rithms like those used for online bank­ing. No orga­ni­za­tion or indi­vid­ual can con­trol Bit­coin, and the net­work remains secure even if not all of its users can be trust­ed.”

    But Bit­coin is not secure.

    There have been dozens of rob­beries of Bit­coin banks and exchanges, and mil­lions of dol­lars have been lost.

    To put that in per­spec­tive, if rob­bers were rou­tine­ly walk­ing into brick-and-mor­tar banks and tak­ing mil­lions of dol­lars, with zero con­se­quences and no arrests, it would make huge head­lines every day. The media would be on high alert for the next heist.

    But on the Inter­net, Bit­coin thefts worth hun­dreds of thou­sands and mil­lions of dol­lars hap­pen on a week­ly basis and no one cares.

    Here are a few recent exam­ples of Bit­coin rob­beries, and then we’ll explain why Bit­coin is not 100% “secure.”

    The Chi­nese Bit­coin GBL went offline ear­li­er this month, tak­ing $4.1 mil­lion in users’ accounts with it.
    In Aus­tralia, a Bit­coin exchange run by an 18-year-old user named “Trade­fortress,” claims to have lost $1 mil­lion of his users’ mon­ey.
    Also in Novem­ber, a Czech exchange, Bitcash.cz, declared that hack­ers had made off with an undis­closed amount stored in its users’ Bit­coin wal­lets.
    In Sep­tem­ber, Bit­floor announced that it had lost $250,000 in hacked Bit­coins.
    Last year $228,845 was stolen from a trad­ing plat­form known as Bit­coini­ca.

    Per­haps the biggest heist was pulled off by the U.S. gov­ern­ment. After Ross Ulbricht, the alleged “Dread Pirate Roberts” who ran the online drugs mar­ket Silk Road was arrest­ed by the FBI, author­i­ties report­ed they had seized near­ly $29 mil­lion in Bit­coins con­trolled by him. Techdirt lat­er not­ed that some of the mon­ey may have belonged to users who did busi­ness on his site, and not all the busi­ness trans­act­ed there was ille­gal.

    Don’t hold you breath for refunds.

    Here’s a web­site devot­ed to list­ing dozens of Bit­coin rob­beries through 2012. In 2011.

    Ars Tech­ni­ca report­ed on this descrip­tion of what it is like to be the vic­tim of Bit­coin theft:

    The user known as “allinvain” is a long-time con­trib­u­tor to the Bit­coin forums. He says he’s been min­ing Bit­coins for over a year, and had amassed a for­tune of 25,000 BTC. This was a mod­est sum a few months ago, when Bit­coins were worth pen­nies, but over the last two months the val­ue of a Bit­coin sky­rock­et­ed to around $20, which means 25,000 BTC would have been worth half a mil­lion dol­lars. “I remem­ber watch­ing the price like a hawk,” he wrote.

    And then dis­as­ter struck. “I just woke up to see a very large chunk of my bit­coin bal­ance gone,” he wrote. “Nee­dles [sic] to say I feel like I have lost faith in bit­coin.” He spec­u­lat­ed that a Win­dows secu­ri­ty flaw may have allowed the cul­prit to gain access to his dig­i­tal wal­let. “I feel like killing myself now,” he said.

    Bit­coin is vul­ner­a­ble in the same way any oth­er online asset is vul­ner­a­ble: Pass­words can be stolen or guessed, accounts can be hacked. Most of the thefts involve hack­ing into users’ accounts. Bit­floor’s descrip­tion of how it lost $250,000 in Bit­coin is typ­i­cal. A hack­er found an unen­crypt­ed copy of the cod­ed keys to users’ wal­lets:

    Last night, a few of our servers were com­pro­mised. As a result, the attack­er gained access­es to an unen­crypt­ed back­up of the wal­let keys (the actu­al keys live in an encrypt­ed area). Using these keys they were able to trans­fer the coins. This attack took the vast major­i­ty of the coins Bit­Floor was hold­ing on hand. As a result, I have paused all exchange oper­a­tions.

    mon­ey on fire

    In fact, Bit­coin defend­ers say this is exact­ly the point. Bit­coin isn’t inse­cure — you are!

    Here’s Bitcoin.org’s answer to that very ques­tion on secu­ri­ty:

    Although these events are unfor­tu­nate, none of them involve Bit­coin itself being hacked, nor imply inher­ent flaws in Bit­coin; just like a bank rob­bery does­n’t mean that the dol­lar is com­pro­mised. How­ev­er, it is accu­rate to say that a com­plete set of good prac­tices and intu­itive secu­ri­ty solu­tions is need­ed to give users bet­ter pro­tec­tion of their mon­ey, and to reduce the gen­er­al risk of theft and loss.

    The idea that Bit­coin is “secure” even though it can be stolen is a bit like say­ing that gold is “secure,” even if it is being spir­it­ed away by gang­sters. They can’t destroy the gold, after all.

    What they real­ly mean is that Bit­coins them­selves can­not be copied or faked, like coun­ter­feit bills. Any­one receiv­ing a Bit­coin can be con­fi­dent that it is real and valu­able.

    But that aspect of its secu­ri­ty — the per­ma­nence of the val­ue in the trans­ac­tion — turns out to be Bit­coin’s biggest secu­ri­ty flaw. Once a Bit­coin trans­ac­tion has been approved by both sides, it can­not be reversed with­out the per­mis­sion of the receip­i­ent. So when hack­ers engi­neer the trans­ac­tion, the cash is gone for­ev­er.

    That’s not what hap­pens with tra­di­tion­al cur­ren­cy. In the U.S., if your bank is robbed or even if the bank goes out of busi­ness, the FDIC backs up the lost deposits and replaces your mon­ey, up to $250,000 per bank.

    And then there is this new the­o­ry from Cor­nell Uni­ver­si­ty which posits that there is an incen­tive in the sys­tem for users to coop­er­ate and hoard their coins until they con­trol a major­i­ty of avail­able Bit­coins. At that point, the cur­ren­cy col­laps­es.

    Bit­coin is only as “secure” as the fal­li­ble, ill-inten­tioned users who open accounts, cre­ate pass­words and cov­et their fel­lows’ wal­lets.

    Which is to say, not espe­cial­ly secure.

    Posted by Vanfield | November 19, 2013, 11:32 am
  3. http://arstechnica.com/tech-policy/2011/06/bitcoin-the-decentralized-virtual-currencyrisky-currency-500000-bitcoin-heist-raises-questions/

    A risky cur­ren­cy? Alleged $500,000 Bit­coin heist rais­es ques­tions
    A long­time Bit­coin user claims that a hack­er has stolen half a mil­lion dol­lars …

    by Tim­o­thy B. Lee — June 15 2011, 9:41am PDT

    Pho­to illus­tra­tion by Aurich Law­son

    Bit­coin, the decen­tral­ized vir­tu­al cur­ren­cy whose val­ue has sky­rock­et­ed in recent weeks, faced a key test Mon­day as a vet­er­an user report­ed that Bit­coins worth hun­dreds of thou­sands of dol­lars had been stolen from his com­put­er.

    Ars Tech­ni­ca was unable to inde­pen­dent­ly ver­i­fy the user’s sto­ry, and he did not respond to our request for an inter­view. But whether the sto­ry is true or not, it high­lights a major dis­ad­van­tage of the cur­ren­cy’s much-tout­ed lack of inter­me­di­aries. Bypass­ing mid­dle­men frees users from gov­ern­ment med­dling and bank fees. But it also deprives them of the ben­e­fits those inter­me­di­aries pro­vide, includ­ing pro­tec­tion against theft and fraud.

    As we report­ed last week, Bit­coin’s key sell­ing point is its clever peer-to-peer scheme for record­ing trans­ac­tions. Rather than rely­ing on a cen­tral­ized data­base, the Bit­coin pro­to­col allows any com­put­er on the Inter­net to par­tic­i­pate in the pay­ment clear­ing process. At the end of each 10-minute round, one of the nodes is cho­sen at ran­dom to receive a pay­ment for his con­tri­bu­tion to the process. For this rea­son, par­tic­i­pat­ing in the clear­ing process is known as “min­ing” Bit­coins.
    Wiped out

    The user known as “allinvain” is a long-time con­trib­u­tor to the Bit­coin forums. He says he’s been min­ing Bit­coins for over a year, and had amassed a for­tune of 25,000 BTC. This was a mod­est sum a few months ago, when Bit­coins were worth pen­nies, but over the last two months the val­ue of a Bit­coin sky­rock­et­ed to around $20, which means 25,000 BTC would have been worth half a mil­lion dol­lars. “I remem­ber watch­ing the price like a hawk,” he wrote.

    And then dis­as­ter struck. “I just woke up to see a very large chunk of my bit­coin bal­ance gone,” he wrote. “Nee­dles [sic] to say I feel like I have lost faith in bit­coin.” He spec­u­lat­ed that a Win­dows secu­ri­ty flaw may have allowed the cul­prit to gain access to his dig­i­tal wal­let. “I feel like killing myself now,” he said.

    Some oth­er mem­bers of the Bit­coin forum expressed skep­ti­cism about allinvain’s sto­ry, but most believed it. Anoth­er mem­ber of the Bit­coin forums chimed in to report that he’d lost a small­er amount of mon­ey to the same Bit­coin address.

    Forum mem­bers dis­cussed sev­er­al options, includ­ing call­ing the police and ask­ing MtGox, the pop­u­lar Bit­coin cur­ren­cy exchange, to block the funds from being con­vert­ed into more tra­di­tion­al cur­ren­cies.
    “An expen­sive test case”

    Ars Tech­ni­ca talked to Gavin Andresen, the leader of the Bit­coin soft­ware project, about the inci­dent. Andresen said that it would be dif­fi­cult to con­firm the authen­tic­i­ty of the report. “All Bit­coin trans­ac­tions are broad­cast on the net­work,” he said. “So if some­one want­ed to claim they lost a bunch of bit­coins, they could claim that any trans­ac­tion on the net­work belonged to them.”

    Still, the kind of attack described in the post is cer­tain­ly pos­si­ble. Andresen says he always empha­sizes that Bit­coin is an exper­i­ment, and not (yet) for the faint of heart. “Unfor­tu­nate­ly, this is an expen­sive test case for the guy who lost the Bit­coins,” he said.

    Andresen says that there’s cur­rent­ly no good infra­struc­ture for track­ing down stolen Bit­coins. And, he said, there may nev­er be a good mech­a­nism for revers­ing unau­tho­rized trans­ac­tions because Bit­coin trans­ac­tions are designed to be irre­versible. “Once a trans­ac­tion hits the net­work, you can gen­er­ate oth­er trans­ac­tions that depend on that trans­ac­tion,” he said. “So Bit­coin trans­ac­tions get tan­gled up fair­ly quick­ly.”

    Even if it were tech­ni­cal­ly fea­si­ble, adding a mech­a­nism for dis­put­ing trans­ac­tions would cre­ate headaches of its own, because that mech­a­nism could be used fraud­u­lent­ly as well. “Mer­chants like that there are no charge­backs” with Bit­coin trans­ac­tions, Andresen said.

    Right now, then, Bit­coin is a “work in progress” only suit­able for the most tech­ni­cal­ly savvy users. Will Bit­coin even­tu­al­ly be ready for the mass­es? Andresen thinks so. He told Ars that the Bit­coin pro­to­col is flex­i­ble enough to sup­port clients that han­dle secu­ri­ty in a more sophis­ti­cat­ed way. For exam­ple, a future client could split a user’s pri­vate key between his PC and his cell phone. As long as no one com­pro­mised both devices simul­ta­ne­ous­ly, the user’s bit­coin would be safe.
    The ben­e­fits of inter­me­di­aries

    Still, a finan­cial sys­tem with­out inter­me­di­aries has some inher­ent down­sides. Split­ting a Bit­coin user’s pri­vate key between a com­put­er and a cell phone makes it hard­er to com­pro­mise, but it also cre­ates new risks. For exam­ple, unless the user backs up his cell phone sep­a­rate­ly from his com­put­er, los­ing the phone would mean los­ing the Bit­coins. A mul­ti­fac­tor authen­ti­ca­tion scheme also can’t pro­tect a user who is tricked into autho­riz­ing a pay­ment to the wrong par­ty.

    Indeed, the tra­di­tion­al bank­ing sys­tem offers con­sumers pro­tec­tions against fraud that are hard to repli­cate in any sys­tem with­out inter­me­di­aries. For exam­ple, fed­er­al reg­u­la­tions lim­it con­sumer lia­bil­i­ty for fraud­u­lent cred­it card trans­ac­tions to $50, and some banks offer cards that reduce the con­sumer’s lia­bil­i­ty to zero.

    And because lia­bil­i­ty for fraud falls most­ly on the banks and cred­it card net­works, these par­ties have invest­ed in infra­struc­ture to detect and deter fraud. They set min­i­mum stan­dards for get­ting a mer­chant account to exclude fly-by-night com­pa­nies. They care­ful­ly mon­i­tor their cus­tomers’ trans­ac­tions and inves­ti­gate any that look sus­pi­cious. And with the help of law enforce­ment, they aggres­sive­ly pros­e­cute fraud, both to recov­er lost funds and to deter oth­er poten­tial crim­i­nals.

    Of course, some anti-theft and anti-fraud ser­vices can be built on top of the extant Bit­coin infra­struc­ture. For exam­ple, Clearcoin holds pay­ments in escrow for sell­ers until buy­ers receive their orders, mak­ing Bit­coin pur­chas­es less risky. And ser­vices like MyBit­coin hold Bit­coins on their cus­tomers’ behalf. Pre­sum­ably, these “online wal­let” ser­vices can invest more heav­i­ly in secur­ing their sys­tems than indi­vid­ual users would.

    But this is just to say that the dis­ad­van­tages of an inter­me­di­ary-free bank­ing sys­tem can be mit­i­gat­ed by rein­tro­duc­ing inter­me­di­aries. And if most users are inter­act­ing with Bit­coin via inter­me­di­aries like ClearCoin and MyBit­coin, it’s not obvi­ous how many of the sys­tem’s much-tout­ed advan­tages are pre­served. If your Bit­coins are held by a third par­ty like MyBit­coin, then a gov­ern­ment can force MyBit­coin to freeze your account just as it can force a tra­di­tion­al bank to do so.

    In any event, Andresen seems unfazed by the heist and con­fi­dent of Bit­coin’s long-term via­bil­i­ty. “These prob­lems will get solved,” he told Ars, argu­ing that the Bit­coin com­mu­ni­ty sim­ply has­n’t grown large enough to throw seri­ous engi­neer­ing resources at them. And the broad­er Bit­coin com­mu­ni­ty seems to agree. The mar­ket price of a Bit­coin has been sta­ble over the last 48 hours at just under $20.

    Posted by Vanfield | November 19, 2013, 11:35 am

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