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What is Bitcoin?

Bitcoin is a digital crypto-currency with no single point of failure due to its decentralized peer-to-peer architecture. The source code is publicly available and changes to the reference Bitcoin client are made via concensus within the community. Advantages of Bitcoin include irreversible transactions (i.e. no possibility of chargebacks as with credit cards), pseudo-anonymous, limited and fixed inflation, near instant transactions, multi-platform, no double-spend and little to no barriers to entry and more. It was created by an anonymous person known as Satoshi Nakamoto. Find out more at WeUseCoins.com.

Bitcoin Latest News

Bitcoin market may be financing North Korea after sanctions - New York Post


New York Post

Bitcoin market may be financing North Korea after sanctions
New York Post
But I'm told the nations that put those sanctions in place are worried North Korea is getting around them by using the bitcoin market to get secret financing. And I'm wondering if that's the reason China, which seems to be on board in pressuring North ...

and more »

Posted on 25 September 2017 | 9:12 pm

Bitcoin Trading at 85% Premium in Zimbabwe - Priced at $7200 - CoinTelegraph


CoinTelegraph

Bitcoin Trading at 85% Premium in Zimbabwe - Priced at $7200
CoinTelegraph
The use of Bitcoin in Zimbabwe has grown exponentially as the government has begun to stop all credit card payments and has restricted the flow of cash into and out of the country. People wishing to make payments for vehicles have been forced to use ...

and more »

Posted on 25 September 2017 | 9:08 pm

Ukrainian Central Banker: Bitcoin Is 'Definitely Not a Currency'

A Ukrainian official described bitcoin as a risky investment and a vehicle for fraud but downplayed any systemic concerns about the cryptocurrency.

Posted on 25 September 2017 | 3:35 pm

Why China's Ban On Bitcoin May Be Temporary - Forbes


Forbes

Why China's Ban On Bitcoin May Be Temporary
Forbes
China's ban on Bitcoin and other cryptocurrencies may be temporary, to appease international agencies and hardcore communist members ahead of the upcoming Communist Party convention. China's big government and banks cannot tolerate Bitcoin.

and more »

Posted on 25 September 2017 | 3:01 pm

This US Senate candidate accepts donations in bitcoin — and gives away AR-15 rifles - Wichita Eagle


This US Senate candidate accepts donations in bitcoin — and gives away AR-15 rifles
Wichita Eagle
In reality, a payment processor linked to his campaign's website instantly converts any bitcoin donations into dollars to simplify campaign finance reporting. But for Petersen, a former Libertarian presidential candidate who's running for U.S. Senate ...

and more »

Posted on 25 September 2017 | 2:42 pm

Nigerian Central Bank Director: Cryptocurrency Wave 'Cannot Be Stopped'

A representative of the Central Bank of Nigeria opened up about his views on cryptocurrency at a technology-specific conference this week.

Posted on 25 September 2017 | 2:35 pm

CarbonX and ConsenSys Put P2P Carbon Credit Trading on the Blockchain

carbontrade.jpg

Carbon credits trading (also known as “cap and trade”) as a means to help mitigate the effects of global climate change has long been advocated by environmentalists fighting one of the most intransigent environmental challenges of the 21st century.

Now ConsenSys and CarbonX Personal Carbon Trading Inc. have stepped up to enable the first-ever peer-to-peer carbon credit trading platform, built on the Ethereum blockchain.

CarbonX Personal Carbon Trading Inc. is principally a Tapscott family enterprise, with CEO and founder William (Bill) Tapscott, co-founder and CMO Jane Ricciardelli, chair of the board of directors Don Tapscott, and director and board member Alex Tapscott.

Bill Tapscott is a software engineer who has founded and co-founded a number of tech startups including IntelliOne, a cell phone geo-location and traffic data processing company; Maptuit, a navigation and optimization software company in transportation logistics; and Mountain Lake Software, a custom software development company with a strong financial services practice.

Tapscott told Bitcoin Magazine:

“My interest in carbon trading and clean technologies was piqued by being on the Investment Committee of the Toronto Atmospheric Fund, a City of Toronto venture fund with a mandate to develop greenhouse gas reduction projects and companies.

“CarbonX will engage millions of people in fighting climate change by materially rewarding responsible behaviors toward the personal consumption of carbon. CarbonX will achieve this by investing in carbon reduction projects and re-casting generated offsets as ERC20 tokens on an Ethereum Blockchain.

“CarbonX’s ultimate goal is to become the global exchange for peer-to-peer personal carbon trading.”

Don Tapscott, chair of the CarbonX board of directors said in a post:

“... climate change is arguably the world’s most daunting challenge. Virtually every scientist now agrees that the debate is over. Rising average surface temperatures combined with rapidly expanding deserts, melting Arctic sea ice caps and ocean acidification now provide unequivocal evidence that human activities are fundamentally altering the Earth’s climate.”

ConsenSys was one of the first startups to build practical applications for the Ethereum blockchain. Their mission is to create simplified and automated decentralized applications (dApps) to facilitate peer-to-peer transactions and exchanges, principally on the Ethereum blockchain.

In a statement, ConsenSys founder and Ethereum co-founder Joseph Lubin said:

“As one of the fastest growing companies working on Ethereum, a platform that is poised to reformat how the world organizes itself, ConsenSys is committed to enabling technologies to be built that will facilitate attention to externalities like pollution and critical new foundations like sustainability.

“CarbonX has the potential to incentivize behavior that contributes to environmental sustainability, and is an excellent example of Ethereum-based technologies poised to make positive change,” added Lubin.

The CarbonX Token CxT

The CarbonX initiative will buy carbon credits from environmentally sustainable practices like ridesharing and will invest in carbon reduction projects like tree planting and convert this value to Ethereum ERC20 tokens known as CxT tokens.

CarbonX will be announcing a formal token launch in the near future. CxT tokens will be distributed through an open-loop-style loyalty rewards program. The CxTs will then be tradeable on the CarbonX platform and be able to be exchanged for carbon-friendly goods and services, other reward program points or other digital currencies.

For verification, CarbonX will use industry-standard carbon offsets like the REDD and VCS offsets (for example, to apply to ridesharing) and will convert these into CxT tokens.

Investments in carbon reduction projects that will generate offsets will use government protocols, such as those developed by the Ontario provincial government, for example.

“The CxTs will be awarded by enterprises who encourage ridesharing, and brands/retailers who wish to feature products that are carbon-friendly. We will provide guidelines, and consumers/users will be able to track overall performance. In the example of rideshare, we plan to work with companies like Luum and their clients to incent carbon-friendly behaviors. There are many ways we can boost awareness and responsibility for personal action in the fight,” explained Tapscott.

Well-known environmentalist Richard Sandor, chair and CEO of Environmental Financial Products and founder of the Chicago Climate Exchange, has endorsed the CarbonX initiative, saying:

“Blockchain technology has the potential to further expand the applications of market-based mechanisms to help solve environmental concerns. I am pleased to support CarbonX as another positive step towards transparency, accountability and lower transaction costs.”

The post CarbonX and ConsenSys Put P2P Carbon Credit Trading on the Blockchain appeared first on Bitcoin Magazine.

Posted on 25 September 2017 | 1:28 pm

Interview With Roger Ver: His Plans to Start a New Libertarian Country

rogerverland.jpg

Imagine a country where you could live free without a central government telling you who to be, what to do and how to act. Roger Ver does, and he is inviting people to join him on a ground level in plans for creating a libertarian utopia.

The early Bitcoin investor and voluntaryist (someone who advocates nonviolent strategies to achieve a free society) took the stage last week at Nexus Conference, a three-day event in Aspen hosted by the cryptocurrency platform Nexus Earth, to announce Free Society, a project aimed at raising money to organize the venture.

Ver, who is founding the project along with Olivier Janssens, another early Bitcoin investor, stated he has already raised $100 million, but hopes to raise plenty more.

As Ver explained to a surprised audience, who settled into their seats expecting a talk about Bitcoin Cash, he is currently negotiating with different countries to purchase sovereign land with the hope that fellow libertarians will begin populating the area in one to two years.

Bitcoin Magazine caught up with Ver in Aspen to learn more about his ambitious plans for a free country.   

Non-Country

Inspiration for the libertarian country or “non country,” as Ver called it, comes from David Friedman’s The Machinery of Freedom, a book that explores the idea of a society organized by private property, individual rights and voluntary cooperation.

Ver’s dream is to create a free society where people voluntarily abide by a set of rules they sign off on when purchasing a land title. “It will be a new experiment where it is the first time it’s been tried in the world,” he said.

The Bitcoin enthusiast hopes to raise more money for more land. “I think very realistically, we can raise half a billion dollars and maybe a billion dollars. If we have a billion dollars, we will have a lot more capital to play with for a bigger piece of land,” he said.

Right now, the seed funding comes from early Bitcoin and Ethereum adopters. “I’m one of them,” he said. He would not disclose who the others are, saying if they wanted to come forward, that was up to them.  

But the general idea was to open the door to the public. “We were planning to have an ICO, but the regulators have kind of gotten in the way of that at the moment. But basically, we are working out the details as to how people can participate directly,” he said.

Ver added that this type of project is only possible due to cryptocurrency. “Thanks to cryptocurrencies, now there is a way to fundraise for people all over the world who are interested in this. Myself and my other friends all have a fair amount of capital now because of cryptocurrency. Dying with a pile of money isn’t any fun, so let’s make the world a better place,” he said.

Search for Land

But before he can build out his libertarian paradise, Ver and his team need to find some land to buy. He doesn’t see that as being an issue though.

“We have approached a number of different governments already, and we have actually been really surprised at how eager they are. Governments love money, and so, we will have to negotiate the final details.”

Of course, they have criteria. “We want to have a seaport, we want to be geographically close to other economic powerhouses so we have trading partners. We don’t want to be out in the middle of nowhere,” he said, adding that something close to Europe or South America or parts of Asia would be best.   

Once they buy the land, the next step is putting the infrastructure in place. “When we auction off the land, we suspect a lot of the people who would be most interested in buying land will be development companies that will want to develop the land into big buildings,” he said.  

Governance

The concept of libertarianism revolves around the idea that order evolves spontaneously, rather than through some central authority pushing out arbitrary laws.

Still, for many, it can be hard to imagine how that might work exactly. How will the country resolve disputes? What if someone gets out of line?  

Right now, decisions are easy because so far only a handful of people are involved, said Ver. Otherwise, instead of laws, there will be guidelines similar to what someone might agree to before joining a condominium homeowner’s association.

“Everybody can do whatever they want within the guidelines, and they will be agreeing to the guidelines by the time they purchase in. There will not be a government. It will all be private institutions and private organizations,” he said.  

The idea is to purchase land from a government that will allow sovereign behavior. “We are guessing that the governments will still try saying things like, you can’t export drugs, you can’t have nuclear weapons and that sort of thing,” he said, adding, “I think the main answer is there isn’t going to be some centralized institution imposing these rules. That is what we are trying to escape.”

He also emphasized that there would be no taxes. People would need to raise money for roads and other projects on their own.

Who Will Live There?

What will people do for work in the country? “We suspect it will be a lot of people working on the internet,” said Ver, adding that he thinks 90 percent of the population will come from the blockchain and cryptocurrency space.

And will citizens be forced to use cryptocurrency? “People will be free to use whatever form of money they want,” said Ver. But whatever the case, he made it clear, the time to act was now. “Life is short,” he said. “We want to move quickly.”

The post Interview With Roger Ver: His Plans to Start a New Libertarian Country appeared first on Bitcoin Magazine.

Posted on 25 September 2017 | 1:20 pm

Miner Argument Continues Over Ethereum's Byzantium Economics

The question of how ethereum is incentivizing miners is developing ahead of an expected hard fork on the platform this month.

Posted on 25 September 2017 | 1:15 pm

Bitcoin's price is spiking by 7 percent as traders shake off China fears - CNBC


CNBC

Bitcoin's price is spiking by 7 percent as traders shake off China fears
CNBC
In addition, recent reports said regulators in China have ordered bitcoin exchanges to close hurt the digital currency's price. "In my opinion, the markets overreacted to the China news. In the short term, it was bad news, but long term the ...
Bitcoin is poppingBusiness Insider
Wait and Watch? Bitcoin Prices Hover Near Make or Break LevelCoinDesk
Bitcoin Trades Sideways As Investors Look To ChinaForbes
Benzinga -Seeking Alpha -Daily Reckoning
all 66 news articles »

Posted on 25 September 2017 | 12:40 pm

Neo ICO Token Wins Traders as China Worries Fade

A popular ICO token launched in China is showing signs of recovery, weeks after the country took moves to limit similar domestic activities.

Posted on 25 September 2017 | 11:01 am

Patientory’s Journey to Change Healthcare

Delivering a New Blockchain-Centric Patient Care Model

Blockchain healthcare company Patientory has been busy since Bitcoin Magazine first covered the organization in May.

The company, which is putting electronic medical records (EMRs) on an Ethereum-based blockchain for better security, has obtained funding and partnerships to help promote its concept. By the time it launches its enterprise solution, the company wants to give medical practitioners healthcare at their fingertips — and easy account settlement for patients and healthcare payers alike.

Patientory released its payment token, “PTOY,” on May 31. The three-day token sale raised $7.2 million from over 1,700 purchasers. The company is using the funding to launch its smart contract-based platform for EMR storage and patient payment processing.

“The healthcare system is fragmented,” explained Chrissa McFarlane, CEO of Patientory. As McFarlane pointed out, Patientory “really brings together the industry as a collective toward reducing costs and improving not only the U.S. healthcare infrastructure but the global healthcare ecosystem.”

Since its crowdsale, the company has focused on integrating with other networks to help build a decentralized ecosystem for healthcare participants. One of the most significant developments for Patientory came in late August when it announced its partnership with the Linux Foundation’s Hyperledger initiative.

Hyperledger follows the Linux Foundation’s model of building reference platforms for commonly-used technologies. What it did for Linux, it hopes to do for the blockchain. Just as there are multiple Linux distributions, the project will spawn a family of blockchain frameworks using code from a single reference platform, making it easier for the frameworks to interoperate with each other.

A key part of a smart contract-based platform is an oracle, an agent that derives information from a third-party information source; which Patientory will build to communicate with Hyperledger’s code.

But Hyperledger won’t be the group’s only such partnership.

“The future of the blockchain is that there will be multiple chains out there,” explained McFarlane. She expects to build oracles for those, too.

One of Patientory’s key goals is to integrate disparate processes in the healthcare system to produce end-to-end visibility.

“If we’re going to use the blockchain to really be the foundational layer for that interoperability, then the chains have to interact with each other and provide the same functionality,” McFarlane said.

The company is paying similar attention to payments integration. Blockchain-based digital cash network Dash has partnered with blockchain web services company BlockCypher to offer a grant program for organizations integrating their services. Patientory announced its participation in that program in August.

“Dash is purely digital cash, so we’re able to spearhead and accelerate the usage of digital currency for transactions in the health industry,” said McFarlane.

With this integration initiative, Patientory is focusing on healthcare payers. They can use the network for claims processing, finding patients securely and processing their claims transactions. Patients will also be able to use the system for settling payments.

Using the blockchain for payments between providers will drive efficiencies into a traditionally complex and bureaucratic system.

Patientory “decreases their transaction fees and overhead from an administrative level,” said McFarlane.

Patientory has been busy building relationships in other ways, too. McFarlane now chairs a blockchain working group; and July saw the company win an “innovation mention” in the #Patient2Consumer challenge organized by start-up network 1776 and the MedStar Institute for Innovation. Patientory is also active on the conference circuit and is involved in the Distributed: Health conference currently taking place in Nashville.

On the technical side, Patientory established its genesis block in July and launched its Alpha testnet.

Perhaps the biggest task facing the company now, though, is educating the market: It hopes to do so through the Patientory Foundation, the organization that orchestrated the crowdsale.

“A part of that at the Foundation level is to host events,” McFarlane said. “We promote the concept and providing an avenue for people to ask questions and learn about the process and how everything works in this space.”

The company is hoping to launch its enterprise solution and beta the 1.0 version of it by the end of this year. Its focus now is on proving its concept, scaling the platform and fostering adoption. The first half of 2017 may have been busy, but for Patientory, much is still to come.

The post Patientory’s Journey to Change Healthcare appeared first on Bitcoin Magazine.

Posted on 25 September 2017 | 9:52 am

Gibraltar Issues ICO Advisory Amid Drive Toward Blockchain Regulation

Gibraltar's financial watchdog has said it will soon put in place new regulations aimed to bring oversight to cryptocurrency exchanges.

Posted on 25 September 2017 | 9:26 am

Europe's Largest Port Launches Blockchain Research Lab

The Dutch port of Rotterdam, the biggest shipping hub in Europe, is opening a research lab devoted to blockchain technology.

Posted on 25 September 2017 | 8:00 am

Wait and Watch? Bitcoin Prices Hover Near Make or Break Level

The price of bitcoin may be headed toward a fork in the road, if current chart analysis is any indication.

Posted on 25 September 2017 | 7:00 am

Barclays Joins CLS Blockchain Consortium in Search of Swift Alternative

Barclays has become the latest major financial institution to join the foreign exchange-focused blockchain consortium CLS.

Posted on 25 September 2017 | 6:00 am

Japan's Regulators Are Putting Bitcoin Exchanges Under Heavy Surveillance - Fortune


Fortune

Japan's Regulators Are Putting Bitcoin Exchanges Under Heavy Surveillance
Fortune
Japan's financial watchdog will soon pay very close attention to the internal systems of exchanges for virtual currencies such as bitcoin. The country's Financial Services Agency (FSA) said Sunday that it would be putting exchanges under what The Japan ...
Japan's Bitcoin Exchanges Under Regulator Surveillance From OctoberCoinDesk
Japan's Regulator to Put Bitcoin Exchanges Under 'Full Surveillance'CryptoCoinsNews
Japanese Bitcoin Exchanges To Go Under 'Full Surveillance' Starting OctoberBitcoinist
The Japan Times
all 13 news articles »

Posted on 25 September 2017 | 5:36 am

Bitcoin: The Case For A $10000 Coin - Forbes


Forbes

Bitcoin: The Case For A $10000 Coin
Forbes
You've probably read it on a multitude of news outlets, but the decentralized virtual currency Bitcoin is on a seemingly unstoppable tear, rising over 54% in value the first two weeks of August alone. As of late August, its value was at $4,625 per coin ...
Will bitcoin become mainstream in a decade? ThroughBit founders believe soYourStory.com
You'll Be Shocked by How Much $10 Invested in Bitcoin in 2010 Is Worth TodayMadison.com

all 8 news articles »

Posted on 25 September 2017 | 4:20 am

FICO Patent Filing Hints at Plans for Bitcoin Exchange Monitoring

The company behind the FICO credit score system is looking at how to collect information from bitcoin exchanges, new public documents show.

Posted on 25 September 2017 | 4:00 am

Payment or Asset? Bitcoin's Limbo Is Leaving Merchants in the Middle - CoinDesk


CoinDesk

Payment or Asset? Bitcoin's Limbo Is Leaving Merchants in the Middle
CoinDesk
Meanwhile, after a flurry of bitcoin activity from merchants a couple of years ago, interest has dwindled. Several large retailers accepting bitcoin report that customer engagement is minimal. And regulatory uncertainty in most jurisdictions makes ...

Posted on 25 September 2017 | 2:12 am

Payment or Asset? Bitcoin's Limbo Is Leaving Merchants in the Middle

Is bitcoin more of a payment mechanism or an investment asset? A recent trial by a supermarket chain could shed light on the debate.

Posted on 25 September 2017 | 2:00 am

Vivid History: 'How Money Got Free' Is the Untold Story of Bitcoin

Early bitcoin entrepreneur Alex Waters reviews the latest book in the bitcoin canon – arguing Brian Eha's "How Money Got Free" is one of the best.

Posted on 24 September 2017 | 5:10 am

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Untangling Bitcoin: Why Russell Yanofsky Is Taking Apart Crypto's Oldest Code

One developer is quietly working on splitting up bitcoin's codebase – an effort aimed to give users more flexibility and developers more clarity.

Posted on 24 September 2017 | 4:30 am

Welcome to Bitcoin Country: Silk Road and the Lost Threads of Agorism

Silk Road and black markets? University of Dublin's Paul Ennis takes a dive into the kinds of sub-cultures bitcoin and cryptocurrencies enable.

Posted on 23 September 2017 | 5:00 am

Better in Byzantium? Ethereum Takes Baby Steps Toward a Privacy Boost

The upcoming "Byzantium" hard fork of ethereum will usher in new cryptographic procedures that should eventually pave the way for increased privacy.

Posted on 23 September 2017 | 4:00 am

Money Manager Josh Brown: 'ICOs Are Where The Frauds Will Take Place'

Josh Brown, the money manager and bitcoin bear-turned-bull, had some harsh words for initial coin offerings (ICOs) in a new blog post.

Posted on 22 September 2017 | 3:31 pm

EU Budget Amendments Call For Millions in Blockchain Funding

As many as four blockchain-related amendments, funding various initiatives, could find their way into the European Union's 2018 budget.

Posted on 22 September 2017 | 1:00 pm

SegWit2X and the Case for Strong Replay Protection (And Why It's Controversial)

BTC1replay.jpg

Come November, the remaining signatories of the “New York Agreement” (NYA) plan to deploy the “SegWit2X” hard fork to double Bitcoin’s block weight limit, allowing for up to 8 megabytes of block space. Since not everyone supports this hard fork, this could well “split” the Bitcoin network into two incompatible blockchains and currencies, not unlike Bitcoin and Bitcoin Cash (Bcash) did two months ago.

But this NYA hard fork is controversial and not only because it lacks consensus. It’s also controversial because of design choices made by the development team behind BTC1, the software client associated with the New York Agreement. Perhaps most importantly, this development team, led by Bloq CEO Jeff Garzik, has so far refused to implement replay protection, a measure that Bcash did take. Partly for this reason, at least one NYA signatory — Wayniloans — has backed out of the agreement.

So what is replay protection, why should BTC1 implement it … and why doesn’t it?

What Is Replay Protection? (And What Are Replay Attacks?)

Bitcoin could see another “split” by November. (It’s arguably more accurate to consider the “splitting” nodes and miners as an entirely new cryptocurrency with a new blockchain and token — not an actual split of Bitcoin itself.) For the purpose of this article, we’ll refer to the blockchain and currency that follows the current Bitcoin protocol as “Legacy Bitcoin” and “BTC.” The blockchain and currency that follows the New York Agreement hard fork is referred to as “SegWit2X” and “B2X.”

If this split happens, the two blockchains will be identical. All past transactions and (therefore) “balances” are copied from the Legacy Bitcoin blockchain onto the SegWit2X blockchain. Everyone who owns BTC will own a corresponding amount of B2X.

Without replay protection, new transactions will be equally valid on both chains as well. This means that these transactions can be copied or “replayed,” from one chain to the other — in other words, for them to happen on both. This is called a “replay attack.”

So, let’s say Alice holds BTC at the time of split, which means she also owns B2X after the split. Then, after the split, she wants to send BTC to Bob. So, she creates a transaction that spends BTC from one of her Legacy Bitcoin addresses to one of Bob’s Legacy Bitcoin addresses. She then transmits this transaction over the Legacy Bitcoin network for a Legacy Bitcoin miner to pick it up and include in a Legacy Bitcoin block. The payment is confirmed; all is good.

But this very same transaction is perfectly valid on the SegWit2X blockchain. Anyone — including Bob — can take Alice's Legacy Bitcoin transaction and also transmit it over the SegWit2X network for a miner to include in a SegWit2X block. (This can even happen by accident quite easily.) If this payment is also confirmed, Alice has inadvertently sent Bob not only BTC but also an equal amount of B2X.

And, of course, all of this is true in reverse as well. If Alice sends B2X to Bob, she might accidentally send him BTC as well. A lack of replay protection, therefore, is a problem for users of both chains. No one wants to accidentally send any money — not even if it was “free money.”

Technically, there are ways to “split” coins on both chains to ensure they can only be spent on one chain. This would, for example, require newly mined coins to be mixed into a transaction. Tiime-locks can also offer solutions. But this takes effort and is not easy, especially for average users — not to mention that many average users may not even know what’s going on in the first place.

To avoid this kind of hassle, at least one side of the split could add a protocol rule to ensure that new transactions are valid on one chain but not the other. This is called replay protection.

Why Should BTC1 Implement Replay Protection? (And Why Not Bitcoin Core?)

In case of a split, at least one side must implement replay protection. But many — Bitcoin Core developers and others — believe there’s only one viable option. It’s the splitting party — in this case BTC1 — that should do it.

There are several arguments for this.

First of all, it makes the most sense for BTC1 to implement replay protection because that requires the least effort. BTC1 is a new client that’s already implementing new protocol rules anyway, and it’s not very widely deployed yet. It would be relatively easy for BTC1 to include replay protection.

Meanwhile, it would not be sufficient for Bitcoin Core to implement replay protection on its own. While it is dominant, and even considered by some to be the protocol-defining reference implementation, Bitcoin Core is not the only Bitcoin implementation on the network. Bitcoin Knots, Bcoin, Libbitcoin and other alternative clients would all have to implement replay protection, too. (And that’s not even taking non-full node clients into account.)

But even more importantly, the reality of the current situation is that all deployed Bitcoin nodes do not have replay protection implemented. And logically, they can’t: Some of these nodes even predate the New York Agreement. So even if Bitcoin Core and other implementations were to implement replay protection in new releases of their software, it wouldn’t suffice. All users must then also update to this new version within about two months: a very short period of time for a network-wide upgrade.

If only some of the nodes on the network upgrade to these new releases, Bitcoin could actually split in three: Legacy Bitcoin, SegWit2X and “Replay Protected Bitcoin.” Needless to say, this three-way split would probably make the problem worse — not better.

Lastly, there is a bit of a philosophical argument. Anyone who wants to adopt new protocol rules, so the argument goes, has the responsibility to split off as safely as possible. This responsibility should not fall on those who want to keep using the existing protocol: They should be free to keep using the  protocol as-is.

Many developers — including RSK founder Sergio Lerner who drafted the SegWit2Mb proposal on which SegWit2X is based — have argued that BTC1 should implement replay protection. In fact, many developers think that any hard fork, even a hard fork that appears entirely uncontroversial, should implement replay protection.

But so far, the BTC1 development team will only consider optional replay protection.

What’s Wrong With Optional Replay Protection?

Implementing optional replay protection, as proposed by former Bitcoin developer Gavin Andresen, for example, is currently on the table for BTC1.

In short, this type of optional replay protection would make certain specially crafted (“OP_RETURN”) Legacy Bitcoin transactions invalid on the SegWit2X chain. Anyone who’d want to split their coins could spend their BTC with such a transaction. These transactions should then confirm on the Legacy Bitcoin blockchain but not on the SegWit2X chain. This effectively splits the coins into different addresses (“outputs”) on both chains.

Such optional replay protection is probably better than nothing at all, but it’s still not a definitive solution.

One problem is that the Legacy Bitcoin blockchain would have to include all these OP_RETURN transactions. This would probably result in more transactions on the network and would require extra data for each transaction. All this data must be transmitted, verified and (at least temporarily) stored by all Legacy Bitcoin nodes. It presents a burden to the Legacy Bitcoin network.

But more importantly, it would probably still not be very easy to utilize this option. It might suffice for professional users — exchanges, wallet providers and other service providers — as well as tech-savvy individual users. But these are generally also the types of users that would be able to split their coins even without replay protection. Average users, if they are even aware of what’s going on, would probably find it much more difficult to utilize optional replay protection.

Optional replay protection, therefore, offers help to those who need it least and does little for those who need it most.

Does the NYA Preclude Replay Protection?

While it’s unclear what was (or is) discussed behind closed doors, the New York Agreement seems to be a very minimal agreement. Published on May 23, 2017, it really only consists of two concrete points:

  • Activate Segregated Witness at an 80 percent threshold, signaling at bit 4, and

  • Activate a 2 MB hard fork within six months.

With the first point completed through BIP91, the only remaining point is a hard fork to 2 megabytes before November 23. (This assumes that this hard fork wasn’t completed with the creation of Bitcoin Cash which is supported by a number of NYA signatories.)

Notably, a lot of details are not filled in. For example, the agreement does not even state that signatories must specifically run the BTC1 software: Any software implementation that implements a hard fork to 2 megabytes might do. This could even include a software implementation that implements replay protection. And, of course, nothing in the NYA stops BTC1 from implementing replay protection; some signatories may have even expected it.

Why Won’t BTC1 Implement Replay Protection?

There are really several reasons why BTC1 — both stated and speculated — might not want to add replay protection.

The first reason is that replay protection would require simplified payment verification (SPV) wallets and some other thin clients to upgrade in order to send and receive transactions on SegWit2X. Replay protection would, therefore, in the words of BTC1 developer Jeff Garzik, “break” SPV wallets; they wouldn’t be compatible with SegWit2X until upgraded.

This framing and choice of words is disputed. If SegWit2X were to implement replay protection (and if SPV wallets don’t upgrade), these wallets could still send and receive transactions on Legacy Bitcoin perfectly fine. On top of that, they wouldn’t accidentally spend B2X when they don’t mean to.

Meanwhile, if the SegWit2X chain does not implement replay protection (and if SPV-wallets don’t upgrade), users may not be sure if their wallet is receiving or sending BTC transactions or B2X transactions or both. They also may not be sure if the balance in their wallet is a BTC balance or a B2X balance or both. And if hash power moves from one chain to another over time, these wallets could even switch from displaying BTC balances to B2X balances or the other way round without users knowing. (This problem could be solved, to some extent, through another workaround, but this is not yet implemented in either.)

Indeed, not implementing replay protection on SegWit2X could arguably “break” SPV wallets much worse.

The only (plausible) scenario where implementing replay protection would perhaps not break SPV wallets much worse is if there is no Legacy Bitcoin to speak of. Indeed, the New York Agreement very specifically intends to “upgrade” Bitcoin, rather than split off into a new coin as Bcash did. And based on miner signaling and statements of intent by several big Bitcoin companies, some NYA signatories claim that Legacy Bitcoin will not be able to survive at all.

Implementing replay protection is, therefore, sometimes considered an admission that SegWit2X will split off from (Legacy) Bitcoin into something new and will not be considered the upgraded version of Bitcoin.

But the assumption that Legacy Bitcoin won’t be able survive is a big one. In reality, miner signaling is effectively meaningless, while Bitcoin Core — the dominant Bitcoin implementation — will not adopt the hard fork. There is also a significant list of companies that have not stated that they support the hard fork, including two top-10 mining pools. Similarly, it’s not clear if many (individual) users will support SegWit2X either. The implementation of wipe-out protection (another safety measure) also suggests that even BTC1 developers aren’t so sure that there will only be one chain.

And perhaps even more importantly, it’s not clear that replay protection would affect any of this. If miners, developers, companies and users are to consider SegWit2X an upgrade of Bitcoin, they will probably do so with or without replay protection.

This is why it has also been suggested that BTC1 is rejecting replay protection for the specific purpose of being as disruptive as possible. If the Legacy Bitcoin chain is effectively made unusable, SegWit2X might stand the best chance of being recognized as “Bitcoin.”

For more information and debate on replay protection, also see the the relevant threads on the SegWit2X mailing list.

The post SegWit2X and the Case for Strong Replay Protection (And Why It's Controversial) appeared first on Bitcoin Magazine.

Posted on 22 September 2017 | 12:11 pm

Vaultoro Continues on Its VC Funding Road to Future Growth With Finlab AG

Vaultoro Continues on Its VC Funding Road to Future Growth With Finlab AG

Vaultoro, a bitcoin-to-gold exchange, has secured funding from Finlab AG, a fintech company based in Frankfurt, Germany.

Vaultoro co-founder Joshua Scigala stated that the funding from Finlab will allow them to reach their goals faster. The first upgrade the company plans to implement will be a real-time gold-backed debit card. The card will allow the customers of the firm to hold their allocated gold — stored in a high-security Swiss bullion vault — while they can easily spend the funds anywhere Visa or Mastercard is accepted.

This latest funding announcement is in keeping with Vaultoro’s history of seeking funding and support from venture capitalists and established players in the space, rather than following the recent ICO trend.

In 2015, Vaultoro conducted a BnkToTheFuture raise. The funds were raised primarily from VCs, as opposed to ICOs. That same year, it hit its first $1 million in gold traded on the platform and was one of three finalists from the blockchain space to compete for the BBVA Open Talent Competition in Barcelona, Spain. Most recently, Vaultoro was selected as one of eight startups for the 2017 Techstars Berlin program.

“We decided against an ICO because coins that pay a dividend are not really legal yet, equity taken absolutely illegal[ly], and we didn’t want to confuse the product with a utility coin when we don’t need one. Also, we found that so many ICOs are scams and we didn’t want to be associated with this kind of hype. We have been solidly working on making Vaultoro a name people can trust, a brand with the highest principles.”

However, Scigala is not opposed to ICOs in general:

“I’m not saying ICOs are bad,” he added. “In fact, I love them, I think they are the future of fundraising because they enable anyone to invest in startups. In fact, we want to launch an ICO later to enable our users to profit from our success, but we want it well thought-out and fully legal for our investors. For this reason, we decided on a standard VC funding round that would not only bring us money but also strategic contacts that will help us grow as quick as possible.”

Gold on the Blockchain

According to Vaultoro, the latest financial crises have been a cause for concern for citizens around the world. People are worried about leaving their fiat funds in a bank account while earning low or no interest. The Vaultoro debit card will allow its customers to hold their funds in gold without the need for a bank.

“We see gold as a gateway to crypto. Many people don’t trust crypto, they don’t understand it, but they understand the 3000+ years of value that gold has held. We are currently building an easy-to-use euro/gold wallet so people can easily buy and save in gold. But here is the kicker. They will see a little button, spend your gold as SEPA, SWIFT, debit card or bitcoin. So, many people will want to see what that is,” he said.

A Secure Store of Value

“Our goal is to have real asset vaulting,” said Scigala. “We have always been a bitcoin-only business but we will bring some other promising digital assets on board. IOTA, ETHEREUM and DASH will be the first. We will also be adding silver, platinum and palladium. The wallet software will enable you to tell the card which asset you would like to spend from.”

The firm emphasized that all gold is allocated in the users’ name as their legal property so that even if Vaultoro were to experience a negative event, users’ gold holdings would be protected: even liquidators wouldn’t be able to touch the assets of the company’s clients.

“The most important thing about Vaultoro is that all physical assets are allocated to the user and are not on the company balance sheet. That means if anything happens to Vaultoro as a company, no one, not even liquidators, can touch our clients’ property because it has nothing to do with us. It’s the full property of our clients. We are figuring out if digital currencies can also be allocated under bailment laws,” Scigala said.

By allowing users to purchase gold for bitcoins and back, Vaultoro customers can benefit from the ease of BTC payments while investing in a stable asset. Unlike bitcoin or a lot of fiat currencies, gold has a very low volatility rate. Investors can invest and trade in cryptocurrencies; however, many of them dislike the volatility associated with them — especially when there is an event that drives the prices toward the bottom, like the recent Chinese regulations on bitcoin exchanges and ICOs.

“We are also working on a maker-taker trading fee model for the marketplace so people that place orders into the market don’t pay as much fee[s] as people taking an order from the order book. We hope to lift liquidity drastically.”

The post Vaultoro Continues on Its VC Funding Road to Future Growth With Finlab AG appeared first on Bitcoin Magazine.

Posted on 22 September 2017 | 8:44 am

Op Ed: Lessons From a Cryptocurrency Hack (A Public Service Announcement)

Op Ed: Lessons From a Cryptocurrency Hack (A Public Service Announcement)

Cryptocurrency-related cyber attacks are on the rise. As cryptocurrency continues to explode in value and public awareness, we can only expect this trend to continue. I was recently the target of such an attack. I also personally know of multiple other cases of the same attack being successfully carried out. Even worse, this type of attack is becoming ever more common and is likely to see an even bigger boost thanks to the professional excellence of firms like Equifax, making it an urgent topic as almost everyone is at immediate risk.


This article describes this increasingly common attack vector and provides immediate steps you can take to protect yourself. I will also provide additional tools and best practices to further safeguard yourself and your funds more generally.


As a computer programmer active in the crypto ecosystem since early 2013, I’ve always been too aware of the constant threat of cybersecurity attacks and the possibility that I could be targeted at any time. Cryptocurrency is the perfect hacker pay day. Once it’s transferred away from your control it’s gone forever, and it’s easily liquidated in any number of ways. Black hats are constantly prowling for possible cryptocurrency holders.

As such, I’ve always taken the minimum precaution of keeping my coins off third-party accounts, and have always advised others to do the same. But what I couldn’t prepare for was how unnerving being the target of an attack could be regardless of your level of preparation. The hypothetical can become reality in a matter of seconds, and you never truly understand the personal value of putting proper security in place until it’s too late. For those with enough at stake, it can be ruinous. Ultimately none of my funds were compromised by this attack, but others have not been so lucky.

“But not all accounts are created equal for data thieves  —  and the most valuable online accounts to steal are like the ones belonging to Mr. Burniske, who is a cryptocurrency fan. In the few minutes it took to get control of his phone, the virtual currency investor saw his virtual currency password change and its accounts drained of $150,000.” -PYMNTS

The Attack

It started when I received a text message from my cellular service provider alerting me that my SIM card had been “updated.” Included in the text was a number to call if this “update” wasn’t in fact authorized by me. I read this text several minutes after it had been sent, and by the time I called the number provided a minute or two later, my cell service and data were suddenly cut off by what I began realizing must be an attacker. Almost immediately, I was also logged out of my Facebook messenger window right before my eyes. With control of my phone number, my attacker had managed to quickly reset my Facebook password and gain control of the account.

As the reality of what was happening to me sank in, I felt an initial wave of panic. Suddenly, I didn’t know if the years of precautions I had taken amounted to anything at all. I had no idea how robust the attack was, how deep the attacker had penetrated my numerous online accounts or what my first reaction should even be. I momentarily feared the worst. Could my coins be at risk?

I forced several deep breaths. Thankfully my coins were not at risk via a phone, social media or email hijacking. Reminding myself of this eased my fears and allowed me to focus on going on the defensive and taking back control of my accounts as quickly as I could.

Using FaceTime from my laptop, I was able to get a family member to call the number provided by my cellular provider’s text message and initiate the process to eventually retake control of my phone number. Using an old email strictly used as an emergency recovery email for situations such as these, I was also able to lock down my Facebook account and regain control soon after.

What I discovered once I logged back in confirmed that the attacker had specifically targeted me due to my public cryptocurrency involvement. In the brief span of time they controlled my Facebook account, they had sent the same message to several friends of mine also involved in the ecosystem, many of whom I’ve known for years. The messages claimed I had an emergency and needed to borrow several bitcoins or the equivalent value in alternate coins for a day. The attacker was in the middle of sending out many more such messages to even more of my friends when I regained control.

At the end of the day, the damage done to myself was limited to being spooked. Unfortunately, however, at least one of the recipients of my fake Facebook messages was later the target of the same attack. I’ve decided to learn from these events and share those lessons, and hopefully help some avert the worst. First and foremost is eliminating this specific and trivially easy attack vector completely.

How to Stop It Before It Happens

Text message two-factor authentication (2FA) is the default security precaution for most online accounts today, and cellular service providers are woefully unprepared for this reality. It is almost trivially easy for an attacker to contact your service provider and pretend to be you.

In all the cases I’ve personally observed, it began with the attacker identifying an individual likely to have cryptocurrency and contacting their cell provider. They impersonate their target using personal information like social security numbers and home addresses from any number of possible leaks, Equifax being the most obvious and concerning source.

After successfully convincing your cell provider that they are you, they then port your SIM card to a phone they control. This approach is known as a social engineering attack, and with today’s common security default of using text messages for 2FA, they immediately have the keys to the kingdom. With your phone number they can now reset the password to any account you have with text 2FA enabled, including cryptocurrency wallets and accounts.

The minimal action you should take right now to prevent this: Contact your cellular service provider and request restrictions to be placed on your account so that no changes can be made to it without special verification. This can include setting a password on your account or requiring you to physically visit a store with your ID to make any account changes. Call again once this is in place and attempt to change your own SIM card as a test to ensure the restrictions have indeed been put in place and are being properly enforced by your cellular provider.

This simple step means that no matter what information an attacker may have on you, socially engineering a takeover of your SIM card is no longer a trivially simple endeavor. However, this precaution isn’t ironclad, and there’s also a variety of other attacks you can be the target of.

Taking It a Step Further

Black hat actors tend to focus on the low-hanging fruit, which is why the social engineering SIM attack has become so prevalent. But it is by no means the only way to compromise your accounts, and as the low-hanging fruit become harder to find, attackers will move on to these other methods. I highly recommend everyone implement these precautionary steps to further secure yourselves. The upfront investment needed to set up these measures may seem tedious now, but can pay invaluable dividends in the future.

1. If you hold any significant amounts of cryptocurrency, invest in an offline hardware storage solution.

These devices contain your cryptocurrency private keys and can remain completely disconnected from the internet or any computer until you need to make transactions, so that your funds remain totally safe regardless of any of your other devices or accounts being compromised. These devices include OpenDime, TREZOR and Ledger. Even if you do not opt for any of these solutions, at a bare minimum do not store funds on third-party services such as Coinbase or exchanges, especially on any service or wallet that integrates email or a phone number to authorize access to funds.

2. Ditch text messaging 2FA.

Placing verification restrictions on your cellular service account is a big step up in security, but can still be circumvented by an insider or even just a careless customer service rep who doesn’t do their job properly. Text message authorization is also still too incredibly insecure to be relied on in any way, period. Recent research shows that intercepting text messages is a trivial task for someone with the right tools, and many other exploits are likely to be discovered in the future.

The first item on this list will protect your personal funds from theft, but as I learned the hard way your money isn’t the only thing at risk. With access to your social media accounts and emails, an attacker can trick your friends into giving them funds or exposing themselves in other ways. They’ll also obviously have a clear look into all your messaging and file history on those accounts, which can expose you and your social circle even more. Shoring up your 2FA is a big step in preventing this.

Eliminate all of your text messaging–based 2FA and at a minimum replace it with Google Authenticator. However, like storing cryptocurrency, you can take it a step further with a dedicated hardware solution. I highly recommend YubiKeys.

You can configure many major online accounts (not Coinbase yet) to require you to physically insert and activate your YubiKey as your 2FA authorization, eliminating the risk of a remotely compromised phone.

3. Use multiple emails with interlinked recovery options, and use completely different and robust passwords for those emails and other online accounts alike.

Luckily I did not have text messaging 2FA enabled on the email account associated with my Facebook profile; otherwise my attacker could have seized control of that as well. If they did, I have a chain of recovery emails I could have used to regain control of it, all with different passwords. This practice also means that having your password being captured or leaked for any one of your accounts won’t jeopardize all of them.

4. Stay vigilant, stay paranoid.

To quote the Onion Knight, “Safety is never a permanent state of affairs.” Don’t get lazy and begin recycling passwords or leaving funds on Coinbase or other third-party accounts. Be aware of the technology you are using and the tradeoffs you are making or exposure you are generating by doing so. Stay up to date on the latest breaches, exploits and technology. Opt to use end-to-end encrypted messaging services like Signal, Telegram or WhatsApp. Don’t answer calls from strange phone numbers, and use apps like Hiya to filter out known spam numbers to reduce the risk that you do. Ultimately, however, there is no easy fix for security and no list that can guarantee you won’t get hacked.

Make no mistake, there are individuals out there who want to harm you and are actively working to do so. The time needed to reasonably secure yourself can seem tedious and time-consuming up front, but can easily and quickly become a priceless investment as I and many others have learned firsthand. 

This guest post by Ariel Deschapell was originally published on Medium and is reproduced here under a Creative Commons License. The views expressed do not necessarily reflect those of BTC Media or Bitcoin Magazine.

The post Op Ed: Lessons From a Cryptocurrency Hack (A Public Service Announcement) appeared first on Bitcoin Magazine.

Posted on 21 September 2017 | 5:13 pm

Op Ed: How Blockchain Technology Could Save Struggling Artists Around the World

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To a complete outsider, the worlds of art and cryptocurrency do not appear to be linked. But for content creators of all kinds, blockchain technology provides an ideal solution to preserve intellectual property, create demand and increase value for digital content.

The digital revolution is often blamed for making life harder than ever for artists. We are always hearing stories of artists realizing their work has been ripped off by a major brand or that they are not being paid or credited for the content they create.

However, thanks to blockchains, ownership rights can be restored in favor of artists. The very digital landscape that proves so difficult for artists could well increase the possibility of profits for artists online.

Physical art was one of the first big applications of blockchain technology.

The concept of integrating blockchain technology into the art industry is not untested. Blockchains have already been a part of the physical art world for a few years now as a reliable way to verify creation and ownership details. The application of a trustworthy system of verification like the blockchain to artworks makes perfect sense.

A number of companies are actually already authenticating artwork with blockchain technology, including Verisart in Los Angeles, Tagsmart in London and Ascribe in Berlin. For both collectors and artists, they provide digital certificates of authenticity and provenance records that enable buyers to verify the authenticity of the artwork they purchase while creating an accredited ownership history for the artwork over time.  

What blockchain technology provides is its unmodifiable digital ledger which logs every single digital transaction. More importantly, this ledger is public so everyone can see its history. This means, for example, that you can see that the painting you are interested in has been purchased three times from buyers in London, Madrid and Milan. Because the log is decentralized and cannot be edited, there is no potential for lies or trickery — no one can sell you a fake copy if a digital record of the authentic piece exists.

By allowing records like provenance, authorship and ownership to be unmodifiable, blockchain technology potentially solves the issue of forgeries and thefts in the art world. According to the FBI, billions of dollars worth of art and cultural property go missing every year. Being able to prove and track the ownership of artwork could make it almost impossible to resell stolen artwork in the future.

By increasing trust in the art world, blockchain technology could also help increase the value of art. One important factor in art is scarcity — it is what drives demand. People covet beautiful things: the more unique, the better. The Mona Lisa wouldn’t likely be worth $2 billion if there were 10 originals on the market.

Blockchain technology may pave the way for a robust new market of digital art.

It is no secret that life for digital artists can be difficult. In the music world, for example, physical sales are almost non-existent. Artists earn less than a cent from each time their music is played. At Spotify, the average payout for a stream to labels and publishers is between $0.006 and $0.0084. By the time the label has taken its share, artists receive an estimated $0.001128.

The digital art and design world is arguably just as bad — or worse. While individuals can easily download a music file from a file-sharing website, it is even easier to screenshot or share digital art without any attribution or financial benefit for the artist. As long as people don’t consider digital assets “objects,” digital artists won’t be paid what their work is worth. However, being able to certify the ownership of digital assets through the blockchain could assure the value of digital art and change the behavior that it is okay to swipe art from the web without a thought. People already consume all kinds of creative content on digital screens, be it books, movies, media, or music. The time has come for them to value digital art they can appreciate just as thoroughly on their devices.

A new generation of blockchain-based art collections is bringing the digital art and cryptocurrency worlds together.

For many people, a painting on the wall is worth money; but a digital work of art online has no financial value. A new business model, however, is now emerging for digital art that could alter this perspective.

CryptoPunks by Larva Labs is one known example. The company has created 10,000 computer-generated digital characters, each one unique, with proof of ownership stored on the Ethereum blockchain. Each one is owned by a single person and verified by a smart contract. As the blockchain data is public, you can see exactly which of the characters have been purchased and which remain available. Some people have spent 10 ETH (around $3,000) on the rarest types of CryptoPunks on the secondary market.

Another example is the selling of “Rare Pepes,” crude depictions of the meme often used online as an alt-right symbol. Meme artists previously tried to watermark their memes; nevertheless, they continued to be downloaded and shared. The solution was to use the Counterparty platform, which allows users to make anything into a unique digital token. Now the Pepes can be bought and sold — the rarest costing $11,589 — with RarePepeWallet.com.

This is just the tip of the creative iceberg. Imagine the possibilities with digital art created by actual artists becoming desirable and more valuable. In addition, artists who otherwise would have been forced to use a large-scale centralized company to distribute their work are now able to distribute their work in a decentralized way and receive fair compensation.

Soon, people may begin collecting digital art in the very same way they collect it in its physical form. This may also require a cultural shift in the perception of digital art and its value, but this cultural shift could well be instigated by applying technology, thereby adding financial value and scarcity to digital art. This may well turn out to be a significant boon in the lives of artists all over the world who will be able to profit and take control of their creative output and their intellectual property in a dynamic, budding market.


The post Op Ed: How Blockchain Technology Could Save Struggling Artists Around the World appeared first on Bitcoin Magazine.

Posted on 21 September 2017 | 2:54 pm

Joint Report by Stellar and Luxembourg Fintech Platform: Approach ICOs with Caution

Joint Report by Stellar and Luxembourg Fintech Platform: Approach ICOs with Caution

 Stellar, a nonprofit decentralized financial network, and the Luxembourg House of Financial Technology (LHoFT), the country’s dedicated fintech platform, have published a joint report on Initial Coin Offerings (ICOs).

According to the report, organizations have raised over $1.8 billion through ICOs since January 2017. As this popular new fundraising method provides a simple and fast method to acquire serious funding, there has been “tremendous momentum” growing around ICO launches among new businesses in the blockchain industry, the report said.

On the other hand, the report also detailed that there are high risks associated with ICO investments. Since there is still a lack of regulation and control surrounding the industry, Stellar and LHoFT compared the current ICO sphere to the “Wild West” — a term that has become rather popular of late in reference to ICOs.

“ICOs raise issues for consumer protection, combating money laundering, and other regulatory compliance goals. Complications may arise from several sources, including the mechanism through which ICOs are conducted, the teams spearheading ICOs, the identities of contributors to ICOs, the quantity of money that is raised, the validity of ICOs’ technology and processes, marketing claims, and the impact that ICOs have on the greater cryptocurrency markets. All these factors must be scrutinized so that the heralded benefits of ICOs are balanced against market and legal risks as the model matures and gains broader acceptance,” the report states.

LHoFT and Stellar addressed both the upsides and the downsides of ICO fundraising. Organizations launching ICOs benefit from a built-in customer base, a committed group of customers that will stay with the product or service until it officially launches. Furthermore, according to the report, the fundraising method has positive effects on the network, can target global investors (or donors) in a non-discriminatory manner while providing a fast and easy fundraising mechanism. Additionally, retail investors are keen on participating in ICOs, and open-source projects can benefit from the fundraising method too.

Similarly, investors can benefit from the high liquidity of the tokens (sold during ICOs), in addition to being able to sell them through cryptocurrency exchanges or over-the-counter (OTC) transactions, which would allow the investors to transfer the tokens easily without the authorization of the token issuer (the organization launching the ICO).

Token holders are often offered bonuses, such as “gift cards” or “licenses” that will incentivize them to support the growth and the development of the project. ICO investors also benefit from the lack of “geo-lock” — they can invest in the project no matter the location (unless specified otherwise). Most importantly, ICOs have a high potential for big gains.

On the other hand, there are plenty of risks associated with ICOs, according to the report. Firstly, ICOs lack the formal process for auditing the organizations.The writers of the study highlighted a potential problem with smart contracts: If the contract is not programmed correctly, it could lead to unexpected transfers without the authorization of the token owner. Some tokens are not based on any fundamental value, thus, may facilitate bubbles and Ponzi schemes.

Furthermore, Stellar and LHoFT emphasized the issue of “investor education” — some investors are not informed well enough about an ICO project before investing in it. The report also detailed security problems, such as phishing scams and the loss of private keys, which can result in the investors losing their tokens.

As with most cryptocurrencies, tokens also tend to be volatile. According to the report, ICO cashouts may create price distortions on the market. Furthermore, the market can be subjected to manipulation, such as the “Whales” method, in which the token issuer organization holds back a percentage of the tokens and distributes them between the team members. Both investors and organizations can experience network lag during popular ICOs, while some token distribution mechanisms can cause unpredicted difficulties for both parties.

The lack of regulations within the ICO space presents various problems for both the investors and the organizations, such as being subject to the financial regulations of multiple jurisdictions. The anonymous nature of the cryptocurrency sphere can result in many of the investors being seen only as pseudonyms, which could cause issues for law enforcement and regulators. Since there is uncertainty about the taxation of tokens, both investors and organizations could face legal issues, such as tax evasion charges. Furthermore, the report discusses that there is an increasing concern that ICOs can be used by criminals for money laundering or terrorist financing purposes.

The post Joint Report by Stellar and Luxembourg Fintech Platform: Approach ICOs with Caution appeared first on Bitcoin Magazine.

Posted on 20 September 2017 | 12:35 pm

Bitcoin price climbs over $4,000

Posted on 14 August 2017 | 1:16 am

Bitcoin reaches new all-time high: $ 3,000

Posted on 12 June 2017 | 1:06 am

CRYENGINE now accepts Bitcoin

Posted on 29 March 2017 | 1:24 am

Consulting firm EY Switzerland accepts Bitcoin

Posted on 26 November 2016 | 12:47 am

Bitcoin Trading Bots

There have been a wide variety of situations in which algorithmic trading programs have proven to be beneficial for investors. However, investors who only trade a cryptocurrency can also take advantage of bitcoin trading bots. Through bitcoin bot trading, traders can become more flexible and prompt, minimize errors and process information more rapidly. At this… Read More »

Posted on 8 November 2016 | 6:20 pm

Steam accepts Bitcoin

Posted on 29 April 2016 | 1:09 am

Major Magazine Publisher to Accept Bitcoin Payments

Posted on 18 December 2014 | 12:43 pm

Microsoft accepts Bitcoin

Posted on 11 December 2014 | 5:06 am

Advertise with Anonymous Ads

Mozilla accepting Bitcoin

Posted on 20 November 2014 | 1:55 pm

PayPal and Virtual Currency

Posted on 23 September 2014 | 9:52 pm

German Newspaper "taz" accepts Bitcoin

Posted on 22 July 2014 | 1:32 pm

airBaltic - World’s First Airline To Accept Bitcoin

Posted on 22 July 2014 | 11:03 am

Expedia to accept Bitcoin payments for hotel bookings

Posted on 12 June 2014 | 12:41 pm

September 25, 2017 -
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