Original author: Nermin Hajdarbegovic
Coin News
Original author: Stan Higgins
Springer says that malware creators have no qualms about looking for bitcoin like low hanging fruit:“I don’t think anyone’s going in specifically targeting bitcoin as their only purpose [for malware], I just don’t think that they have any ethical concerns stealing whatever they find.”Malware going after bitcoinDell SecureWorks recently released a report that identified almost 150 strains of what it calls cryptocurrency stealing malware (CCSM), up from 45 a year prior.The reason for the surge is simple: decentralized money is becoming popular, and that means it is a valuable thing to take from unsuspecting users. 
Source: Dell SecureWorksJoe Stewart, one of the authors of the SecureWorks report, recently tweeted about Springer’s service:Looks like the Bitcoin-wallet-as-host-IDS idea I tweeted on Nov 21 last year is actually a service now: http://t.co/sbUdVbug7x— Joe Stewart (@joestewart71) April 10, 2014 IDS stands for intrusion detection system, which is Bitcoin Vigil’s role in monitoring the wallet addresses.According to SecureWorks, the most common type of CCSM is known as the “wallet stealer.” It looks for files in common locations that are similar to ”wallet.dat” – the same type of file that Bitcoin Vigil uses.And if the money is moved from the wallet, Bitcoin Vigil’s system sees it, said Springer.“Whenever it notices a transaction it just looks at all the inputs. And if it comes from one of the wallets I generated I just send an SMS and email out.”Cryptocurrencies as IT securitySpringer said he decided to create the service to detect wallet file theft after realizing one didn’t exist. “After losing some bitcoins, it seemed like a logical idea,” he said.Though he concedes to the fact that most people don’t keep wallets stored on their computers, he believes that many who are at risk of losing important information on an insecure system unknowingly infected with malware could use Bitcoin Vigil. 
Source: Dell SecureWorksAnother problem, he said, is that people need bitcoins in order to make this method work, which means it might be more suited for larger systems, versus individual PCs:“The limiting factor is that you actually have to put money in each of the wallets.”Despite these challenges, Bitcoin Vigil again proves that cryptocurrencies can be used as an IT security tool. Recently, crowdsourced IT security startup CrowdCurity launched its ‘Capture the Coin’ contest, placing bitcoin private keys on its site to see if participants could find them.“You need to be on a computer that doesn’t have bitcoin-stealing malware,” said Springer, and the growing popularity of decentralized money means that malware creators are on the hunt for private keys.Ideas like Bitcoin Vigil are ways to detect system intrusions proactively rather than running scans reactively when something appears to be wrong.Bitcoin VigilCCSMCrowdcuritycryptocurrency stealing malwareDell SecureWorksEric SpringIDSintrusion detectionJoe StewartmalwareOriginal author: Daniel Cawrey
Welcome to the CoinDesk Weekly Review 13th April 2014 – a regular look at the hottest, most thought-provoking and most controversial events in the world of digital currency through the eyes of scepticism and wonder.Your host … John Law.Breaking China
China stamps hard on bitcoin, and the price crashes: what excellent news for investors.John Law should explain: he’s not shorting bitcoin, and he does feel the pain of anyone who’s got substantial holdings. But in terms of the long-term prospects of cryptocurrencies – and those who are investing time and money on the expectation that the technology itself will prosper – this is no bad thing.It is now generally accepted, because both the FT and the Economist say so, that China has been the dominant force in driving bitcoin prices up. More than half the bitcoin action in the world has been sucked into the Middle Kingdom, and not because everyone there wants to buy alpaca socks or skinny lattes.Instead, the suction has been driven by the osmotic fiscal pressure of having a ferocious economy and a fiat currency badly in need of revaluation.Bitcoin looked very good as an alternative tradable investment device. Too good, decided the Mandarins, who have allegedly re-established the protective veil around the renminbi by banning bitcoin-to-fiat trading.If true, this would have two effects: one being a little obvious round about now. If bitcoin is to be an investment vehicle, it’ll have to be one without the Chinese involved. Where will the value end up? Well, using the highly scientific method of looking at the price over the past year, John Law reckons around $180 to $230, which is where it was happily sitting for a while before some massive object started to pull it skywards. Eastwards, if you prefer.The other is that there will be a huge pool of bitcoin sitting in China that can’t be cashed in. But they will still be moved around – like currency’s supposed to do – and they will retain their nominal value as set by the rest of the world. They’ll still have value, but only if they’re used to buy stuff.An industrious and hard-working nation like China will make use of that. Alpaca socks and skinny lattes are unlikely to see much of a surge, but you can bet your bottom yuan that deals for goods and services will be struck and bitcoin will circulate. Which means its true value, as a damn fine mechanism for circulating, will be realised – alongside all the ancillary economic activity in support services and products.Which is good news for those investing in such things. When faced with broken china, get cracking.MintChip takes a licking
MintChip sounds delicious, like the sort of ice cream John Law remembers – along with sunburn and sand in his socks – from childhood summer holidays. But the ice creams of yesteryear have long since melted and MintChip, a Canadian government initiative in electronic currency announced in 2012, is going the same way.The Canadian state is trying to wash its hands of the sticky residue, hoping that a private company will take it over, but enthusiasm is as limp as a Magnum left in a glove compartment for five hours on the hottest day of the year. (Don’t ask – thank God it was a rental.)But why has it failed, you cry. How can a government project, run by a government agency, tied to the existing government currency, based on a physical chip, limited to one country and relying on governmental software, not have generated the excitement of bitcoin?It’s hard to credit. But check out this Q&A with MintChip project boss Marc Brûlé – who sounds like he’s named after a posh pudding himself – as he went on a 2013 promotional press circus. The idea was cooked up at a retreat of the Royal Canadian Mint executives, where they decided what consumers wanted from electronic currency. They’re a diversified business. They’re good at patents, too.To be fair, MintChip did get some things right – peer-to-peer transfers, low overhead, usable just as physical currency online and in real life. Real advantages, and key features any electronic currency will need to succeed.So why has bitcoin been so successful that governments are trying to ban it while government and big business projects sink out of the bottom of the cone like a melted 99? Remember Visa Cash? Mondex?It’s called letting go. What the Internet knows, and what big pre-Internet concerns do not, is that unless you are a certifiable genius, trying to guess what people want is a really bad way of giving it to them. Hollywood, as William Goldman said, is a place where nobody knows anything. Turns out that that’s true of most things. People are ungrateful sots who persist on deciding for themselves what they like. The best way to make that work for an idea is to put it out there and see what use is made of it – and to make sure that anyone can say “Hm, yes… but what if we try it this way?”.Before the Internet, the closest most businesses got to that was focus groups and pilot projects – or just spending enough on marketing to persuade people that they did want something they wouldn’t otherwise look twice at. Or going on a retreat with your pals and pretending to be certifiable geniuses. That way, you get cash-onna-dongle.What bitcoin and chums have that the Royal Canadian Mint does not isn’t some sort of philosophical purity or magic, God-given genius. It has reddit, Github, blogs and open code.And that can’t be licked.Architecture and Morality
John Law is easily puzzled, but the equation of bitcoin mining with immorality really has him beat. How can it be moral, the argument goes, to burn all those planet – endangering megawatts in the chase for something so ephemeral and tainted with greed?As Coindesk’s own Danny Bradbury is so eloquently exploring, if you take that tack you better be prepared to look at the same equations for the rest of the financial system. It’s also worth casting a look at, oh, gold mining, which chomps through so much power that even at the current exalted price for the metal it’s actually becoming uneconomic. And that gouges actual holes in the planet.But perhaps the critics have a point. After all, every action does have a moral component, and we are comprehensively mucking the environment right up. People don’t want to be evil, but it is impossible to know whether plonking down on the sofa to watch Game of Thrones on a 40” plasma is more culpable in the pleasure-vs-guilt scale of things than driving into town to buy the books. And what if you order them online? More to the point, can bitcoin actually be an unarguable force for moral good?John Law has a modest proposal. Alongside the Internet of Things, where all our devices talk to each other about what they’re doing, we must create the Internet of Sins, where they talk about us.Like any useful technology, the IoS takes something that humans need to do but are bad at doing, and offers the services of automation to relieve us of the burden. Think of it like carbon offsetting but with micropayments and – crucially – a central exchange of naughtiness that sets a value on the good-to-evil scale for everything. It will be a bitcoin of cosmic responsibility: the karmacoin.All our interactions with technology are metered and stored, these days, and just about everything we do is an interaction with technology. Your TV knows what you’re watching and how much power you’re using, while the shop that sells you your TV set knows who made it and how it got there. In turn, the acts of manufacturing and transportation are documented in detail by the computer systems that manage them. The oil that goes into the plastic, the metals that go into the circuitry, the investments in education or armaments that the bank that finances the TV makers has, everything can be factored in.The architecture of the Internet of Sins is conceptually simple. Each such interaction can be graded on the good-versus-evil scale and the value stored, to be transferred along the chain. You’ll end up with your share in your karma wallet whenever you take an action, all transferred by the same anonymous-yet-unfakeable protocols that power cryptocurrencies. The good-versus-evil index will be created by a global database of acts graded by mass consensus – a computerised version of how we decide our morals anyway. The flame wars in the comments will be epic.What we do with our accumulation of karmacoins will, in the end, be up to us. But at least we’ll truly know the consequences of our actions.Bet it won’t just be the Chinese that ban that.John Law is an 18th Century Scottish entrepreneur, financial engineer and gambler. Having reformed the French economy, invented paper currency, state banks, the Mississippi Bubble and other ideas essential to modern economics, he took 300 years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.Broken china, ice cream and morality images via Shutterstockweekly review
China stamps hard on bitcoin, and the price crashes: what excellent news for investors.John Law should explain: he’s not shorting bitcoin, and he does feel the pain of anyone who’s got substantial holdings. But in terms of the long-term prospects of cryptocurrencies – and those who are investing time and money on the expectation that the technology itself will prosper – this is no bad thing.It is now generally accepted, because both the FT and the Economist say so, that China has been the dominant force in driving bitcoin prices up. More than half the bitcoin action in the world has been sucked into the Middle Kingdom, and not because everyone there wants to buy alpaca socks or skinny lattes.Instead, the suction has been driven by the osmotic fiscal pressure of having a ferocious economy and a fiat currency badly in need of revaluation.Bitcoin looked very good as an alternative tradable investment device. Too good, decided the Mandarins, who have allegedly re-established the protective veil around the renminbi by banning bitcoin-to-fiat trading.If true, this would have two effects: one being a little obvious round about now. If bitcoin is to be an investment vehicle, it’ll have to be one without the Chinese involved. Where will the value end up? Well, using the highly scientific method of looking at the price over the past year, John Law reckons around $180 to $230, which is where it was happily sitting for a while before some massive object started to pull it skywards. Eastwards, if you prefer.The other is that there will be a huge pool of bitcoin sitting in China that can’t be cashed in. But they will still be moved around – like currency’s supposed to do – and they will retain their nominal value as set by the rest of the world. They’ll still have value, but only if they’re used to buy stuff.An industrious and hard-working nation like China will make use of that. Alpaca socks and skinny lattes are unlikely to see much of a surge, but you can bet your bottom yuan that deals for goods and services will be struck and bitcoin will circulate. Which means its true value, as a damn fine mechanism for circulating, will be realised – alongside all the ancillary economic activity in support services and products.Which is good news for those investing in such things. When faced with broken china, get cracking.MintChip takes a lickingMintChip sounds delicious, like the sort of ice cream John Law remembers – along with sunburn and sand in his socks – from childhood summer holidays. But the ice creams of yesteryear have long since melted and MintChip, a Canadian government initiative in electronic currency announced in 2012, is going the same way.The Canadian state is trying to wash its hands of the sticky residue, hoping that a private company will take it over, but enthusiasm is as limp as a Magnum left in a glove compartment for five hours on the hottest day of the year. (Don’t ask – thank God it was a rental.)But why has it failed, you cry. How can a government project, run by a government agency, tied to the existing government currency, based on a physical chip, limited to one country and relying on governmental software, not have generated the excitement of bitcoin?It’s hard to credit. But check out this Q&A with MintChip project boss Marc Brûlé – who sounds like he’s named after a posh pudding himself – as he went on a 2013 promotional press circus. The idea was cooked up at a retreat of the Royal Canadian Mint executives, where they decided what consumers wanted from electronic currency. They’re a diversified business. They’re good at patents, too.To be fair, MintChip did get some things right – peer-to-peer transfers, low overhead, usable just as physical currency online and in real life. Real advantages, and key features any electronic currency will need to succeed.So why has bitcoin been so successful that governments are trying to ban it while government and big business projects sink out of the bottom of the cone like a melted 99? Remember Visa Cash? Mondex?It’s called letting go. What the Internet knows, and what big pre-Internet concerns do not, is that unless you are a certifiable genius, trying to guess what people want is a really bad way of giving it to them. Hollywood, as William Goldman said, is a place where nobody knows anything. Turns out that that’s true of most things. People are ungrateful sots who persist on deciding for themselves what they like. The best way to make that work for an idea is to put it out there and see what use is made of it – and to make sure that anyone can say “Hm, yes… but what if we try it this way?”.Before the Internet, the closest most businesses got to that was focus groups and pilot projects – or just spending enough on marketing to persuade people that they did want something they wouldn’t otherwise look twice at. Or going on a retreat with your pals and pretending to be certifiable geniuses. That way, you get cash-onna-dongle.What bitcoin and chums have that the Royal Canadian Mint does not isn’t some sort of philosophical purity or magic, God-given genius. It has reddit, Github, blogs and open code.And that can’t be licked.Architecture and MoralityJohn Law is easily puzzled, but the equation of bitcoin mining with immorality really has him beat. How can it be moral, the argument goes, to burn all those planet – endangering megawatts in the chase for something so ephemeral and tainted with greed?As Coindesk’s own Danny Bradbury is so eloquently exploring, if you take that tack you better be prepared to look at the same equations for the rest of the financial system. It’s also worth casting a look at, oh, gold mining, which chomps through so much power that even at the current exalted price for the metal it’s actually becoming uneconomic. And that gouges actual holes in the planet.But perhaps the critics have a point. After all, every action does have a moral component, and we are comprehensively mucking the environment right up. People don’t want to be evil, but it is impossible to know whether plonking down on the sofa to watch Game of Thrones on a 40” plasma is more culpable in the pleasure-vs-guilt scale of things than driving into town to buy the books. And what if you order them online? More to the point, can bitcoin actually be an unarguable force for moral good?John Law has a modest proposal. Alongside the Internet of Things, where all our devices talk to each other about what they’re doing, we must create the Internet of Sins, where they talk about us.Like any useful technology, the IoS takes something that humans need to do but are bad at doing, and offers the services of automation to relieve us of the burden. Think of it like carbon offsetting but with micropayments and – crucially – a central exchange of naughtiness that sets a value on the good-to-evil scale for everything. It will be a bitcoin of cosmic responsibility: the karmacoin.All our interactions with technology are metered and stored, these days, and just about everything we do is an interaction with technology. Your TV knows what you’re watching and how much power you’re using, while the shop that sells you your TV set knows who made it and how it got there. In turn, the acts of manufacturing and transportation are documented in detail by the computer systems that manage them. The oil that goes into the plastic, the metals that go into the circuitry, the investments in education or armaments that the bank that finances the TV makers has, everything can be factored in.The architecture of the Internet of Sins is conceptually simple. Each such interaction can be graded on the good-versus-evil scale and the value stored, to be transferred along the chain. You’ll end up with your share in your karma wallet whenever you take an action, all transferred by the same anonymous-yet-unfakeable protocols that power cryptocurrencies. The good-versus-evil index will be created by a global database of acts graded by mass consensus – a computerised version of how we decide our morals anyway. The flame wars in the comments will be epic.What we do with our accumulation of karmacoins will, in the end, be up to us. But at least we’ll truly know the consequences of our actions.Bet it won’t just be the Chinese that ban that.John Law is an 18th Century Scottish entrepreneur, financial engineer and gambler. Having reformed the French economy, invented paper currency, state banks, the Mississippi Bubble and other ideas essential to modern economics, he took 300 years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.Broken china, ice cream and morality images via Shutterstockweekly reviewOriginal author: John Law
Original author: Stan Higgins
Know Your Customer rules exemplify why moulding bitcoin into the current regulatory framework won’t work, argues Ariel Deschapell.
Regulation is a persistently hot topic in the cryptocurrency world, with a growing number in favour of government getting involved to further legitimize bitcoin.This includes Circle CEO Jeremy Allaire who recently remarked:“Bitcoin needs greater levels of governance around it. I do not believe this industry will grow without collaboration from governments around the world.”Allaire stressed that a middle ground must be found between privacy and the needs of governments and authorities.This sentiment is reflected by a majority of new industry entrants who want to see bitcoin mature quickly into a legitimate industry in the eyes of banks, Wall Street, and the mainstream in general. It also stands in stark contrasts to the very libertarian spirit still held by many in the community.Proponents of greater regulatory oversight, such as Allaire, can easily claim to be the practical ones in this debate, recognizing the fact that to achieve its full potential, bitcoin must be incorporated into the existing regulatory hierarchy. While there is little doubt bitcoin can’t continue its Wild West free for all, it’s a little more complicated than that.Impossible task 
Eric Holder, US Attorney GeneralIt’s obvious governments aren’t going to simply stop trying to regulate cryptocurrency anytime soon. With this in mind, it becomes tempting to simply advocate that the industry ‘grow up’ and conform to the traditional financial regulatory institutions instead of fighting them.But however seemingly practical this attitude is, it is anything but. Know Your Customer (KYC) rules are a clear example of why moulding bitcoin into the current framework is a fools’ errand at best, and is bound to create highly controversial issues.US Attorney General Eric Holder has been the latest major figure in the regulatory world to comment on bitcoin:“As virtual currency systems develop, it will be imperative to law enforcement interests that those systems comply with applicable anti-money laundering statutes and know-your-customer controls.”Unfortunately it’s not quite that simple. Bitcoin as a whole is a decentralized system that doesn’t require any third parties to interact with, and can’t be controlled or directly regulated by any central authority.“Trying to fit bitcoin into existing rules won’t be doing it, or anyone, any real favours”The only thing that any government would have jurisdiction over are exchanges and other services located within its borders, to which the KYC rules would apply.KYC rules require money-related services to be able to identify all their customers, and self report ‘suspicious activity’ that can be signs of anything from money laundering to terrorist financing.In the traditional financial sector, this makes money laundering much more difficult (although nowhere near impossible). This is because, in order to interact with the modern financial system and transmit money electronically, you need to use a third-party service such as a bank, which are easy points of regulation.Regulation trade-offHowever, with bitcoin it’s an entirely different story.No one needs a third-party service to own, spend, or send bitcoins anywhere in the world. All that is needed is an open-source wallet, of which there are plenty available to download.Individuals who are intent on using bitcoin for illegal and malicious uses can easily avoid regulated exchanges and services that require KYC compliance.In a world where bitcoin is a widely accepted means of payment, forced regulatory compliance to KYC and similar measures does effectively nothing to negate money laundering. It will only serve to increase the cost of running a bitcoin-related company.As this cost increases those most affected will be fledgling startups who don’t have the extensive legal departments that banks and larger companies possess. This will always hamper innovation, and inevitably push it overseas. So is the trade-off worth it?For the traditional financial sector it may very well be, depending on who you ask. With bitcoin, however, the picture is far clearer. Every individual is fast becoming able to to move money all over the planet cheaply and without any institutional oversight.Like any other tool ever invented, bitcoin can be used with both beneficial and malicious motives, and no central authority can do anything about this if they tried. There’s no going back. The real problem is whether governments will accept this new reality and plan appropriately, or continue to fight it.Regulatory bodies can’t fit bitcoin into current regulatory framework. The two are simply not compatible, and that has nothing to do with any libertarian sentiments in the community. It’s fact.The degree of oversight government now has in the traditional payments arena is impossible to replicate with bitcoin, as creating appropriate rules for the bitcoin industry would mean starting from the ground up.Change of thinking
Regulators need to extensively educate themselves, and realize regulating this growing new ecosystem requires a totally new approach. They need to discuss and learn what is possible, what isn’t, what they ultimately want to achieve, and then analyze the costs and benefits of all resulting legislative ideas for society as a whole.Despite a more compromising attitude from several industry leaders and many in the community, drafting any sensible legislation will be no easy task. I previously wrote that bitcoin is changing everything, and that includes the governments historically iron-clad control of the financial system.Any massive adjustments to that level of control due to bitcoin aren’t going to take place without controversy. Any systematically sensible approach will require a major change in the way regulators like US Attorney General Eric Holder think of the role of government.It will cause us not only to rethink what government should monitor, but what it even has the ability to monitor. Will it have any justification to continue to collect private financial data and enforce KYC rules when it only hurts innovation and when the effect on money laundering will be nonexistent?This is especially important in light of public opinion becoming increasingly wary of large government agencies like the NSA, which are already doing plenty to mine data on entire populations.Regardless of the desire of industry leaders to speed the regulatory process along, it will probably be a long uphill political battle to create legislation that actually makes sense and thus actually benefits the bitcoin ecosystem as a whole. Certainly trying to fit bitcoin into existing rules won’t be doing it, or anyone, any real favours.No one should be surprised if cryptocurrency gradually became a larger and more prominent subject in political campaigns as mainstream usage continues to grow, and its effects on the economy and governments regulatory ability start to be felt.Asking the right questionsThe question is, how are politicians and regulators going to react? Will they continue to waste time and effort on the hopeless task of asserting the same amount of control they have in the traditional financial sector? Such an attitude won’t help bitcoin as a whole regardless of the short term ‘legitimacy’ it gains from it.Or will governments willingly adjust to a new way of thinking, and thus help push a massive technological innovation that will have immeasurable benefits for the world economy?The important question isn’t whether bitcoin needs regulation – it’s what kind? And why? That’s the honest and extensive discussion that should be occurring.This debate carries massive consequences and will undoubtedly be dragged out into the national and public level. The importance and implications of the questions brought up by cryptocurrency demand nothing less.How exactly all of this unfolds, we will only be able to tell with time. The only thing that is certain is that regardless of the political dilemmas it provokes, the world needs an open-minded approach from governments toward bitcoin, because the world needs bitcoin.Square peg and think different images via ShutterstockAriel Deschapell is a freelance opinion and news writer for CoinDesk: his opinions do not necessarily reflect those of CoinDesk.crimeEric HolderJeremy AllaireKYCmoney launderingregulation
Regulation is a persistently hot topic in the cryptocurrency world, with a growing number in favour of government getting involved to further legitimize bitcoin.This includes Circle CEO Jeremy Allaire who recently remarked:“Bitcoin needs greater levels of governance around it. I do not believe this industry will grow without collaboration from governments around the world.”Allaire stressed that a middle ground must be found between privacy and the needs of governments and authorities.This sentiment is reflected by a majority of new industry entrants who want to see bitcoin mature quickly into a legitimate industry in the eyes of banks, Wall Street, and the mainstream in general. It also stands in stark contrasts to the very libertarian spirit still held by many in the community.Proponents of greater regulatory oversight, such as Allaire, can easily claim to be the practical ones in this debate, recognizing the fact that to achieve its full potential, bitcoin must be incorporated into the existing regulatory hierarchy. While there is little doubt bitcoin can’t continue its Wild West free for all, it’s a little more complicated than that.Impossible task 
Eric Holder, US Attorney GeneralIt’s obvious governments aren’t going to simply stop trying to regulate cryptocurrency anytime soon. With this in mind, it becomes tempting to simply advocate that the industry ‘grow up’ and conform to the traditional financial regulatory institutions instead of fighting them.But however seemingly practical this attitude is, it is anything but. Know Your Customer (KYC) rules are a clear example of why moulding bitcoin into the current framework is a fools’ errand at best, and is bound to create highly controversial issues.US Attorney General Eric Holder has been the latest major figure in the regulatory world to comment on bitcoin:“As virtual currency systems develop, it will be imperative to law enforcement interests that those systems comply with applicable anti-money laundering statutes and know-your-customer controls.”Unfortunately it’s not quite that simple. Bitcoin as a whole is a decentralized system that doesn’t require any third parties to interact with, and can’t be controlled or directly regulated by any central authority.“Trying to fit bitcoin into existing rules won’t be doing it, or anyone, any real favours”The only thing that any government would have jurisdiction over are exchanges and other services located within its borders, to which the KYC rules would apply.KYC rules require money-related services to be able to identify all their customers, and self report ‘suspicious activity’ that can be signs of anything from money laundering to terrorist financing.In the traditional financial sector, this makes money laundering much more difficult (although nowhere near impossible). This is because, in order to interact with the modern financial system and transmit money electronically, you need to use a third-party service such as a bank, which are easy points of regulation.Regulation trade-offHowever, with bitcoin it’s an entirely different story.No one needs a third-party service to own, spend, or send bitcoins anywhere in the world. All that is needed is an open-source wallet, of which there are plenty available to download.Individuals who are intent on using bitcoin for illegal and malicious uses can easily avoid regulated exchanges and services that require KYC compliance.In a world where bitcoin is a widely accepted means of payment, forced regulatory compliance to KYC and similar measures does effectively nothing to negate money laundering. It will only serve to increase the cost of running a bitcoin-related company.As this cost increases those most affected will be fledgling startups who don’t have the extensive legal departments that banks and larger companies possess. This will always hamper innovation, and inevitably push it overseas. So is the trade-off worth it?For the traditional financial sector it may very well be, depending on who you ask. With bitcoin, however, the picture is far clearer. Every individual is fast becoming able to to move money all over the planet cheaply and without any institutional oversight.Like any other tool ever invented, bitcoin can be used with both beneficial and malicious motives, and no central authority can do anything about this if they tried. There’s no going back. The real problem is whether governments will accept this new reality and plan appropriately, or continue to fight it.Regulatory bodies can’t fit bitcoin into current regulatory framework. The two are simply not compatible, and that has nothing to do with any libertarian sentiments in the community. It’s fact.The degree of oversight government now has in the traditional payments arena is impossible to replicate with bitcoin, as creating appropriate rules for the bitcoin industry would mean starting from the ground up.Change of thinking
Regulators need to extensively educate themselves, and realize regulating this growing new ecosystem requires a totally new approach. They need to discuss and learn what is possible, what isn’t, what they ultimately want to achieve, and then analyze the costs and benefits of all resulting legislative ideas for society as a whole.Despite a more compromising attitude from several industry leaders and many in the community, drafting any sensible legislation will be no easy task. I previously wrote that bitcoin is changing everything, and that includes the governments historically iron-clad control of the financial system.Any massive adjustments to that level of control due to bitcoin aren’t going to take place without controversy. Any systematically sensible approach will require a major change in the way regulators like US Attorney General Eric Holder think of the role of government.It will cause us not only to rethink what government should monitor, but what it even has the ability to monitor. Will it have any justification to continue to collect private financial data and enforce KYC rules when it only hurts innovation and when the effect on money laundering will be nonexistent?This is especially important in light of public opinion becoming increasingly wary of large government agencies like the NSA, which are already doing plenty to mine data on entire populations.Regardless of the desire of industry leaders to speed the regulatory process along, it will probably be a long uphill political battle to create legislation that actually makes sense and thus actually benefits the bitcoin ecosystem as a whole. Certainly trying to fit bitcoin into existing rules won’t be doing it, or anyone, any real favours.No one should be surprised if cryptocurrency gradually became a larger and more prominent subject in political campaigns as mainstream usage continues to grow, and its effects on the economy and governments regulatory ability start to be felt.Asking the right questionsThe question is, how are politicians and regulators going to react? Will they continue to waste time and effort on the hopeless task of asserting the same amount of control they have in the traditional financial sector? Such an attitude won’t help bitcoin as a whole regardless of the short term ‘legitimacy’ it gains from it.Or will governments willingly adjust to a new way of thinking, and thus help push a massive technological innovation that will have immeasurable benefits for the world economy?The important question isn’t whether bitcoin needs regulation – it’s what kind? And why? That’s the honest and extensive discussion that should be occurring.This debate carries massive consequences and will undoubtedly be dragged out into the national and public level. The importance and implications of the questions brought up by cryptocurrency demand nothing less.How exactly all of this unfolds, we will only be able to tell with time. The only thing that is certain is that regardless of the political dilemmas it provokes, the world needs an open-minded approach from governments toward bitcoin, because the world needs bitcoin.Square peg and think different images via ShutterstockAriel Deschapell is a freelance opinion and news writer for CoinDesk: his opinions do not necessarily reflect those of CoinDesk.crimeEric HolderJeremy AllaireKYCmoney launderingregulationOriginal author: Ariel Deschapell
Forget currencies and commodities … perhaps the most helpful analogy for Bitcoin is ‘land’, argues Richard Gendal Brown.
Oleg Andreev posted an insightful tweet the other day:Bitcoin is not a protocol of transfer, but a protocol of ownership. Coins never travel, but simply switch owners.— Oleg Andreev (@oleganza) March 20, 2014 You could argue this is a trivial observation – “how else could it work?!” – but thinking in terms of ownership and protocols for transfer of ownership is a surprisingly helpful way to think about how the system works. That’s because the ‘protocol of ownership’ insight means there is a whole other world of history, tradition and precedent to learn from: land.Here are some observations to motivate the thought:In the end-state the quantity of bitcoin will be fixed, just like landBitcoin is not perfectly fungible and neither is landBitcoin is not ‘consumed’ through use – just transformed and transferred. This is similar to land and dissimilar to many commodities, which are consumed (or at least degraded) through useOK – not a perfect parallel but let’s go with it for now. What happens if we think about bitcoin through the lens of land?Well, first, it allows us to think about coins that haven’t been mined yet … We can think of them as parcels of land on “Bitcoin Island” that haven’t been released:
The “Land Interpretation” of bitcoin. Think “Bitcoin Island”.Second, it helps us put some intuition behind the concept of the ‘unspent transaction output‘. These are bitcoins that have been sent somewhere but not yet themselves been spent. So the set of all unspent transaction outputs (UTXOs) can be thought of as the latest state of every bitcoin that has ever been mined.The UTXO is absolutely crucial to everything in bitcoin and yet very few people think in these terms, talking instead about misleading terms like “address balances” and so forth.But the interesting thing is: if we take a ‘land interpretation’ of bitcoin, then UTXOs have a really simple explanation: they are plots of land! And bitcoin transactions are simply actions that merge or split these plots of land.Imagine I own 20 bitcoins. My bitcoin wallet software will show a ‘balance’ of 20. But it’s likely that this balance actually consists of multiple unspent-transaction outputs.Even if I had bought all 20 bitcoins in one go, it’s likely that the seller merged several smaller UTXOs that added up in total to twenty bitcoins. So perhaps I received three plots of ‘land’: 7 bitcoins in one, 7 in another and 6 in the third. My total ‘holdings’ are 20 – but it is formed from three ‘UTXOs’.Perhaps my holdings on Bitcoin Island look like this:
We can think of Unspent Transaction Outputs as plots of land on ‘Bitcoin Island’. Plots A, B, C represent three unspent transaction outputs controlling 20 bitcoins.And now it’s possible to teach people about bitcoin transactions without completely confusing them!Imagine I wanted to buy a second-hand car for 11 of my bitcoins. Let’s also imagine that I pay a transaction fee of 1 BTC to keep things simple (a HUGE over-estimate, of course).I need to do a few things:Step One: I need to prove ownership of the coins I’m trying to spendStep Two: I need to say how the coins are going to be allocated – how many am I sending and to where? 11 to the seller, 8 back to me and 1 for the miner in this caseStep Three: I need to specify what the new “owners” will need to do to prove they do indeed own the coins. In other words, I need to specify what they will need to do in their Step one when they try to spend their coins in the futureI do this in bitcoin by issuing a transaction that accomplishes all three steps in one. Here’s what it might say:“I own three unspent transaction outputs: A, B and C. In total they represent twenty bitcoins. Here is my proof I am entitled to spend A. Here is my proof I am entitled to spend B. Here is my proof I am entitled to spend C. I hereby reshape my plot into two new plots: one plot 8 units in size, which I call X and a second plot 11 units in size, which I call Y. Whoever mines this transaction can claim the remaining 1 BTC. If you can satisfy the following conditions then you will be considered to own X: … . If you can satisfy the following conditions then you will be considered to own Y: …”I will set the conditions so that only the seller of the car could satisfy the Y condition and so that only I could satisfy the X condition (that’s my change and I don’t want anybody else spending it!).The end result is that I have simply rearranged the land holdings:
Transaction outputs A, B, C are now spent, replaced by two new unspent transaction outputs: X and Y. X is my change, Y now belongs to the car dealer and F goes to the miner. But we can go further … we can now have an informed discussion about what “ownership” means in bitcoin. When I “send” bitcoins to somebody, I’m not assigning ownership to an individual. What I’m actually doing is laying down a condition – and anybody who can satisfy that condition will be considered the owner.Now, normally, the condition is very simple. It says something like:“To spend this output you must prove you know the public key that hashes to the following address: … And you must prove you own the corresponding private key by issuing a digital signature”.That’s what the “OP_DUP OP_HASH160 …” stuff you sometimes see is usually saying.But the conditions can be far more complex than that … It’s all down to how you write your transaction.Where is this going?OK – so thinking of bitcoin in terms of land helps us build some intuition around UTXOs, which we can think of as ‘parcels of land on Bitcoin Island’ and we see that bitcoin transactions are really just a way to merge or split these parcels of land and impose conditions that allow people to assert ownership.And now things get really interesting. Because there are all sorts of interesting phenomena that happen with land transactions that we can use to think about bitcoin problems.FungibilityThe land analogy works because bitcoins are not perfectly fungible. Sure – there are projects trying to overcome this but this feels like an arms race between developers and law-enforcement agencies. To the extent that fungibility remains imperfect, what drivers could force different ‘land parcels’ to have different values?For me, the biggest topic on the horizon for fungibility is ‘coin tainting’, ‘whitelisting’ and the other schemes intended to ‘tag’ bitcoin addresses or UTXOs.I see these schemes as directly analogous to concepts like land ‘blight‘ on the one hand and maybe ‘planning gain‘ on the other. For example, if you own a ‘plot of Bitcoin land’ that has been ‘whitelisted’ by an exchange or finance firm such that you can access their services, presumably your ‘plot’ would be worth more than one that didn’t have that property?It is perhaps no surprise that the fungibility issue is so hot right now.Mineral Rights and Colored CoinsTwo pieces of seemingly identical land can be worth vastly different sums: if one is sitting on oil and the owner has mineral rights, a purchaser will be willing to pay them more for their land than if it didn’t!Perhaps this is a useful analogy for colored coins: two identical bitcoins can trade for different prices if one of them has been ‘colored’ by a trusted issuer. What are the taxation implications? What happens when projects trying to add coin coloration to bitcoin conflict with projects trying to create fungibility?AltcoinsPerhaps Altcoins are just different islands! If there is a Bitcoin Island, then presumably Litecoin has Litecoin Island and Dogecoin has Dogecoin Island?This interpretation now helps us think more clearly about the role and value of altcoins. Perhaps the innate characteristic of a currency (faster confirmation time? Use of scrypt?) makes the island a more attractive place to live. But if all the infrastructure and population is on Bitcoin Island then these features may not be enough – who knows.Charges and LiensIt is possible to impose conditions on land parcels in many jurisdictions. A mortgage company can prevent sale of land unless the debt is settled and some landowners in the UK have been dismayed to discover that their land ownership came with an expensive obligation to pay for the upkeep of a local church.In some cases, the obligation is short-lived (eg the mortgage charge) but in others, it persists across transactions (eg chancel repair liability). A question I don’t know the answer to is: can you write a bitcoin transaction that imposes conditions on a UTXO that propagate? That is: can you write a transaction such that whoever spends the UTXO must impose the same condition on their transaction output?ConclusionOf course, the land analogy is imperfect but I do think there is something to it. If nothing else, the mental image of ‘Bitcoin Island’ with UTXOs being the plots of land feels like a really useful one. It has certainly helped my understanding.Richard Gendal Brown writes on bitcoin and other trends in finance here, his views do not necessarily represent those of IBM. This article has been republished here with permission.altcoinsBitcoin protocolcolored coins
Oleg Andreev posted an insightful tweet the other day:Bitcoin is not a protocol of transfer, but a protocol of ownership. Coins never travel, but simply switch owners.— Oleg Andreev (@oleganza) March 20, 2014 You could argue this is a trivial observation – “how else could it work?!” – but thinking in terms of ownership and protocols for transfer of ownership is a surprisingly helpful way to think about how the system works. That’s because the ‘protocol of ownership’ insight means there is a whole other world of history, tradition and precedent to learn from: land.Here are some observations to motivate the thought:In the end-state the quantity of bitcoin will be fixed, just like landBitcoin is not perfectly fungible and neither is landBitcoin is not ‘consumed’ through use – just transformed and transferred. This is similar to land and dissimilar to many commodities, which are consumed (or at least degraded) through useOK – not a perfect parallel but let’s go with it for now. What happens if we think about bitcoin through the lens of land?Well, first, it allows us to think about coins that haven’t been mined yet … We can think of them as parcels of land on “Bitcoin Island” that haven’t been released:
The “Land Interpretation” of bitcoin. Think “Bitcoin Island”.Second, it helps us put some intuition behind the concept of the ‘unspent transaction output‘. These are bitcoins that have been sent somewhere but not yet themselves been spent. So the set of all unspent transaction outputs (UTXOs) can be thought of as the latest state of every bitcoin that has ever been mined.The UTXO is absolutely crucial to everything in bitcoin and yet very few people think in these terms, talking instead about misleading terms like “address balances” and so forth.But the interesting thing is: if we take a ‘land interpretation’ of bitcoin, then UTXOs have a really simple explanation: they are plots of land! And bitcoin transactions are simply actions that merge or split these plots of land.Imagine I own 20 bitcoins. My bitcoin wallet software will show a ‘balance’ of 20. But it’s likely that this balance actually consists of multiple unspent-transaction outputs.Even if I had bought all 20 bitcoins in one go, it’s likely that the seller merged several smaller UTXOs that added up in total to twenty bitcoins. So perhaps I received three plots of ‘land’: 7 bitcoins in one, 7 in another and 6 in the third. My total ‘holdings’ are 20 – but it is formed from three ‘UTXOs’.Perhaps my holdings on Bitcoin Island look like this:
We can think of Unspent Transaction Outputs as plots of land on ‘Bitcoin Island’. Plots A, B, C represent three unspent transaction outputs controlling 20 bitcoins.And now it’s possible to teach people about bitcoin transactions without completely confusing them!Imagine I wanted to buy a second-hand car for 11 of my bitcoins. Let’s also imagine that I pay a transaction fee of 1 BTC to keep things simple (a HUGE over-estimate, of course).I need to do a few things:Step One: I need to prove ownership of the coins I’m trying to spendStep Two: I need to say how the coins are going to be allocated – how many am I sending and to where? 11 to the seller, 8 back to me and 1 for the miner in this caseStep Three: I need to specify what the new “owners” will need to do to prove they do indeed own the coins. In other words, I need to specify what they will need to do in their Step one when they try to spend their coins in the futureI do this in bitcoin by issuing a transaction that accomplishes all three steps in one. Here’s what it might say:“I own three unspent transaction outputs: A, B and C. In total they represent twenty bitcoins. Here is my proof I am entitled to spend A. Here is my proof I am entitled to spend B. Here is my proof I am entitled to spend C. I hereby reshape my plot into two new plots: one plot 8 units in size, which I call X and a second plot 11 units in size, which I call Y. Whoever mines this transaction can claim the remaining 1 BTC. If you can satisfy the following conditions then you will be considered to own X: … . If you can satisfy the following conditions then you will be considered to own Y: …”I will set the conditions so that only the seller of the car could satisfy the Y condition and so that only I could satisfy the X condition (that’s my change and I don’t want anybody else spending it!).The end result is that I have simply rearranged the land holdings:
Transaction outputs A, B, C are now spent, replaced by two new unspent transaction outputs: X and Y. X is my change, Y now belongs to the car dealer and F goes to the miner. But we can go further … we can now have an informed discussion about what “ownership” means in bitcoin. When I “send” bitcoins to somebody, I’m not assigning ownership to an individual. What I’m actually doing is laying down a condition – and anybody who can satisfy that condition will be considered the owner.Now, normally, the condition is very simple. It says something like:“To spend this output you must prove you know the public key that hashes to the following address: … And you must prove you own the corresponding private key by issuing a digital signature”.That’s what the “OP_DUP OP_HASH160 …” stuff you sometimes see is usually saying.But the conditions can be far more complex than that … It’s all down to how you write your transaction.Where is this going?OK – so thinking of bitcoin in terms of land helps us build some intuition around UTXOs, which we can think of as ‘parcels of land on Bitcoin Island’ and we see that bitcoin transactions are really just a way to merge or split these parcels of land and impose conditions that allow people to assert ownership.And now things get really interesting. Because there are all sorts of interesting phenomena that happen with land transactions that we can use to think about bitcoin problems.FungibilityThe land analogy works because bitcoins are not perfectly fungible. Sure – there are projects trying to overcome this but this feels like an arms race between developers and law-enforcement agencies. To the extent that fungibility remains imperfect, what drivers could force different ‘land parcels’ to have different values?For me, the biggest topic on the horizon for fungibility is ‘coin tainting’, ‘whitelisting’ and the other schemes intended to ‘tag’ bitcoin addresses or UTXOs.I see these schemes as directly analogous to concepts like land ‘blight‘ on the one hand and maybe ‘planning gain‘ on the other. For example, if you own a ‘plot of Bitcoin land’ that has been ‘whitelisted’ by an exchange or finance firm such that you can access their services, presumably your ‘plot’ would be worth more than one that didn’t have that property?It is perhaps no surprise that the fungibility issue is so hot right now.Mineral Rights and Colored CoinsTwo pieces of seemingly identical land can be worth vastly different sums: if one is sitting on oil and the owner has mineral rights, a purchaser will be willing to pay them more for their land than if it didn’t!Perhaps this is a useful analogy for colored coins: two identical bitcoins can trade for different prices if one of them has been ‘colored’ by a trusted issuer. What are the taxation implications? What happens when projects trying to add coin coloration to bitcoin conflict with projects trying to create fungibility?AltcoinsPerhaps Altcoins are just different islands! If there is a Bitcoin Island, then presumably Litecoin has Litecoin Island and Dogecoin has Dogecoin Island?This interpretation now helps us think more clearly about the role and value of altcoins. Perhaps the innate characteristic of a currency (faster confirmation time? Use of scrypt?) makes the island a more attractive place to live. But if all the infrastructure and population is on Bitcoin Island then these features may not be enough – who knows.Charges and LiensIt is possible to impose conditions on land parcels in many jurisdictions. A mortgage company can prevent sale of land unless the debt is settled and some landowners in the UK have been dismayed to discover that their land ownership came with an expensive obligation to pay for the upkeep of a local church.In some cases, the obligation is short-lived (eg the mortgage charge) but in others, it persists across transactions (eg chancel repair liability). A question I don’t know the answer to is: can you write a bitcoin transaction that imposes conditions on a UTXO that propagate? That is: can you write a transaction such that whoever spends the UTXO must impose the same condition on their transaction output?ConclusionOf course, the land analogy is imperfect but I do think there is something to it. If nothing else, the mental image of ‘Bitcoin Island’ with UTXOs being the plots of land feels like a really useful one. It has certainly helped my understanding.Richard Gendal Brown writes on bitcoin and other trends in finance here, his views do not necessarily represent those of IBM. This article has been republished here with permission.altcoinsBitcoin protocolcolored coinsOriginal author: Richard Brown
AMD’s new card is pricey and designed with enthusiasts in mind, so few miners will be willing to pay the premium for an elaborate hybrid cooler. What’s more, an increasing number of scrypt miners are looking beyond Radeon graphics processing units (GPUs) for their mining needs.With that in mind, the dual-GPU Radeon R9 295X2 is starting to sound like a swan song for GPU mining, at least as far as scrypt goes.Meet the R9 295X2, AMD’s new flagshipThe Radeon R9 295X2 is the latest card in a long line of dual-GPU graphics cards from AMD. It is based on the 6.2bn transistor Hawaii XT GPU, the same chip used in the R9 290X. Each GPU packs 2816 stream processors, 176 texture units and 64 ROPs. The GPUs are paired with 4GB of GDDR5 on a 512-bit bus. In essence it’s like having two R9 290X cards on a single printed circuit board.The closed loop hybrid air/water cooler helps the card maintain high boost clocks, which was not the case with the reference R9 290X design, which quickly ran up against the thermal barrier in AMD’s Uber mode. AMD says the R9 295X2 can consume up to 500W. The suggested retail price is $1,499, or €1,100 plus VAT in Europe.The price makes it more or less pointless for GPU miners, as they would much rather invest in two R9 290X cards, with a suggested retail price of $549. However, buying an R9 290X at that price has been next to impossible for months due to strong demand. This appears to be changing.Miners are saving their cash for scrypt ASICsAMD has been struggling to meet demand for Hawaii-based cards for months. The R9 290X was on allocation for a while and the shortage also led to plenty of price gouging, especially in Europe and North America.Contrary to many reports, the shortages were not caused solely by miners, although they contributed to them. AMD’s Hawaii cards tend to offer good value for money compared to Nvidia’s high-end cards and AMD sweetened the deal with Mantle, a proprietary API that enables developers a “close to metal” approach and eliminates plenty of CPU overhead. The Mantle API still lacks support, but there are plenty of studios that have already signed up, making the cards a bit more appealing.Demand for Radeon R290-series cards has dropped over the past few weeks. Miners have been scooping up Hawaii-based and Tahiti-based Radeon cards by the dozen for the past few months. However, retailers and distributors say demand is finally cooling down. It appears that miners are waiting for more scrypt ASICs, which is understandable.It should be noted that this only applies to scrypt. There is always a chance that someone out there will come up with a popular altcoin based on a new ASIC-proof algorithm, but don’t hold your breath. There is already plenty of altcoin fatigue.Performance-per-watt conundrumRadeons still account for much of the computing power behind scrypt altcoins such as litecoin and dogecoin. However, they are no longer the money making machines they once were. Difficulty is going up and the first ASICs capable of handling scrypt are rolling out.One example is the GridSeed ASIC hybrid miner, which can mine both scrypt and SHA cryptocurrencies. GridSeed offers a range of miners ranging from $205 to $27,195.For example, GridSeed’s Set B – 5X 2M package features five 55nm ASICs capable of churning out 330-450KH/s at 4-7W. It is priced at $1,375, so it costs about as much as a pair of Radeon R9 290X cards and it’s roughly on par in terms of performance, as the R9 290X delivers about 1MH/s. However, the Radeons consume up to 250W each, but in reality the number can go up to 300W under load, especially if some overclocking is involved.On top of that you’ll need a motherboard, power supply unit, CPU and a few other components to build a GPU mining rig, which basically means you will end up spending more to get inferior performance-per-watt.As if that isn’t bad enough, comparing Radeons to upcoming scrypt miners paints an even bleaker picture for GPU mining. KnCMiner recently updated the spec for its upcoming Titan miner, which will now deliver up to 250MH/s and will require a standard 800W-1000W power supply unit. To get that sort of performance out of Radeon-based rigs a miner would need about 250 cards rated at 250W each, not including the consumption of other components.Possible RMA falloutGPUs still have one advantage on their side. Miners can use them for weeks or months and then simply sell them as used graphics cards. Selling used ASICs is a lot harder, especially in small markets. While miners would probably find a lot of interest for used ASICs in places like the US, Germany or China, in many smaller countries they would have to look abroad, with all the bureaucratic mess that entails. Unloading unneeded GPUs is a lot easier and depreciation tends to be much lower.However, there is a problem. Many miner cards have a lot of mileage on them. Bear in mind that these are consumer products, and were not designed to run under full load for months at a time. The average gamer does not push the graphics card to its limits more than a few hours a day. These are the numbers AMD takes into account when it works out its return merchandise authorization (RMA) scenarios. Some cards are always expected to die an untimely death, so AMD and its add-in-board partners are usually willing to replace them free of charge.However, they can refuse to do so if the cards were abused.This may be a problem for some miners. Serious miners with dozens of cards tend to buy the cheapest available cards, namely reference cards with stock coolers rather than overclocked cards with non-reference coolers. In many cases the cards will be underclocked rather than overclocked, trading performance for efficiency. There are exceptions though – some miners overclock their cards.A card that has spent six months mining for altcoins has more than 4,300 hours on it, under full load. The same card in a gaming rig, with two hours of load per day for six months, had to deal with just 360 hours of full load, if that. Games don’t push cards to 100% load all the time, so two hours of full load is usually what gamers get from extended gaming sessions. All the load takes its toll on various components, ranging from voltage regulator modules to fans and GPUs themselves.In other words, people who know what they are doing will avoid mining cards in the second-hand market, so they may not be as easy to unload as some miners expect. Selling a couple of cards shouldn’t be hard, but selling dozens at once will, as many gamers will stay away from them to avoid possible RMA issues.Photo creditNermin Hajdarbegovic is a freelance opinion and news writer for CoinDesk: his opinions do not necessarily reflect those of CoinDesk.AMDRadeonscryptscrypt ASICScrypt mining
Original author: Nermin Hajdarbegovic