BitBuzz Daily: A look at some of the most interesting bitcoin news around the web

Welcome to the start of a brand new week and plenty of crypto-currency related news as well.

As bitcoin grows in popularity, more and more people are hearing about it and it is getting increasingly wider coverage in the mainstream press. Over the weekend, The Economist published a insightful piece about bitcoin, outlining its flaws as well as the underlying beauty in its mathematics. Whereas much press tends towards the negative, this is a well-written critical analysis and explores some of the potential weaknesses we should all be aware of.

ALL currencies involve some measure of consensual hallucination, but Bitcoin, a virtual monetary system, involves more than most. It is a peer-to-peer currency with no central bank, based on digital tokens with no intrinsic value. Rather than relying on confidence in a central authority, it depends instead on a distributed system of trust, based on a transaction ledger which is cryptographically verified and jointly maintained by the currency’s users.

Transactions can occur directly between the system’s participants at almost zero cost, without the need for a trusted third party or any other intermediary, and are irreversible once committed to a permanent and fully public record. Bitcoin’s mathematically elegant design ensures that the money supply can increase only at a fixed rate that slows over time and then stops altogether. Anonymity, while not assured, is possible with the right precautions and tools. No wonder Bitcoin is so appealing to geeks, libertarians, drug dealers, speculators and gold bugs.

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When it comes to U-turns, it is usually a reference to a political change of heart, or perhaps at another end of the scale, a footballer not transferring to another club. Here’s one that is going to prove very interesting to bitcoin enthusiasts.  Joe Weisenthal (@TheStalwart) of Business Insider is changing his mind about bitcoin.

Despite several articles writing off bitcoin as “a joke”, he is now eating those words. Here’s his article explaining why.

Joe Wesenthal: Business Insider

I’m changing my mind about Bitcoin.

I used to think it was a joke or at best a currency for clowns.

Now, I no longer think that. Now, I don’t know what its future is.

Here, let me explain.

I’ve gone through two phrases writing about the “crypto-currency” called Bitcoin. I first started paying close attention to it early this year. In April, during its first big mega-spike, I wrote Bitcoin Has No Intrinsic Value, And Will Never Be A Threat To Fiat Currency.

Then the price of Bitcoin crashed, and I kind of lost interest.

Then a few weeks ago, as the price of Bitcoin started exploding again, I wrote a post that earned me all kinds of trolls and anger on the Internet. That post was titled Bitcoin Is A Joke.

That post seriously caused a major ruckus. Everyone on the Bitcoin message boards freaked out. Someone tried turning me into a meme.

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Ever wondered what sort of research and work is going into bitcoin and the protocol behind the scenes?

Well, this is an interesting blog post from Ed Felten about some of the research currently being carried out at Princeton. There are some interesting thoughts about Prediction Markets...

Continuing our post series on ongoing research in computer security and privacy here at Princeton, today I’d like to survey some of our research on Bitcoin. Bitcoin is hot right now because of the recent run-up in its value. At the same time, Bitcoin is a fascinating example of how technology, economics, and social interactions fit together to create something of value.

Our Bitcoin work started with a paper by Josh Kroll, Ian Davey and me, about the dynamics and stability of the Bitcoin mining mechanism. There was a folk theorem that the Bitcoin system was stable, in the sense that if everyone acted according to their incentives, the inevitable result would be that everyone followed the rules of Bitcoin as written. We showed that this is not the case, that there are infinitely many outcomes that are stable yet differ from the written rules of Bitcoin. So the rule-following behavior that we currently see is at best stable in the weaker sense that if everyone else is following the rules (and no one mining entity has too much power) then deviating from the rules will cost you money.

Beyond this, we have built a better understanding of the “political economy” of Bitcoin—how the Bitcoin community governs itself to keep the system operating well, despite the lack of a central authority and despite the complicated issues around the theoretical stability of the protocol. The ultimate goal of this line of work is to understand how Bitcoin is likely to deal with challenges in the future, and whether there are feasible changes that could improve the governance of Bitcoin.

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One video that looks at ‘The True Value of Bitcoin’ has been published online by Canadian philosopher and author, Stephan Molyneux. He has been talking about bitcoin for over two years now and this is his latest look at what bitcoin is, other than just ‘Internet money’. It is sure to provoke a few questions as well as answering them.

Watch it on YouTube


And we could not complete our roundup without mentioning the story that is still doing the rounds and might send any bitcoiner with a few stashed away, running to double check their wallet security (and perhaps more importantly, whereabouts.) Matthew Norman in The Telegraph tells the story of James Howells, who has lost what now equates to nearly £5 million worth of bitcoin. 

The timing may strike you as another informal application to be sectioned, coming in the week the Government performed its latest nimble U-turn over plain packaging for cigarettes. None the less, allow me to propose that the ban on tobacco advertising be suspended for one product, and that the famous Hamlet cigar campaign be revived for one glorious last hurrah.

Mature readers will fondly recall the commercials in which a sufferer of some personal calamity lit up, and was so utterly becalmed and revived that a beatific smile spread over his recently distraught features. “Happiness is a cigar called Hamlet,” went the tag line, to the background strains of Bach’s Air on the G String.

The star I have in mind for the new advert is one James Howells. In the absence of a miraculous tobacco curative, the only sensible use this IT worker from South Wales might have for a G string – be it taken from a violin or a lingerie drawer – is as a makeshift noose.

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BitScan's exclusive Q&A with Roger Ver

He loves Tokyo, jiu jitsu and more than anything, he loves bitcoin (he even has the bitcoin logo emblazoned on the back of his jiu jitsu outfit. He showed us) There is a lot of information out there about Roger Ver so we thought we’d find out not just about that time he ended up in hospital when he first discovered bitcoin but about his thoughts on the current situation with Mt.Gox and CoinLab, the US Government’s stance on bitcoin and what he thinks needs to be done to get bitcoin into the wider community. All this while he was having breakfast...

BitScan: Can you tell us a bit more about the time you got sick after discovering bitcoin?

Roger: When I discovered bitcoin, I realised this is it—this is world-changing technology that’s happening right before my eyes. I was in California when I first discovered it and I started reading about it and it drew me in. I was googling it while eating my breakfast. I was intending to go to my office that day but I didn’t make it, I stayed home, read all about bitcoin, stayed up that whole night until 11am the next morning until I finally fell asleep a little. About an hour and a half later I woke up and read more about bitcoin and stayed up all day, just ordered food to be delivered to the house, stayed up all night the next night and didn’t go to bed until about 7am the next morning. Two hours later I woke up and read more about bitcoin and was just absolutely obsessed with bitcoin. This went on for about a week, where I only slept about two hours a night and didn’t leave the house. Normally I need about eight or nine hours of sleep a night so after over a week I got really really sick. I couldn’t even drive myself to the hospital so I called my best friend and he took me. They gave me some sort of antibiotics and sleep medication and I slept twelve hours straight and started to feel a little better. But ever since it has been about bitcoin every single day, for coming up three years now.

B: What was it about bitcoin that instantly grabbed you in such a way?

R: When I was younger I studied some economics and when I discovered bitcoin I realised that this is the best form of money that the world has ever seen and I realised that this is going to take over absolutely everything. So here I am having been involved with bitcoin for the last three years.

B: So it seems understandable people refer to you as bitcoin Jesus—how do you take to that title?

R: Well, eventually Jesus was executed by the Government of his time so I hope the same thing doesn’t happen to me.

B: You were prosecuted by the US government [for selling fire crackers], has that influenced your view of the government and state or have you always taken an anti-regulatory stance?

R: Absolutely it has influenced me. Before it was all abstract to me. The world would be a better place; the rich would get richer, the poor would become richer if the government got out of the way of the economy, but it was all theoretical. I had read about some of the abuses that government agents had done to people but again, it was all just a story until, they sure made it personal and brought it right into my life. If it wasn’t for them prosecuting me, I wouldn’t be living in Japan today, I would still be happy in California with my friends and family there. 

B: Would you still be as proactive in the bitcoin world if you were still living in the States?

R: If I had never been prosecuted, I would still be just as passionate about bitcoin. If I were still living in the States, would I be as active? Probably. I think it is just in the core of my being. Bitcoin is something the world really needs and it will make the world a better place for absolutely everybody. I don’t see any reason why anybody would want to delay or stop that in anyway. I just think the biggest thing that is holding back bitcoin at this point is that most people haven’t even heard of it yet, let alone understand it, and it takes a little bit of time to understand it, so I am doing my job to spread the word as quickly as I can.

B: Do you think the Winklevoss twins' plans to float their bitcoin stash will help in this regard and make bitcoin more accessible?

R: I think it will help. The more things that people can use bitcoin for, the better, and that’s just one more. There are lots of people for whom buying bitcoin is a little bit difficult so if there’s an ETF, which any traditional trader can trade into, people will love that. It will definitely help.

B: One obstacle might be the US Government. What impact do you think it will have if they remain wary of or hostile towards bitcoin?

R: I think it’s important to remember that the government is not a single entity, it’s made up of lots of individual people and everybody within government is doing what they think is for the best so I don’t think you will necessarily see hostility from individual actors within government. Certainly, some don’t like it but some will think that this a neat, new technology, why shouldn’t we use it?  You’ll have a wide spectrum of opinions inside the government just as outside.

It would be incredibly shortsighted for US regulators, or any regulators to try to clampdown on it because almost certainly there will be a handful of countries around the world that will allow bitcoin. I imagine that if the US tried to clampdown on it right away, you would probably see the Iranians and the Iraqis adopt it real quick, or any other country, that’s opposed to the US Government’s foreign policy. Right now, [bitcoin’s] total market cap is only about 1.6 billion dollars, that’s going to have to be several orders of magnitude bigger at some point to accommodate additional commerce going through the bitcoin ecosystem so talk about shooting yourself in the foot if the United States regulators were to try to ban bitcoin. It would impoverish all these Americans by not letting them use it and enrich all the foreigners. Granted, I think borders are just imaginary lines but it would be sad if people that happen to live in one political designation are not allowed to use bitcoin and become much more worse off because of it. It would be incredibly shortsighted.

B: But do you think they’ll ever reach a point where they follow Germany’s route and recognize it as a legal unit of account?

R: I think it will go a lot further than that. Once people realize just how much better bitcoin is than dollars, euro or yen I think we’ll see the majority of the world using either bitcoin or something that comes along using the same concept, that might be even better. At the end of the day, the regulators aren’t going to be able to stop it, even if they wanted to.

B: Have you renounced your US citizenship?

R: I'm a felon so it's really difficult to obtain citizenship somewhere else. I would love to be able to renounce my US citizenship but becoming stateless isn't really a practical option. I'm not a fan the idea of countries in general, but if someone out there wants a really hardworking entrepreneur, I'd be happy to change my citizenship from the US to just about anywhere else.

B: How many bitcoin businesses are you supporting at the moment?

R: I am an investor in around a dozen. The two that suck up the vast majority of my time are the bitcoinstore.com and I am involved with blockchain.info as well. Then there are a million and one emails everyday about random bitcoin things.

B: Do you get a lot of requests for support from startups and other bitcoin projects?

R: Yes. I feel bad at this point because I want to help everybody I possibly can who’s interested in bitcoin but I am having to tell people I’m sorry, I just haven’t the time to help. I think this is a good thing though, that bitcoin is growing so much that so many people are interested in doing all sorts of exciting things.

B: With all these requests, you can get an idea of how the bitcoin ecosphere is growing. How do you see it evolving?

R: I think with enough help from the media and enough attention, people will see that bitcoin is a superior currency to dollars or euros or yen and they’ll want to use it.

Someone posted on my facebook page recently about a gas station with a sign saying: “Gas: 20 cents a gallon when paid for in pre-1964 coins,” which are the coins that are still made in silver. It’s crazy, gasoline is just 20 cents a gallon if you paid for it in what money used to be worth before the government converted to this fiat currency where they can just print as much as they want.

So people have the choice, they can use a dollar, which is worth less and less and less as each month goes by or they can use bitcoins, which are very likely to be worth more and more and more. I think once people realise that, they are going to flock in mass to bitcoin and not just in the US but in countries around the world. That will be a wonderful thing.

B: And what about your vision for bitcoin in the future?

R: My vision or objective for bitcoin, I understand it can sound a bit pie in the sky, but I think with bitcoin it is a real possibility: Most people don’t realise that quantitative easing, or governments printing money, is basically just a form of counterfeiting in which it transfers wealth from normal people to the people receiving the money being spent by the government first. This is happening all over the world in mass. And my goal is to destroy every single government's on the planet ability to manipulate the money supply. That’s my goal: to remove money from the control of governments where they can no longer print money at will to spend on whatever they want. As an American citizen it is extra sad for me that the US government loves to print money and instead of using that money to help people, they use it to build weapons and drop bombs on people around the world. At least in Japan with the crazy money they are printing here, at least they are using that to build infrastructure and not to drop bombs on people in other countries. So my goal is to prevent every single government on the entire planet to debase their currency supply, to pay for things that the politicians want.

"Bitcoin is the new peace dollar. 

Bitcoin is the currency of peace." - Roger Ver

Most people don’t even realise [quantitative easing] is happening. If you or I printed money, we would go to jail for counterfeiting, but when the government do it, they call it quantitative easing, or economic stimulus. I think it’s really important that people understand that and I don’t know if bitcoin will help people understand it but people will be pretty smart when it comes to their own money and they have two options: one that is continually worth less, or one that is worth more and more.

I once organized a meet up in Hong Kong with all my business contacts I had from my previous career selling IT equipment and a lot of them are using bitcoins now. Some of them, their English isn’t so good so when one man emails me trying to sell me parts, he doesn’t ask how many dollars I’ll pay him, but how many bit corns. But he understands the concept and because of how the blockchain works, I can see that he hasn’t moved any of the bitcoins I sent him, so he now has well over a million dollars worth of bitcoin and I think he has really become obsessed by bitcoin as well. He is always emailing me, asking me what I think about this or that.

B: People are sometimes put off by the fact that bitcoin isn’t backed by anything other than the willingness of people to use it. How would you answer someone with those concerns?

R: There are a couple of answers. One, the US dollar today isn’t backed by anything but people use it fine all over the world. Two, gold is useful as money because of its inherent properties: that it’s really useful to identify as gold, it’s difficult to counterfeit and easily divisible. The one thing gold doesn’t have, is that it is not easily transportable. If you look at bitcoin, it has all those same characteristics of gold in terms of it being easily recognizable, easily divisible and similarly, they both have a limited supply and can’t just be made out of thin air. Where bitcoin differs from gold is that it is easily transportable. You can send bitcoins anywhere on the planet instantly basically for free. It is incredibly expensive to ship gold around the world and if you do, you have to trust the shipping company or the delivery company, with bitcoin you don’t have to trust anybody at all. All you do, is send the bitcoins and they have been sent. So bitcoin has gold’s valuable characteristics as money but it is also transportable. Plus, if you have gold stored in a safe or safety deposit box at the bank, that gold can be seized at any time but if you have bitcoin and you keep your password safe, nobody can seize your bitcoin.

B: Being based in Tokyo, I know you are friendly with the Mt.Gox team and you posted a youtube video a few weeks a go, reassuring people that their withdrawal problems were temporary and they were looking to expand their banking partners. You have also invested in CoinLab, do you think the ongoing issues between Mt.Gox and CoinLab are going to exacerbate the withdrawal problems?

R: From what I have seen and heard, I don’t think the CoinLab lawsuit is having an effect on delaying the withdrawals. I will also gladly tell people that I saw with my own eyes Mt. Gox’s bank account balances and the withdrawal delays are certainly not being caused by a lack of money in their bank account. They have plenty of money. Whatever the issues, it is not cause by a lack of fiat currency in their bank account. 

B: So are the issues down to the banking system, not allowing transactions to take place?

R: That’s what Mt. Gox claims and I believe them. Again, the banks are terrified of the governmental regulators so that's why they’ll be difficult, not because they want to be difficult.

B: We can't comment on specifics with the legal case ongoing but what do you think the case, the suing and counter-suing, is doing for bitcoin's image? Do you think it will undermine trust in bitcoin?

R: Unfortunately Americans love to sue people all the time. Personally I don’t like it and am not interested in lawsuits but if anything, it might end up being good for bitcoin in the sense that it gets it some additional publicity and most people haven’t even heard of bitcoin.

B: Peter Vessenes (Founder and CEO, CoinLab)  and Mark Karpeles (CEO, Mt. Gox) both have positions on the board of the Bitcoin Foundation. Do you think it could affect those relationships?

R: I haven’t seen them in person at the same time recently, but I would guess on a personal level they can still get along. The Foundation's goals are different than either CoinLab's or Mt. Gox’s individually, so I don’t think there would be an issue there.

B: And what do you think people need to do or what needs to happen for bitcoin to gain wider adoption?

R: They need to convert as many of their government-issued currencies as they can into bitcoin and thenwhenever they want to buy anything, ask the store where they want to buy it from, to accept bitcoin as payment. 

"I realised that this is the best form of money that the world has ever seen and I realised that this is going to take over absolutely everything. " - Roger Ver

At this point I can’t count how many businesses I have got to accept bitcoin just by contacting them and saying, 'I want to buy this product you are offering, and I would like to pay with bitcoin, will you accept bitcoin for this?' Then I provide them with a couple of links explaining what bitcoin is and dozens and dozens of businesses have started accepting bitcoin—because they want to sell their product and if they know they can convert back to dollars or yen if they want to, many say, ‘sure, no problem.’ So the key is whenever you want to buy anything, try to buy it in bitcoin and it’s probably better if it’s a new merchant that deosn’t already take it because that will help spread the word faster.

You can also appeal to the peace community and those that are opposed to war. Bitcoin is the new peace dollar, bitcoin is the currency of peace and if you’re opposed to war, you should be using bitcoin every opportunity you get because if you use dollars, that’s what governments are using to make bombs. 

The thing to remember is that people worry that if bitcoin is that good and you can send money anonymously and your account can’t be seized, then the government is going to shut it down right away—but it can’t be shut down. The only way to stop bitcoin would be to shut down the entire Internet on the entire planet and I don’t think that’s a realistic possibility. Bitcoin really is that good and it can’t be stopped. How can someone not be excited when they understand it?

Thanks to Roger Ver for his time to do the interview.

By Louise @ BitScan