BitBuzz Daily: our roundup of what's new and interesting on bitcoin

Well, bitcoin's price is up again - at the time of writing, the Mt.Gox price is  US$429. The big question: where or when is it going to stop? This article by Robin Sidel and Saabira Chaudhuri in the Wall Street Journal doesn't answer that but does look at what its future might be and how it is being increasingly viewed as a credible form of payment.

The price of a bitcoin vaulted to a record Wednesday, fueled by growing views that the virtual currency can have a credible future as an alternative to traditional methods of payment.

The momentum is coming from around the world, as amateur investors, venture capitalists and technology enthusiasts pump money into businesses that are trying to figure out how to swap and use bitcoin to buy goods and services.

"Our clients have seen an uptick in interest among a wider circle than just the types of people who were early adopters in the U.S.," said Adam Shapiro, a director at Promontory Financial Group LLC, a financial-services consulting firm that is advising clients on bitcoin ventures.

Bitcoin is a four-year-old virtual currency that isn't backed by a central bank and can be traded on a number of exchanges or swapped privately. A growing number of merchants also accept bitcoin as payment because the transaction costs associated with the currency are generally lower than those with credit or debit cards.

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If you do want a slightly more technical look at the future of bitcoin and what needs to happen for it to compete with the traditional credit card companies, just check out this interview with Mike Hearn by Timothy B Lee for the Washington Post. 

At the heart of Bitcoin is the blockchain, a global, shared record of every Bitcoin transaction that has ever occurred. It gets its name from the fact that every 10 minutes, on average, the peer-to-peer Bitcoin network adds a new "block" containing records of recent transactions.

The blockchain is shared among the numerous computers that participate in the transaction-clearing process known as "mining." To avoid overloading those computers, Bitcoin software currently limits each block to one megabyte in size. The result: right now, the Bitcoin network is only capable of processing around 7 transactions per second. For comparison, the Visa network is designed to handle peak volumes of 10,000 transactions per second.

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One of the big talking points about bitcoin right now is, of course, how are the regulators going to deal with it? This video by James D'Angelo for the Bitcoin 101 Blackboard series is an interesting look at some of the hurdles regulators will have to face. No one said this was going to be easy...



Watch it on YouTube


From cattle to crypto-currency, we've come a long way since the days of trading cows for wealth. This cool infographic by Chargeback.com shows the different stages in the Evolution of the Paying Customer.

Click image to see a larger version


Bitcoin has been gaining popularity rapidly in Argentina as the population look to alternatives to their ever-inflating peso. Now, as if to really cement the country as a serious player in the Bitcoin economy, the first Latin American Bitcoin Conference will be taking place in Buenos Aires. Elizabeth Ploshay explains more in this piece on Bitcoin Magazine.

From December 7 through 8, Bitcoin enthusiasts and those interested in learning about this digital, decentralized phenomena will gather in Buenos Aires, Argentina for the first Latin American Bitcoin Conference hosted by the Fundación Bitcoin Argentina.

Why Argentina? The Argentinian Bitcoin community is rapidly growing in reaction to national economic strain, but most importantly due to the opportunities Bitcoin represents as a disruptive technology and economic growth potential. With an inflating Argentinian Peso and limited access to additional fiat currencies such as the US Dollar, Bitcoin provides a credible solution and represents opportunity for Argentinians and those interested in doing business in Argentina.

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How likely is a decentralised exchange for bitcoin?

There is no doubt that for some, bitcoin is more than just a currency, or a commodity, it is an ideology. Its fundamental characteristics of being decentralised and open-source, and its disruptive nature, appeal to the libertarians out there.

Yet, when it comes to exchanging bitcoins, the majority still have to go through a third party; one of the exchanges, or a broker, who all take their cut. Even the partly-decentralised exchange platform of local bitcoins still requires users to go through a company-owned website, so for some bitcoiners, and not just the purists, a fully decentralised exchange cannot come soon enough.

It is a topic, which will be discussed in a panel at next month’s European Bitcoin Conference taking place in Amsterdam. One of the panel members is Mike Hearn, software developer for Google and one of the brains behind much of the bitcoin technology for Android. When we interviewed him, we touched on his first introduction to bitcoin and his dealings with Satoshi (see our earlier post) during the very early days of the currency, but soon moved on to his thoughts about decentralised exchange.

The problem is that centralised exchanges are financial institutions, which have to interface with the banking system, the one system bitcoin tries to remove. However, “they’re not going anywhere,” Hearn says, stating that, “if you want to move large sums of money they are the best way to do that.”

A direct, peer-to-peer exchange system sounds good in theory but in practise, Hearn believes there are limitations, and it comes down to trust. “It becomes very difficult to do this swap in an entirely fraud-free way,” Hearn says. “Someone always has to go first, and whoever goes first risks losing out... You can’t swap money for bitcoins atomically.”

Hearn explored some way of instigating a decentralised exchange system using social networks at the London bitcoin conference last year.

However, he says not too much has developed since then because “the centralised exchanges are working.” Despite the banking system being “slow and expensive” he says, “It is hard to get around that as your money starts off in the banking system.”

In a bitcoin utopia, the main exchanges might be redundant but Hearn thinks that is a long way off becoming the reality. “It is not clear the decentralised exchange concept is going to work very well so for now I don’t see them going anywhere.” He refers to the fact that even if a person were to try to trade through a social network via the internet, every movement peer to peer, would go through the banking system with the banks taking a small fee. He also raises the risks of taking part in a decentralised exchange system. “The assumption is that banks won’t figure out what you’re doing, and why you’re suddenly sending and receiving wire transfers. What we’ve seen is people getting their bank accounts terminated because banks view them as a money transmitter and abusing the banking system.”

Of course, some people circumvent some of these problems by meeting up face to face to trade small amounts of cash but the issue is how to scale that up. “A decentralised exchange would marry the best of both worlds,” Hearn explains. “You could have the scale of a standard exchange but with the decentralisation of in-person trading.”

One UK company has announced its plans to create a decentralised exchange for fiat and crypto-currencies. Metalair is looking for investors and donors for what it claims will be a “double-spending proof, fully decentralised exchange mechanism” for its open-source software. It is also hoping to promote the adoption of all cryptocurrencies by providing an exchange for bitcoin and litecoin as well.

Despite Hearn believing the future of bitcoin is bright, he is not quite as enthusiastic about that of other alternative crypto-currencies. When asked about such digital currencies as Litecoin and Feathercoin, he seemed sceptical. “Most alt coins haven’t introduced any compelling technical changes and I don’t see any reason why they’d be competitive in the long-term,” he says.

Mike will be speaking at the European Bitcoin Convention, which takes place from September 26^th – 28^th. 

By Louise @ Bitscan

Will the real Satoshi please stand up? The mystery of bitcoin's creator: Interview with Mike Hearn

There’s an enduring mystery in the bitcoin world; it has nothing to do with mining algorithms or hidden features within the bitcoin coding; it is: who is Satoshi Nakamoto? 

The enigmatic character who created the original Bitcoin software in 2008 is the subject of many theories as to who he is and where he is from. Depending on what you read, or whom you listen to, Satoshi Nakamoto is a pseudonym for one person or even a group of people, and theories as to his location or place of origin range from Japan, to Britain to Finland.

On the P2P (peer to peer alternatives) site in February 2009, Satoshi Nakamoto introduced bitcoin on his profile page, which states he is a 38-year-old male in Japan.

Prime suspects as to the hidden identity of Satoshi have included OpenCoin founder and creator of Mt.Gox, Jed McCaleb, and  Finnish compuer scientist, Martti Malmi. Malmi states here that he contacted Satoshi Nakamoto after he came up with the idea of a decentralised Internet currency. He was also the first person to make a Bitcoin to US dollar transaction.

According to the bitcoin Wikipedia entry, an investigation by Fast Company links three men, Neal King, Vladimir Oksman and Charles Bry, who in 2008 filed an encryption patent containing similar encryption technologies to bitcoin and the fact the bitcoin.org domain name was registered 72 hours later. Similar phrases were also said to have appeared in the patent and the 2008 bitcoin white paper.

Shinichi Mochizuki has been another name thrown into the ring. The Japanese mathematician was born in 1969, making him similar in age to how old Satoshi claimed to be and having lived and studied in the US also has fluency in English. On that point, it is also thought Satoshi could be British due to some of the language and formatting of his written work.

Even Paco Ahlgren has been mentioned and although much less widely circulated, his name has still cropped up in forums. The author and financial analyst has written articles extolling the virtues of bitcoin: http://www.pacoahlgren.com/pacoahlgren/bitcoin-cannot-fail/

So, although we may never find out the real identity, one man who probably has a better insight into Satoshi Nakamoto than most, is Google software developer and author of bitcoinj, Mike Hearn, who I spoke to recently.

He first heard about bitcoin back in 2009 when it was just a few months old and there were no forums or communities in which to get involved. Interested in how it worked and with no one to transact with, he emailed Satoshi Nakamoto. “I asked him some questions about how it worked and stuff I didn’t understand and he sent me some coins and I sent them back,” Hearn says, adding, laughing, “I should probably have kept them.”

With nothing much happening in the early days, Hearn “lost interest for a bit” but came back to bitcoin in September 2010, realising a small community had formed and bitcoins now had a price, albeit of only around 10-20 cents. He started to develop on it himself at that point and says, “Throughout this time I emailed back and forth with Satoshi quite a lot about technical topics.”

But when asked about who Satoshi is or whether Satoshi is one individual or possibly a group, Hearn seems adamant that Satoshi is just one man. “I don’t know where this idea that it was a group of people came from. Some people seem to say, ‘this is really clever therefore it must have been a group of people,’ but that doesn’t really hold. I don’t think there is any evidence that it was more than one guy. For one thing, the way the code was written implies it was the work of one guy.”

With Satoshi Nakamoto having stepped away publicly from bitcoin, I asked Hearn what he thought he would be making of how quickly bitcoin is growing and in particular, what he might think of how the pace of bitcoin mining is evolving. “I don’t think anyone really understood the speed at which things would go,” he says. “[Satoshi] talked about maybe one day there would be industrial consortiums with farms of GPUs. The way he phrased it was ‘in the distant future, this might happen.’” However, he seems to think Satoshi would have liked to delay that moment to allow as many people as possible to take part with their regular computers. “Satoshi did anticipate that mining hardware would get better but it was remote, theoretical possibility. The whole idea that it would take off sounded so ridiculous back then.”

Hearn believes it is not only the speed at which hardware is changing but also how fast it is entering public consciousness that would surprise Satoshi. When people were encouraging bitcoin to be used for projects such as Wikileaks, Hearn says Satoshi believed it was “too early” and bitcoin was “too small”. That argument certainly couldn’t be used today. 

Whoever Satoshi is, Hearn thinks he would have liked him. He ends by telling me, “I think I would have liked him if I’d met him. I even tried to recruit him to work at Google once.”

For a little more from this interview, a short clip is available here. Please bear in mind this is not a quality, audio recording but hopefully you find might find it interesting.  

More from this interview on decentralised exchange and alternative currencies will be featured in another post soon!

By Louise @ Bitscan