Lawsky - Digiconomist

The Flipside Bitcoin News #5 - BTC Guild Sale, Mining Farm Up In Flames, Ode to Ben Lawsky

The Flipside Bitcoin News #5 - BTC Guild Sale, Mining Farm Up In Flames, Ode to Ben Lawsky submitted by bitpotluck to Bitcoin [link] [comments]

The Flipside Bitcoin News #5 - BTC Guild Sale, Mining Farm Up In Flames, Ode to Ben Lawsky

The Flipside Bitcoin News #5 - BTC Guild Sale, Mining Farm Up In Flames, Ode to Ben Lawsky submitted by bitpotluck to BitcoinTV [link] [comments]

The Flipside Bitcoin News #5 - Chris Ellis A Cyborg, Mining Farm Up In Flames, Ode to Ben Lawsky

The Flipside Bitcoin News #5 - Chris Ellis A Cyborg, Mining Farm Up In Flames, Ode to Ben Lawsky submitted by bitpotluck to worldcryptonetwork [link] [comments]

Ripple added Benjamin Lawsky as CFO LOL.

Ripple added Benjamin Lawsky as CFO LOL. submitted by EpicTraumatology to btc [link] [comments]

NVIDIA is engaged in a proxy war for future of proof of work. They call it "progPOW" and the first target is Ethereum. We must stop it now before it reaches Bitcoin Cash. [censorship] [conspiracy]

I tried to post this in /ethereum, but was censored. My post was immediately flagged and the /etheruem subreddit moderators told me that I should post it in a mining subreddit. I have reason to believe that the Ethereum foundation, some of the /ethereum moderators, and some Ethereum developers have been compromised by NVIDIA through proxy agents/assets.
Since this subreddit was founded in anti-censorship, I felt it relevant to post here.
Furthermore, Bitcoin Cash will be in danger if progPOW is merged into the Ethereum codebase. If Ethereum forks to this new PoW algorithm, its proponents will use that as an excuse to lobby for its inclusion in Bitcoin Cash.
If you are interested in this topic, bookmark my username ugtarmas and read my previous posts on this topic. I will be posting more.
First up, my previous posts:
Archive: http://archive.is/kK1lE
Archive: http://archive.is/ZikY4
Next up, my post that was censored:
Now that my posts have put me on Kristy's Leigh Anne Minehan's radar, she and her various shills have begun to manufacture a smear campaign against me, and have attempted to implicate my company in "just someone else protecting their hardware investment".
I would like to address this head-on. Neither I, nor my company, have purchased ETH ASICs or any meaningful quantity of AMD GPUs. In fact, I bought over $100,000 worth NVIDIA GPUs {invoices}, and I am still arguing against progPOW.
As I have mentioned in my previous posts, progPOW will not stop ASICs, it will only increase the R&D cost of making them such that only the people closest to the algorithm will benefit. How do I know this? Well, because Kristy is already offering consulting to ASIC manufacturers who have already claimed that ASICs can be 8x faster than GPUs on progPOW.
Kristy and her team will have no shortage of work available helping ASIC manufacturers develop progPOW ASICs, and get paid handsomely for it. She has already proposed to work together with Linzhi. She has already worked on ASIC designs for Genesis Mining, Bitmain, and NVIDIA.
Imagine that you are an ASIC manufacturer and you want to complete with Bitmain, Linzhi, and NVIDIA. You do the R&D, which costs a few million. Then, right before you take your product to market, NVIDIA's influence in progPOW destroys your entire company. Now imagine that this happens to all potential ASIC competitors.
Meanwhile, Kristy's team offers paid consulting for all incumbent ASIC manufacturers. What could have been a healthy and competitive ecosystem is now dominated exclusively by a select few. The push for progPOW is nothing more than a cash grab by special interests. It reminds me of when Benjamin Lawsky pushed for the BitLicense bill, then immediately retired from the public sector and went to work for Ripple/XRP to help the private sector circumnavigate his very own BitLicense.
My only hope is that, before the ETH developers decide on forking to progPOW, they look at more than just its technical aspects, and look at the economic aspects. There are some people out that claim we must judge projects solely by its merits, but doing that misses the bigger picture. progPOW would not exist without the team responsible for making it, who stands to benefit massively from its inception.
Onward:
The connection between Core Scientific, NVIDIA, and progPOW (and possibly CSW/Coingeek)
submitted by ugtarmas to btc [link] [comments]

All cryptocurrencies are down... except for Ripple. This seems like a big bank scam to me.

The big bankers are behind Ripple.
Fucking Benjamin Lawsky, the man who nearly destroyed Bitcoin in New York, sits on their board of directors.
Ripple is a centrally-controlled "coin"... it shouldn't even be considered a cryptocurrency.
Ripple owns your coins and they own your accounts... they can freeze your accounts, withdraw money from your accounts, reverse transactions... just like a bank. Ripple has full control.
Ripple handed out millions of free coins to their executives. Talk about the epitome of "pre-mining".
Yet ALL cryptocurrencies are DOWN... except for Ripple?!? (Which shouldn't even be considered a cryptocurrency in the first place!)
Yep... smells like banker manipulation to me.
These bankers are not going down without kicking & screaming & fighting unfairly... just like the bankers have always done throughout history.
The "powers that be" will do all they can to try to stop cryptocurrencies from gaining a foothold. They are using the BCH availability on Coinbase as an opportunity to trash BTC and BCH (as well as all cryptocurrencies) by sowing fear and confusion amongst the masses. Typical of the “old and tired" institutions when the “new” idea comes along.
Fuck you, bankers!
Freedom shall win in the end.
submitted by scotty321 to btc [link] [comments]

Thank you Jeremy Allaire for your post today.

Jeremy Allaire's blog post today, regarding the NYDFS BitLicense proposal, was excellent and very much needed.
https://www.circle.com/2014/08/13/thoughts-new-york-bitlicense-proposal/
I had previously derided Allaire in my own NYDFS response several weeks ago. I'd like to formally retract that derision.
Thank you Jeremy for standing up and openly confronting the BitLicense proposal. It was diplomatic and well-spoken; the kind of articulate opposition to creeping surveillance and state control that Bitcoin business leaders, especially in the US, should be conveying.
submitted by evoorhees to Bitcoin [link] [comments]

Bruce Fenton advocates a call to arms for the bitcoin community: "civil disobedience against a corrupt regulator!" - x/post from r/bitcoin

Bruce Fenton advocates a call to arms for the bitcoin community: submitted by JoshIsMaximum to Anarcho_Capitalism [link] [comments]

There is a 30 day comment period for the current Bitlicense proposal. Unless there are substantial changes, New York will be a Bitcoin dead zone

The 30 day comment period starts next week. Bitlicense, as proposed will force most companies that store customer BTC deposits to block New York IP addresses. There is very little chance that Lawsky will make any further changes to it, so what will this mean for Bitcoin around the world?
EDIT, as a reminder:
This is how the Bitlicense will affect Bitcoin businesses, taken from here:
http://www.reddit.com/Bitcoin/comments/2aycxs/hi_this_is_ben_lawsky_at_nydfs_here_are_the/cizyqyz
(I've added modifications in light of changes in the new proposal and information that I found was missing in the original write-up)
Entities are considered dealing in virtual currencies if:
.. to any resident in New York. Web services, even those incorporated overseas, must either comply or block access for NY users. (200.2n)
Entities 'dealing in virtual currency' must:
Added:
The (only?) good news: Merchants do not need a BitLicense to accept Bitcoin for a good or service. (200.3c2).
> This post was created for general guidance, and does not constitute legal advice. You should not act upon the information contained in this publication without obtaining specific advice from a professional. No representation or warranty (expressed or implied) is given as to the accuracy or completeness of the information contained in this post.
EDIT 2, targetpro suggested expressing any concerns you may have about the proposed regs to the NY Dept. of Finan. Services:
submitted by aminok to Bitcoin [link] [comments]

BitLicense isn't bitcoin regulation, it is a de facto bitcoin ban, coupled with the introduction of a whitelist-based altcoin run by governments but utilizing the bitcoin blockchain.

It's tough to accept, but we might be facing the first attempt at seriously enforcing a total ban on all bitcoin transactions. The fact that it will be enforced simultaneously with the introduction of a government-controlled NYCoin just makes it even more dangerous.
This is probably the first time bitcoin has ever been in real danger of being supplanted by something else. NYCoin might become USACoin, which might then merge with ChinaCoin and EUCoin to become something I imagine will commonly be called WhiteCoin - a global surveillance based currency with a worldwide monopoly on trading legal goods and services.
I think it is important that we realize that the BitLicense is what can best be described as an "attack" - a deliberate attempt to hurt bitcoin users - and we should fight back with everything we have. The fact that Ben Lawsky tricked us into thinking his main concern was to ensure a good environment for startups shows that the people attacking us are not holding back, but are willing to use any tricks necessary to crush us.
I can't think of much that can be done right now, but my best bet is that we need to try to attack the value of this WhiteCoin wherever it pops up, NYCoin being the first. It will be tough, and a boycott will not be enough because this is the coin that big money will be investing in.
Perhaps it will be possible for bitcoin users to force miners to choose between mining transactions for one of the two coins, thus making sure that as long as bitcoin is the dominant digital currency by transaction fees, whitecoin transactions will be really slow. We can be absolutely certain the opposite would happen instantly should whitecoin ever become the dominant currency.
submitted by Rune_And_You to Bitcoin [link] [comments]

Even by I.R.S. standards, the recent ruling on bitcoin flirts with nonsensical non-logic in a way that is truly shocking to an outsider. Govt officials have called bitcoin "digital currency" thousands of times, not once have they called it "digital property".

Really astonishing. For months, including the Senate hearing and the Treasury Department's own published documents on bitcoin always refer to it as a "virtual currency," "digital currency," or my favorite "convertible virtual currency." Don't take my word for it. Search through publicly available federal government documents that mention or address bitcoin in any way. It's always discussed as a convertible electronic currency, which it is, not as property.
If the government views bitcoin as property - for taxation purposes the same as selling ice cream sandwiches out of an ice cream truck - why was this not a topic broached during the Senate hearing? Why did former Fed chairman Ben Bernanke in his letter refer to "virtual currency" several times, and "virtual property" not once. His successor, Janet Yellen, has had an equally sane approach toward bitcoin.
Even by the sometimes byzantine logic of modern tax agencies, the IRS is simply wrong.
If mining Bitcoins is self employment, so is jerking off to porn.
If Bitcoin is primarily "property" and not currency, then why the focus on KYC/AML compliance? It's not money according to the IRS. And why the need for money transmitter licenses? And why is New York State trying to regulate Bitcoin if it's just property? Lawsky's job is over before it even begins, if this nonsensical IRS classification is not challenged and revised.
Please don't tip me, I don't want the burden of having your property thrown at me unsolicited over these inter web tubes. Thank you.
submitted by CryptoDonDraper to Bitcoin [link] [comments]

GAWminers.com / Paycoin / Josh Garza has the potential to destroy or gravely set back the cryptocurrency revolution. Here is why.

Gawminers right now is initiating fraud that is beyond the scope of most bitcoin scams, maybe second only to MTGOX.
They are misrepresenting their products and fraudulently shifting hidden risks to customers. Here are my claims
  1. They are selling virtual hashes without the actual machines backing it.
  2. They falsify payouts according to pools that never existed or never received hashes from GAW.
  3. They are known and have been caught using shill accounts. Not just the company but the CEO himself. Josh Garza.
  4. They are just generally immature assholes that will ruin the fun for everyone because of their unethical character and greed.
Here are the reasons why I submit my claims based upon public evidence:
Josh Garza publicly stated that the payouts from his virtual hashing machines are from a combination of mining, day trading, and private rentals. https://bitcointalk.org/index.php?topic=720844.msg8601489#msg8601489 Nothing on the product page mentions day trading and it is misrepresentation of risks by omitting such evidence.
None of the pool owners listed on the gawminers website confirmed ever receiving hashes from GAWminers. You can go email them yourself.
The most obvious reason they do not have physical mining hardware would be to read the gawminers TOS. Here: https://bitcointalk.org/index.php?topic=720844.msg8605520#msg8605520
Their Zenpool had consistently paid 2x more than other multipools during the beginning of the launch. Their fake zenpool speed counter went up to 300MHS when it was displayed publicly here: https://www.zenminer.com/pool/ until they realized they are claiming to own more than 50% of the total litecoin network at the time. That is when the counter disappeared when people began to question the enormous scope of their fake mining operation.
The zenpool is a farce. It is fake and it just simulates ponzi payouts. Which was confirmed when the payouts predictably dropped more then 100% few weeks ago and even lower than some of the other multipools. Josh publicly stated this was because "investors" were not buying big contracts. He publicly stated this here:
http://webcache.googleusercontent.com/search?q=cache:8j3lrbmknSgJ:https://hashtalk.org/topic/11712/zenpool-fluctuations-update-update+&cd=1&hl=en&ct=clnk&gl=us
realized his mistake of making such statement and deleted the whole thread.
If a pool requires investors to buy contracts for increased payouts, then you do not have a real mining pool with real mining machines.
Josh Garza used shill accounts on bitcointalk.org here: http://share.pho.to/6pc3a/9a/original . I think he was caught publicly using shills twice. If anyone has proof, msg me and I will send you 0.25BTC.
If this ponzi scheme collapses and if his claims that he sold over 120mm of products this year are true. Then the regulatory fall out will be ugly. This is not a small scam. It is huge and will give ammunition to people like Ben Lawsky to regulate us to death as this occured with a US company on US soil. It will be another Enron or worse.
Please please please educate.
The private evidence I have is much much more condemning. But it should be obvious enough what is already out there publicly.
Also, please feel to present counter arguments.
submitted by gaw-whistleblower to Bitcoin [link] [comments]

Bitcoin 2017 a Comprehensive Timeline

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submitted by BitcoinChronicler to btc [link] [comments]

A few thoughts - Friday, July 18, 2014

Good afternoon! Yesterday was the darkest day in at least the recent history of bitcoin, perhaps ever. I'll get into why yesterday was more significant than Mt. Gox and China later, but the end point of this post is going to be that these proposed regulations are a breathtaking expansion of government power into areas of commerce that have never traditionally been regulated. If this passes, we may well find ourselves fighting against bitcoin acceptance.

Some basic truth about The Law

First, it's important to eliminate a common misunderstanding in /bitcoinmarkets. Some users are arguing that this law (lowercase letters) isn't that bad because while it covers a broad range of activity, it is only intended as a tool to fight money laundering (or some other goal, depending on the user). People need to understand that the long arm of The Law (capital letters) does not care what laws were actually intended to do. You either violate them, or you do not. A judge isn't going to allow a business to operate based on the argument that this law was intended for a different purpose.
As you make your evaluation of the effects of this law, you need to consider every possible activity that could be illegal under it. You can't write off certain activities because they were unintentionally added to the law. The Law is not compassionate and does not allow people to get away with things because the creators were trying to prevent some other behavior. There are many examples of poorly-designed laws that have had devastating unintended consequences.

Some examples

Now that we are clear that the intent of the law doesn't matter, I thought it would be worth sharing how a few examples of bitcoin-related activities in New York will work. This section includes three rows each. The first is the activity, the second is an example of what I would consider some reasonable regulations, and the third is the actions needed for compliance under this law. Since there are an absurd number of requirements for each case, I only listed one or two of the most ridiculous for each.
Activity: Operating a tipping bot that sends $0.25 tips to residents of New York that holds balances
Reasonable: Require the tips to be backed with 100% reserve in the tipped currency
Lawsky: Collect personally identifiable information about all people ever tipped, retain it for 10 years, and submit paperwork to the department when tips qualifying as "suspicious activity" are sent
Activity: Changing a variable in the bitcoin code and creating a new blockchain for testing a proposed feature
Reasonable: No regulation
Lawsky: Register with the NYDFS, payi thousands of dollars, wait 90 days, and undergo a background check with the FBI
Activity: Operating the Elgius mining pool, which adds PPLNS payouts to its own blocks, so that users never have outstanding balances
Reasonable: Allow people to take civil action if their payouts don't match what they are owed
Lawsky: Register as a money transmission service, develop compliance programs, and conduct "intrusion prevention" tests against the nonexistent wallets
Activity: Running a business like blockchain.info, which does not hold any balances whatsoever in dollars and pays all employees and vendors in bitcoins
Reasonable: Require recordkeeping of profits and expenses similar to current laws
Lawsky: This business model is expressly prohibited; no business is allowed to take profits in bitcoins
Activity: Operating an altcoin exchange, which takes untraceable litecoins and exchanges them for untraceable nanotokens
Reasonable: Prohibit fractional reserve banking and require that reserves be kept in the currencies they are backing
Lawsky: Requires altcoin exchanges to back its reserves in dollars and to associate every altcoin address with a username. If there is a bubble, the business goes under because it is no longer able to back customers' deposits.
Activity: Being a one-time arbitrator, where two parties trade something and use a multisignature transaction with you as the decider in the case something goes wrong
Reasonable: At most, require background checks on the arbitrator to verify his integrity
Lawsky: File paperwork with security plans, a list of anyone who might help you with collecting evidence to make the decision (even if you are never called upon to do so), and obtain background checks and fingerprints for all of them; pay thousands of dollars to register, wait 90 days to be approved, file suspicious activity report if the transaction is over $3k regardless of whether you are called upon to arbitrate or not
Activity: Modify your mining pool's pay-per-share algorithm to prevent block withholding attacks, or introduce a new algorithm like PPLNS, without branching out into other business areas
Reasonable: No paperwork necessary
Lawsky: File new request with the Department and wait 90 days for the new model to be approved before rolling out the feature, while competitors in other states launch immediately

Businesses no logner possible to be served to New York residents

In addition to the regulation requirements, there are also some types of business models that simply cannot overcome the regulations at all. Here are some of those types of businesses:
Arguably, the following business types could also not operate in New York because of cost concerns:
The greatest problem with these regulations is simply that there is no clause for the amount of money the company has to control. While we plan to take all possible security measures, our pool's greatest security measure is that we automatically pay out balances that are too large, so that we will never owe more than $10k in customer funds. If there were to be a hack, then we would simply eat the cost of less than $10k from personal funds because it is a small amount. The reason this works is because it would cost more than $100k to provide the sort of professional infrastructure that Lawsky is requiring, so even if the site were hacked ten times, and even if we never fixed the security holes, we would still be ahead.
That's why this legislation is irreparably flawed and cannot be salvaged. It makes sense for people holding a billion dollars to be subject to strict regulations. It is nonsensical to require people who hold $5k in customer funds to spend $200k/yr in compliance measures, given that taking 40 hacks are still preferable to such ridiculous regulations.

The likely outcome of these regulations is less protection

Now that we know the local effects on certain types of businesses, we should ask what the end result is going to be a year from now, should these regulations not be completely overhauled. I propose that the end outcome of these regulations is going to be less consumer protection and more crime. The only businesses able to operate in New York will be huge banks and hedge funds. While the banks charge excessive fees and rip customers off, they already are far more trustworthy than Mark Karpeles ever was. They already practice good security anyway because they understand (unlike Mt Gox) that customer service is important. The law isn't going to have much impact on them. Furthermore, these guys aren't even into the bitcoin business yet, so (at least at first), the only people the law effects are the small guys.
Meanwhile, everyone else other than the banks is going to do exactly what we may be forced to do: milk the system by applying for licenses and waiting as long as possible, and then, on the day before compliance is required, ban New York residents from our service and avoid doing business with anyone in New York. However, it will be impossible for us, or anyone else, to eliminate every single New York resident from our system no matter how hard we try or how good our intentions are. Because there is no minimum funds limit, New York residents are going to find that they are excluded from the use of nearly every altcoin, mining pool, exchange, open source project, wallet service, auction site, escrow system, and so on.
They key here is that by making the regulations too hard to comply with, every site is going to be equalized. If the cost of compliance were low, then honest businesses would have no problem complying. When the cost of compliance is high, there is no distinction between honest and scam businesses because New York residents will have to do business illegally. This leads to more scams and losses of money. Whereas now a New York resident who uses a service available in New York can sue the provider of a scam, they have no recourse in this proposed new world. After all, the New York resident was engaging in illegal activity by using a non-licensed business. This allows scammers to directly target people who live in New York because they have fewer legal protections than do people who live in other states.
I'm very glad that I do not live in New York right now, and I actually feel sorry for what those who have been in bitcoins since the beginning and who live in New York are going to be unable to take part in the future.

About money laundering

One of the reasons we got into this mess is because the Federal government ignored consumer protection. While they were issuing regulations about money laundering, people like Mark Karpeles were able to take advantage of a complete lack of attention to consumer protection. The Federal government wasted millions of dollars in its cases against bitcoin_charlie, who is not accused of stealing any money or participating in any violent behavior, while ignoring real consumers who were being ripped off by exchanges operating as fractional reserves like Mt Gox and Vircurex. BenLawsky is now able to seize upon the Federal government's inaction and make himself look like a hero of consumer protection because New York will do what the Feds didn't do.
Proponents of anti-money laundering regulations argue that terrorists have been significantly hindered by restrictions in moving money. Terrorism is a great excuse for many things. Consider the case of airport x-ray screening devices. Every time a person goes through one of those devices, he has a 1 in 30 million chance of developing cancer as a direct result of the x-ray exposure pushing that person over the cumulative radiation exposure threshold at which cancer would develop. The risk of dying in a terrorist attack on the plane before the machines were installed was also about 1 in 30 million. Therefore, we spent hundreds of millions of dollars on machines that kill as many people as the terrorists do. Not only that, but anyone would rather die in a terrorist attack than go through chemotherapy and years of pain in a long, excruciating death.
People seem to accept that money laundering rules are necessary, and are pushing the bar of regulation lower and lower every day. How much would your risk of death really increase if money laundering regulations were loosened? If you have a 1 in 1 million greater chance of death but vastly more freedom in your finances, wouldn't you take that? In a perfect world where people didn't die, that would be an unacceptable compromise. In our world, however, people do die. It is ludicrous that people allow themselves to become obese and then live in fear of a terrorist attack.

The creation of a new kind of criminality?

There were some shameful comments from people like the Winklevoss twins yesterday about how they appreciate regulation of the industry. For those guys, it's all about getting rich, which isn't surprising given how their wealth is largely based on winning lawsuits rather than actually creating stuff. Few people seem to be reading the text of the document and understanding how this goes beyond bitcoins. This is a breathtaking expansion of government power that has never been seen before in the financial world. The regulations in this document expand the scope of financial oversight into industries far removed from anything that is covered by existing financial regulations, like open source development. For the first time, they dictate how businesses may pay out profits and promote inefficiency by requiring a bitcoin -> dollar -> bitcoin conversion, widening the pockets of Coinbase. They signal the creation of a huge bureaucracy that will require ever more taxpayer dollars to process millions of "suspicious activity reports," licenses, and minute software changes.
But most importantly, they require recordkeeping and information gathering of unprecedented scope, and trust so many entities to gather these records that they will be leaked to everyone. People running small mining pools that pay out $0.30 per day will be retaining passport numbers. Some people are viewing this as the "government" collecting information on people, but the government already has all this information. What will happen is that these records will be so prevalent because so many people are mandated to collect them that every hacker in the world will have a copy. In what other area of business are so many people required to keep huge databases of passport photos, utility bills, and other documentation that enables all sorts of criminal activity? These records will exist for at least 10 years, be copied in mergers and acquisitions, and leaked to the media and to the criminals, who will pay record sums for them.
The criminals and rogue insiders can use the data not only to perform identity theft, but to learn everything you ever bought, who your contacts are, where you live, how much you earn, what time of day you are away from your house, and what sites you use. They can phish for passwords at just the sites you use, arrange a theft when they recognize you are on vacation, threaten to phone your employer with false allegations of rape unless you pay up, use stolen wallets to frame you by purchasing child pornography with them, and contact repressive governments to have you arrested for associating with a known dissident.
That brings me back to the opening sentence in these thoughts for today. If these regulations pass and spread to other jurisdictions, we may actually find ourselves opposing the uptake of bitcoins. If more states adopt these regulations and people start adopting, then the stage will be set for an increase in government power to track everything about everyone, and a corresponding increase in criminal activity.
I said in the past that bans on bitcoins would not have an impact on the technology because people would go somewhere else, so they were not a change to the fundamentals. Few anticipated such a dramatic expansion of government power like we saw yesterday. Using the technology to procure unprecedented amounts of data would be a change to the fundamentals which even Nakamoto probably didn't intend.

Other

submitted by quintin3265 to BitcoinThoughts [link] [comments]

A few thoughts - Monday, August 4, 2014

Good afternoon! A few thoughts for lunch today:

Regulations will have another effect

Suppose that you agree with all the New York regulations and don't think that they will hurt small businesses. Or, you think that the bitcoin industry would be better served by large corporations that have compliance programs and insurance and all the other things that big banks do. However, if the New York regulations pass, bitcoins will actually become more expensive to use than dollars will, because the number of regulations proposed for bitcoins is higher than the number of regulations currently required for many types of banking activities.
Bitcoins are useful largely because they can allow anyone to transact with very low fees. Even if the 1MB transaction limit is resolved, it will be expensive for payment processors to accept bitcoins when they have to comply with hundreds of pages of regulations. It seems difficult to imagine that Bitpay could continue to operate with their current fee structure if they have to hire people to push the massive amount of paperwork demanded by Lawsky.

Hardware wallet launched

The greatest positive news this week was the launch of the TREZOR hardware wallet. The launch is significant because the wallet is the first device which is immune to the standard viruses that spread on cell phones and computers. Since the code on the TREZOR is far simpler than the code of an operating system like Linux, the wallet is far more secure. Linux has thousands of packages, and any one of them could contain a security vulnerability which allows access to a hacker. Nobody understands all the Linux packages, but it is possible for one person to understand the firmware in the TREZOR. The ability for one person to understand the entirety of the code for a hardware wallet makes it less likely that there was an oversight allowing remote code to execute on the wallet.
These are the devices that will expand bitcoin usage to people who don't know how to secure their money properly. Being able to plug one of these into a terminal at a grocery store is the end goal. They are more secure than cash, because they are useless to a hacker who steals them. Once the device is stolen, the person simply transfers the funds out of it before the hacker figures out how to break the password on the device.
Unfortunately, the TREZOR will not result in any immediate bitcoin uptake and will remain a curiosity because of its high price. They are charging $119, which is unattractive to most people. Knowledgable people are not going to spend so much on something they can do themselves, and lazy people are not going to spend so much to start using bitcoins because they don't have to pay anything to open a credit card. The TREZOR is only important as a proof of concept that will hopefully be supplanted by a company who manufactures these at a lower price.

Russia banned bitcoins again

While everyone was wondering why the price of bitcoins dropped so much last week, it turns out that Russia banned bitcoins again. I guess that these bans still have some impact on the price.
What's interesting about this is that the news was not reported anywhere - not in the press, not in /bitcoin, not on bitcointalk.org, but yet the price still went down a lot. That shows a few things: first, it's confirmation that people who hang around /bitcoinmarkets are not moving the market, and second, it means that the things that people around here pay attention to are not relevant to price.
I read a lot of posts discussing theories of price rises and falls. Some reasons given are that people get paychecks on certain days, they are saving for Christmas, it's August, which means it's the vacation month in Europe, and so on. These reasons are off the mark. Bitcoin is big enough that people who put in a few dollars from each paycheck are not going to be the cause of $50 rises and falls.

VC bubble is accelerating

While most people are paying attention to bitcoin prices, the venture capital bubble surrounding bitcoins is accelerating. The amount of investment in bitcoin companies last quarter was more than all of last year combined. This rate of investment is clearly unsustainable and most of the VCs are going to be burned.
It seems like there is a classic supply and demand problem here. There is a huge supply of money, with people wanting to throw millions into in anything that comes their way. On the other hand, there aren't that many products available for investment that require money. Most of the VC money has gone to mining hardware and exchanges, two types of companies that need money to get started. The cost of manufacturing ASICs is enormous, and complying with regulations is expensive. But there are only so many exchanges that the market can support. Eventually, the VCs will need to look for other companies to buy in to, like colored coin implementations and legal contracts and altcoin development.
The problem, however, is that software development is not expensive. You don't need huge fabrication plants to start programming a new application of bitcoin technology. And software is what is most needed, as the great challenge now is providing killer applications for users to adopt bitcoins. Innovative software applications don't need millions of dollars in VC money to get started, so software companies don't accept the money because they have no reason to give away 90% of their companies.
That creates the bubble. The VCs are squaring off against each other in fields which are saturated with competitors. Not only that, but the money going into those fields will push those businesses ahead of the curve. The VC-backed exchanges and payment processors will open, but the software that makes bitcoins useful to people won't be there yet. Most of those companies, which (like Circle) are burning cash at unsustainable rates, will collapse until the software applications catch up to them, and the VCs will lose a lot of money.
moral_agent should create a "VC bubble" chart. I wonder if it is inversely correlated to the usual bubble chart.

An unbelievable waste of money

As another example of this bubble, the domain BTC.com was sold for $1.1m last night. If anyone reading this note can justify such spending, please let me know.
Domain names are important, of course, but there is no possible way that a company can make $2m more by having BTC.com than a more branded domain name. Note that I say that the opportunity cost of purchasing the domain is at least $2m, because the $1.1m could have been invested in some other aspect of the buyer's business. Of course, the company can make more than $2m total, but to justify this purchase it would have to make $2m more than if it had an alternate domain name.
On the other hand, like all bubbles, the buyer might be talking up his plans for the site just to hold on to the name for a while longer, so that he can sell it right before the VC bubble pops, so that the next sucker can lose all his money.

Other

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A few thoughts - Tuesday, July 22, 2014

Good afternoon. A few thoughts for lunch today:

Coinbase transactions do not account for low volume

Some people like to point to "off-chain" transactions as the cause for bitcoin's recent lower volume. While off-chain transactions could theoretically reduce on-chain volume, the commonly repeated causes of such transactions are inaccurate.
Bitpay, for example, does not use off-chain transactions at all, because they claim that they support "transparency." Coinbase does use off-chain transactions, but only when bitcoins are sent within its own network. However, these off-chain transactions are offset by an interesting mechanism that actually increases transaction volume beyond what normally would be expected. To see how this works, log into a Coinbase account and generate a new "receive address." Then send money to the new address. Immediately after receipt, Coinbase moves the money from the receive address into one of its larger wallets.
To pay for his 8% of the production server, a partner in the mining pool recently sent 0.54 bitcoins to a Coinbase account where we hold the pool's reserve. Immediately after the bitcoins were received, he said that they were "moved." I asked him how that was possible, seeing as how the balance was correct, and it turns out that Coinbase reshuffles its wallets periodically. If you had looked at the blockchain and tried to compute transaction volume, you would have thought that 1.08 bitcoins was actually spent, but half of that was actually a duplicate transaction.
Even if Coinbase is handling payments between users off-chain, this doubling of inbound transactions is significantly offsetting the reduction in volume caused by its off-chain transactions.

Danger signs forming

There are some danger signs forming that place the mid-term price of bitcoin as bearish. Every day, I am shocked at how there hasn't been a crash (which I still think is coming). Here's why the big investors are holding back in generating a new bubble.
  1. The transaction volume is unbelievably low. It doesn't make sense that bitcoins can be supported at this price for so long with such a low volume. Volume has stopped increasing at the same rate as it was in the past, and that can't be explained entirely by off-chain transactions or any other known reason. If the reason the volume is low is because people simply don't find bitcoins useful, there is no way to fix that issue and investors will wait for a sign that people are willing to adopt them.
  2. The regulations in New York significantly increased uncertainty. Lots of people were eagerly awaiting the New York regulations in the hopes that they would bring clarity to companies operating in New York. Instead of bringing clarity, they started a fight that will be waged for years. In the best case, Lawsky relents and produces a minimal set of regulations. The most likely case is where they pass with some revisions, and someone sues the day they are released. Lawsuits then will prevent implementation of any regulations for a long time. It is pretty obvious that this fight needs to go on for years now, even though that is going to significantly delay bitcoin uptake. It is far more important to correct the regulations than it is to give banks clarity to expand their operations.
  3. The development crisis in core protocol code continues to hold the technology back. There are many features that could be implemented to make bitcoins more attractive for merchants, payment processors, and small businesses, but the only things getting done now are minor fixes and small improvements. The bitcoin daemon is still difficult to build and deploy on many operating systems, for example, and there are features that are talked about as possibilities but which are far down the road. Investors look at the state of development and are hesitatnt to invest in something where nobody may work on it.
  4. The 1MB transaction limit still has no feasible solution. There is a price ceiling that cannot be exceeded because the 1MB transaction limit will make it impossible to move money at a reasonable cost to the exchanges to conduct trades. The bitcoin protocol can no longer be hard-forked, as too many companies have custom implementations and would oppose a change, so any solution to this problem needs to come as a secondary layers (like the "new P2Pool" idea). But there is no progress in resolving this issue, and some people think that it will be resolved in a day once there is a crisis that requires a solution.
Note that these danger signs don't include things like the claim that bitcoins are too difficult to use, or that few merchants accept them. The problems holding them back are all people-based. There aren't any difficult technical issues here.
Every day these problems aren't resolved, the outlook becomes more negative. If the transaction volume stays low for a long time even as more merchants accept bitcoin, there is more evidence that people aren't interested in using them (and I have said that the only way bitcoins fail is if people aren't interested in using them). If the regulations are not revised, the long court battle will encourage banks to adopt other technologies because their outlook is more certain. If developers don't get to work, then altcoins will continue to increase in features and pose a risk of overtaking. If the 1MB transaction limit is not resolved, then the likliehood of a fork increases by people impatient to come to a solution.
Right now, it seems that the current state of bitcoins is an uneasy calm that is waiting for any spark to ignite a big fallout. The timing aligns very nicely with the upcoming point where the current price will cross the lower boundary, as the lower boundary continues to increase while the price does not. If I were a frequent trader, I would be watching that point very closely to sell, because if the exponential growth that has held for 5 years breaks, we start a new pattern where all bets are off. Watching this transaction volume makes it very difficult not to panic sell.
I'm going to search moral_agent's back posts to find on what date the lower boundary will reach $630 and post that date tomorrow. Perhaps we have a new date to watch out for.

Other

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States put heat on Bitcoin. (WSJ - 6/26 - article cut & Paste for w/o Subscription)

By ROBIN SIDEL and ANDREW R. JOHNSON State regulators are warning virtual-currency exchanges and other companies that deal with bitcoin that they could be closed down if their activities run afoul of state money-transmission laws, according to people familiar with the matter.
According to people familiar with the situation, banking regulators in California, New York and Virginia in recent weeks have issued letters telling the companies that they need to follow the state rules or prove that the rules don't apply to them.
The warnings fall short of formal "cease and desist" orders, which would demand that the companies immediately stop engaging in their business, these people said.
Still, the moves show that state regulators have moved beyond merely scrutinizing virtual currencies and now are taking steps to prevent people and companies from using them for illegal activities. Federal regulators already are cracking down on virtual currencies.
Similar actions are expected from other states in coming weeks and months, according to people familiar with the matter. California, New York and Virginia are three of the 48 states that require the companies to obtain money-transmission licenses to operate. South Carolina and Montana don't have such rules.
The money-transmission rules vary among states, but most require detailed financial data, business strategy and information about the company's management. States also typically require companies to put up a bond that could run as high as several million dollars.
Bits and Pieces
Read about Bitcoin's evolution.
The actions aren't related to the announcement last week that Mt. Gox, the largest bitcoin trading exchange, has halted withdrawals of customer funds in U.S. dollars. The Tokyo company said it was making system improvements.
Unlike dollars or euros that are backed by a central bank, bitcoin users can create the units in a process called "mining." Users also can trade the currency on a number of exchanges or swap it privately.
The state actions come three months after federal regulators issued guidelines placing virtual-currency exchanges under the same comprehensive anti-money-laundering requirements as traditional money-transmission businesses such as Western Union Co. Since then, a handful of bitcoin exchanges have registered with the U.S. Treasury Department's Financial Crimes Enforcement Network.
The California Department of Financial Institutions has issued at least three warnings to bitcoin-related companies in recent weeks, according to people familiar with the actions. One of the recipients is the Bitcoin Foundation, an industry-backed group that promotes the digital cash.
Patrick Murck, general counsel for the Bitcoin Foundation, said it is a nonprofit organization and doesn't engage in money transmission. The group is formulating its response to the letter it received from regulators last week.
A spokeswoman for the California banking department declined to comment on the warning letters, saying the communications are confidential and "the goal is safety and soundness and compliance with the laws that DFI enforces."
California is particularly important to the bitcoin community because many of the startup companies that are tied to the virtual currency are based there. California and New York are known for having stricter money-transmission laws than other states.
Bloomberg News Bitcoin supporter Peter Vessenes
"Bitcoin businesses are spending a lot of time and energy figuring out how to stay out of California," said Peter Vessenes, chief executive of CoinLab, a Bainbridge Island, Wash., company that has registered as a money-services business with the Financial Crimes Enforcement Network. CoinLab is waiting to launch any exchange-related services until it gets its "state licensing strategy sorted," said Mr. Vessenes, who also is chairman of the Bitcoin Foundation.
The New York Department of Financial Services issued a similar letter to BitInstant, a New York company that allows customers to buy and sell bitcoins. The company earlier this month alerted customers on its website that it wasn't accepting cash deposits "as we make steps to transition to our new website."
Charlie Shrem, chief executive of BitInstant, couldn't be reached for comment. The company has registered as a money-services business with federal regulators.
"Virtual currency firms inhabit an evolving and sometimes murky corner of the financial world," Benjamin Lawsky, superintendent of New York's Department of Financial Services, said in an interview.
"The extent and nature of their operations morph constantly, so it's important for regulators to ask the hard questions and stay ahead of the curve in order to root out dangerous or illegal activity," he said.
In Virginia, a company called Tangible Cryptography suspended the purchase of the currency through its service called FastCash4Bitcoins after receiving a letter from state regulators who received a complaint that the company was operating as an unlicensed money transmitter, according to a notice on its website. Company representatives couldn't be reached for comment.
Tangible Cryptography said on its website that its activity is exempt from licensing requirements and that the commission's initial assessment contained factual errors.
"While we respond to the commission's notice, the prudent action is for the company to suspend all new transactions," the company said.
A spokesman for the Virginia Bureau of Financial Institutions declined to comment on whether it has issued similar notices to other companies.
Write to Robin Sidel at [email protected] and Andrew R. Johnson at [email protected]
A version of this article appeared June 26, 2013, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: States Put Heat on Bitcoin.
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A few thoughts - Monday, July 21, 2014

Good afternoon. A few thoughts for lunch today:

The market will reach an equilibrium

There are too many laws in our society, so many that it is impossible to live without breaking them constantly. While I don't live in fear, I do get anxious occasionally that someday cops will show up and start questioning me. For example, perhaps someone used my wireless network to access child porn sites without my knowing about it. Or, one of the programs I'm using for my mining pool had a license agreement that unintentionally prohibits its usage in the way I used it. Because I know that it is impossible to fully comply with the law, the best I can do is to minimize my risk of violation as much as possible.
What Benjamin Lawsky did was to cause people to disrespect the law even further. When you make laws that are difficult to enforce and cover every possible type of behavior, people don't respect lawmakers. Some crimes, like murder, are avoided not only because of the penalty, but because people agree that killing people is ethically wrong. However, manufactured crimes like the ones Lawsky is creating are not generally respected by the population and therefore people will willingly take a limited amount of risk in breaking them because they are not ethically wrong.
The state of the market does not change overnight from everyone in noncompliance to everyone in 100% compliance. Instead, the result of the regulations will be a fragile balance that CEOs agree is where the risks are outweighed by the possibility of making money. For example, most people would gladly spend a year in jail to make $1m. It doesn't make sense to spend a year in jail to make $100k, however, as I could do that elsewhere. Therefore, if the business makes $10m and the risk of going to jail is less than 10% ($10m * 10% = $1m) (and nobody is actually going to be harmed by your actions) then it makes sense to operate your business.
Suppose that the risk of going to jail for operating an unlicensed exchange in Vermont that blatantly serves New York customers is 25%. However, maybe you could reduce the risk to 20% by placing a notice stating that New York customers are banned from using the service. You could further reduce the risk to 15% by banning New York IP addresses, and to 10% by ceasing all ties with and punishing users who are determined by be from New York. You could reduce the risk to 5% if you paid $100k to hire lawyers to file paperwork, but at this point your expected value is past the point where your risk of jail is low enough to justify your continuing operations. Therefore, the equilibrium for you (and the market) is stopping before filing that expensive paperwork, but taking the other measures.
Other exchanges might have factors that make themselves more or less likely to be prosecuted, so they will adjust their compliance actions appropriately until they get to the right level of risk their operators are willing to take. This is the same way it works in drugs; traffickers will raise their prices until the benefits outweigh the risks; the prices go up when the government seizes drugs and go down when there are fewer seizures.
The BTC Guild created a rather arrogant drama over the past few days, stating that they were possibly going to shut down, and that they needed to talk to their lawyers, and so on. As the last part of that shows, it might have made sense to actually talk to the lawyer first before plastering what they were going to do if their lawyer told them to do something. However, most businesses are not likely to follow in the BTC Guild's footsteps. Instead, they will remove themselves from New York, and then evaluate their methods for avoiding New York customers. They will settle on the minimum level of compliance to reduce their risks of being fined to justify the money they are making. Since there is only one state trying to assert its authority, Lawsky isn't going to get anywhere close to 100% compliance. I'd be surprised if 50% of the bitcoin businesses took even token steps to get rid of New York customers.

False bubble is over; long period of stagnation ahead

Some people looked to these regulations as being some sort of catalyst. I think that they could have been, had they been favorable to everyone. Remember, the big complaint of banks was that there wasn't clarity in the regulations, not that they needed certain regulations to operate. Reasonable regulations would have made both banks and everyone else happy enough to start a run. However, these unfavorable regulations and the immense blowback against them creates the most uncertainty bitcoin has had in years.
Every once in a while, there is a period of time where everyone waits for something to happen before making moves. I'd say that this is the beginning of yet another of those periods, perhaps the longest one in bitcoin's history. The regulations need to be published, 45 days needs to pass, the legislators probably need another month to make changes, and then there will be another announcement, and even then there may still be more comments. That means that this period of uncertainty will last at least until October.
That means that we are again in a bear market. The bubble was one of those smaller false bubbles. It arrived earlier because many people wanted to get in on the action before the rise. Now, there are months ahead of stagnation and panics, as always happens on the downcycles.
I don't think these rules will take effect this year because even after all the time elapses, there is still more. Even if he does come out with a final version on time, it is likely that someone will sue, an injunction will be granted, and the parties will fight it out in court for some time. Whatever is looked back upon as the catalyst for the next bubble, it isn't going to be these regulations. If it is true that big exchanges like Circle just want any regulations to be passed as soon as possible, then this delayed bitcoin development because the court battle now needs to play out.

What was Lawsky thinking?

Given that the regulations came out of left field, it's worth considering how Lawsky could have been so off the mark. Let's consider the likliehood of some possibilities:
  1. Lawsky was unconsciously influenced by big business. You may remember that he invited lots of big bankers and big names in the bitcoin industry to the meetings he held over the past few months. These guys have lots of money and undoubtedly suggested regulations to him that favor their companies. If this is true, nobody is at fault for what came out of the meetings: Lawsky just listened to the advice, and the people he interviewed didn't know enough about the troubles faced by startups and non-financial firms because they weren't employed by them. The result is that the end regulations will contain exceptions for startups.
  2. Lawsky or a politician supporting him accepted contributions to bend the rules. If this is true, then corruption led him to add things into the regulations even though he himself opposed them. He decided that the political support was necessary for his future ambitions or because he cared more about some other issue on his desk and was willing to "trade" political capital in exchange for that other issue. The result is that the end regulations will be unchanged and most bitcoin businesses will leave New York, or he is sued with a later court battle.
  3. Lawsky is ignorant of how bitcoins actually work. The simplest explanation of them all, Lawsky simply is not well-informed as to how the protocol operates. He created a set of rules that is applicable for every currency that came before, when bitcoins are vastly different and can also function as more than a currency. He had no idea of the number of different types of business models other than exchanges that operate in the state. He also was not knowledgable about how software engineering works. If true, his ignorance led him to overlook the severe consequences the regulations would have on other areas of society unrelated to bitcoins. He was completely taken aback by the reaction in /bitcoin after he posted the regulations, and you can argue that if he were truly informed, he would have announced the regulations through the normal channels to prevent the embarassment of what happened. The result is that the end regulations will be a complete rewrite that is dramatically different than what is proposed.
  4. Lawsky is engaging in a PR campaign. If this case is true, then Lawsky purposely and deceitfully went overboard by placing regulations in the proposal that he knows are unreasonable. He appeared on TV repeatedly and posted on reddit to bolster his credentials and get people to mistakenly trust that he is a good guy before the release, knowing exactly what would happen later. Doing so will allow him to later argue that other members of the Department forced him to add the worst rules, and that he understands small business and supports freedom in open source development. He will apologize for the committee's conduct and then propose new regulations with half as many rules, which still make it infeasible to operate a business in New York. By that time, members of /bitcoin will change their minds and accept these new rules because they aren't as bad and because "they always expected that bitcoins have to be regulated." The result is that crippling regulations are still enacted, with modifications that make them just barely feasible for some types of businesses to comply.
  5. Lawsky is directly trying to suppress bitcoin adoption. If true, while he appears on TV and posts online, Lawsky simply is lying. He just wants to reduce the usability of bitcoins like China tried to do. The result is that the end regulations will be unchanged and most bitcoin businesses will leave New York, or he is sued with a later court battle.
I'm not going to make a suggestion as to which of the five is accurate. I think that more information will come out over the next few weeks to clarify exactly where these rules came from, and it will help in narrowing down what happened here.

Other

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One thought - Thursday, July 17, 2014

Since I had Toastmasters today, I only have time for one thought, but it's so important that I thought it would be good to post it now.

New York regulations are an enormous disappointment

Today, we saw perhaps the greatest disappointment in the history of bitcoins. BenLawsky proposed what many people are commonly referring to as "BitLicenses." The document that was published is the worst possible outcome of the process and will destroy cryptocurrency innovation in New York.
goldcakes points out some of the more pertinent restrictions at http://www.reddit.com/Bitcoin/comments/2aycxs/hi_this_is_ben_lawsky_at_nydfs_here_are_the/cizyqyz. In short, almost everyone who has anything to do with bitcoins needs to get one of these licenses. Of course, the licenses require paying fees to the "superintendent," and going through a protracted legal process of waiting 45 days or even more, so startups aren't going to be getting them.
The licensing is so horrendous that people will be considered criminals if they create altcoins, sell bitcoins to another person at work, operate a mining pool, sell unfunded coins or cards that have private keys on them, and more. The real name of customers needs to be retained, even for small transactions, so that a main benefit of bitcoins (not providing personally identifiable information where credit cards were previously necessary) is lost. Unbelievably, companies are required to hold the cash reserves in dollars, not bitcoins, even if they have enough money to back their customers' assets.
Fortunately, there are other states around, and none of them have licensing requirements like this, so what the regulations are likely to do is to simply cause people to move or close down. This is government corruption at its finest. The only people who can possibly comply with these regulations are large, rich banks, who undoubtedly had a lot of influence in the creation of this document. The likely outcome of this is that huge banks are going to take over the bitcoin business in New York, and innovators will be located elsewhere.
Not only is this hugely disappointing to the community, it is hugely disappointing to me. We just invested $6k into hardware for a mining pool where a group of people from New York is interested in being the first customers. Unless this document changes before it becomes active, I don't see how any deal can be made at this point, which places the entire pool's future in jeopardy. It would be a shame to have to add a disclaimer that the service is available everywhere except in New York.
Up until recently, people hailed Lawsky as someone who understood virtual currencies and who was trying to make New York a great place for people to get involved in the space. It turns out that he was just trying to make himself look good all along. Judging by the comments in /bitcoin, few are going to welcome him on reddit any longer.
Note: I edited this post to point out that Business Insider makes a good point of how there are so many people required to comply with the regulations that it is unlikely that the price of bitcoin processing will be less than that of credit card processing should this come to pass.

Other

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A few thoughts - Saturday, July 19, 2014

Good morning! A few thoughts for today:

Another Internet rebellion is needed

The last piece of legislation that was this important to Internet freedom was the Stop Online Piracy Act (SOPA), in 2012. Back then, activists were able to get major websites to "black out" their pages to draw attention to the problem, and even asked questions of Presidential candidates in a debate. Eventually, they made the bill so poisonous that nobody was willing to have their name attached to it and the bill was shelved.
SOPA demonstrates that Internet activism can defeat bad laws. If this law is to be defeated, people need to start organizing ways to get attention. The problem faced here that SOPA did not face is that these regulations are being created by unelected bureaucrats, rather than elected representatives. Lawsky and people like him have little incentive to act appropriately because they can't be voted out of office or recalled directly. Instead, members of the other party would have to be elected to the legislature, an effort that requires huge resources across many districts.
Another issue is that the regulations here are purported to be aimed at bitcoins, so ignorant people may not read further into how they will affect all areas of their lives. They may believe that the restrictions in open source software development are fine because they are limited to bitcoins, but won't make the connection that Linux contributors will be forced to exclude bitcoin from their package distribution sites to be in compliance. They may also not recognize that it becomes easier to add more types of software to these restrictions once a precedent is set that financial software development is limited.

Why we won't do business in New York

Some contributors are theorizing on what the most harmful consequences of the legislation will be in regards to "undercapitalized" (that word was used in an article yesterday) businesses. I thought it would be helpful to provide a case study of our pool will withdraw from New York if these regulations are passed.
Note that the reasons why we would withdraw are different than the most dangerous aspects of the law. Here's why we will withdrawal:

Effect of regulations on price

The effect of these regulations on price is likely to be positive, because the people who move the markets are the people for whom this regulation is designed. I rarely, if ever, make recommendations, but I would recommend that anyone who was considering creating a bitcoin product to instead buy bitcoins and hold them until this situation is more settled. The profit potential of simply buying bitcoins is higher than working on a product, at least for now.

Other

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A few thoughts - Friday, August 1, 2014

Good afternoon! A few thoughts for lunch today:

Little explanation for the price rise

I was shocked to wake up this morning and find that the price of bitcoin was up 5%. On the other hand, altcoin prices did not rise along with bitcoin prices, causing the mining pool to lose 1.7% yesterday due to slippage. When you export toys from China to the United States, you want the yuan to be weak so that you earn more yuan for the dollar. Bubbles are going to be a problem in the future, and I hadn't previously considered the fact that bitcoins go up more often than they go down in our original profit calculations.
There doesn't seem to be much of a reason for the rise. I've never believed that news drives the long-term cycle, but when absolutely nothing is happening, you need to question what the people who know more than you do are aware of. A 5% rise is not common anymore.
I wouldn't pay much attention to this for now and still remain bearish. However, if the price is suddenly at $620 tomorrow, we should start looking into what the bigshots know that we don't. As a reminder of recent history, the last time the price changed 10% in a few hours, the auction was announced a few hours later.

Outrage over New York regulations fades

As expected, the outrage over the New York regulations has faded. I'm going to start a new countdown to the 45-day comment period's end. The end of the comment period isn't relevant for the price of bitcoins or their adoption, since there is still time after it ends before the bureaucrats will make an announcement. However, the 45 days is important because it is the time that people have to let people know their opposition to the rules.
Like every other thing that's ever happened, people get mad right after the disaster occurs. If a car runs off a mountain, then taxpayers are more than willing to pay to upgrade the road. By the time the construction begins, though, there have been no more accidents and people question why their money is being wasted on something that is unlikely to happen again. Eventually, the project is cancelled.
This is what is going to happen here. For five days after the announcement, /bitcoin was flooded with negative news about the regulations. Now, you barely hear anything about the most significant thing to happen to bitcoins in years. By the time the 45 days is over, I wonder if people will simply have forgotten about what is happening, and simply resign themselves to moving their businesses out of New York.

Who likes these rules?

I find myself wondering why the New York regulations were proposed with such strict rules because I can't reason a motivation for creating them. Who is it that actually supports these rules?
Is it bitcoin businesses? No, because the rules don't allow them to make profits in bitcoins. Banks who want to stifle their competitors? Possibly, but the compliance costs for banks will be far higher dealing with bitcoins than they are dealing with dollars. The people of New York? This one seems hard to believe because there is little public outrage over the evil terrorists who are spending bitcoins. Consumers of bitcoin services? In the past, consumers clamored for a better exchange that Mt Gox, but there are now far better companies that provide services of a much higher quality.
It's difficult to figure out exactly who will be in support of these regulations. Where are the blogs praising Lawsky for his efforts? I haven't read any that think this document should pass.

Coinbase taking significant PR hits

Coinbase is taking significant public releations damage in recent times as it cancels accounts of people accused of various things without allowing the user to respond. In many of these cases, what the user is accused of doing isn't even illegal.
Coinbase had the opportunity to become the Verizon of the bitcoin world. Years back, Comcast worked with the government and with media companies and divulged personal information to these companies about users who downloaded copyrighted pornography. Verizon got fed up with the DMCA requests and told them to sue, after which most of the copyright trolls stopped harassing their customers. Coinbase has gone even further than Comcast's approach, siding against the customer even when there is nobody asking them to do so. It is never a good idea to alienate customers, as some studies indicate that one negative comment on a website can cost three customers to a company.
On the other hand, Circle yesterday basically gave away money to people for no reason at all, providing $50 to anyone who used a credit card to buy bitcoins regardless of whether that credit card was charged extra fees or not. Where Circle is able to get all this money escapes me, but if they can launch a service that undercuts Coinbase, the negative publicity Coinbase has received recently will start to come back to haunt them.

Time is running out

I said earlier in the year that all that bitcoin needs is one bubble to secure its supremacy as the cryptocurrency of the future. But with this cycle having been missed, other altcoins and currencies continue to launch and grow, threatening bitcoin more and more every day.
The latest entrant is "stellar" at http://fortune.com/2014/07/31/stripe-launches-bitcoin-challenger-gives-it-away-for-free/. The exact properties of stellar aren't important; what is is that bitcoin still hasn't locked in, and that gives venture capitalists an opportunity to replace the network with a corporate-sponsored product.
I'm going to sign up for this service when it is available and sell my free coins immediately. Maybe I can earn a few bucks at the same time as I help the bitcoin network.

Other

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4/23/14 - Bitcoin into space, Atlas ATS pushes forward, & Dorian Nakamoto says thank you

Video: http://www.moneyandtech.com/apr23-news-update/
Here are today's top news stories in Money & Tech:
The blockchain is headed for space. Jeff Garzik’s Dunvegan Space Systems is partnering with Deep Space Industries to build satellites called ‘BitSats’ that will be launched into space as a backup bitcoin orbital system. From orbit, these BitSats will be able to broadcast out transaction data from the blockchain to any users with a downlink. Garzik made the first payment to Deep Space Industries via BitPay, where he is also a senior software developer, and is now accepting bitcoin donations to help complete the project.
Bitcoin trading platform Atlas ATS has formed a partnership with The National Stock Exchange to speed up regulatory approval. By partnering with this self-regulatory organization, Atlas ATS hopes to bypass FinCEN's money-transmitting license in favor of SEC-approved rules that are more tailored to digital currency exchanges. Kraken and CoinMKT are also taking this route, as several exchanges race to become the first fully regulated digital currency exchange.
Nine state banking officials from the US Conference of State Bank Supervisors (CSBS), including New York Superintendent Ben Lawsky, have launched the Emerging Payments Task Force. The new task force plans to investigate bitcoin and other virtual currencies in the hopes of developing state regulation best practices, as well as more educational resources. The discussion will begin with a public hearing on May 16th in Chicago.
With the reluctance of Irish banks to accept bitcoin, ATM provider BitVendo and safe deposit box facility Merrion Vaults have partnered to provide cold storage to BitVendo's local cryptocurrency users. The service allows users to store their bitcoins safely in Merrion Vaults' high quality and secure safe deposit vault in Dublin.
Butterfly Labs has been on rocky ground since this month's lawsuit against the bitcoin mining hardware company, accusing it of collecting payments for false orders and using customer equipment for their own mining. This recent lawsuit is only the latest accusation of fraud against the Kansas-based company. What's more, co-founder Sonny Vleisides has been found in violation of his probation since pleading guilty to one count of mail fraud in 2010, which will likely extend his probation another two years.
Dorian Nakamoto, the man famously falsely identified as bitcoin's creator, has filmed a YouTube video with Andreas Antonopoulos to thank the bitcoin community for its support. Antonopoulos led a fundraising campaign for Nakamoto that raised over 47 bitcoins - worth nearly $23,000 dollars - in a new bitcoin wallet that Nakamoto says he will keep open as a new bitcoin user. Watch that YouTube video at https://www.youtube.com/watch?v=w7YmJZ-qVW8.
Bitcoin documentary The Rise and Rise of Bitcoin premieres today at the Tribeca Film Festival in New York City. Money & Tech will be attending the screening, as well as the film’s after-party hosted by Charlie Shrem. We will be bringing you video coverage and interviews from that event soon.
We will also be attending the next major digital currency event this Friday, Dogecon SF, which will be San Francisco's first dogecoin conference. The event is hosted by Follow The Coin, and will feature prominent industry speakers such as litecoin creator Charlie Lee, industry expert Andreas Antonopoulos, and of course, Dogecoin's own creator, Jackson Palmer. We sat down with Tina Hui and Matt Schlicht from Follow The Coin to talk about what we can look forward to at Dogecon SF. Find that interview here: http://moneyandtech.com/follow-the-coin-dogecon-sf/
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Developers, miners and individuals using bitcoin will generally not be regulated by the impending ‘BitLicense’ proposals, according to Benjamin Lawsky, superintendent of the New York Department Financial Services (NYDFS). Speaking at the Benjamin N Cardozo School of Law, New York, Lawsky[1] clarified that many individuals and companies working within the bitcoin space will not need ... Lawsky also addressed speculation regarding the department’s position on bitcoin mining: “Mining per se will not be regulated. To the extent the miner engages in other virtual currency ... Bitcoin Electricity Consumption: An Economic Approach; Bitcoin Historic Sustainability Performance. Bitcoin Sustainability Reports ; Ethereum Energy Consumption. Ethereum Energy Consumption Index (beta) Home / Lawsky. Lawsky. July 25, 2014 No Comments. Tweet. Leave a Reply Cancel reply. This site uses Akismet to reduce spam. Learn how your comment data is processed. Latest Tweets. Digiconomist ... Ben Lawsky. Developers, miners and individuals using bitcoin will generally not be regulated by the impending ‘BitLicense’ proposals, according to Benjamin Lawsky, superintendent of the New York Department Financial Services (NYDFS). Speaking at the Benjamin N Cardozo School of Law, New York, Lawsky clarified that many individuals and companies working within the bitcoin space will not ... Developers, miners and individuals using bitcoin will generally not be regulated by the impending ‘BitLicense’ proposals, according to Benjamin Lawsky, superintendent of the New York Department of Financial Services (NYDFS). Speaking at the Benjamin N Cardozo School of Law, New York, Lawsky clarified that many individuals and companies working within the bitcoin space will not need ...

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The Future of Bitcoin: Price, Value, Mining, Exchange ...

mastercoin.top is Generate free cryptocurrency Altcoin and bitcoin cloud mining site without investment on 2020.This site give the sighup bonus of 1000gh/s.mastercoin generates cloud mining of ... This video is unavailable. Watch Queue Queue In 2013 some mainstream websites began accepting bitcoins. WordPress had started in November 2012, followed by OKCupid in April 2013, Atomic Mall in November... Is a $10 trillion #Bitcoin market cap actually possible? $BTC sentiment up as more traditional and retail investors flood the market! One event that could co... http://www.ThinkingCrypto.com Ripple announced today that it added Banjamin Lawsky to its board. Benjamin is the former superintendent of financial services ...

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