Tag Archives: bitcoin

Bitcoin Shop Appoints Alliance Investors – Plus Other News

bitcoin shopBitcoin Shop, Inc. (www.bitcoinshop.us), the virtual currency ecommerce marketplace, today announced the appointment of Alliance Advisors as its investor relations firm. Located in New York City, Alliance Advisors is a comprehensive investor relations, market intelligence, corporate communications and strategic consulting services firm that has represented well over 300 United States publicly listed companies located in the Americas, Asia, and Europe.

Read the full article here: http://uk.finance.yahoo.com/news/bitcoin-shop-appoints-alliance-advisors-130000244.html.

Bitcoin Bugs Invest in China Bitcoin Exchange

Despite China’s recent crackdown, the bitcoin cryptocurrency has been given a new lease of life in the world’s second largest economy.

The company that claims to be China’s largest Bitcoin exchange by volume has announced a $10m Series A funding round. Venture Capital firm Ceyuan led the way and was followed by Mandra Capital, Ventures Lab and a string of other Angel investors.

This amounts to one of the largest cases of Bitcoin financing so far. Recently OKCoin became China’s first virtual currency trading platform.

You can read the full story here: http://uk.finance.yahoo.com/news/bitcoin-bugs-invest-10m-chinas-largest-exchange-125415569.html.

Warren Buffet Says Bitcoin Has No Itrinsic Value

US billionaire Warren Buffett said bitcoin is an effective money transmitter without any intrinsic value and warned people to “stay away from it”.

During an interview with CNBC, the CEO of Berkshire Hathaway compared the popular digital currency to a “very fast money order.”

“It’s a mirage basically, it’s a method of transmitting money, it’s a very effective way of transmitting money and you can do it anonymously and all that… a cheque is a way of transmitting money, too. Are cheques worth a whole lot of money?” he said.

However, he admitted that bitcoin is a promising technology.

You can read the full story here: http://uk.news.yahoo.com/bitcoin-very-fast-money-order-without-intrinsic-value-090822277.html#gkadHIq.

Nakamoto Denies Bitcoin Involvement

The man Newsweek claims to be the father of Bitcoin has issued an unconditional denial that he had anything to do with the creation of the cryptocurrency, reports Reuters Felix Salmon.

The American magazine claimed the 64-year old Dorian Satoshi Nakamoto was the same person as Satoshi Nakamoto who invented Bitcoin.

Nakamoto has denied any involvement with the bitcoin digital currency and said the allegations had damaged his career prospects and led to confusion as well as stress for members of his family.

You can read the full story here: http://uk.finance.yahoo.com/news/nakamoto-unconditionally-denies-newsweek-bitcoin-story-090403355.html.

Never a Dull Moment for Bitcoin !

These days I seem to come across news about Bitcoin every time I go on the web, and this week has been no exception. Here’s a quick round up of what’s been happening over the past few days.

Mark Karpeles Has Web Accounts Hacked

It hasn’t been a good week for Mark Karpeles – the CEO of collapsed bitcoin exchange MtGox – as it emerged that he has had some of his web accounts hacked.

Mark Karpeles - MtGox CEO

Mark Karpeles – MtGox CEO

Following the closure of MtGox in February, there has been growing frustration from people who have lost money due to MtGox’s collapse, over the recent actions (or lack of) of the company. Some people have claimed that Mr Karpeles lied about the number of bitcoins MtGox had before it filed for bankruptcy. As a result, hackers have stolen account transaction information belonging to Mr Karpeles.

It is claimed that the stolen information shows a ledger balance of 951,116 bitcoins, which is over 100,000 more than Mr Karpeles claimed was stolen from his exchange when he filed for bankruptcy protection in Japan on 28 February.

Many have called on MtGox to release more information about what has happened to the lost bitcoins as there has been no activity in the blockchain (the central list of buying and selling that underpins the entire Bitcoin network) suggesting they have been traded.

MtGox Wins Temporary Bankruptcy Protection in the US

Following the recent collapse of the MtGox bitcoin exchange and its subsequent filing for bankruptcy, a US judge has given the firm temporary bankruptcy protection. What this means is that the firm’s assets are protected and two US lawsuits have been halted while bankruptcy proceedings take place in Japan.

MtGox is expected to return to court at the beginning of April to extend this protection. The filing asks the US bankruptcy court to recognize Mt Gox’s bankruptcy in Japan and protect its US assets. The protection gives MtGox a temporary reprieve against two US lawsuits: one a class-action suit in Chicago filed by an Illinois resident, and another a $75m breach-of-contract case filed in Seattle by Coinlab Inc.

New York Regulator Plans ‘Regulated’ Bitcoin Exchanges

One of the aspects of bitcoin that is appealing is the fact that it is unregulated and is outside of the jurisdiction of any governments or authorities. Of course, at the same time, this is one of the worst aspects of bitcoin, and its lack of regulation means that if an exchange such as MTGox goes bankrupt, there is no authority that people can go to for help.

Of course, in the long run and in order to survive, bitcoin will need to be regulated to some extent. In response to this requirement, New York’s financial regulator has called on firms to submit proposals to set up “regulated” exchanges for bitcoin and other digital currencies.

The result should be better consumer protection as well as the prevention of money laundering, which is a stigma that has bugged bitcoin since its inception.

Benjamin Lawsky, New York’s superintendent of financial services, had this to say:

“The fact is that virtual currencies are unlikely to disappear entirely. The recent problems at MtGox and other firms further demonstrate the urgent need for stronger oversight of virtual currency exchanges”

“As such, turning a blind eye and failing to put in place guardrails for virtual currency firms while consumers use that product is simply not a tenable strategy for regulators.”

This, I think, is what bitcoin needs if it is ever to become a truly mainstream currency in which people have confidence. This is progress.

How Does Bitcoin Work?

Here’s a very quick explanation of how bitcoin works.

Bitcoin is a virtual currency that is not backed by any authority. The currency was invented by someone called Satoshi Nakamoto who, in 2008, published a paper explaining how the financial transactions could be processed without going through a financial institution.

Bitcoins are created using a complicated mathematical process called mining. This provides one method of obtaining bitcoins. An alternative way is to buy them using a bitcoin exchange. To do this you will need a bitcoin wallet. Bitcoin wallets can be online (web-based), they can be downloaded and installed on a computer, or they can exist in the form of a dedicated ‘hardware’ wallet.

When bitcoin transactions are processed, a long string of letters and numbers is used to identify the buyer of the bitcoins, and another for the seller. There is not identification in the form of a real name associated with the transactions. In other words, money is effectively transferred anonymously, which has led to the process being used for such illegal activities as money laundering.

There are currently two main problems with the currency: one is its volatility, and two is that because the currency is unregulated, if your bitcoins get stolen, for example, there is no authority you can go to for help.

Supporters of the currency see it as an effective way to transfer money, whilst skeptics say that it is too volatile and that governments and other other authorities will eventually clamp down on its use and make it obsolete.

You can read a more detailed introduction to the bitcoin currency here: http://www.mybookkeepingmanager.com/user-guides/getting-started-with-bitcoin.html

Testing Times For Bitcoin

The past few weeks have been a bit on the testing side for the bitcoin crypto-currency. What with the collapse of the MtGox bitcoin exchange following the theft of 744,000 bitcoins – about $350m (£210m) worth – due to a loophole in its security, the news that Japan’s government has said that Bitcoin is not a currency, the closure of Canada-based virtual currency exchange Flexcoin following the theft of bitcoins worth around 440,000 euros, and the very sad death of Autumn Radtke – the CEO of the First Meta bitcoin exchange in Singapore, it’s hard at the moment to imagine a successful future for the currency.

The current value of bitcoin is running at about half of its November value, so things are not looking too positive on that front. In order for the currency to survive, people need to have confidence in it – not just that its value isn’t going to fall through the floor, but also that any bitcoins you have in your bitcoin wallet aren’t going to be stolen. This is really, really important. I, for example, own 0.2 of a bitcoin – about £75 worth at the moment – and I would like to buy some more but I’m waiting to see how things stabilize over the next few weeks or months. If I’m typical of the average micro investor, this lack of activity isn’t going to do much for the price of bitcoin.

I like the idea of bitcoin because for me it offers ‘potentially’ an additional way to buy and sell goods on the Internet, which will be good for competition, and which in turn will be good for keeping transaction charges down to a minimum. I say ‘potentially’ because as of March 2014 I don’t think there are really that many places where you can actually use bitcoin to buy items. I also like the idea of bitcoin – I think it’s clever how the whole bitcoin network/system works and that should be applauded – even if only from a technological point of view.

And, of course, there’s the business of whether governments around the world allow bitcoin transactions to take place in their jurisdiction. Governments don’t like bitcoin because of the anonymity of the transactions…after all, it’s all well and good saying that you should pay tax on any profits you make from bitcoin investments, but if no-one knows about the profits are you going to declare them? … of course you are !! Still, I’m about 25% down at the moment on my investment so capital gains taxes are not really something I have to worry about just yet !

Ultimately – unfortunately – there might end up being just too many reasons why bitcoin can’t survive. I hope this doesn’t turn out to be the case, but I’m concerned at the moment that it might be.

If you want to know more about bitcoin, take a look at our beginner’s guide.

Bitcoin – What’s All the Fuss About?

I guess that the increase in price of bitcoins during 2013 has generated a lot of interest in this crypto-currency, with lots of people wanting to get in on the action. Knowing whether Bitcoin is something you should get involved in, and how, is the tricky thing to get right.

You might decide, as I did, to buy some bitcoins in the hope that they will increase in value. Unfortunately for me, I’m currently about 30% down on my investment of £100 (I’ve just checked their value while I’m writing this post and their current value is just under £70).

So, I’m currently sitting here feeling a bit disappointed that my investment has gone down so much, but at the same time feeling happy that I didn’t invest more – I almost bought another £50 worth a week or so ago. But, as I’ve come to understand, this is the world of Bitcoin – it’s very volatile, with daily fluctuations in the value of the currency being a lot more dramatic than we would expect from a ‘normal’ currency.

Or perhaps I could try Bitcoin mining. It certainly sounds interesting, but what is it. Here’s a sort of explanation: bitcoins are created when mathematical problems are solved by various computers dotted around the world – either working together as a ‘pool’ or individually. When a problem is solved, a block of bitcoins (I think there are 25 in a block) is created and distributed between the computers that solved the problem. When bitcoin was first invented in 2008/9, the problems were relatively (compared to today) easy to solve and a normal desktop PC was all you needed.

However, every time a block of bitcoins is mined, the subsequent mathematical problem is slightly more difficult to solve than the previous one. So, gradually, what has happened over the past few years is that in order to mine bitcoins you need to use a more and more powerful computer. Now, in 2014, you can only sensibly mine bitcoins by using specialized computers that have been specifically designed to mine bitcoins and nothing else.

OK, so I’ll buy one. Well, at least that’s what I thought until I started looking into the price of them. If you want something that’s going to earn you some serious crypto-currency, you’re talking about forking out a few grand. You can pay a lot less than that of course, but it’ll take you a year to earn a few quid.

This got me thinking, so who’s making money out of bitcoin mining? the people selling the bitcoin mining computers (or rigs as they’re referred to) of course. And, another thing to bear in mind if you’re thinking about buying a rig is, if the bottom falls out of the bitcoin market, all of these very expensive rigs will become completely redundant as they have no other use apart from bitcoin mining (I guess you could possibly use them to mine other crypto-currencies, but you wouldn’t be able to run your favourite bookkeeping spreadsheet application on them). My guess is that the providers of bitcoin mining rigs are desperately trying to sell as many units as possible, just in case the whole bitcoin thing disappears down the toilet. I’ve no doubt that bitcoin mining is making some people very rich….but perhaps not the miners themselves !!

So, what do you do? do you invest some money in bitcoin in some way or not? Personally, I think I’ll just keep an eye on the value of my initial investment … let me just have another quick look to see what they’re worth since I last checked about fifteen minutes ago … just give me a couple of seconds … they’ve gone down by another 30 pence … what joy. Still, it gives me something else to check numerous times every day !!

If you want to know more about bitcoin, why not have a quick read through my Beginner’s Guide to Bitcoin, which you can find here.

Bitcoin – a threat to PayPal’s global dominance?

PayPalFor a long time now, PayPal has been the dominant international online payment system, with very few alternatives (Wirecard and Skrill – formerly Moneybookers – are the only two I can think of) if you want to send or receive money internationally for e-commerce transactions.

PayPal performs payment processing for millions of online businesses, auction sites and other commercial users and in the space of about 15 years has grown to its current situation whereby it processes somewhere between US$150billion and US$200billion worth of transactions annually. So, there’s no doubting PayPal’s credentials, but is its spot at the top of the heap about to be challenged?

BitcoinWell, there’s a new kid on the block – Bitcoin. By now, most of us have heard of it, but have we thought much about the impact it might have on the online payment business?

A couple of days ago I was browsing through some accounting and bookkeeping websites (I know, I should get a life) when I came across www.quickfile.co.uk and noticed that they had just published a blog post stating that they were the first UK accounting platform to enable businesses to accept payment in the Bitcoin currency. This caught my attention.

 

I think possibly the main difference between Bitcoin and other competitors to PayPal is that Bitcoin already seems to quite well known – how many of you have heard of Wirecard or Skrill? – probably not many even though both are big, successful brands. For example, in August 2013, Skrill was bought by another company for €600m, and Wirecard ranks among the 30 largest German technology companies.

So, what is Bitcoin?

Bitcoin is a payment system that can be used for the payment of products or services, and which has seen considerable growth since its introduction in 2009. Whether it goes on to achieve the dizzy heights of a system like PayPal depends largely on whether online merchants embrace it as a method of payment for their products or services, and whether buyers of those products or services choose to use Bitcoin. (Strictly speaking, Bitcoin is the payment system/network, and bitcoins are the currency itself.)

One of the attractions of Bitcoin is that transaction fees are typically very low – typically 1% – making it very competitive when compared with other online payment methods. One of the disadvantages is that the digital currency is a lot more volatile than a hard currency such as the US dollar or £ Sterling. This volatility has been largely fueled by currency speculators though, which may well change as the currency gains more widespread commercial use.

The Blockchain

When a transaction is made in the Bitcoin network it gets assigned to a distributed public database – the Blockchain (take a look at this website – it’s really interesting) – so there are no banks to levy charges. The Blockchain contains a sequential record of all Bitcoin transactions.

 

The Blockchain is maintained by minors, who are rewarded with newly created bitcoins as well as transaction fees. Payment processing work done by miners verifies each transaction as valid and adds it to the Blockchain (this all a bit confusing I know, but hopefully the videos on this page will help to clarify the situation somewhat).

Bitcoin Payment Service Providers

So, if you want to buy or sell something with bitcoins, how do you do it? Well, if you want to buy something with bitcoins you need to use a Bitcoin wallet, which allows a user to carry out a bitcoin transaction. If you want to sell something, you need to use a payment service provider such as BitPay. BitPay offers a complete checkout solution for including automatic conversion to local currencies and integration with a host of shopping cart software.

So, are Bitcoin and BitPay about to upset the PayPal apple cart? … well, it’s very early days. As of January 2014, BitPay has around 20,000 businesses and charities using its services, whereas PayPal has about 100 million active accounts (this includes people who use PayPal to buy products and services as well as those selling them).

BitPay LogoAs a merchant, it’s very easy to integrate PayPal into your website; BitPay needs to be just as easy to use if online merchants are going to use it in sufficient numbers. And, of course, there needs to be enough people with Bitcoin wallets willing to buy products and services with bitcoins. People also need to feel secure when they are buying or selling using bitcoins, and people need to understand how the whole Bitcoin thing works … which is a bit confusing at the moment.

So, yes, there’s a long way to go before Bitcoin and BitPay become a real threat to PayPal’s market dominance, but it will be an interesting story to follow.

Glossary

bitcoins – digital currency.
Bitcoin – payment system/network that handles transactions in bitcoins.
Bitcoin wallet – lets you send and receive money using bitcoins as the currency. You can get one of these from the Blockchain website.
BitPay – payment service provider that lets you sell items (as an online merchant) using bitcoins as the currency.

References

Wikipedia – Article about Bitcoin
BitPay – Bitcoin payment service provider
Blockchain – Bitcoin block explorer
Wirecard – Online payment service provider
Skrill – Online payment service provider
PayPal – International e-commerce business
QuickFile – Free online (web-based / cloud) accounting service that claims to be the first accounting services company in the UK to accept payments using bitcoins

Want to know more about Bitcoin? – then read our Getting Started / Beginner’s Guide to Bitcoin.

Author: this article was written by technology writer Stephen Fletcher

 

Update: 03 Feb 2014 – Here’s a blog post that helps to explain bitcoin mining : http://startbitcoin.com/

And another site: http://www.bitcoinmining.com/