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The History of the Mt Gox Hack: Bitcoin's Biggest Heist
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Technical: A Brief History of Payment Channels: from Satoshi to Lightning Network
Who cares about political tweets from some random country's president when payment channels are a much more interesting and are actually capable of carrying value? So let's have a short history of various payment channel techs!
Generation 0: Satoshi's Broken nSequence Channels
Because Satoshi's Vision included payment channels, except his implementation sucked so hard we had to go fix it and added RBF as a by-product. Originally, the plan for nSequence was that mempools would replace any transaction spending certain inputs with another transaction spending the same inputs, but only if the nSequence field of the replacement was larger. Since 0xFFFFFFFF was the highest value that nSequence could get, this would mark a transaction as "final" and not replaceable on the mempool anymore. In fact, this "nSequence channel" I will describe is the reason why we have this weird rule about nLockTime and nSequence. nLockTime actually only works if nSequence is not 0xFFFFFFFF i.e. final. If nSequence is 0xFFFFFFFF then nLockTime is ignored, because this if the "final" version of the transaction. So what you'd do would be something like this:
You go to a bar and promise the bartender to pay by the time the bar closes. Because this is the Bitcoin universe, time is measured in blockheight, so the closing time of the bar is indicated as some future blockheight.
For your first drink, you'd make a transaction paying to the bartender for that drink, paying from some coins you have. The transaction has an nLockTime equal to the closing time of the bar, and a starting nSequence of 0. You hand over the transaction and the bartender hands you your drink.
For your succeeding drink, you'd remake the same transaction, adding the payment for that drink to the transaction output that goes to the bartender (so that output keeps getting larger, by the amount of payment), and having an nSequence that is one higher than the previous one.
Eventually you have to stop drinking. It comes down to one of two possibilities:
You drink until the bar closes. Since it is now the nLockTime indicated in the transaction, the bartender is able to broadcast the latest transaction and tells the bouncers to kick you out of the bar.
You wisely consider the state of your liver. So you re-sign the last transaction with a "final" nSequence of 0xFFFFFFFF i.e. the maximum possible value it can have. This allows the bartender to get his or her funds immediately (nLockTime is ignored if nSequence is 0xFFFFFFFF), so he or she tells the bouncers to let you out of the bar.
Now that of course is a payment channel. Individual payments (purchases of alcohol, so I guess buying coffee is not in scope for payment channels). Closing is done by creating a "final" transaction that is the sum of the individual payments. Sure there's no routing and channels are unidirectional and channels have a maximum lifetime but give Satoshi a break, he was also busy inventing Bitcoin at the time. Now if you noticed I called this kind of payment channel "broken". This is because the mempool rules are not consensus rules, and cannot be validated (nothing about the mempool can be validated onchain: I sigh every time somebody proposes "let's make block size dependent on mempool size", mempool state cannot be validated by onchain data). Fullnodes can't see all of the transactions you signed, and then validate that the final one with the maximum nSequence is the one that actually is used onchain. So you can do the below:
Become friends with Jihan Wu, because he owns >51% of the mining hashrate (he totally reorged Bitcoin to reverse the Binance hack right?).
Slip Jihan Wu some of the more interesting drinks you're ordering as an incentive to cooperate with you. So say you end up ordering 100 drinks, you split it with Jihan Wu and give him 50 of the drinks.
When the bar closes, Jihan Wu quickly calls his mining rig and tells them to mine the version of your transaction with nSequence 0. You know, that first one where you pay for only one drink.
Because fullnodes cannot validate nSequence, they'll accept even the nSequence=0 version and confirm it, immutably adding you paying for a single alcoholic drink to the blockchain.
The bartender, pissed at being cheated, takes out a shotgun from under the bar and shoots at you and Jihan Wu.
Jihan Wu uses his mystical chi powers (actually the combined exhaust from all of his mining rigs) to slow down the shotgun pellets, making them hit you as softly as petals drifting in the wind.
The bartender mutters some words, clothes ripping apart as he or she (hard to believe it could be a she but hey) turns into a bear, ready to maul you for cheating him or her of the payment for all the 100 drinks you ordered from him or her.
Steely-eyed, you stand in front of the bartender-turned-bear, daring him to touch you. You've watched Revenant, you know Leonardo di Caprio could survive a bear mauling, and if some posh actor can survive that, you know you can too. You make a pose. "Drunken troll logic attack!"
I think I got sidetracked here.
Bears are bad news.
You can't reasonably invoke "Satoshi's Vision" and simultaneously reject the Lightning Network because it's not onchain. Satoshi's Vision included a half-assed implementation of payment channels with nSequence, where the onchain transaction represented multiple logical payments, exactly what modern offchain techniques do (except modern offchain techniques actually work). nSequence (the field, but not its modern meaning) has been in Bitcoin since BitCoin For Windows Alpha 0.1.0. And its original intent was payment channels. You can't get nearer to Satoshi's Vision than being a field that Satoshi personally added to transactions on the very first public release of the BitCoin software, like srsly.
Miners can totally bypass mempool rules. In fact, the reason why nSequence has been repurposed to indicate "optional" replace-by-fee is because miners are already incentivized by the nSequence system to always follow replace-by-fee anyway. I mean, what do you think those drinks you passed to Jihan Wu are, other than the fee you pay him to mine a specific version of your transaction?
Satoshi made mistakes. The original design for nSequence is one of them. Today, we no longer use nSequence in this way. So diverging from Satoshi's original design is part and parcel of Bitcoin development, because over time, we learn new lessons that Satoshi never knew about. Satoshi was an important landmark in this technology. He will not be the last, or most important, that we will remember in the future: he will only be the first.
Incentive-compatible time-limited unidirectional channel; or, Satoshi's Vision, Fixed (if transaction malleability hadn't been a problem, that is). Now, we know the bartender will turn into a bear and maul you if you try to cheat the payment channel, and now that we've revealed you're good friends with Jihan Wu, the bartender will no longer accept a payment channel scheme that lets one you cooperate with a miner to cheat the bartender. Fortunately, Jeremy Spilman proposed a better way that would not let you cheat the bartender. First, you and the bartender perform this ritual:
You get some funds and create a transaction that pays to a 2-of-2 multisig between you and the bartender. You don't broadcast this yet: you just sign it and get its txid.
You create another transaction that spends the above transaction. This transaction (the "backoff") has an nLockTime equal to the closing time of the bar, plus one block. You sign it and give this backoff transaction (but not the above transaction) to the bartender.
The bartender signs the backoff and gives it back to you. It is now valid since it's spending a 2-of-2 of you and the bartender, and both of you have signed the backoff transaction.
Now you broadcast the first transaction onchain. You and the bartender wait for it to be deeply confirmed, then you can start ordering.
The above is probably vaguely familiar to LN users. It's the funding process of payment channels! The first transaction, the one that pays to a 2-of-2 multisig, is the funding transaction that backs the payment channel funds. So now you start ordering in this way:
For your first drink, you create a transaction spending the funding transaction output and sending the price of the drink to the bartender, with the rest returning to you.
You sign the transaction and pass it to the bartender, who serves your first drink.
For your succeeding drinks, you recreate the same transaction, adding the price of the new drink to the sum that goes to the bartender and reducing the money returned to you. You sign the transaction and give it to the bartender, who serves you your next drink.
At the end:
If the bar closing time is reached, the bartender signs the latest transaction, completing the needed 2-of-2 signatures and broadcasting this to the Bitcoin network. Since the backoff transaction is the closing time + 1, it can't get used at closing time.
If you decide you want to leave early because your liver is crying, you just tell the bartender to go ahead and close the channel (which the bartender can do at any time by just signing and broadcasting the latest transaction: the bartender won't do that because he or she is hoping you'll stay and drink more).
If you ended up just hanging around the bar and never ordering, then at closing time + 1 you broadcast the backoff transaction and get your funds back in full.
Now, even if you pass 50 drinks to Jihan Wu, you can't give him the first transaction (the one which pays for only one drink) and ask him to mine it: it's spending a 2-of-2 and the copy you have only contains your own signature. You need the bartender's signature to make it valid, but he or she sure as hell isn't going to cooperate in something that would lose him or her money, so a signature from the bartender validating old state where he or she gets paid less isn't going to happen. So, problem solved, right? Right? Okay, let's try it. So you get your funds, put them in a funding tx, get the backoff tx, confirm the funding tx... Once the funding transaction confirms deeply, the bartender laughs uproariously. He or she summons the bouncers, who surround you menacingly. "I'm refusing service to you," the bartender says. "Fine," you say. "I was leaving anyway;" You smirk. "I'll get back my money with the backoff transaction, and posting about your poor service on reddit so you get negative karma, so there!" "Not so fast," the bartender says. His or her voice chills your bones. It looks like your exploitation of the Satoshi nSequence payment channel is still fresh in his or her mind. "Look at the txid of the funding transaction that got confirmed." "What about it?" you ask nonchalantly, as you flip open your desktop computer and open a reputable blockchain explorer. What you see shocks you. "What the --- the txid is different! You--- you changed my signature?? But how? I put the only copy of my private key in a sealed envelope in a cast-iron box inside a safe buried in the Gobi desert protected by a clan of nomads who have dedicated their lives and their childrens' lives to keeping my private key safe in perpetuity!" "Didn't you know?" the bartender asks. "The components of the signature are just very large numbers. The sign of one of the signature components can be changed, from positive to negative, or negative to positive, and the signature will remain valid. Anyone can do that, even if they don't know the private key. But because Bitcoin includes the signatures in the transaction when it's generating the txid, this little change also changes the txid." He or she chuckles. "They say they'll fix it by separating the signatures from the transaction body. They're saying that these kinds of signature malleability won't affect transaction ids anymore after they do this, but I bet I can get my good friend Jihan Wu to delay this 'SepSig' plan for a good while yet. Friendly guy, this Jihan Wu, it turns out all I had to do was slip him 51 drinks and he was willing to mine a tx with the signature signs flipped." His or her grin widens. "I'm afraid your backoff transaction won't work anymore, since it spends a txid that is not existent and will never be confirmed. So here's the deal. You pay me 99% of the funds in the funding transaction, in exchange for me signing the transaction that spends with the txid that you see onchain. Refuse, and you lose 100% of the funds and every other HODLer, including me, benefits from the reduction in coin supply. Accept, and you get to keep 1%. I lose nothing if you refuse, so I won't care if you do, but consider the difference of getting zilch vs. getting 1% of your funds." His or her eyes glow. "GENUFLECT RIGHT NOW." Lesson learned?
Payback's a bitch.
Transaction malleability is a bitchier bitch. It's why we needed to fix the bug in SegWit. Sure, MtGox claimed they were attacked this way because someone kept messing with their transaction signatures and thus they lost track of where their funds went, but really, the bigger impetus for fixing transaction malleability was to support payment channels.
Yes, including the signatures in the hash that ultimately defines the txid was a mistake. Satoshi made a lot of those. So we're just reiterating the lesson "Satoshi was not an infinite being of infinite wisdom" here. Satoshi just gets a pass because of how awesome Bitcoin is.
CLTV-protected Spilman Channels
Using CLTV for the backoff branch. This variation is simply Spilman channels, but with the backoff transaction replaced with a backoff branch in the SCRIPT you pay to. It only became possible after OP_CHECKLOCKTIMEVERIFY (CLTV) was enabled in 2015. Now as we saw in the Spilman Channels discussion, transaction malleability means that any pre-signed offchain transaction can easily be invalidated by flipping the sign of the signature of the funding transaction while the funding transaction is not yet confirmed. This can be avoided by simply putting any special requirements into an explicit branch of the Bitcoin SCRIPT. Now, the backoff branch is supposed to create a maximum lifetime for the payment channel, and prior to the introduction of OP_CHECKLOCKTIMEVERIFY this could only be done by having a pre-signed nLockTime transaction. With CLTV, however, we can now make the branches explicit in the SCRIPT that the funding transaction pays to. Instead of paying to a 2-of-2 in order to set up the funding transaction, you pay to a SCRIPT which is basically "2-of-2, OR this singlesig after a specified lock time". With this, there is no backoff transaction that is pre-signed and which refers to a specific txid. Instead, you can create the backoff transaction later, using whatever txid the funding transaction ends up being confirmed under. Since the funding transaction is immutable once confirmed, it is no longer possible to change the txid afterwards.
Todd Micropayment Networks
The old hub-spoke model (that isn't how LN today actually works). One of the more direct predecessors of the Lightning Network was the hub-spoke model discussed by Peter Todd. In this model, instead of payers directly having channels to payees, payers and payees connect to a central hub server. This allows any payer to pay any payee, using the same channel for every payee on the hub. Similarly, this allows any payee to receive from any payer, using the same channel. Remember from the above Spilman example? When you open a channel to the bartender, you have to wait around for the funding tx to confirm. This will take an hour at best. Now consider that you have to make channels for everyone you want to pay to. That's not very scalable. So the Todd hub-spoke model has a central "clearing house" that transport money from payers to payees. The "Moonbeam" project takes this model. Of course, this reveals to the hub who the payer and payee are, and thus the hub can potentially censor transactions. Generally, though, it was considered that a hub would more efficiently censor by just not maintaining a channel with the payer or payee that it wants to censor (since the money it owned in the channel would just be locked uselessly if the hub won't process payments to/from the censored user). In any case, the ability of the central hub to monitor payments means that it can surveill the payer and payee, and then sell this private transactional data to third parties. This loss of privacy would be intolerable today. Peter Todd also proposed that there might be multiple hubs that could transport funds to each other on behalf of their users, providing somewhat better privacy. Another point of note is that at the time such networks were proposed, only unidirectional (Spilman) channels were available. Thus, while one could be a payer, or payee, you would have to use separate channels for your income versus for your spending. Worse, if you wanted to transfer money from your income channel to your spending channel, you had to close both and reshuffle the money between them, both onchain activities.
Poon-Dryja Lightning Network
Bidirectional two-participant channels. The Poon-Dryja channel mechanism has two important properties:
No time limit.
Both the original Satoshi and the two Spilman variants are unidirectional: there is a payer and a payee, and if the payee wants to do a refund, or wants to pay for a different service or product the payer is providing, then they can't use the same unidirectional channel. The Poon-Dryjam mechanism allows channels, however, to be bidirectional instead: you are not a payer or a payee on the channel, you can receive or send at any time as long as both you and the channel counterparty are online. Further, unlike either of the Spilman variants, there is no time limit for the lifetime of a channel. Instead, you can keep the channel open for as long as you want. Both properties, together, form a very powerful scaling property that I believe most people have not appreciated. With unidirectional channels, as mentioned before, if you both earn and spend over the same network of payment channels, you would have separate channels for earning and spending. You would then need to perform onchain operations to "reverse" the directions of your channels periodically. Secondly, since Spilman channels have a fixed lifetime, even if you never used either channel, you would have to periodically "refresh" it by closing it and reopening. With bidirectional, indefinite-lifetime channels, you may instead open some channels when you first begin managing your own money, then close them only after your lawyers have executed your last will and testament on how the money in your channels get divided up to your heirs: that's just two onchain transactions in your entire lifetime. That is the potentially very powerful scaling property that bidirectional, indefinite-lifetime channels allow. I won't discuss the transaction structure needed for Poon-Dryja bidirectional channels --- it's complicated and you can easily get explanations with cute graphics elsewhere. There is a weakness of Poon-Dryja that people tend to gloss over (because it was fixed very well by RustyReddit):
You have to store all the revocation keys of a channel. This implies you are storing 1 revocation key for every channel update, so if you perform millions of updates over your entire lifetime, you'd be storing several megabytes of keys, for only a single channel. RustyReddit fixed this by requiring that the revocation keys be generated from a "Seed" revocation key, and every key is just the application of SHA256 on that key, repeatedly. For example, suppose I tell you that my first revocation key is SHA256(SHA256(seed)). You can store that in O(1) space. Then for the next revocation, I tell you SHA256(seed). From SHA256(key), you yourself can compute SHA256(SHA256(seed)) (i.e. the previous revocation key). So you can remember just the most recent revocation key, and from there you'd be able to compute every previous revocation key. When you start a channel, you perform SHA256 on your seed for several million times, then use the result as the first revocation key, removing one layer of SHA256 for every revocation key you need to generate. RustyReddit not only came up with this, but also suggested an efficient O(log n) storage structure, the shachain, so that you can quickly look up any revocation key in the past in case of a breach. People no longer really talk about this O(n) revocation storage problem anymore because it was solved very very well by this mechanism.
Another thing I want to emphasize is that while the Lightning Network paper and many of the earlier presentations developed from the old Peter Todd hub-and-spoke model, the modern Lightning Network takes the logical conclusion of removing a strict separation between "hubs" and "spokes". Any node on the Lightning Network can very well work as a hub for any other node. Thus, while you might operate as "mostly a payer", "mostly a forwarding node", "mostly a payee", you still end up being at least partially a forwarding node ("hub") on the network, at least part of the time. This greatly reduces the problems of privacy inherent in having only a few hub nodes: forwarding nodes cannot get significantly useful data from the payments passing through them, because the distance between the payer and the payee can be so large that it would be likely that the ultimate payer and the ultimate payee could be anyone on the Lightning Network. Lessons learned?
We can decentralize if we try hard enough!
"Hubs bad" can be made "hubs good" if everybody is a hub.
Smart people can solve problems. It's kinda why they're smart.
After LN, there's also the Decker-Wattenhofer Duplex Micropayment Channels (DMC). This post is long enough as-is, LOL. But for now, it uses a novel "decrementing nSequence channel", using the new relative-timelock semantics of nSequence (not the broken one originally by Satoshi). It actually uses multiple such "decrementing nSequence" constructs, terminating in a pair of Spilman channels, one in both directions (thus "duplex"). Maybe I'll discuss it some other time. The realization that channel constructions could actually hold more channel constructions inside them (the way the Decker-Wattenhofer puts a pair of Spilman channels inside a series of "decrementing nSequence channels") lead to the further thought behind Burchert-Decker-Wattenhofer channel factories. Basically, you could host multiple two-participant channel constructs inside a larger multiparticipant "channel" construct (i.e. host multiple channels inside a factory). Further, we have the Decker-Russell-Osuntokun or "eltoo" construction. I'd argue that this is "nSequence done right". I'll write more about this later, because this post is long enough. Lessons learned?
Bitcoin offchain scaling is more powerful than you ever thought.
An extensive guide for cashing out bitcoin and cryptocurrencies into private banks
Hey guys. Merry Xmas ! I am coming back to you with a follow up post, as I have helped many people cash out this year and I have streamlined the process. After my original post, I received many requests to be more specific and provide more details. I thought that after the amazing rally we have been attending over the last few months, and the volatility of the last few days, it would be interesting to revisit more extensively. The attitude of banks around crypto is changing slowly, but it is still a tough stance. For the first partial cash out I operated around a year ago for a client, it took me months to find a bank. They wouldn’t want to even consider the case and we had to knock at each and every door. Despite all my contacts it was very difficult back in the days. This has changed now, and banks have started to open their doors, but there is a process, a set of best practices and codes one has to follow. I often get requests from crypto guys who are very privacy-oriented, and it takes me months to have them understand that I am bound by Swiss law on banking secrecy, and I am their ally in this onboarding process. It’s funny how I have to convince people that banks are legit, while on the other side, banks ask me to show that crypto millionaires are legit. I have a solid background in both banking and in crypto so I manage to make the bridge, but yeah sometimes it is tough to reconcile the two worlds. I am a crypto enthusiast myself and I can say that after years of work in the banking industry I have grown disillusioned towards banks as well, like many of you. Still an account in a Private bank is convenient and powerful. So let’s get started.
A. What is required to open an account in a Private bank when you made your fortune through crypto.
There are two different aspects to your onboarding in a Swiss Private bank, compliance-wise. *The origin of your crypto wealth *Your background (residence, citizenship and probity) These two aspects must be documented in-depth. How to document your crypto wealth. Each new crypto millionaire has a different story. I may detail a few fun stories later in this post, but at the end of the day, most of crypto rich I have met can be categorized within the following profiles: the miner, the early adopter, the trader, the corporate entity, the black market, the libertarian/OTC buyer. The real question is how you prove your wealth is legit. 1. Context around the original amount/investment Generally speaking, your first crypto purchase may not be documented. But the context around this acquisition can be. I have had many cases where the original amount was bought through Mtgox, and no proof of purchase could be provided, nor could be documented any Mtgox claim. That’s perfectly fine. At some point Mtgox amounted 70% of the bitcoin transactions globally, and people who bought there and managed to withdraw and keep hold of their bitcoins do not have any Mtgox claim. This is absolutely fine. However, if you can show me the record of a wire from your bank to Tisbane (Mtgox's parent company) it's a great way to start. Otherwise, what I am trying to document here is the following: I need context. If you made your first purchase by saving from summer jobs, show me a payroll. Even if it was USD 2k. If you acquired your first bitcoins from mining, show me the bills of your mining equipment from 2012 or if it was through a pool mine, give me your slushpool account ref for instance. If you were given bitcoin against a service you charged, show me an invoice. 2. Tracking your wealth until today and making sense of it. What I have been doing over the last few months was basically educating compliance officers. Thanks God, the blockchain is a global digital ledger! I have been telling my auditors and compliance officers they have the best tool at their disposal to lead a proper investigation. Whether you like it or not, your wealth can be tracked, from address to address. You may have thought all along this was a bad feature, but I am telling you, if you want to cash out, in the context of Private Banking onboarding, tracking your wealth through the block explorer is a boon. We can see the inflows, outflows. We can see the age behind an address. An early adopter who bought 1000 BTC in 2010, and let his bitcoin behind one address and held thus far is legit, whether or not he has a proof of purchase to show. That’s just common sense. My job is to explain that to the banks in a language they understand. Let’s have a look at a few examples and how to document the few profiles I mentioned earlier. The trader. I love traders. These are easy cases. I have a ton of respect for them. Being a trader myself in investment banks for a decade earlier in my career has taught me that controlling one’s emotions and having the discipline to impose oneself some proper risk management system is really really hard. Further, being able to avoid the exchange bankruptcy and hacks throughout crypto history is outstanding. It shows real survival instinct, or just plain blissed ignorance. In any cases traders at exchange are easy cases to corroborate since their whole track record is potentially available. Some traders I have met have automated their trading and have shown me more than 500k trades done over the span of 4 years. Obviously in this kind of scenario I don’t show everything to the bank to avoid information overload, and prefer to do some snacking here and there. My strategy is to show the early trades, the most profitable ones, explain the trading strategy and (partially expose) the situation as of now with id pages of the exchanges and current balance. Many traders have become insensitive to the risk of parking their crypto at exchange as they want to be able to trade or to grasp an occasion any minute, so they generally do not secure a substantial portion on the blockchain which tends to make me very nervous. The early adopter. Provided that he has not mixed his coin, the early adopter or “hodler” is not a difficult case either. Who cares how you bought your first 10k btc if you bought them below 3$ ? Even if you do not have a purchase proof, I would generally manage to find ways. We just have to corroborate the original 30’000 USD investment in this case. I mainly focus on three things here: *proof of early adoption I have managed to educate some banks on a few evidences specifically related to crypto markets. For instance with me, an old bitcointalk account can serve as a proof of early adoption. Even an old reddit post from a few years ago where you say how much you despise this Ripple premined scam can prove to be a treasure readily available to show you were early. *story telling Compliance officers like to know when, why and how. They are human being looking for simple answers to simple questions and they don’t want like to be played fool. Telling the truth, even without a proof can do wonders, and even though bluffing might still work because banks don’t fully understand bitcoin yet, it is a risky strategy that is less and less likely to pay off as they are getting more sophisticated by the day. *micro transaction from an old address you control This is the killer feature. Send a $20 worth transaction from an old address to my company wallet and to one of my partner bank’s wallet and you are all set ! This is gold and considered a very solid piece of evidence. You can also do a microtransaction to your own wallet, but banks generally prefer transfer to their own wallet. Patience with them please. they are still learning. *signature message Why do a micro transaction when you can sign a message and avoid potentially tainting your coins ? *ICO millionaire Some clients made their wealth participating in ETH crowdsale or IOTA ICO. They were very easy to deal with obviously and the account opening was very smooth since we could evidence the GENESIS TxHash flow. The miner Not so easy to proof the wealth is legit in that case. Most early miners never took screenshot of the blocks on bitcoin core, nor did they note down the block number of each block they mined. Until the the Slashdot article from August 2010 anyone could mine on his laptop, let his computer run overnight and wake up to a freshly minted block containing 50 bitcoins back in the days. Not many people were structured enough to store and secure these coins, avoid malwares while syncing the blockchain continuously, let alone document the mined blocks in the process. What was 50 BTC worth really for the early miners ? dust of dollars, games and magic cards… Even miners post 2010 are generally difficult to deal with in terms of compliance onboarding. Many pool mining are long dead. Deepbit is down for instance and the founders are MIA. So my strategy to proof mining activity is as follow: *Focusing on IT background whenever possible. An IT background does help a lot to bring some substance to the fact you had the technical ability to operate a mining rig. *Showing mining equipment receipts. If you mined on your own you must have bought the hardware to do so. For instance mining equipment receipts from butterfly lab from 2012-2013 could help document your case. Similarly, high electricity bill from your household on a consistent basis back in the day could help. I have already unlocked a tricky case in the past with such documents when the bank was doubtful. *Wallet.dat files with block mining transactions from 2011 thereafter This obviously is a fantastic piece of evidence for both you and me if you have an old wallet and if you control an address that received original mined blocks, (even if the wallet is now empty). I will make sure compliance officers understand what it means, and as for the early adopter, you can prove your control over these wallet through a microtransaction. With these kind of addresses, I can show on the block explorer the mined block rewards hitting at regular time interval, and I can even spot when difficulty level increased or when halvening process happened. *Poolmining account. Here again I have educated my partner bank to understand that a slush account opened in 2013 or an OnionTip presence was enough to corroborate mining activity. The block explorer then helps me to do the bridge with your current wallet. *Describing your set up and putting it in context In the history of mining we had CPU, GPU, FPG and ASICs mining. I will describe your technical set up and explain why and how your set up was competitive at that time. The corporate entity Remember 2012 when we were all convinced bitcoin would take over the world, and soon everyone would pay his coffee in bitcoin? How naïve we were to think transaction fees would remain low forever. I don’t blame bitcoin cash supporters; I once shared this dream as well. Remember when we thought global adoption was right around the corner and some brick and mortar would soon accept bitcoin transaction as a common mean of payment? Well, some shop actually did accept payment and held. I had a few cases as such of shops holders, who made it to the multi million mark holding and had invoices or receipts to proof the transactions. If you are organized enough to keep a record for these trades and are willing to cooperate for the documentation, you are making your life easy. The digital advertising business is also a big market for the bitcoin industry, and affiliates partner compensated in btc are common. It is good to show an invoice, it is better to show a contract. If you do not have a contract (which is common since all advertising deals are about ticking a check box on the website to accept terms and conditions), there are ways around that. If you are in that case, pm me. The black market Sorry guys, I can’t do much for you officially. Not that I am judging you. I am a libertarian myself. It’s just already very difficult to onboard legit btc adopters, so the black market is a market I cannot afford to consider. My company is regulated so KYC and compliance are key for me if I want to stay in business. Behind each case I push forward I am risking the credibility and reputation I have built over the years. So I am sorry guys I am not risking it to make an extra buck. Your best hope is that crypto will eventually take over the world and you won’t need to cash out anyway. Or go find a Lithuanian bank that is light on compliance and cooperative. The OTC buyer and the libertarian. Generally a very difficult case. If you bought your stack during your journey in Japan 5 years ago to a guy you never met again; or if you accumulated on https://localbitcoins.com/ and kept no record or lost your account, it is going to be difficult. Not impossible but difficult. We will try to build a case with everything else we have, and I may be able to onboard you. However I am risking a lot here so I need to be 100% confident you are legit, before I defend you. Come & see me in Geneva, and we will talk. I will run forensic services like elliptic, chainalysis, or scorechain on an extract of your wallet. If this scan does not raise too many red flags, then maybe we can work together ! If you mixed your coins all along your crypto history, and shredded your seeds because you were paranoid, or if you made your wealth mining professionally monero over the last 3 years but never opened an account at an exchange. ¯_(ツ)_/¯ I am not a magician and don’t get me wrong, I love monero, it’s not the point. Cashing out ICOs Private companies or foundations who have ran an ICO generally have a very hard time opening a bank account. The few banks that accept such projects would generally look at 4 criteria: *Seriousness of the project Extensive study of the whitepaper to limit the reputation risk *AML of the onboarding process ICOs 1.0 have no chance basically if a background check of the investors has not been conducted *Structure of the moral entity List of signatories, certificate of incumbency, work contract, premises... *Fiscal conformity Did the company informed the authorities and seek a fiscal ruling.
B. The tax issue I am not a tax specialist, but I can say that this year I have seen it all. Again I am not judging. You made $100m hodling, and still wouldn’t pay your taxes ? Your decision.I personally advise everyone to pay their taxes, but also to be generous, to give to charities. I mean you eventually made it. Good for you. What about you contribute to make the world a better place now? I will stop patronizing you. It’s just my 2cts, and it’s your money.
For the record, I am not into the tax avoidance business, so people come to me with a set up and I see if I can make it work within the legal framework imposed to me. First, stop thinking Switzerland is a “offshore heaven” Swiss banks have made deals with many governments for the exchange of fiscal information. If you are a French citizen, resident in France and want to open an account in a Private Bank in Switzerland to cash out your bitcoins, you will get slaughtered (>60%). There are ways around that, and I could refer you to good tax specialists for fiscal optimization, but I cannot organize it myself. It would be illegal for me. Swiss private banks makes it easy for you to keep a good your relation with your retail bank and continue paying your bills without headaches. They are integrated to SEPA, provide ebanking and credit cards. For information, these are the kind of set up some of my clients came up with. It’s all legal; obviously I do not onboard clients that are not tax compliant. Further disclaimer: I did not contribute myself to these set up. Do not ask me to organize it for you. I won’t. EU tricks Swiss lump sum taxation Foreign nationals resident in Switzerland can be taxed on a lump-sum basis if they are not gainfully employed in our country. Under the lump-sum tax regime, foreign nationals taking residence in Switzerland may choose to pay an expense-based tax instead of ordinary income and wealth tax. Attractive cantons for the lump sum taxation are Zug, Vaud, Valais, Grisons, Lucerne and Berne. To make it short, you will be paying somewhere between 200 and 400k a year and all expenses will be deductible. Switzerland has adopted a very friendly attitude towards crypto currency in general. There is a whole crypto valley in Zug now. 30% of ICOs are operated in Switzerland. The reason is that Switzerland has thrived for centuries on banking secrecy, and today with FATCA and exchange of fiscal info with EU, banking secrecy is dead. Regulators in Switzerland have understood that digital ledger technologies were a way to roll over this competitive advantage for the generations to come. Switzerland does not tax capital gains on crypto profits. The Finma has a very pragmatic approach. They have issued guidance- updated guidelines here. They let the business get organized and operate their analysis on a case per case basis. Only after getting a deep understanding of the market will they issue a global fintech license in 2019. This approach is much more realistic than legislations which try to regulate everything beforehand. Italy new tax exemption. It’s a brand new fiscal exemption. Go to Aoste, get residency and you could be taxed a 100k/year for 10years. Yes, really. Portugal What’s crazy in Europe is the lack of fiscal harmonization. Even if no one in Brussels dares admit it, every other country is doing fiscal dumping. Portugal is such a country and has proved very friendly fiscally speaking. I personally have a hard time trusting Europe. I have witnessed what happened in Greece over the last few years. Some of our ultra high net worth clients got stuck with capital controls. I mean no way you got out of crypto to have your funds confiscated at the next financial crisis! Anyway. FYI Malta Generally speaking, if you get a residence somewhere you have to live there for a certain period of time. Being stuck in Italy is no big deal with Schengen Agreement, but in Malta it is a different story. In Malta, the ordinary residence scheme is more attractive than the HNWI residence scheme. Being an individual, you can hold a residence permit under this scheme and pay zero income tax in Malta in a completely legal way. Monaco Not suitable for French citizens, but for other Ultra High Net worth individual, Monaco is worth considering. You need an account at a local bank as a proof of fortune, and this account generally has to be seeded with at least EUR500k. You also need a proof of residence. I do mean UHNI because if you don’t cash out minimum 30m it’s not interesting. Everything is expensive in Monaco. Real Estate is EUR 50k per square meter. A breakfast at Monte Carlo Bay hotel is 70 EUR. Monaco is sunny but sometimes it feels like a golden jail. Do you really want that for your kids? Dubaï
Set up a company in Dubaï, get your resident card.
Spend one day every 6 month there
Be tax free
US tricks Some Private banks in Geneva do have the license to manage the assets of US persons and U.S citizens. However, do not think it is a way to avoid paying taxes in the US. Opening an account at an authorized Swiss Private banks is literally the same tax-wise as opening an account at Fidelity or at Bank of America in the US. The only difference is that you will avoid all the horror stories. Horror stories are all real by the way. In Switzerland, if you build a decent case and answer all the questions and corroborate your case in depth, you will manage to convince compliance officers beforehand. When the money eventually hits your account, it is actually available and not frozen. The IRS and FATCA require to file FBAR if an offshore account is open. However FBAR is a reporting requirement and does not have taxes related to holding an account outside the US. The taxes would be the same if the account was in the US. However penalties for non compliance with FBAR are very large. The tax liability management is actually performed through the management of the assets ( for exemple by maximizing long term capital gains and minimizing short term gains). The case for Porto Rico. Full disclaimer here. I am not encouraging this. Have not collaborated on such tax avoidance schemes. if you are interested I strongly encourage you to seek a tax advisor and get a legal opinion. I am not responsible for anything written below. I am not going to say much because I am so afraid of uncle Sam that I prefer to humbly pass the hot potato to pwc From here all it takes is a good advisor and some creativity to be tax free on your crypto wealth if you are a US person apparently. Please, please please don’t ask me more. And read the disclaimer again. Trust tricks Generally speaking I do not accept fringe fiscal situation because it puts me in a difficult situation to the banks I work with, and it is already difficult enough to defend a legit crypto case. Trust might be a way to optimize your fiscal situation. Belize. Bahamas. Seychelles. Panama, You name it. At the end of the day, what matters for Swiss Banks are the beneficial owner and the settlor. Get a legal opinion, get it done, and when you eventually knock at a private bank’s door, don’t say it was for fiscal avoidance you stupid ! You will get the door smashed upon you. Be smarter. It will work. My advice is just to have it done by a great tax specialist lawyer, even if it costs you some money, as the entity itself needs to be structured in a professional way. Remember that with trust you are dispossessing yourself off your wealth. Not something to be taken lightly. “Anonymous” cash out. Right. I think I am not going into this topic, neither expose the ways to get it done. Pm me for details. I already feel a bit uncomfortable with all the info I have provided. I am just going to mention many people fear that crypto exchange might become reporting entities soon, and rightly so. This might happen anyday. You have been warned. FYI, this only works for non-US and large cash out. The difference between traders an investors. Danmark, Holland and Germany all make a huge difference if you are a passive investor or if you are a trader. ICO is considered investing for instance and is not taxed, while trading might be considered as income and charged aggressively. I would try my best to protect you and put a focus on your investor profile whenever possible, so you don't have to pay 52% tax if you do not have to :D
C. The cash out itself So you have accumulated patiently a good amount of wealth. For some of us who have been involved in crypto since 2010, it took years. Remember when BTC was stuck at 200$ for months? I personally feel like it was yesterday. There is no way you screw up your wealth by cashing out in a hurry or with low security standards. Here is how the cash out takes should place.
Full cash out or partial cash out? People who have been sitting on crypto for long have grown an emotional and irrational link with their coins. They come to me and say, look, I have 50m in crypto but I would like to cash out 500k only. So first let me tell you that as a wealth manager my advice to you is to take some off the table. Doing a partial cash out is absolutely fine. The market is bullish. We are witnessing a redistribution of wealth at a global scale. Bitcoin is the real #occupywallstreet, and every one will discuss crypto at Xmas eve which will make the market even more supportive beginning 2018, especially with all hedge funds entering the scene. If you want to stay exposed to bitcoin and altcoins, and believe these techs will change the world, it’s just natural you want to keep some coins. In the meantime, if you have lived off pizzas over the last years, and have the means to now buy yourself an nice house and have an account at a private bank, then f***ing do it mate ! Buy physical gold with this account, buy real estate, have some cash at hands. Even though US dollar is worthless to your eyes, it’s good and convenient to have some. Also remember your wife deserves it ! And if you have no wife yet and you are socially awkward like the rest of us, then maybe cashing out partially will help your situation ;) What the Private Banks expect. Joke aside, it is important you understand something. If you come around in Zurich to open a bank account and partially cash out, just don’t expect Private Banks will make an exception for you if you are small. You can’t ask them to facilitate your cash out, buy a 1m apartment with the proceeds of the sale, and not leave anything on your current account. It won’t work. Sadly, under 5m you are considered small in private banking. The bank is ok to let you open an account, provided that your kyc and compliance file are validated, but they will also want you to become a client and leave some money there to invest. This might me despicable, but I am just explaining you their rules. If you want to cash out, you should sell enough to be comfortable and have some left. Also expect the account opening to last at least 3-4 week if everything goes well. You can't just open an account overnight. The cash out logistics. Cashing out 1m USD a day in bitcoin or more is not so hard. Let me just tell you this: Even if you get a Tier 4 account with Kraken and ask Alejandro there to raise your limit over $100k per day, Even if you have a bitfinex account and you are willing to expose your wealth there, Even if you have managed to pass all the crazy due diligence at Bitstamp, The amount should be fractioned to avoid risking your full wealth on exchange and getting slaughtered on the price by trading big quantities. Cashing out involves significant risks at all time. There is a security risk of compromising your keys, a counterparty risk, a fat finger risk. Let it be done by professionals. It is worth every single penny. Most importantly, there is a major difference between trading on an exchange and trading OTC. Even though it’s not publicly disclosed some exchange like Kraken do have OTC desks. Trading on an exchange for a large amount will weight on the prices. Bitcoin is a thin market. In my opinion over 30% of the coins are lost in translation forever. Selling $10m on an exchange in a day can weight on the prices more than you’d think. And if you trade on a exchange, everything is shown on record, and you might wipe out the prices because on exchanges like bitstamp or kraken ultimately your counterparties are retail investors and the market depth is not huge. It is a bit better on Bitfinex. It is way better to trade OTC. Accessing the institutional OTC market is not easy, and that is also the reason why you should ask a regulated financial intermediary if we are talking about huge amounts. Last point, always chose EUR as opposed to USD. EU correspondent banks won’t generally block institutional amounts. However we had the cases of USD funds frozen or delayed by weeks. Most well-known OTC desks are Cumberlandmining (ask for Lucas), Genesis (ask for Martin), Bitcoin Suisse AG (ask for Niklas), circletrade, B2C2, or Altcoinomy (ask for Olivier) Very very large whales can also set up escrow accounts for massive block trades. This world, where blocks over 30k BTC are exchanged between 2 parties would deserve a reddit thread of its own. Crazyness all around. Your options: DIY or going through a regulated financial intermediary. Execution trading is a job in itself. You have to be patient, be careful not to wipe out the order book and place limit orders, monitor the market intraday for spikes or opportunities. At big levels, for a large cash out that may take weeks, these kind of details will save you hundred thousands of dollars. I understand crypto holders are suspicious and may prefer to do it by themselves, but there are regulated entities who now offer the services. Besides, being a crypto millionaire is not a guarantee you will get institutional daily withdrawal limits at exchange. You might, but it will take you another round of KYC with them, and surprisingly this round might be even more aggressive that the ones at Private banks since exchange have gone under intense scrutiny by regulators lately. The fees for cashing out through a regulated financial intermediary to help you with your cash out should be around 1-2% flat on the nominal, not more. And for this price you should get the full package: execution/monitoring of the trades AND onboarding in a private bank. If you are asked more, you are being abused. Of course, you also have the option to do it yourself. It is a way more tedious and risky process. Compliance with the exchange, compliance with the private bank, trading BTC/fiat, monitoring the transfers…You will save some money but it will take you some time and stress. Further, if you approach a private bank directly, it will trigger a series of red flag to the banks. As I said in my previous post, they call a direct approach a “walk-in”. They will be more suspicious than if you were introduced by someone and won’t hesitate to show you high fees and load your portfolio with in-house products that earn more money to the banks than to you. Remember also most banks still do not understand crypto so you will have a lot of explanations to provide and you will have to start form scratch with them! The paradox of crypto millionaires Most of my clients who made their wealth through crypto all took massive amount of risks to end up where they are. However, most of them want their bank account to be managed with a low volatility fixed income capital preservation risk profile. This is a paradox I have a hard time to explain and I think it is mainly due to the fact that most are distrustful towards banks and financial markets in general. Many clients who have sold their crypto also have a cash-out blues in the first few months. This is a classic situation. The emotions involved in hodling for so long, the relief that everything has eventually gone well, the life-changing dynamics, the difficulties to find a new motivation in life…All these elements may trigger a post cash-out depression. It is another paradox of the crypto rich who has every card in his hand to be happy, but often feel a bit sad and lonely. Sometimes, even though it’s not my job, I had to do some psychological support. A lot of clients have also become my friends, because we have the same age and went through the same “ordeal”. First world problem I know… Remember, cashing out is not the end. It’s actually the beginning. Don’t look back, don’t regret. Cash out partially, because it does not make sense to cash out in full, regret it and want back in. relax. The race to cash out crypto billionaire and the concept of late exiter. The Winklevoss brothers are obviously the first of a series. There will be crypto billionaires. Many of them. At a certain level you can have a whole family office working for you to manage your assets and take care of your needs . However, let me tell you it’s is not because you made it so big that you should think you are a genius and know everything better than anyone. You should hire professionals to help you. Managing assets require some education around the investment vehicles and risk management strategies. Sorry guys but with all the respect I have for wallstreebet, AMD and YOLO stock picking, some discipline is necessary. The investors who have made money through crypto are generally early adopters. However I have started to see another profile popping up. They are not early adopters. They are late exiters. It is another way but just as efficient. Last week I met the first crypto millionaire I know who first bough bitcoin over 1000$. 55k invested at the beginning of this year. Late adopter & late exiter is a route that can lead to the million. Last remarks. I know banks, bankers, and FIAT currencies are so last century. I know some of you despise them and would like to have them burn to the ground. With compliance officers taking over the business, I would like to start the fire myself sometimes. I hope this extensive guide has helped some of you. I am around if you need more details. I love my job despite all my frustration towards the banking industry because it makes me meet interesting people on a daily basis. I am a crypto enthusiast myself, and I do think this tech is here to stay and will change the world. Banks will have to adapt big time. Things have started to change already; they understand the threat is real. I can feel the generational gap in Geneva, with all these old bankers who don’t get what’s going on. They glaze at the bitcoin chart on CNBC in disbelief and they start to get it. This bitcoin thing is not a joke. Deep inside, as an early adopter who also intends to be a late exiter, as a libertarian myself, it makes me smile with satisfaction. Cheers. @swisspb on telegram
Why Bitcoin is NOT a scam / lottery / bubble / Tulip mania / whatever
So, another thread has hit /all and brought another influx of people new to Bitcoin. I usually don't pay much attention to all negative comments, but since I have some extra time today and nothing better to do... I wanted to address the main thing that often pops up in these threads. Namely: is Bitcoin a scam? First of all, if you asked me this question in few years back (2015 when price crashed back to $200)... I would've said: maybe. At that point jury was still out - I often like to quote Satoshi's genius observation:
In twenty years, Bitcoin will either be worth quite a lot or nothing
With marketcap below $4B Bitcoin was still an easy target. We all remember MtGox scandal, government dumping Bitcoin seized from Silk Road for $48m (boy... did they dropped the ball with that one ;), discussions in Senate etc. etc. Meaning - at that point - it was still possible for rogue actor to pump and dump and break the whole system beyond repair. But, it is end of 2017 now... and Bitcoin is worth over $7000 (boy, will it be fun when it's over 9000 ;). All this results in Bitcoin ecosystem being way more powerful now than few years back. Not only there is daily trading volume of over $3 BILLION going through Bitcoin... There are now Bitcoin companies that are worth over $1B. Hell, there are people who are Bitcoin billionaires. Which brings us to the main point:
Bitcoin is genuine technological revolution, accompanied by tangible merits. In a nutshell, Bitcoin is a scam in 2010s as much as Internet was a scam in 1990s.
1 Bitcoin is valuable because you can do "technologically new" things with it. Never before in the history of humanity we had TRULY DECENTRALIZED "asset" that had properties traditionally associated with currencies (previously always backed by someone / government) or commodities (like gold).
Bitcoin is a store of value. You can easily hold it with your private key and NOBODY can take it away from you. Compare that to having $1 in the bank - government can block it. If you have $1 and you hold it in cash, government can still take parts of it from you through inflation (dollar has lost 99% of it's value from 1950s). Also, compare Bitcoin to gold - it's MUCH easier to store. And much easier to turn into medium of exchange.
Bitcoin is medium of exchange. You can buy stuff directly in Bitcoin. Numerous websites and people around the globe now accept it. You can easily transfer it. Wherever you are in the world, you can instantly send Bitcoin to other people. This is not a big deal for people in first world countries as they have numerous options. But for majority of the world this is a HUGE deal. More than 50% of population is without bank account (let along online bank account) and have no way to participate in global economy.
Bitcoin is unit of account. If you have Bitcoin you can exchange it for whatever currency you want. In a sense Bitcoin is MORE VALUABLE than native currencies of MANY countries. If you are in Venezuela right now, would you rather hold Bolivar or Bitcoin? It's kinda no-brainer, right?
I hope this overview gave you good insight into why it's pretty much impossible for Bitcoin to be scam at this point. Like, I understand that recent HUGE price jump can influence people to see Bitcoin as Tulip mania. But Tulip mania was a scam because nothing substantial changed with tulips over night. People just started paying more and more for them. Plus, you could always produce more Tulips. With Bitcoin you have genuine technological revolution behind. If you own Bitcoin you can do stuff you never could do before in various parts of the world. It's like banking infrastructure on steroids really. Plus, unlike Tulips, Bitcoin supply is limited. Hell, even gold - you can always mine more of it. Bitcoin is fixed at 21 million, for all eternity. Any question - fell free to hit me up. Always glad to help newcomers to Bitcoin! EDIT: One of the responses says - OK, we can agree Bitcoin is obviously not a scam. But, is it a bubble? Consider that Bitcoin has been a bubble for last 8 years. It was bubble when it was $2. It was bubble when it was $30. I thought it was bubble when it broke $2000. Hell, to me stock market is in the bubble. I like to compare Bitcoin to Internet... lots of people thought "Internet is a bubble"... yet 20 years later, here it is... completely changing humanity. In that sense I think Internet is best comparison to Bitcoin... time will tell whether or not Bitcoin is right now in the bubble... but I strongly believe that in 20 years Bitcoin will be above today's levels. Now, if you share my long term prospects - then "Bitcoin bubble" will never be too much of an issue for you. Like - I don't buy in batches... I dollar cost average my BTC investment (you can look through my history for more info). See also Max_Thundernice observation of using Bitcoin as vehicle for protection against inflation... EDIT: I've incorrectly presented amount of money pumped into Bitcoin... read this for explanation. EDIT: I also want to emphasize one thing:
DO NOT go ALL IN hoping that Bitcoin will hit whatever mark. Especially DO NOT BORROW MONEY and GO ALL IN unless you are ready to forget about whatever money you've invested for next 20 years.
95% of people I know that have been trading Bitcoin have LOST most of their money. I know bunch of people who bought at $20 and then sold at $2. Then there is a group that bought at $800 and sold at $200. There are also those on other side of equation... there was short worth tens of millions of $$$ earlier this year when BTC was breaking $1100. Crazy thing - Bitcoin price did drop few days later... but that was AFTER short was wiped out and whoever did it lost TENS OF MILLIONS of $$$. Profiting is not only about being right about eventual price... it's also about knowing when it'll happen. Final EDIT: Blow away by all the feedback. That's why I like to post here - I get interact with people and in the process learn something new. I'll be monitoring my Inbox so if you have more questions just drop them here. And if you like my writing, visit my motivational / various blog that I update occasionally.
Introduction All Bitcoin are created equal, but they rarely remain that way. With the traceability and open nature of Bitcoin's Blockchain, individual Bitcoin and satoshis can be traced back to cypherpunk giants like Hal Finney, or even Satoshi Nakamoto himself. Furthermore, newly minted, or old-minted-but-never-moved Bitcoin trade at a significant premium, compared to the Bitcoin spot price (it's been reported that there have been premiums of 15-20% for coinbase Bitcoin). These coins are novelties. Collectables. Because they can be tracked, identified and are cryptographically verifiable. So with that dynamic in place, there is an opportunity for a Premium Bitcoin market to form. This subreddit will attempt to form the infancy of that market for retail customers, and perhaps whales. Instructions for Buyers on making a Post If you wish to buy a specific kind of coin you can make a post is this subreddit starting with
followed by the kind of Bitcoin you wish to buy,
followed by specific requirements, like the number of transactions away from the source/event/coinbase/person/exchange
followed by the premium above spot price as a percentage in which you are willing to buy the novelty, collectable or even tainted Bitcoins.
followed by your preferred payment method
[WTB] 1 Satoshi Nakamoto Bitcoin, 1 transaction away from coinbase: 100% above spot - USDC [WTB] 2 Bitcoin Coinbase from 2013, less then 2 transactions away from origin: 21% above spot - Bitcoin [WTB] 0.5 Silk Road Bitcoin, any length of transactions away from origin: -10% below spot - Monero
Instructions for Sellers on making a Post If you believe you have collectable, unique or novelty Bitcoin for sale, you can make a post in this subreddit starting with
followed by the kind of Bitcoin you wish to sell,
followed by any specifics of those Bitcoin, like the number of transactions away from the event/source/coinbase/person/exchange
followed by the asking premium above spot price as a percentage you wish to charge for the novelty, collectable or even tainted Bitcoins.
followed by what kind of payment you accept
[WTS] 1 Satoshi Nakamoto Bitcoin, 2 transactions away from coinbase, 121% above spot - Accepting Bitcoin, ETH, USDC [WTS] 25 Bitcoin coinbase, from 2014 has not be moved, asking for 25% above spot - Accepting USDT [WTS] 1 Hacked Bitfinex Bitcoin, 21 transactions away from source, -20% below spot - Accepting Monero
Instructions for Escrow Agents on making a Post If you want to offer your escrow services to facilitate the buying and selling of Premium Bitcoin between two parties then you can make a post in this subreddit starting with
a short description of yourself
the percentage or flat rate you will charge for your services
any extra features available
payment methods accepted
[EA] Experienced and Reviewed Escrow Agent here to help, flat rate of 0.01BTC - all payment methods accepted [EA] Bitrated verfied Escrow Agent, 0.5% commission - physical opendime optional for 150$ more - Bitcoin and USDC accepted upfront
Best Practices for Buyers, Sellers and Escrow Agents once you submit a post, a seller may try to contact you by private message, chat, or by replying to your post. Most will claim that they have what you are looking for. But you will need to verify on your own that the person you are communicating with does have the type of coins you are looking for. You can verify this by having the seller who contacts you sign a message from the address that holds the coins that satisfy your buying requirements. It's recommended that the verification message format be something like "I am ." Further instructions on signing messages can be found here: http://support.vaultoro.com/knowledgebase/articles/536758-how-do-i-sign-a-message-with-my-bitcoin-wallet https://www.youtube.com/watch?v=B4GZ4qDEanA https://www.youtube.com/watch?v=S88ciN9DsRk Once the buyer has verified the coins are possessed by the seller with a signed message from the seller, the transaction can begin. Other useful tools for looking up the transaction trail of the coins being sold can be found here: blockpath.com blockchain3d.info symphony.iohk.io walletexplorer.com a list of MTGox cold wallet coins a list of historic bitcoin transactions It's recommended that a trusted third party escrow agent be used to ensure that neither party scams another. It's important that the seller, buyer and escrow agent all know the details of the transaction that is to occur, including the evidence to support the Bitcoins novelty. It's important that the buyer conduct his due diligence in verifying the evidence of the coins authenticity and related history. If possible, the escrow agent should do the same. To find a escrow agent, a buyeseller can search this subreddit for EA posts, use www.bitrated.com to search for a trusted escrow, or use a different escrow agent service that they both agree to using. Once all parties are clear on the details of the transactions, including the EA's fee, the transaction can proceed. If the transaction is successful, please let us know in the original subreddit posting.
Apologies for typos and grammatical errors; wanted to get this out as soon as possible for those that weren't able to watch the live stream. Cleaned up formatting to make it more readable.
While this isn't a 100% word-for-word transcript, the overtone of the meeting should have been conveyed. SEC and CFTC want protections for consumers, but don't want to outright ban crypto. I was under the impression that both agencies were well-educated, but understaffed. They both want to introduce protections for customers and investors and go after scam artists, but don't want to impose any restrictions or regulations that would be bad for crypto as a whole (both from a security perspective, and a technological innovation perspective). Overall a huge positive.
Touched on the definition, use, history, all-time-high, market cap, negative news
Mentioned that the techonology has positives to transform the financial landscape, transfer risk
Volatility, 1000% rise, 60% fall, compared to DOW Jones
touched on scam artists/hackers, undereducated market participants
mentioned there are regulatory gaps, potentials for abuse
neither SEC/CFTC has authority to police all aspects
mentioned some analogies to the dotcom bubble
may be used to fund illicit activity
says they need to do more to get ahead of the curve
"don't forget your day jobs to pursue and punish misconduct", mentioned the 3 big banks being punished recently
crypto brings us to a new age, but don't overlook the princilpes of going after the bad guys and being tough
estimated highest market cap $700 bn; promising new technology
great efficiencies, including capital markets; seek to WORK WITH those who seek to bring innovation
Crypto currencies - replacement for dollars
widely known introduced as substitutes
make it easier and cheaper ot buy and sell goods
verification and fees/costs eliminated
ICOs - stock offering
stocks and bonds, under a new label
security being offered is a virtual token
"if it functions as a security, it IS a security"
doesn't mean you are investing in blockchain ventures
market have less oversight than traditional securities
if it looks like a stock exchange, don't take comfort
no capital and conduct requirements
many ICOs are conducted illegally
creators not following securities laws
those who try to circumvent the SEC are in their crosshairs
do not have control over the regulation of the markets that exchanges exist in
"do not view this as a request for increased SEC jurisdiction"
"I believe every ICO I have seen is a security"
we are working with the DOJ to enforce laws
story about how his kids recently showed an interest in Bitcoin
"we must foster their interest, but crack down hard on those that abuse"
response should have several elements:
learn as much as we can - Lab CFTC to engage with innovators
put things in perspective - as of this morning, Bitcoin 113 bn market cap. less than the market cap of McDonald's. sometimes compared to gold; value of gold dwarfs Bitcoin at 8 trillion market cap
educate consumers - podcasts, webinars, visits to libraries, outreach to seniors
legal authority - "The CFTC does not regulate the dozens of cryptocurrencies"; through their authority, they have enforcement over spot coin markets; analyze manipulation
tough enforcement - they have already launched civil actions, more will follow overall take: wants to work to foster education but introduce protections
Suggesting that perhaps one or both of SEC/CFTC may or should have full control
we should all come together and have a coordinated plan for dealing with the virtual currency market
far from how the stock market is addressed
asked by Crapo if there needs to be additional measures, responded "we may"
FINCEN has been active with AML/KYC
there isn't a comprehensive structure to deal with this
cross-border and international concerns; what challenges?
international nature means patchwork is not sufficient
FINCEN reports that these currencies are used for
encourages FINCEN to continue pursuing this
Markets have been global
Challenge working with overseas and bringing regulations
Challenge requires a lot of new thinking
Encourage to work together to decide how the regulation should look
ICOs raised $4bn globally
SEC focused to protect investors
not clear how much was raised in the U.S., due to unregulated basis; "significant portion"
cooperation between SEC and CFTC regulating Bitcoin but doesn't mention consumer protection bureau CFPB
we're in the enforcement perspective, i can check on that
report that "SEC has stopped enforcement actions against wall street firms"
"I saw that report"; found it annoying; gestation period is 22-24 months, latency period
we've put out a comprehensive report; i'm happy with that
we're pursuing our securities laws vigorously
troubled by a statement "SEC might lose 100 of its enforcement staff by not hiring those who leave"
how are you going to stay on top of everything else we've talked about as well as virtual currencies
personnel is my biggest challenge at the moment
we have a hiring freeze - natural cost, trouble finding people, etc
would receive the "greatest return for additional bodies"
is that the message that you're not the cop it should be?
not at all
I hope you will ask for money and flexibility
I've been very straight about money and value that can be added
Federal reserve is the biggest bank regulator we have
how are you going to put together a task force to deal with crypto currencies before this gets out of control
treasury secretary has brought us together to talk about this
"the funny thing is, they only work for their purported purpose if they're integrated with the financial service"
we are going to be coordinating responses; needs to be clear as to what we're doing
do you need additional legislation
we may be back to ask for that
virtual; go to a virtual doctor, virtual currency, etc
"i started out with pencil and paper in school"
Lack intrinsic value, lack liquidity
gained money going up, lost money going down
don't know where the floor is
relation between Bitcoin value and the cost of mining
charts plotting the correlation
the floor isn't zero, because there is some cost
"think there is something to the value of the crypto exchange"
"I'm not seeing the benefits manifesting themselves in the market yet"
"I'm interested in protecting the main street investors; they should see that"
in the securities world, there are rules that dictate how much you have to tell someone about what they're investing in
we will give you every tool you need to do your job and to hire every person you need to execute that
(essentially) do you have any cryptologists?
emerging area; could always use more horsepower
hired the industry's first "chief innovation officer"
started Lab CFTC
formed virtual currency task force
brought 3 cases against bitcoin fraudsters
used bypass authority for additional resources (13% over budget)
Bitcoin isn't the only one; there are seemingly new ones every day
are you tracking them all?
is someone looking at the long-term systemic effects
eerily similar to late-90s derivatives
Bitcoin is one of many; important to know that many are fraudulent
"MyBigCoin" which became known as "MyBigCon" - Ponzi scheme; we went after them
relatively small market, but we have to watch it
we have had to watch it because they're integrated with the markets we do oversee
on systemic - agrees with Giancarlo
if people are getting ripped off, that is an issue
"I used a pen and pencil as well"
fascinating to see how things are moving
we keep coming back to dollars and cents
new type of exchange; bartering
could avoid determination of the value of the dollar and cents
how do you tax? how do you recognize income?
seems that have to be filled, but basics that a lot of us don't understand
how do you respond to ICOs?
definition of a security is broad
"when you're offering me something and i give you money and the purpose of me giving you money is to profit from your actions going forward"
is Bitcoin a commodity or a security or is it both?
has characteristics of both
is a "medium of exchange, store of value, or a means of account"
we hear a lot of people holding - "HODL - hold on for dear life"
30 year old niece bought some years ago, is holding on
in this regard, it's a commodity
we are looking for fraud and manipulation so that people like his niece are protected
Jan 26th Bloomberg "SEC weighs a big gift [...] blocking class action lawsuits"
wants to get a straight yes/no - "do you support this enormous change in SEC policy"
bottom line - "I can't dictate whether or not this issue comes to us, but I'm not anxious to see a change in this area"
change can't happen without your approval
I'm only 1 of 5 votes
I'd guess there will be at lest 2 votes against it
It would take a long time
I'll let you get away with that
SEC's mission is to protect; not throw under bus
advisers that put fees, kickbacks for recommending product ahead of interest of clients
I want to know that you will not weaken the protections for retirement savers
that's what I'm trying to do - the relation between a broker and their client is regulated by no less than 5 people (the SEC)
want to make sure you're not jeopardizing investors
insufficient standard, lack of clarity, "the standard is only as good as the remedy available"
what dollars do you actually collect when someone does you harm?
if you want to strengthen it, i'm with you
who pays for frivolous lawsuits?
regulatory arbitrage, hard to trace
South Korea, China
was a largely unregulated space
each country is now taking regulatory measures
there's a lot happening beyond the understanding of your average investor
what do we need to do to combat this?
regulatory arbitrage, price arbitrage
different regional and international market
regulation - i think some time ago there was a perception Bitcoin was off the regulatory grid
enforcement / ICOs - we're using our full authority
we will go after misconduct
pump and dump
unregulated exchange, ability for price manipulation
we've taken 3 cases in the last few weeks, more to come
digging deep, learning a lot, seeing a lot
we are working the beat hard
what about retail investors?
formed partnership with CFPB (Consumer Financial Protection Bureau)
Bitcoin is one of the most frequently searched term on library computers
enhancing outreach to educate people coming to the library
getting the word out - financial intermediaries
are you protecting retirement investments
seniors seem to be the prey of choice - not just for Bitcoin
we seek to prosecute these predators
article from Kentucky "Bitcoin is my potential pension"
what would you do to protect them?
troubling, which is why we're putting out so much material
"if it sounds too good to be true, it is"
"if you're giving them money, you'd better be prepared to lose it"
disruptive technologies, but you shouldn't bank on it
pumping all of your money into a disruptive technology has a very high probability of not working out
"there will be winners, but there will be many losers"
want to ensure it's not used against terrorist groups and countries like N Korea
working with FBI; will require cooperation among multiple organizations
also has a dark web working group
when was the last time you bought a fund?
a year or two ago, index funds
did you read the fine print?
not cover to cover
so what's the point of all this over-disclosure if nobody's reading it?
why do we want to do the same for Bitcoin?
adequacy of full disclosure
"I don't think the disclosure we have right now works"
good for lawyers / financial advisers, but right now, we over-disclose
how far should we go to protect people from themselves?
how far do you think we ought to go here? should we just go after the shysters and fully disclose?
what is the right way to deal with this new technology?
we want to deal with ICOs; don't want to go too far
our securities laws work pretty well, but disclosure can be improved
we have to have disclosure that works, and helps the helpless people
if we see the same continued growth, we may see the market cap at 20 trillion dollars by 2020
we may see the same transformation take place
we are going to have to wrap our hands around this
not sure what the right answer is, but this could systemically rise to an FSOC-level event
if this does keep going, is this a systemic issue?
want to go back to separating these two things
should regulate ICOs like securities
false disclosure is fraud, period
so much more to be done
Ethereum - creating "file sharing or extra computer time"
are these in your realm?
if it's an ICO that promises to deliver server time, it's a security
worried that we need a much more coordinated effort
could be as transformational as wireless technology
it is important; we are all working to understand our authorities
bitcoin futures are different; fully transparent and regulated, compared to Bitcoin that's opaque and unregulated
ICOs should be taken under our regime
Putting aside Bitcoin and other distributed ledger, what do you think the value is?
Without Bitcoin, there would be nothing. everything grew out of it.
applications range from financial services and banking, to charity dollars are spent, refugee, access to banking for those who don't have it
66 million tons of soybeans were traded using Bitcoin
allow regulators to do really close market surveillance with precision
challenges, but the potential is significant
agree the potential is significant
hope people pursue it vigorously
DOW Jones fell 4.6%; dollar seen 2% inflation or less; Bitcoin seems to be very volatile in comparison
we have seen volatility but in our world, we're used to it
emergence of futures to provide those who are exposed to it
don't really know what's driving the volatility
not related to foreign currencies
must be something different
lot of volatility compared to what they're supposed to be a substitute for
(essentially) so how does that bode to its claim?
it would not be a very effective means of exchange
with the volatility and delays, there's a significant risk
(quick shout out to) rogue nations, hackers, etc
under what circumstances do the SEC and CFTC have a role in regulating this?
fraud and manipulation - will not hesitate to take authority
what about manipulating to avoid U.S. sanctions?
I'll have to look into that
are there gaps that could create vulnerabilities?
part of a virtual currency task force; includes the fed and FINCEN
meeting with FINCEN this week to get some discussion of cooperation started
seen increase in ICOs; investors using digital tokens
grew from $96mil in 2016 to $4bil in 2017
celebrity promotion - Floyd Mayweather, Kardashian, et al
investors may not understand true risk when they see a product promoted by celebrities
we put out an alert that if you promote a security, you are taking on securities law liability
can you walk us through why the SEC is not comfortable with approving ETFs with crypto currencies?
we've made it clear that there are some issues - price discovery, custody, volatility
don't want to approve an ETF product with a cryptocurrency underlier without working out these issues
don't ETFs mitigate those concerns? are crypto currencies different?
MGT act - modernizing government technologies
create a fund for federal agencies to rid themselves of legacy technology
allows access to dollars; move to cloud
i would be delighted that there isn't a SEC/CFTC hack in the papers soon; advise strengthening cyber security
Kodak and Burger King investments
companies are using block chain as an opportunity to pump up stock prices
Long Island Ice Tea - Long Blockchain
nobody should think it's okay to chain your name to something that contains block chain when you have no idea what you're doing
any time there's something new that can raise the value of their stock without the underlying goods being there, it's not good
ICOs misrepresenting their affiliation where there are wild claims
"Our big task is bringing in enforcement cases and letting people see that"
3bn Bitcoin have been hacked, $500bn hack weeks ago, MtGox
what can buyers do to get their money back?
when you engage in investing online with an offshore entity, the chances that we can do anything to get your money back are very low
for the underlying spot markets, we don't have the authority to enforce safeguards and protections; this is a problem
"It's the old axiom "buyer beware"."
(in regards to the stock market) "Is this perhaps more than ordinary correction?"
I asked my staff and the federal government the same question
nothing to indicate any of our systems didn't indicate properly
largest volume since 2016
Neither single stock nor circuit breakers triggered
Nothing that came out of this are concerning
Is it profit taking? Is it a spook?
Interest rates? Fed has info we don't have?
Economy high, unemployment low?
Combination? Can we really say?
I can't really say. Lots of opinions.
Our job is to look at the systemic risks.
I've not seen anything.
"Markets up? More people bought than sold. Market down? More people sold than bought."
Markets are very complex. Fundamentals are sound. Doesn't appear to be any significant breeches.
Some ICOs are legitimate, some are just Ponzi schemes
"It's now so bad that Facebook recently banned all ads for virtual currencies"
How do we make ICOs safer?
Companies raised more than $4bil
How many companies registered with SEC?
Can you say just a word as to why that's so?
the gatekeepers haven't done their job. we've made it clear what the law is.
there are thousands of private placements. we want them to raise capital. but we want them to do it right.
folks somehow got comfortable that this was new and it's okay.
According to the Mtgox leaks from early 2014, our brand new 'Satoshi' Craig Wright bought 17.24 bitcoins at a rate of $1198 each.
As winlifeat posted here, Craig was user 'e62d5e53-0dbc-44be-9591-725cd55ca9dd' at the Mtgox exchange. With this identifier, it's possible to look up his trades in the 2014 leak. I posted the raw data in this pastebin, you can import it into spreadsheet software like Excel to play with it yourself. He started trading at 22/04/2013, this is just after the crash of the April 2013 bubble (or the 'Cyprus bubble'). He lost interest pretty quickly, because activity stopped 27/04, only to come back 25/11 around the peak of the last bitcoin bubble. His average price is actually $120 and he bought around 50 bitcoins, but his last buy was 17 bitcoins at around $1200. He ends up with a balance of just under 15 bitcoins when mtgox shuts down, so he probably lost another few bitcoins with trading. (The trade data in the leak stops at November 2013) Edit: You can also find his btc deposit/withdraw history in the leak http://pastebin.com/g3ME3Grc
Why the "Trustee" sold YOUR BTC/BCH now in quiet and on open Markets..?
Dear Creditors! Finita la Commedia with the trustee's claims to act in the best interests of Mt.Gox creditors. RIP. We need to URGENTLY act collectively on this revelation in a manner that will make SURE creditors interests are upheld in this bankruptcy process and justice is made. As the matters stand now we are drifting in the wrong direction.
1. Mt.Gox trustee sells 35,841 Bitcoin and 34,008 Bitcoin Cash for a total of 42,988,044,343 JPY (~405,167,934 USD).
Why now and not before distribution in couple of years?
Why has he decided that $10K/btc is a "high" price? What if in a year 1BTC worth $100k? What he will say then?
Why not sell OTC to avoid market crash?
Why not disclose beforehand?
Why dump on market and not put limit sell order?
Why is this magic number? Why not sell 100,000 BTC?
This is because the total amount of claims that have been accepted until now is 45,609,593,503 JPY with YOUR bitcoin price fixed by the trustee in 2014 at 50,058.12 JPY (~471 USD). All this because the trustee wanted to be "in compliance with Japanese Bankruptcy Laws." not taking into account the reality of deflationary crypto assets. After the current sell-of by the trustee, he has a total of 44,952,982,218 JPY in fiat assets almost enough to pay all the accepted claims of creditors by fixed price of 50,058.12 JPY (~471 USD) per BTC. 2. All Bitcoin Cash and other forks that belongs to creditors has just been unilaterally confiscated by the trustee's decision in favor of Mark Karpeles and other Gox shareholders with the following decision on page 12 par. II.3 of latest meeting report:
"It is my understanding that the cryptocurrencies split from BTC of the bankruptcy estate belong to the bankruptcy estate."
Do you see where this is drifting? 3. Moreover, the trustee in the last creditors meeting report on page 12 paragraph II.2 Says:
With the trustee now playing a role of amateur shady surprise trader on open markets, we are in a worse situation then we have thought. Just FYI, this "trader" have panic sold 18,000 (50%) of all BTC he sold at near bottom prices at around February 5 crashing the market even further. If this is not a blatant market manipulation then this is utter incompetence. See this: https://twitter.com/matt_odell/status/971432146656202752 So at the current trajectory the trustee is planning to give ~24,750 user victims of Mt.Gox fiasco ~45 billion JPY (~430 Million USD) and Mark Karpeles with other Gox shareholders the remaining 166,344 Bitcoin with 168,177 Bitcoin Cash with the remaining forks! Is this justice? Does this scenario suit US? NO! All this bogus conduct is justified by the trustee "to be in compliance" with existing outdated Japanese bankruptcy laws. Common sense, justice, moral values, honor or any other value besides what's in the outdated "Japanese bankruptcy law" does not play any role here. These people dragging feet for years while letting Mark Karpeles get away with the biggest scam in crypto history. Remember the "it's only technical" explanations while continuing to accept deposits from his own users while he perfectly well knows that his company is INSOLVENT? Now it got to the point that this masterpiece Mr. Karpeles claims that because the remaining fiat value of btc left is much higher today then the value of all the btc his company possessed in 2014 it is somehow makes Mt.Gox "solvent". Huh? Didn't he loose more than 75% of all crypto assets he held and this state remains to this day? Yes? Then his company is INSOLVENT! Period. Any other type of bogus calculation to make a thief rich and proud of himself on the misery of tenth's of thousands of users whose trust he has abused is nothing short of preposterous and should be challenged in the supreme court at the very least!
So what can be done? I propose the following: A. Prepare what ever necessary legal proposal to change the bankruptcy law in Japan to take into account the new reality of deflationary monetary assets/currencies. The Japanese bankruptcy law as it stands today is one sided, outdated and not reflecting on the reality of existence of appreciating (deflationary) assets like crypto, some stocks, real estate in a growing market. We need a specific change that when the bankruptcy deals with holding appreciating assets then the initial asset exchange rate to JPY ($483) will be used as an "assessment" price only to determine the Pro-Rata % amount of each creditors portion of the assets at the time of bankrupt entity's collapse. The "actual" exchange rate will be determined by the assets price at the time of liquidation of those assets for JPY or distribution. In this case the creditors will receive their rightfully owned percent of the assets in the time of distribution/conversion. This is the only just way to avoid a scenario when a bankrupt insolvent entity suddenly claims to become "solvent" during the process of bankruptcy proceedings because of prematurely determining the exchange rate of the assets before hand. B. Prepare what ever needed application to Japans supreme court to freeze any distribution to Mt.Gox shareholders until the necessary amendments to the bankruptcy law are passed. C. Stop the Mt.Gox trustee trader from selling more BTC in a surprise and anonymous manner. Until the final ruling by the supreme court about the belonging of the crypto assets held by the trustee either to Mt.Gox creditors or shareholders is decided. The Mt.Gox Trustee has no right to sell or trade with these assets as he sees fit. D. Prepare a lawsuit against MtGox/sharehoders for unjust enrichment/conversion and get a preemptive lien/garnishment against the distribution that might go to them. (proposed by jespow). E. We as Mt.Gox creditors are not organized in due manner to effectively enforce our interests. We need one UNIFIED representative body to act on our behalf in this bankruptcy saga. I propose we set up for all creditors a voting process through which we will be able to elect "Mt.Gox creditors representative counsel". People we absolutely trust to think and act in accordance with the best interests of the creditors. These people can be big creditors (for example, Josh Jones CEO and Founder of Bitcoin Builder), Other people that are not creditors but have proven themselves over the years to be on the side of the creditors like Jesse Powell jespow the CEO and owner of Kraken, he has done a lot over the years to help us. You can read his proposals on here: https://www.reddit.com/mtgoxinsolvency/comments/7dyr74/re_inquiries_about_mtgox_disbursements_and/ Unless we step up our organizational game it's game over. I think the best and easiest for creditors would be communicating by email: E1. We have a list of all the creditors from the list of acceptance or rejection for all claimants posted by the Mt.Gox trustee. E2. We need to get from trustee or build an email list of all the creditors to send them periodic communication like monthly news, voting proposals, status updates, password for forum, etc. All this managed by trusted party like Kraken preferably or with oversight by them with unsubscribe option. E3. We need more than 50% of the creditors to join this list preferably to claim we have the majority of creditors support in courts. Best for this process to be all inclusive not requiring any mandatory financial contributions because of the fact that many investors got themselves into debt and financial hardships by Gox fiasco. If a creditor that was not active until now, can't help financially but can commit his support by voting or pledging some financial support once the successful distribution of BTC is made then this is a big win. E4. We probably need a new forum. Best would be to allow only the original email addresses of Mt.Gox creditors to set up accounts there to avoid trolls signing up and ruining or influencing our decision making. Also new accounts could be set up for trusted people after review by the moderator and marked as such. Example: Lawyer, People the creditors hire for different jobs, etc. All of the above together with monthly or weekly updates can create a positive momentum and keep this issue afloat with a lot of new organizational ideas coming in and helping improve our overall chance as creditors to win this battle for the benefit of all of us and the crypto community! Please keep your comments and info constructive! Suggest names for possible representative council members, ping users, post ideas, let's get this brainstormed. Pinging for input: jespow -- Kraken CEO andypagonthemove --Coordinating Mtgoxlegal.com P.S. I apologize for the long post. Thank you for your time & contribution!
As far as I can tell this guy is genuine. Here are some quotes: Came on board Jan 2018. But I really think that was just the beginning. Long way up still to go 🌝 Early 2018: I’m very happy to have the chance to invest in bitcoin at a very early stage of its adoption. Tom Lee thinks there will be a significant rally next week. I’d rather not miss out on it. I’ll message you from my yacht in 4-5 years to prove I’m right. The more I educate myself on Bitcoin and its history, the stronger my conviction that it will substantially continue to increase in value over time. Just got to find the right coin: I missed out on the whole crypto scene last year unfortunately. Is there an altcoin out there that is low price with ethereum potential that I could buy now? On John Mcaffee: Watch YouTube videos of interviews of him with the mainstream media. He presents himself quite formally (when necessary) and makes a great case for crypto. Very different from his alleged private persona. I was very impressed anyway. and: I understand he was paid, but many celebrities do paid advertising. This doesn’t mean he doesn’t believe in the products (coins). He claims he rejected 9/10 of submissions. I’ve been watching some interviews with mcafee and he talks about these coins sometimes with great enthusiasm. Unless he is a really good liar then he seems to really like the coins. On his user name being The Physicist: Amateur only, unfortunately. However, if bitcoin moons that may change. Or at least I’ll have more time. That’s my dream anyway. On alternative opinions: I’d like to make a suggestion. Please consider assigning a “known troll” badge (if possible) to known trolls who consistently just post FUD all the time. They come out of the woodwork whenever bitcoin price comes down and it would be helpful for newbs to know who they are so they can make an informed decision on whether to listen to them. Never sell: Exactly it puts the power back in the hands of the people. All of us should be getting behind this. Selling our bitcoin is like stabbing each other in the back. We are only hurting ourselves by helping to delay the adoption of the tech. The greater the price volatility due to panic selling the longer it will take for the common man to accept the change. On MTGOX dumps somehow being a good thing for Bitcoin:I am a big fan of this viewpoint Optimism: Yeah the one day chart is very bullish
Is there a way to determine how much Bitcoin was worth at a certain point in time?
For example: Is there a way for me to determine how much Bitcoin was worth on September 4th, 2012, 4:00 PM GMT? Random example, nothing significant about the date... but I was just wondering if its even possible to determine this kind of thing. I have been around Bitcoin for about a year and a half now, but I have never thought about whether this possible to achieve until now.
Hi Bitcoiners! I’m back with the sixteenth monthly Bitcoin news recap. It's easy for news and developments to get drowned out by price talk, so each day I pick out the most popularelevant/interesting stories in Bitcoin and save them. At the end of the month I release them in one batch, to give you a quick (but not necessarily the best) overview of what happened in Bitcoin over the past month. Lots of gems this time around! You can see recaps of the previous months on Bitcoinsnippets.com A recap of Bitcoin in April 2018
Bank of China reviewed the history of cryptocurrencies and figured out the main value of Bitcoin
Bank of China published informational materials on its website in which it reviewed in detail the principles of Bitcoin functioning and the reasons for its value. This publication is a further report on the history of Bitcoin since the 2008 White Paper was released. The following refers to the creation of the Genesis block in 2009, the purchase of two pizzas for 10,000 BTCs in 2010 and other important industry events that have shaped the formation of new types of digital assets in some way. The story ends with the announcement of Libra. In addition, these materials indicate some of the factors that have a positive impact on bitcoin prices, with particular emphasis on their limited circulation, increased mining complexity, use as a medium of exchange and prevention of inflation. The authors of the publication also identified the negative aspects of the first cryptocurrency, including speculative risks and other aspects related to security. For example, such as the crash of the MtGox exchange and various episodes of stealing cryptoactive assets. Bank of China infographics claims that bitcoin is used mainly for international payments. This is due to the low transaction costs, when compared with traditional payment systems, and fast transfers. “Yesterday, Bank of China did what I never expect. He published an article about Bitcoin that explained the reasons why Bitcoin grew and the principles of work, ”said Samson Mow, director of security for Blockstream. In September last year, it became known that Bank of China took part in testing the payment system on the blockchain, which is being developed by the Central Bank of the country. # News # China # Bitcoin # Banks #Cryptocurrency #Positive #Blockchain https://preview.redd.it/lsq2cju5x7d31.jpg?width=900&format=pjpg&auto=webp&s=5e474c9739af86d2f2ef2b8bfffeaa749c6ee149
Please provide an option to download a CSV file with the complete order history, for tax reporting purposes!
Please provide an option to download a CSV file with the complete order history, for tax purposes. Reporting crypto Tx's is necessary to be tax-compliant in the US, Europe and many other countries. Most large exchanges have such a feature, or they have an API that Tax-reporting apps can use. The CSV file should be in a format that can be recognized by Crypto tax apps, e.g. http://bitcoin.tax , https://cointracking.info or https://taxtoken.io . For example, bitcoin.tax format is: The files must either contains the following fields or have these names in the header row:
Date (date and time as YYYY-MM-DD HH:mm:ss Z)
Source (optional, such as an exchange name like MtGox or gift, donation, etc)
Action (BUY, SELL or FEE)
Symbol (BTC, LTC, DASH, etc)
Volume (number of coins traded - ignore if Action = FEE)
Currency (specify currency such as USD, GBP, EUR or coins, BTC or LTC)
Price (price per coin in Currency or blank for lookup - ignore if Action = FEE)
Fee (any additional costs of the trade)
FeeCurrency (currency of fee if different than Currency)
For example: Date,Action,Source,Symbol,Volume,Price,Currency,Fee 2014-01-01 13:00:00 -0800,BUY,Online,BTC,1,500,USD,5.50
Bitcoin explained in plain English (so that you can explain this voodoo magic money to your mom)
Bitcoin explained in plain English Like Paypal and Visa, Bitcoin is a system that can send money digitally. The innovation that sets Bitcoin apart is that it isn’t controlled or operated by a single company. Instead of having a company like Visa run the system, anybody can join the Bitcoin network and participate in the record keeping that keeps Bitcoin running. Nobody owns the Bitcoin software or the Bitcoin network. If an oppressive government wants to shut down Bitcoin, it can’t simply go after a single company. An oppressive government would (in theory) have to go after everybody running Bitcoin server software on their computer to shut it down. In practice, the decentralization doesn’t actually work. Most people buy Bitcoins through exchanges run by private companies, which are subject to government-imposed laws and regulations. While Bitcoin’s innovation is interesting, it doesn’t actually do anything useful in the real world. However, very few people actually understand Bitcoin. So, journalists and cryptocurrency fanatics can make up fancy stories about how Bitcoin or other cryptocurrencies will change the world. What Bitcoin is Bitcoin was originally designed to be a “Peer-to-Peer Electronic Cash System“. Think of other peer-to-peer systems like Napster or BitTorrent, except that users can exchange Bitcoins instead of files. Instead of having a single set of records controlled by one company, the set of records is copied to all the volunteer record keepers in the Bitcoin network. There can be hundreds or thousands of copies of the Bitcoin ledger distributed around the world. Changes to the ledger (from people sending Bitcoin to one another) are distributed throughout the network and each participant duplicates the record-keeping process on their copy of the ledger. This is the “distributed ledger” that everybody keeps talking about. All of this means that the Bitcoin network can run by itself. Anybody can join the network and help keep it running. Bitcoin in the real world Unfortunately the key benefit to Bitcoin (the “decentralization” everybody keeps talking about) doesn’t actually pan out in the real world. Most people get Bitcoins by buying them via a centralized exchange, which are all private companies that can be shut down or bullied by the government. As all developed countries have laws against money laundering, banks will enforce these laws and will refuse to do business with exchanges that may be enabling questionable activities like online gambling with Bitcoins. Cryptocurrencies are effectively regulated by governments around the world. The only practical alternative to exchanges is to trade Bitcoins in person. However, this defeats the main benefit of digital money as face-to-face transactions are inconvenient. It’s unlikely that a system that involves trading paper money for Bitcoins will revolutionize the world. Currently, the trend is that banks and credit card companies have been cutting off access to Bitcoin and other cryptocurrencies. Banks have to comply with anti-money laundering regulations so that they don’t intentionally or unintentionally help criminals profit from illegal activities. A key part of fighting money laundering is knowing who your customers actually are. Criminals are less likely to use a bank as part of their illegal activities (e.g. to trade stolen Bitcoins for cash) if the bank knows their true identity. However, Bitcoin was designed to be anonymous as stated by its inventor’s white paper. (Bitcoin doesn’t fully succeed in allowing for anonymous payments. However, the anonymity that it does offer is enough to be problematic.) Bitcoin’s design makes it difficult for banks to obey the law if they are to allow access to Bitcoin exchanges. This is one of the many reasons why Bitcoin is unlikely to become a mainstream payment method for goods and services. You can safely ignore the hype If somebody tries to explain Bitcoin to you and you don’t understand it, the problem isn’t you. The person explaining Bitcoin likely has some misguided understanding of Bitcoin because there are certain things that they want to believe. Some people want to look smart by being early believers in new technology that they don’t understand. Some journalists want to write clickbait stories. Some people want to believe in get-rich-quick schemes. Some people are getting rich quick through cryptocurrency-related scams. Whatever the case is, I wouldn’t worry about it. You aren’t missing out on a revolutionary new technology. Bitcoin’s only innovation is interesting but useless in the real world. Appendix A: What Bitcoin mining is (and why everybody is saying it’s bad for the environment) The problem with a set of records delivered over the Internet is that you don’t know if some stranger on the Internet has nefariously tampered with the version that they sent you. It is possible for somebody to cheat the system by spending Bitcoins and then distributing a copy of the ledger that leaves out their spending, allowing them to spend their Bitcoins again. Other users somehow have to figure out which version of history is correct. To prevent shenanigans, each node on the Bitcoin network will determine trust based on “proof of work“. Trust will go to the side that has spent/wasted the most computing power to back up their version of events. The theory is that the honest users will always control more computing power than dishonest users. To perform proof of work, Bitcoin “miners” do a set of very difficult mathematical calculations to try to find results with a certain number of zeroes in it. It’s basically computers competing over their ability to produce special numbers with a really long series of zeroes. Record keepers in the Bitcoin network (“nodes”) will trust the side that has wasted the most computing power. Because the math needed to find the special numbers is much harder than the math needed to verify the numbers (sort of like how Sudoku puzzles are harder to solve than to check), participants can easily verify which side wasted the most computing power. This is the key idea behind “blockchain“, the technology that tries to solve the problem of not being able to trust what strangers send you over the Internet. Honest record keepers will continue to add valid pages (blocks) to the Bitcoin journal. If the honest side controls more computing power, they will produce a longer chain of valid pages (blocks) than dishonest record keepers. Eventually, the honest record keepers’ version of events will be considered the authoritative one. This system works as long as honest users throw more computing power at the problem than dishonest users. A dishonest user cannot pass off a bogus version of events (such as one that omits their spending) unless that user has more computing power than all of the honest users combined. To make attacks from dishonest users very difficult, the Bitcoin system provides incentives to its users to maintain a large standing army of computers that are ready to waste more computing power than people trying to cheat the system. Bitcoins are given out to users who devote computing power towards the Bitcoin cause. This is called Bitcoin “mining”, as the miners exert effort and are rewarded with digital “gold”. The creation of new Bitcoins is part of Bitcoin’s design. If Bitcoin’s price averages $10,000, Bitcoin miners will receive $6.57 billion dollars worth of newly-printed Bitcoins in 2018 (1800 Bitcoins will be created every day in 2018). Bitcoin miners will also receive transaction fees from people who pay extra to have their transactions added to the ledger first (their transactions will be confirmed first). This might sound crazy but Bitcoin mining is on track to being a multi-billion dollar industry. Various companies will fight over their share of newly-printed Bitcoins. Competition will cause them to use a lot of electricity since electricity is the main ingredient needed to mine Bitcoins. Digiconomist has a webpage that estimates Bitcoin’s power consumption, which is currently about 1.3% of the United State’s energy consumption- that’s the same as millions of Americans. Bitcoin mining will consume as much energy as entire countries like Bangladesh. While Bitcoin mining is one way to get Bitcoins, it is very expensive for most people compared to buying Bitcoins on an exchange. This is because Bitcoin mining benefits from scale. Big companies such as Bitmain will spend millions of dollars on designing computers that do one thing and one thing only: mine Bitcoins. Think of a calculator: it is a computer that does only one thing. Because it is designed for only one task, it does it very well. A calculator is incredibly energy efficient and cheap compared to your smartphone or laptop computer. Similarly, a computer that is designed specifically for mining Bitcoins does it more cost-effectively than everyday computers. Without millions of dollars spent designing special computers, access to very cheap electricity, and large data centers, normal citizens can’t compete against Bitcoin mining juggernauts. These companies drive up the cost of mining Bitcoins (Bitcoin is designed so that fewer Bitcoins are produced if more computing power is spent on mining), pushing out the small fish. You will likely lose money if you try to mine Bitcoin on your home computer. Appendix B: Buzzwords and technobabble explained ICO: Initial coin offering, or “it’s a con offering”. Generally speaking, these are investment scams where investors exchange real money for fake money (or a stake in a fake business or Ponzi scheme). Immutable: can’t be changed. In theory, Bitcoin is designed so that the ledger can’t be changed. In the past, the ledger has been changed by the Bitcoin community banding together to fix bugs. One such bug allowed a hacker to give him or herself 184 billion Bitcoins. Trustless: This refers to a trust problem that only decentralized systems have; centralized systems don’t have this problem. For Bitcoin specifically, the problem is this: some stranger on the Internet sent me a journal of all Bitcoin transactions and I don’t know if I should trust it. Bitcoin’s key innovative technology, the blockchain, attempts to solve that problem so that decentralization can work. Blockchain: a journal of all (Bitcoin) transactions since the very beginning. Transactions are grouped together into chunks called blocks, which form the ‘pages’ of the journal. Miners solve difficult math puzzles so that they can attach special numbers to each block, proving that they spent a lot of computing power. A series (or chain) of blocks with the most computing power spent on ‘proving’ that chain will become the authoritative blockchain. This system works as long as the honest users waste more computer power and electricity than dishonest users. Decentralization: a system that works without a trusted central authority. Double spending: Cheating the system to spend the same Bitcoin two or more times, ultimately resulting in spending Bitcoins that you don’t have. Secure: An adjective that describes systems other than Bitcoin. For starters, Bitcoin was hacked to create 184 billion Bitcoins. When the Mt. Gox exchange was hacked, at least 5% of all Bitcoins at the time (at least 650,000) were stolen. Many people also lose Bitcoins due to their computer being hacked, being tricked into giving away their passwords or identity, or from malicious browser add-ons. Bitcoin also has outstanding security issues that haven’t been fixed. If a single party controls 51% of the world’s Bitcoin mining power, that mining power can be used to disrupt the Bitcoin network. Currently, more than 51% of the world’s mining power is controlled by Chinese companies.
Hi Bitcoiners! I’m back with the seventh monthly Bitcoin news recap. Last month's post got very little love, and I don't expect much more success with everyone focussing on August 1st, but here it is nonetheless. In my eyes definitely one of the most eventful months in Bitcoin's history, absolutely unreal how much happened:
SegWit activation imminent
Epic analysis of spam attacks & a 10M-user LN network
2013 price buble & Mt. Gox hack reveals
BTC-e went down
Bitcoin sign guy
Steepest rises and crashes USD-wise
To name a few. For those unfamiliar with the monthly recap, each day I pick out the most popularelevant/interesting stories in bitcoin and save them. At the end of the month I release them in one batch, to give you a quick (but not necessarily the best) overview of what happened in bitcoin over the past month. You can see recaps of the previous months on Bitcoinsnippets.com If you're on mobile and can't see the links below, check the web version. A recap of Bitcoin in July 2017
The New Crypto Order & Escaping Financial Repression
The Vigilante’s View It is our first issue in months that bitcoin hasn’t hit an all-time high! And it’s the last issue of the year. And what a year for cryptos it was. To put it in perspective, bitcoin could fall 90% from current levels and it will still have outperformed stocks, bonds and real estate in 2017. Bitcoin started 2017 at $960.79. At the time of this writing it is near $13,000 for a gain of 1,250% in 2017. And, bitcoin was actually one of the worst performing cryptocurrencies in our TDV portfolio in 2017! Ethereum (ETH) started 2017 at $8. It has since hit over $800 for a nice 10,000% gain in 2017. That’s pretty good, but not as good as Dash which started the year at $11.19 and recently hit $1,600 for a nearly 15,000% gain. I hope many of you have participated in these amazing gains! If not, or you are new, don’t worry there will be plenty more opportunities in the years ahead. It won’t all be just home runs though… in fact, some of the cryptos that have performed so well to date may go down dramatically or collapse completely in the coming years. I’ll point out further below why Lightning Network is not the answer to Bitcoin Core’s slow speeds and high costs. And, I’ll look ahead to 2018 and how we could already be looking beyond blockchains. Yes, things are moving so fast that blockchain just became known to your average person this year… and could be nearly extinct by next year. That’s why it is important to stick with us here at TDV to navigate these choppy free market waters! New Years Reflection On The Evolution Of Consensus Protocols Sooner or later crypto will humble you by its greatness. Its vastness is accompanied by a madness that is breathtaking, because you quickly realize that there is no stopping crypto from taking over the world. The moment you think you have everything figured out, is the moment the market will surprise you. We are for the first time living and witnessing the birth of the first worldwide free market. Throughout this rampage of innovation, we all are implicitly aiming for the best means of harnessing consensus. As we leave this bountiful 2017 and aim at 2018, it is important for us to meditate and appreciate the progress we have made in transforming the world through the decentralization of consensus. It is also important to reflect on the changes in consensus building we have partaken in and those yet to come. Consensus is the agreement that states “this is what has occurred, and this is what hasn’t happened.” Throughout the vastness of history, we humans have only really had access to centralized means for consensus building. In the centralized world, consensus has been determined by banks, states, and all kinds of central planners. As our readers know, any centralized party can misuse their power, and their consensus ruling can become unfair. In spite of this, many individuals still praise the effectiveness of consensus building of centralized systems. People from antiquity have had no other option but to trust these central planners. These systems of control have created still-water markets where only a few are allowed to compete. This lack of competition resulted in what we now can objectively view as slow innovation. For many, centralized consensus building is preferred under the pretense of security and comfort. Unfortunately, these same individuals are in for a whole lot of discomfort now that the world is innovating on top of the first decentralized consensus building technology, the blockchain. Everything that has occurred since the inception of bitcoin has shocked central planners because for the first time in history they are lost; they no longer hold power. We now vote with our money. We choose what we find best as different technologies compete for our money. What we are witnessing when we see the volatility in crypto is nothing more than natural human motion through price. The innovation and volatility of the crypto market may seem unorthodox to some, because it is. For the first time in history we are in a true free market. The true free market connects you to everybody and for this reason alone the market shouldn’t surprise us for feeling “crazy.” Volatility is a sign of your connection to a market that is alive. Radical innovation is a sign of a market that is in its infancy still discovering itself. In juxtaposing centralized consensus building with decentralized consensus building, I cannot keep myself from remembering some wise biblical words; “ And no one pours new wine into old wineskins. Otherwise, the new wine will burst the skins; the wine will run out and the wineskins will be ruined.” – Luke 5:37 The centralized legacy financial system is akin to old wineskins bursting to shreds by the new wine of crypto. Decentralized consensus building has no need for central planners. For example, think about how ludicrous it would be for someone to ask government for regulation after not liking something about crypto. Sorry, there is no central planner to protect you; even the mathematical protocols built for us to trust are now competing against one another for our money. These new mathematical protocols will keep competing against one another as they provide us with new options in decentralizing consensus. As we look unto 2018, it is important that we as investors begin to critically engage and analyze “blockchain-free cryptocurrencies.” HASHGRAPHS, TANGLES AND DAGS Blockchain-free cryptocurrencies are technologies composed of distributed databases that use different tools to achieve the same objectives as blockchains. The top contenders in the realm of blockchain-free cryptos are DAGs (Directed Acyclic Graphs) such as Swirlds’ Hashgraph, ByteBall’s DAG, and IOTA’s Tangle. These blockchain-free cryptos are also categorized as belonging to the 3 rd generation of cryptocurrencies. These technologies promise to be faster, cheaper, and more efficient than blockchain cryptocurrencies. Blockchains were the first means of creating decentralized consensus throughout the world. In the blockchain, the majority of 51% determine the consensus. The limits of blockchains stem from their inherent nature, whereupon every single node/participant needs to know all of the information that has occurred throughout the whole blockchain economy of a given coin. This opens up blockchains to issues akin to the ones we have been exposed to in regards to Bitcoin’s scaling. It is important to make a clear distinction in the language used between blockchains and blockchain-freecryptocurrencies. When we speak about blockchains it is more proper to speak about its transactionconsensus as “decentralized”, whereas with blockchain-free cryptocurrencies it is best if we refer to transaction consensus as “distributed.” Swirlds’ Hashgraph incorporates a radical and different approach to distributing consensus. Swirlds claims that their new approach will solve scaling and security issues found on blockchains. They use a protocol called “Gossip about Gossip.” Gossip refers to how computers communicate with one another in sending information. In comparison to the Blockchain, imagine that instead of all of the nodes receiving all of the transactions categorized in the past ten minutes, that only a few nodes shared their transaction history with other nodes near them. The Hashgraph team explains this as “calling any random node and telling that node everything you know that it does not know.” That is, in Hashgraph we would be gossiping about the information we are gossiping; i.e., sending to others throughout the network for consensus. Using this gossiped information builds the Hashgraph. Consensus is created by means of depending on the gossips/rumors that come to you and you pass along to other nodes. Hashgraph also has periodic rounds which review the circulating gossips/rumors. Hashgraph is capable of 250,000+ Transactions Per Second (TPS), compared to Bitcoin currently only allowing for 7 TPS. It is also 50,000 times faster than Bitcoin. There is no mention of a coin on their white paper. At this moment there is no Hashgraph ICO, beware of scams claiming that there is. There is however a growing interest in the project along with a surge of app development. IOTAs DAG is known as the Tangle. Contrary to Hashgraph, IOTA does have its own coin known as MIOTA, currently trading around the $3 mark. There are only 2,779,530,283 MIOTA in existence. The Tangle was also created to help alleviate the pains experienced with Blockchain scaling. IOTAs Tangle creates consensus on a regional level; basically neighbors looking at what other neighbors are doing. As the tangle of neighbors grows with more participants the security of the system increases, along with the speed of confirmation times. IOTA has currently been criticized for its still lengthy confirmation times and its current levels of centralization via their Coordinators. This centralization is due to the fact that at this moment in time the main team works as watchtower to oversee how Tangle network grows so that it does not suffer from attacks. Consensus is reached within IOTA by means of having each node confirm two transactions before that same node is able to send a given transaction. This leads to the mantra of “the more people use IOTA, the more transactions get referenced and confirmed.” This creates an environment where transactional scaling has no limits. IOTA has no transaction fees and upon reaching high adoption the transactions ought to be very fast. Another promising aspect about IOTA is that it has an integrated quantum-resistant algorithm, the Winternitz One-Time Signature Scheme, that would protect IOTA against an attack of future quantum computers. This without a doubt provides IOTA with much better protection against an adversary with a quantum computer when compared to Bitcoin. ByteBall is IOTA’s most direct competitor. They both possess the same transaction speed of 100+ TPS, they both have their own respective cryptocurrencies, and they both have transparent transactions. ByteBall’s token is the ByteBall Bytes (GBYTE), with a supply of 1,000,000; currently trading at around $700. ByteBall aims to service the market with tamper proof storage for all types of data. ByteBall’s DAG also provides an escrow like system called “conditional payments;” which allows for conditional clauses before settling transactions. Like IOTA, ByteBall is also designed to scale its transaction size to meet the needs of a global demand. ByteBall provides access to integrated bots for transactions which includes the capacity for prediction markets, P2P betting, P2P payments in chat, and P2P insurance. ByteBall’s initial coin distribution is still being awarded to BTC and Bytes holders according to the proportional amounts of BTC or Bytes that are held per wallet. IOTA, ByteBall and Hashgraph are technologies that provide us with more than enough reasons to be hopeful for 2018. In terms of the crypto market, you don’t learn it once. You have to relearn it every day because its development is so infant. If you are new to crypto and feel lost at all know that you are not alone. These technologies are constantly evolving with new competitive options in the market. As the technologies grow the ease for adoption is set to grow alongside innovation. We are all new to this world and we are all as much in shock of its ingenuity as the next newbie. Crypto is mesmerizing not just for its volatility which is a clear indication of how connected we are now to one another, but also because of the social revolution that it represents. We are experiencing the multidirectional growth of humanity via the free market. Meanwhile Bitcoin Is Turning Into Shitcoin It is with a great degree of sadness that I see bitcoin is on the cusp of destroying itself. Bitcoin Core, anyway. Bitcoin Cash may be the winner from all of this once all is said and done. Whether by design or by accident, bitcoin has become slow and expensive. Many people point out that IF the market were to upgrade to Segwit that all would be fine. I’ll explain further below why many market participants have no incentive to upgrade to Segwit… meaning that the implementation of Segwit has been a massively risky guess that so far has not worked. Others say that the Lightning Network (LN) will save bitcoin. I’ll point out below why that will not happen. Lightning Networks And The Future Of Bitcoin Core If you’ve been following bitcoin for any length of time, you’re probably aware of the significant dispute over how to scale the network. The basic problem is that although bitcoin could be used at one time to buy, say, a cup of coffee, the number of transactions being recorded on the network bid up the price per transaction so much that actually sending BTC cost more than the cup of coffee itself. Indeed, analysis showed that there were many Bitcoin addresses that had such small BTC holdings that the address itself couldn’t be used to transfer it to a different address. These are referred to as “unspendable addresses.” In the ensuing debate, the “big blockers” wanted to increase the size of each block in the chain in order to allow for greater transaction capacity. The “small blockers” wanted to reduce the size of each transaction using a technique called Segregated Witness (SegWit) and keep the blocks in the chain limited to 1MB. SegWit reduces the amount of data in each transaction by around 40-50%, resulting in an increased capacity from 7 transactions per second to perhaps 15. The software engineers who currently control the Bitcoin Core code repository have stated that what Bitcoin needs is “off-chain transactions.” To do this, they have created something called Lightning Networks (LN), based on an software invention called the “two-way peg.” Put simply, the two-way peg involves creating an escrow address in Bitcoin where each party puts some bitcoin into the account, and then outside the blockchain, they exchange hypothetical Bitcoin transactions that either of them can publish on Bitcoin’s blockchain in order to pull their current agreed-upon balance out of the escrow address. Most layman explanations of how this works describe the protocol as each party putting in an equal amount of Bitcoin into the escrow. If you and I want to start transacting off-chain, so we can have a fast, cheap payment system, we each put some Bitcoin in a multi-party address. I put in 1 BTC and you put in 1 BTC, and then we can exchange what are essentially cryptographic contracts that either of us can reveal on the bitcoin blockchain in order to exit our agreement and get our bitcoin funds. Fortunately, it turns out that the video’s examples don’t tell the whole story. It’s possible for the escrow account to be asymmetric. See:. That is, one party can put in 1 BTC, while the other party puts in, say, 0.0001 BTC. (Core developer and forthcoming Anarchapulco speaker Jimmy Song tells us that there are game theoretic reasons why you don’t want the counterparty to have ZERO stake.) Great! It makes sense for Starbucks to participate with their customers in Lightning Networks because when their customers open an LN channel (basically a gift card) with them for $100, they only have to put in $1 worth of Bitcoin. Each time the customer transacts on the Lightning Network, Starbucks gets an updated hypothetical transaction that they can use to cash out that gift card and collect their bitcoin. The elephant in the room is: transaction fees. In order to establish the escrow address and thereby open the LN channel, each party has to send some amount of bitcoin to the address. And in order to cash out and get the bitcoin settlement, one party also has to initiate a transaction on the bitcoin blockchain. And to even add funds to the channel, one party has to pay a transaction fee. Right now fees on the bitcoin blockchain vary widely and are extremely volatile. For a 1-hour confirmation transaction, the recommended fee from one wallet might be $12 US, while on another it’s $21 US. For a priority transaction of 10-20 minutes, it can range from $22-30 US. Transactions fees are based on the number of bytes in the transaction, so if both parties support SegWit (remember that?) then the fee comes down by 40-50%. So it’s between $6 and $10 US for a one hour transaction and between $11-15 for a 15 minute transaction. (SegWit transactions are prioritized by the network to some degree, so actual times may be faster) But no matter what, both the customer and the merchant have to spend $6 each to establish that they will have a relationship and either of them has to spend $6 in order to settle out and get their bitcoin. Further, if the customer wants to “top off” their virtual gift card, that transaction costs another $6. And because it adds an address to the merchant’s eventual settlement, their cost to get their Bitcoin goes up every time that happens, so now it might cost them $9 to get their bitcoin. Since these LN channels are essentially digital gift cards, I looked up what the cost is to retailers to sell acustomer a gift card. The merchant processor Square offers such gift cards on their retailer site. Their best price is $0.90 per card. So the best case is that Lightning Networks are 600% more expensive than physical gift cards to distribute, since the merchant has to put a transaction into the escrow address. Further, the customer is effectively buying the gift card for an additional $6, instead of just putting up the dollar amount that goes on the card. But it gets worse. If you get a gift card from Square, they process the payments on the card and periodically deposit cash into your bank account for a percentage fee. If you use the Lightning Network, you can only access your Bitcoin by cancelling the agreement with the customer. In other words, you have to invalidate their current gift card and force them to spend $6 on a new one! And it costs you $6 to collect your funds and another $6 to sell the new gift card! I’m sure many of you have worked in retail. And you can understand how this would be financially infeasible. The cost of acquiring a new customer, and the amount of value that customer would have to stake just to do business with that one merchant, would be enormous to make any financial sense. From time immemorial, when transaction costs rise, we see the creation of middlemen. Merchants who can’t afford to establish direct channels with their customers will have to turn to middlemen, who will open LN channels for them. Instead of directly backing and cashing out their digital gift cards, they will establish relationships with entities that consolidate transactions, much like Square or Visa would do today. Starbucks corporate or individual locations might spend a few USD on opening a payment channel with the middleman, and then once a month spend 6 USD to cash out their revenues in order to cover accounts payable. In the meantime, the middleman also has to offer the ability to open LN channels for consumers. This still happens at a fixed initial cost, much like the annual fee for a credit card in the US. They would continue to require minimum balances, and would offer access to a network of merchants, exactly like Visa and MasterCard today. This process requires a tremendous amount of capital because although the middleman does not have to stake Bitcoin in the consumer’s escrow account, he does have to stake it in the merchant’s account. In other words, if the Lightning Network middleman wants to do business with Starbucks to the tune of $100,000/month, he needs $100,000 of bitcoin to lock into an escrow address. And that has to happen for every merchant. Because every month (or so) the merchants have to cash out of their bitcoin to fiat in order to pay for their cost of goods and make payroll. Even if their vendors and employees are paid in bitcoin and they have LN channels open with them, someone somewhere will want to convert to fiat, and trigger a closing channel creating a cascading settlement effect that eventually arrives at the middleman. Oh, and it triggers lots of bitcoin transactions that cost lots of fees. Did I mention that each step in the channel is expecting a percentage of the value of the channel when it’s settled? This will come up again later. Again, if you’ve worked in the retail business, you should be able to see how infeasible this would be. You have to buy inventory and you have to sell it to customers and every part that makes the transaction more expensive is eating away at your margins. Further, if you’re the middleman and Starbucks closes out a channel with a $100,000 stake where they take $95,000 of the bitcoin, how do you re-open the channel? You need another $95,000 in capital. You have revenue, of course, from the consumer side of your business. Maybe you have 950 consumers that just finished off their $100 digital gift cards. So now you can cash them out to bitcoin for just $5700 in transaction fees, and lose 5.7% on the deal. In order to make money in that kind of scenario, you have to charge LN transaction fees. And because your loss is 5.7%, you need to charge in the range of 9% to settle Lightning Network transactions. Also, you just closed out 950 customers who now have to spend $5700 to become your customer again while you have to spend $5700 to re-acquire them as customers. So maybe you need to charge more like 12%. If you approached Starbucks and said “you can accept Bitcoin for your customers and we just need 12% of the transaction,” what are the odds that they would say yes? Even Visa only has the balls to suggest 3%, and they have thousands and thousands of times as many consumers as bitcoin. The entire mission of bitcoin was to be faster, cheaper and better than banks, while eliminating centralized control of the currency. If the currency part of Bitcoin is driven by “off-chain transactions” while bitcoin itself remains expensive and slow, then these off-chain transactions will become the territory of centralized parties who have access to enormous amounts of capital and can charge customers exorbitant rates. We know them today as banks. Even for banks, we have to consider what it means to tie up $100,000/month for a merchant account. That only makes sense if the exchange rate of bitcoin grows faster than the cost of retaining Bitcoin inventory. It costs nothing to store Bitcoin, but it costs a lot to acquire it. At the very least the $6 per transaction to buy it, plus the shift in its value against fiat that’s based on interest rates. As a result, it only makes sense to become a Lightning Network middleman if your store of value (bitcoin) appreciates at greater than the cost of acquiring it (interest rate of fiat.) And while interest rates are very low, that’s not a high bar to set. But to beat it, Bitcoin’s exchange rate to fiat has to outpace the best rate available to the middleman by a factor exceeding the opportunity cost of other uses of that capital. Whatever that rate is, for bitcoin, the only reason the exchange rate changes is new entry of capital into the “price” of bitcoin. For that to work, bitcoin’s “price” must continue to rise faster than the cost of capital for holding it. So far this has happened, but it’s a market gamble for it to continue. Since it happens because of new capital entering into the bitcoin network and thus increasing the market cap, this results in Bitcoin Core becoming the very thing that its detractors accuse it of: a Ponzi scheme. The cost of transacting in Bitcoin becomes derived from the cost of holding bitcoin and becomes derived from the cost of entering bitcoin. Every middleman has to place a bet on the direction of bitcoin in a given period. And in theory, if they think the trend is against Bitcoin, then they’ll cash out and shut down all the payment channels that they transact. If they bought bitcoin at $15,000, and they see it dropping to $13,000 — they’ll probably cash out their merchant channels and limit their risk of a further drop. The consumer side doesn’t matter so much because their exposure is only 1%, but the merchant side is where they had to stake everything. If you’re wondering why this information is not widely known, it’s because most bitcoin proponents don’t transact in bitcoin on a regular basis. They may be HODLing, but they aren’t doing business in bitcoin. Through Anarchapulco, TDV does frequent and substantial business in bitcoin, and we’ve paid fees over $150 in order to consolidate ticket sale transactions into single addresses that can be redeemed for fiat to purchase stage equipment for the conference. For Bitcoin to be successful at a merchant level via Lightning Networks, we will have to see blockchain transactions become dramatically cheaper. If they return to the sub-$1 range, we might have a chance with centralized middlemen, but only with a massive stabilization of volatility. If they return to $0.10, we might have a chance with direct channels. Otherwise, Lightning Networks can’t save bitcoin as a means of everyday transaction. And since that takes away its utility, it might very well take away the basis of its value and bitcoin could find itself truly being a tulip bubble. One final note: there are a some parties for whom all these transactions are dramatically cheaper. That is the cryptocurrency exchanges. Because they are the entry and exit points for bitcoin-to-fiat, they can eliminate a layer of transaction costs and thus offer much more competitive rates — as long as you keep your bitcoin in their vaults instead of securing it yourselves. Sending it out of their control lessens their competitive advantage against other means of storage. It comes as no surprise, then, that they are the least advanced in implementing the SegWit technology that would improve transaction costs and speed. If you buy bitcoin on Poloniex, it works better for them if it’s expensive for you to move that coin to your Trezor. In fact, an exchange offering Lightning Network channels to merchants could potentially do the following… 1) Stake bitcoins in channels with merchants. These coins may or may not be funds that are held by their customers. There is no way to know. 2) Offer customers “debit card” accounts for those merchants that are backed by the Lightning network 3) Establish middle addresses for the customer accounts and the merchant addresses on the Lightning Network. 4) Choose to ignore double-spends between the customer accounts and the merchant addresses, because they don’t actually have to stake the customer side. They can just pretend to since they control the customer’s keys. 5) Inflate their bitcoin holdings up to the stake from the merchants, since the customers will almost never cash out in practice. In other words, Lightning Networks allow exchanges a clear path to repeating Mtgox; lie to the consumer about their balance while keeping things clean with the merchant. In other words, establish a fractional reserve approach to bitcoin. So, to summarize, Bitcoin Core decided increasing the blocksize from 1mb to 2-8mb was “too risky” and decided to create Segwit instead which the market has not adopted. When asked when bitcoin will be faster and less expensive to transfer most Bitcoin Core adherents say the Lightning Network will fix the problems. But, as I’ve just shown, the LN makes no sense for merchants to use and will likely result in banks taking over LN nodes and making BTC similar to Visa and Mastercard but more expensive. And, will likely result in exchanges becoming like banks of today and having fractional reserve systems which makes bitcoin not much better than the banking system of today. Or, people can switch to Bitcoin Cash, which just increased the blocksize and has much faster transaction times at a fraction of the cost. I’ve begun to sell some of my bitcoin holdings because of what is going on. I’ve increased my Bitcoin Cash holdings and also increased my holdings of Dash, Monero, Litecoin and our latest recommendation, Zcash. Other News & Crypto Tidbits When bitcoin surpassed $17,600 in December it surpassed the total value of the IMF’s Special Drawing Rights (SDR) currency. Meanwhile, Alexei Kireyev of the IMF put out his working paper, “ The Macroeconomics of De-Cashing ,” where he advises abolishing cash without having the public aware of the process. Countries such as Russia are considering creating a cryptocurrency backed by oil to get around the US dollar and the US dollar banking system. Venezuela is as well although we highly doubt it will be structured properly or function well given the communist government’s track record of destroying two fiat currencies in the last decade. To say that the US dollar is being attacked on every level is not an understatement. Cryptocurrencies threaten the entire monetary and financial system while oil producing countries look to move away from the US dollar to their own oil backed cryptocurrency. And all this as bitcoin surpassed the value of the IMF’s SDR in December and in 2017 the US dollar had its largest drop versus other currencies since 2003. And cryptocurrency exchanges have begun to surpass even the NASDAQ and NYSE in terms of revenue. Bittrex, as one example, had $3 billion in volume on just one day in December. At a 0.5% fee per trade that equaled $15m in revenue in just one day. If that were to continue for 365 days it would mean $5.4 billion in annual revenue which is more than the NASDAQ or NYSE made this year. Conclusion I never would have guessed how high the cryptocurrencies went this year. My price target for bitcoin in 2017 was $3,500! That was made in late 2016 when bitcoin was near $700 and many people said I was crazy. Things are speeding up much faster than even I could have imagined. And it is much more than just making money. These technologies, like cryptocurrencies, blockchains and beyond connect us in a more profound way than Facebook would ever be able to. We are now beginning to be connected in ways we never even thought of; and to some degree still do not understand. These connections within this completely free market are deep and meaningful. This is sincerely beautiful because we are constantly presented with an ever growing buffet of competing protocols selling us their best efforts in providing harmony within the world. What all of these decentralized and distributed consensus building technologies have in common is that they connect us to the world and to each other. Where we are going we don’t need foolish and trite Facebook’s emojis. As we close a successful 2017 we look with optimism towards a much more prosperous 2018. The Powers That Shouldn’t Be (TPTSB) can’t stop us. As we move forward note how much crypto will teach you about ourselves and the world. In a radical free market making our own bets will continue to be a process of self discovery. Crypto will show us the contours of our fears, the contours of our greed, and will constantly challenge us to do our best with the knowledge we have. Remember, randomness and innovation are proper to the happenstance nature of a true digital free market. Happy New Year fellow freedom lovers! And, as always, thank you for subscribing! Jeff Berwick
Bitcoin history price chart since 2009 to 2018. On the price chart there is shown historical value of BTC cryptocurrency, log graph of Bitcoin market capitalization and the most reasonable historical dates. Bitcoin in 2008 . History of Bitcoin price in 2008, 2009, 2010. On 18 August 2008, the domain name bitcoin.org was registered. Later that year on October 31st, a link to a paper authored by ... In spite of the June 2011 hack, by 2013 Mt. Gox had established itself as the largest bitcoin exchange in the world, in part as a result of increased interest in bitcoin as the price of the coins increased rapidly (jumping from $13 dollars in January 2013 to a peak of more than $1,200).. However, behind the scenes all was not well. Bitcoincharts provides real-time USD price data of the Mt. Gox exchange including charts, orderbook and more. Subsequent bitcoin hacks involving Mt. Gox would prove larger and harder for its CEO to absorb, but all that was still years away. Bitcoin History is a multipart series from news.Bitcoin.com charting pivotal moments in the evolution of the world’s first cryptocurrency. Read part 15 here. Images courtesy of Shutterstock. A brief history of Mt. Gox, the $3B Bitcoin tragedy that just won’t end . The 740,000 Bitcoin stolen from users is worth $3 billion today. Story by Matthew Beedham. 90 . Shares. Mt. Gox’s ex ...
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