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Category Archive: We Trust Bitcoin

bitcoin taxation

Japan eliminates Bitcoin Taxation; Rise in Price expected

Japan government officially eliminates bitcoin taxation after it recognized as legal method of payment a few months ago.

Consumption taxes on the sale of bitcoin will come into effect on July 1st.

According to a Deloitte’s report entitled “Japan: Inbound Tax Alert, 2017 Tax Reform Proposals,” digital currencies including Bitcoin will be exempt from the 8% consumption tax in Japan.

Deloitte’s report explains:

“The supply of virtual currency will be exempt from Japanese Consumption Tax (“JCT”). Currently, virtual currencies such as Bitcoin do not fall under the category of exempt sales, and as a result, the sale of virtual currencies in Japan have been treated as taxable for JCT purposes. Following the enactment of the amended Fund Settlement Law in May 2016, which newly defined “virtual currency” as a means of settlement, the sale of virtual currency as defined under the new Fund Settlement Law will be exempt from JCT. This change will apply to sales/purchase transactions performed in Japan on or after 1 July 2017.”

Bitcoin Industry in Japan

Back in March, the Japanese National Diet approved the tax reform proposed by Deloitte. The bill, which came into effect on July 1st will drastically increase bitcoin and cryptocurrency trading activities within the Japanese digital currency exchanges.

The bill will probably increase bitcoin and cryptocurrency trading activities within the Japanese digital currency exchanges.

On April 1, the Japanese government officially recognized Bitcoin as a legal payment method and currency.

The Japanese Bitcoin exchange industry is well regulated with Know Your Customer (KYC) and Anti-Money Laundering (AML) systems. AML policies are very strict in Japan and South Korea, and it is difficult for traders to take advantage of utilizing digital currencies to move large amounts outside of Japan.

Price growth because of bitcoin taxation

Although it could be a coincidence- since Japan has proposed the end of Bitcoin taxation, Bitcoin price increased from around $2,450 to $2,570.

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Amelia Tomasicchio

Infographic: Bitcoin in Politics

https://holytransaction.com/page/bitcoin-in-politics

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jorge

Infographic: 5 reasons you should be bullish on Bitcoin!

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jorge

Winklevii Bitcoin ETF under the ‘COIN’ symbol

 
(CryptoCrimson) A recent filing
with the SEC by none other than the Winklevii themselves, reveals some
new developments in regards to the twins’  highly-anticipated and
upcoming bitcoin exchange traded fund (ETF).

The Winklevoss
twins recently filed an amended Form S-1 with the Secutiries and
Exchange Commission. While the form acted as nothing more than an update
to keep the SEC informed, the filing has revealed what many have been
wondering since they first heard of the ETF — the ticker symbol. 

The update acts
as the fourth filing in total since the ETF’s initial proposal; the
process as the twins have explained, is a daunting one that requires a
grueling, yet meticulous process. The fund; however, has come a long way
since its beginning, which was originally filed for on 1 July 2013. 

‘COIN’

As some have speculated, evident of the
twins’ latest filing, the first of its kind bitcoin ETF will trade on
the NASDAQ under the ‘COIN’ symbol. 

According to the Wall Street Journal
the filing has divulged some of the concerns shared by the twins when
it comes to the risks associated with the up and coming ETF. Among those
include government regulation, Bolivia’s recent central bank ban and Switzerland’s latest legislative ruling.

On top of the
more regulatory risk factors, the filing has revealed what the twins
feel to be the technological factors that could threaten the digital
currency’s well-being. This including the much-raved about possibility
of a 51% attack in addition to what others have voiced as a concern of
what would happen if the core developers suddenly stopped sustaining the
bitcoin protocol unless they are compensated.

Still No Date

The question
everyone wants to know; however, remains a mystery. Which is when the
ETF will launch. While the twins are diligently working to make sure the
fund is indeed launched as soon as possible, it will for now remain a
mystery as to when the ETF will be up and running, this is in part due
to the strict laws surrounding these type of filings. 

In a conversation with CoinDesk, Cameron
Vinklevoss reiterated that he cannot speak on a launch date but he did
provide a brief statement in respect to the now-revealed ticker symbol:

“Identifying
the ticker symbol and the exchange are two major events that further
demonstrate that we are moving forward as expected.”

The overall
vision of the twin’s bitcoin ETF is to make it simple for institutional
investors to buy and sell bitcoin without having to endure the risk of
owning bitcoin themselves. The ETF aims to make the digital
currency easily accessible to investors of any size, while providing a
liquid platform that makes it possible for investors to move in an out
of their bitcoin positions with ease.

The Winklevoss
twins currently own a reported 1% of all bitcoins in circulation, the
twins are well known for their ambitious price targets throughout the
bitcoin community of which they expect to see a $40,000 coin in the near
future.

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Satoshi

How we know Bitcoin is not a bubble

The Value of Money

(NakamotoInstitute) No matter how many times Bitcoin grows by orders of magnitude,
holdouts still remain who argue that it is a bubble destined to fail. To
address this claim, I will describe a theory that describes how to
appraise Bitcoin according to the Austrian theory of money.
In Austrian economics, money is valuable because it is liquid. This
means that a given value of money is demanded everywhere and can easily
be traded for goods. For example, say I had enough bitcoins to buy a
100-oz gold bar. In late 2010, this would have been worth around one to
two million bitcoins and would have been impossible to sell on the open
market without drastically affecting the price. By contrast, in early
2014, 100 ounces of gold was worth about 100 bitcoins, and this amount
could easily have been traded quickly on one of the major exchanges
without affecting the price noticeably. Thus, in early 2014 Bitcoin was
more liquid than in late 2010, and was therefore a better currency.
Unfortunately, this insight about the value of money does not give us
a means of appraising it because the liquidity cannot be separated from
the price. This is kind of a problem—it sounds like a circular argument
because it says that Bitcoin’s value is caused by its price! This
allows for no way to detect whether Bitcoin is overvalued or
undervalued.
In order to prevent this model from being causally circular, a time
element is required. Our observations about money come from the past,
whereas our judgments about its value are about the immediate future.
This makes the value of money into a positive feedback loop. If the
network is growing, then it will tend to continue to grow, whereas if it
is shrinking, it will tend to continue to shrink.
This model of money has no independent quantity that estimates
anything like an underlying value. Any price is as good as any other—the
only thing that matters is the direction it is moving. This is not
really an appraisal after all—but it is still the right way to
understand Bitcoin’s price.

Bubbles

In the short term, there is money to be made by buying anything whose
price is showing an upward trend if one spots the trend early enough.
In other words, if one can predict that other people are likely to
appraise a good more highly in the future, regardless of whether that
appraisal is rational or irrational, then it makes sense to buy into the
change of sentiment. If lots of people begin to think this way, then
they can create a positive feedback among one another and bid up the
good beyond any rational appraisal of it. This is a bubble.
A bubble bursts because eventually people have to get around to using
a good for its ultimate purpose. Once it is understood that the people
who actually use the good are being bid out of the market, then the
price crashes because people stop predicting higher and higher
appraisals to the price.
Money, however, need not have any ultimate use. It may only ever
passed around from person to person, without ever being consumed. A
stock is valued by the sum of its interest-adjusted dividends. A bond is
valued by its redemption value adjusted by the interest rate and the
risk of default. A commodity is valued by the value of the goods it can
be used to produce. However, for money, there is no independent quantity
to provide a reality check. All money is like a bubble that never
bursts.

Metcalfe’s Law

Some of the theory of money can be understood in terms of Metcalfe’s law
from computer networking. Metcalfe’s law says that the value of a
network is proportional to the square of the number of nodes. The
rationale is that the network should be valued according to the number
of connections it supports, which is approximately proportional to n2 (for large n).
Consequently, as the network grows, it presents a better and better
opportunity for new members. As new members enter, the network improves
for all its present members.
Metcalfe’s law must be adjusted slightly to apply to media of
exchange because some nodes in the trade network will be more valuable
than others. Those who have a lot of the medium are potentially able to
spend more than those who have little. Therefore, use the market cap of
the medium of exchange as n instead of the number of people.
Similarly, some transactions are also worth more than others, so it
makes sense to use the transaction volume rather than the number of
transactions.
A striking test of Metcalfe’s law in Bitcoin recently appeared on the Bitcointalk forums, created by Peter R. I have made my own chart here.
Metcalfe's Law
This chart plots the market cap in blue and the square of the
transaction volume excluding popular addresses in green. The axis on the
is the price in dollars. Exactly as Metcalfe’s law predicts, the
transaction volume increases very neatly as the square root of the size
of the network. The correspondence is beautiful. I wish I had thought to
make it first!
I would like, however, to criticize the interpretation of the
diagram. On the original Bitcoin Talk, thread, the green plot has been
labeled as the “Metcalfe Value”, as if it is an appraisal of the Bitcoin
that estimates what it could cost.
This interpretation is incompatible with the theory of the value of
money I presented above. In my theory, the value causes the
transactions, whereas in the diagram, the transactions cause the value.
However, it is only potential transactions that cause the value. Past
transactions are of no value to anybody. The present size of the
network and the consequent opportunities is likely to provide tomorrow
will motivate people to buy and sell today.
This may seem like hair-splitting, but a confusion of cause and
effect can have serious consequences. For example, many people believe
that it is necessary to spend bitcoins and increase the transaction
volume in order to make Bitcoin more valuable. Of course this is
nonsense; all this does is fill up the network with transactions for
things that nobody actually wanted. That does not present a good value
for a newcomer because he will want a network that presents him with real
opportunities, not just ways of artificially increasing transaction
volume. The more that the Bitcoin network is focused on artificially
increasing the transaction volume to make it look good, the more it
resembles a Ponzi scheme. Rather, to make the network more valuable, we should be hoarders. This is more likely to present newcomers with lots of potential uses for Bitcoin as a medium of exchange.

Appraising Bitcoin

A real good, of course, can have value due to a network effect and some productive use. Gold, for example, can be money and used as components in electronics. If there were ever a time when gold were used only
for electronics, but were then to acquire use as money once a network
effect formed around their price, an investor might be excused to call
the price an unsustainable bubble. However, it would turn out to be a sustainable bubble that inflates until it fills the entire economy. At least until Bitcoin came along.
This brings us to Bitcoin. To what extent is Bitcoin’s price a
rational appraisal or an investment bubble? The answer is easy, much
easier than with a commodity like gold. Bitcoins have almost no use
other than as a medium of exchange. Thus, the fact Bitcoin has any
price at all is evidence that there is a real network effect. It is
much easier to prove that Bitcoin acts like money than that gold does,
in fact.
Each step in Bitcoin’s growth follows the same pattern. Any demand
for Bitcoin at all is enough to make it function as a medium of
exchange. If demand continues to grow, then it becomes a better medium
of exchange. There is no end to this process because the primary value
of Bitcoin is the network effect surrounding it, not any final
productive use.
Thus, Bitcoin is not a bubble. Its growth is like a self-fulfilling
prophesy: as more people believe in it as a medium of exchange and
become willing to buy it, they create the very conditions required of it
to make it more useful. There is nothing irrational, therefore, in
treating Bitcoin’s price as the cause of its value and no reason to
expect the momentum in its exponential upward trend to cease.1

Conclusion

Every time you buy Bitcoin, a fairy gets its wings. Now clap your
hands, click your heels together three times, and believe in Bitcoin! It
will only take faith the size of a mustard seed.
  1. This analysis leaves something to explain—if the value of a medium of
    exchange is just the market cap, why does Bitcoin go through hype
    cycles? Every time Bitcoin goes up in price, that is an increase in its
    underlying value, so why does its price ever crash? I don’t know the
    answer, but I think I have a reasonable hypothesis: the network takes
    time to adjust to the enormous number of newcomers during each hype
    cycle. Each member of the network adds value, but this takes time—the
    members of the network must learn something about one another before the
    value they add to the network is more fully realized. If this effect is
    real, then the price could temporarily rise more rapidly than the
    growth that the network can support.

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Satoshi

Third CoinSummit to be held in London

(Cryptocoinchronicle) The Third CoinsSummit is to be held in London this July. San
Francisco was the acting ground of the previous CoinSummit convention
that was held in March; as the second convention presented, this next
summit will feature a series of panel discussions and speeches from
bitcoin enthusiasts, hedge fund professionals, VC and angel investors,
and experienced cryptocurrency entrepreneurs.

The information posted on the CoinSummit official site:

“CoinSummit London is a two-day event connecting virtual
currency entrepreneurs, angel and VC investors, hedge fund professionals
and others who are looking to learn and network in the virtual currency
industry. CoinSummit will take place on July 10-11 2014 at the East
Wintergarden London.”

Some notable speakers include Silk Road Equity co-founder Matthew
Roszak, new Bitcoin Foundation board of director Brock Pierce, angel
investor Roger Ver, and Maidsafe CEO David Irvine. Some of the others
participants include Megabigpower founder David Carlson, Lamassu CEO
Zach Harvey, eToro CEO Yoni Assia, and many others.

This 3rd CoinSummit, organizers are presenting a new set.
Besides the usual structure, a special platform is being organized for a
few startup companies. Coinsummit has informed at their site, that ten
startups will be given the chance to present in front of the entire
CoinSummit audience and will be chosen on the basis of the size and
charm of the opportunity they are designing, the strength of the team,
and their traction / metrics / achievements.

Some of the spreakers
Some of the speakers

The summit is organized by Pamir Gelenbe, a strongly firmed crypto
currencies entrepreneur and partner at Hummingbird Ventures. After the
last summit in March, Gelenbe has stated:

“We hope to bring together entrepreneurs, VC investors
and folks from hedge funds who want to learn about bitcoins as an asset
class…we really want to focus on the business side of Bitcoin as we
don’t think there has been an event like this before.”

CoinSummit has been the leading hand on taking Bitcoin discussion to
higher grounds by cementing the bonds between the Bitcoin communities
around the world and relaying trustworthy information to the media and
business investors.

CoinSummit London 2014, will be held at the East Wintergarden and
take place on July 10-11. Entrance to the conference is invite-only.
Digital currency enthusiasts and entrepreneurs who wish to attend the
event can request an invitation on the summit’s official site; applying for the presentation is free and the deadline to register is June 20.

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Satoshi

The Declaration of Bitcoin’s Independence

(BitcoinMagazine)  We have been brought to a point where it has become necessary to
dissolve the bond between currency and institution. We are not required
to declare the causes which impel us to push for the separation, but we
will oblige.
But we are in an age of appropriation, and nothing is immune. Today
bitcoin is not only volatile in its value, but in its very essence.
Bitcoin is in the crucial stages of development. Its code can evolve in
several directions. It’s under threat from those who don’t understand
it; it’s under threat from those who do understand it, but fear it. We
hold these truths to be self-evident. We have been cyclically betrayed,
lied to, stolen from, extorted from, taxed, monopolized, spied on,
inspected, assessed, authorized, registered, deceived, and reformed. We
have been economically disarmed, disabled, held hostage, impoverished,
enervated, exhausted, and enslaved. And then there was bitcoin.
The crusade to absorb bitcoin into the seams of the State has begun.
There is a conscious effort to co-opt. The goal is to swallow bitcoin,
process it, integrate it, devolve it, and keep it stagnant in the gears
of a failed operating system. Bitcoin’s potential is being hijacked.
They have their own idea of what they want bitcoin to be. They have
their own plan for its potential, and they have an investment in that
plan. But our consent is withdrawn and the power of our ideas is too
strong.
Do not underestimate DNA; nothing is born completely neutral. Follow
the protocol: it has anarchistic implications. Bitcoin is inherently
anti-establishment, anti-system, and anti-state. Bitcoin undermines
governments and disrupts institutions because bitcoin is fundamentally
humanitarian. There’s an elimination of 3rd party intrusion. It’s purely
peer-to-peer. The blockchain is free speech. It’s decentralized,
voluntary, and non-aggressive. Bitcoin is not supposed to work within
our current mechanisms. Bitcoin needs not entities of authority to
acknowledge it, incorporate it, regulate it, and tax it. Bitcoin does
not pander to power structures, it undermines them.
Bitcoin is an animal of anonymity. Bitcoin basks in shadow. Satoshi’s
facelessness is symbolic of this. Privacy is the point. Bitcoin is
meant to function outside of regulatory systems. It is not a cog.
Bitcoin means to channel economic power directly through the
individual. This is reflected by Satoshi’s symbolic birthday, which
falls on the same day that Roosevelt signed the 6102 Executive Order,
which forbade the hoarding of gold. We repeat. Bitcoin is not intended
to be integrated; it’s intended to be a ghost outside the machine.
The voices of the people who are working to preserve the purity of
bitcoin’s ethos are being drowned out. But actions speak louder than
words. Bitcoin is utility. The cypherpunks are building anonymous
systems. The crypto-anarchists are making institutions arbitrary. The
internet is anarchy. And cryptocurrencies are the printless fingers of
the internet.
Bitcoin is not just a currency, a commodity, or a convenience. Just
like the internet gave information back to the people, Bitcoin will give
financial freedom back to the people. But that’s only the first step.
There will be a shift in the structure of enterprise, in the way we
interact, in the way we voice our opinions, and in the way we fuel our
action. Bitcoin will allow us to shape the world without having to ask
for permission. We declare bitcoin’s independence. Bitcoin is
sovereignty. Bitcoin is renaissance. Bitcoin is ours. Bitcoin is.

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Satoshi
blockchain_healthcare

A Network analyst’s view of the Blockchain

Martin Harrigan is a computer scientist and software developer. He is the founder of QuantaBytes, an Irish startup developing a suite of tools for analyzing and visualising bitcoin’s block chain. He is also the co-author of one of the earliest academic papers to study the network properties of the block chain and its implications for anonymity.

abstract network
(CoinDesk) The
block chain is a decentralised, consensus-driven ledger of every
successful bitcoin transaction to date. As of the 300,000th block, the
ledger includes over 38 million transactions.
Aside from being a
monumental technical achievement, the block chain is a fascinating
dataset. We can use it to create a transaction network that models the
flow of bitcoins from the creation of the genesis block to the present
day.
In this network, every node represents a transaction, and
every (directed) edge represents a flow of bitcoins from an output of
one transaction to an input of another. This large, complex network has
over 38 million nodes and 85 million edges.
transaction network
The transaction network represents the flow of bitcoins between transactions over time.
Network science
Network
science is the study of complex networks. It provides theories,
techniques and tools that help us understand the structure and evolution of a network.
The bitcoin transaction network is a prime example. Its basic building
block, the transaction, can be combined to produce complex transfers of
value. This is reflected in the topological structure of the transaction
network.
The network as a whole is too large and complex for most
network visualisation tools. However, we can measure various structural
properties of the network. For example, transactions can be
characterised by their varying numbers of inputs and outputs. But how
are these numbers distributed in practice? In the transaction network,
we can analyse the in- and out-degrees of the nodes. We can plot the in-
and out-degree distributions. They show, for each possible degree, the
number of times they occur in the network.
The in-degree distribution of the transaction network
The in-degree distribution of the transaction network.
The out-degree distribution of the transaction network.
The out-degree distribution of the transaction network.
In
both cases, we observe inverse relationships between these numbers. The
lower the degree, the more frequently the nodes with that degree occur;
the higher the degree, the less frequently they occur. There are many
outliers. The outlier in the out-degree distribution with out-degree
equal to two is due to an abundance of transactions with exactly two
outputs.

Giant connected component

Suppose we were able to
visualise the entire bitcoin transaction network. It would probably
resemble a “hairball”. These visualisations suffer from cluttering and
over-plotting to an extreme that makes them unusable for any practical
purposes. However, they do provide one key piece of information. Are we
dealing with one large connected component or several smaller connected
components?
Many visualizations of large networks are "hairballs".
Many visualizations of large networks are “hairballs”.
A
connected component is a group of nodes and edges that are all
connected to each other, either directly or indirectly. If a network has
a giant connected component, this means that almost every node is
reachable from almost every other node. If we ignore the direction of
the edges in the bitcoin transaction network, then it does indeed
contain a giant connected component covering over 99.9% of all nodes.
The second largest connected component has just 71 nodes.

Fourteen degrees of separation

Six
degrees of separation is the theory that everyone on the planet is
connected to everyone else through a chain of acquaintances with no more than six hops.
In network science terminology, this translates to the theory that the
social network of the human race has diameter six. Facebook reported that the effective diameter (covering 90% of all pairs of users) of its social network is five and is decreasing with time.
The
equivalent number for the bitcoin transaction network is fourteen and
is increasing with time. That is, across 90% of all pairs of
transactions, the shortest path between them in the transaction network,
ignoring directionality, is at most fourteen hops. The increasing value
is likely due to the fact that, unlike the Facebook social network,
there is no preferential attachment.
New nodes are connected to existing nodes whose corresponding
transactions are not yet fully redeemed. In other words, the transaction
network is growing at the frontier only.

The first currency with a ledger

Surprisingly,
bitcoin is not the first currency with a ledger from which we can model
the transfer of value. The Tomamae-cho community currency was
introduced into the Hokkaido Prefecture in Japan for a three-month
period during 2004-05 in a bid to revitalise the local economy. The
Tomamae-cho system involved gift certificates that were reusable and
legally redeemable into yen. There was an entry space on the reverse of
each certificate for recipients to record transaction dates, their names
and addresses, and the purposes of use, up to a maximum of five
recipients.
Researchers collected these certificates in order to
derive a network structure that represented the flow of currency during
the period. They showed, for example, that the network had small world properties.
A network representation of the transfer of value with a community currency.
A network representation of the transfer of value with a community currency.
Source: Network Analyses of the Circulation Flow of Community Currency
The
block chain is a digital equivalent to the Tomamae-cho certificates. It
does not contain information such as names and addresses or the
purposes of use. However, it has other properties that make it suitable
for analysing the transfer of value including its accuracy, size, and
completeness.
The application of network analysis to the block
chain is an under-explored, yet fascinating area. There are a handful of
academic studies but very little in the way of software and tools to
open it up to a wider audience. QuantaBytes  is an Irish startup, founded by the author,
developing a suite of tools for analysing and visualising bitcoin’s
block chain. By understanding the structure and evolution of the block
chain, we can better understand bitcoin’s usage patterns, economy, and
the growth of the system as a whole.
Network image via Shutterstock

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Satoshi

What is Bitcoin and how can it change the world?

(Virgin) When you type a website
address into a browser you might have noticed that the letters ‘http’ appear at
the front. ‘Http’ stands for Hypertext Transfer Protocol. In typing a web
address you are actually sending an HTTP command to transmit that website to
you. Hypertext Transfer Protocol is the means by which information is shared
across the Web.
Similarly, when setting up
an email account, you might have noticed the letters ‘smtp’ – for example,
‘smtp.gmail.com.’ SMTP stands for Simple Mail Transfer Protocol. SMTP is the protocol
by which we send emails to each other.
A protocol is the means by
which information is shared across a network. Bitcoin – with a capital ‘B’
– is another protocol. The function of the protocol is to send and receive
payment. The unit of money on the protocol is the ‘bitcoin’ – with a small
‘b’.
You earn a bitcoin by
doing or selling something in exchange for bitcoins – just as you would earn
normal money. If I do this job for you, you pay me in bitcoins. You buy
bitcoins just as you would buy and sell foreign currency. You pay some money to
someone, usually at a Bitcoin exchange, for which you receive some
bitcoins. And you can make your own bitcoins by mining them – more on that
another day.
Image from gettyimages
You keep your bitcoins in
a wallet. There are hundreds of places to get a wallet, just as there are
hundreds of places to get an email account (blockchain.info is as good a place
to start as anywhere). Often people will have more than one wallet – one on
their computer, another with a Bitcoin service provider.
So how can Bitcoin change
the world?
The reason the Bitcoin
technology is potentially so disruptive and transformative is that it’s a new,
efficient form of money. And money, which has been, inexplicably, ignored by
mainstream economists for so long, is, of course, at the heart of almost
everything we do. Bitcoin could change the way the way we make and receive
payment, it could change the way we store money; it even has the potential to
change the actual money we use.
Think about the
possibilities of that for a second. We no longer need banks to store our
money – we store it on our computer with a Bitcoin service provider. We no
longer need banking networks to send or receive money – we just send money as
we would send an email. We no longer need governments to issue our money.
Forget pounds and dollars, we’ll use bitcoins instead. The social implications
of governments and banks losing control of money are considerable. This is
all very well in theory. What will make Bitcoin irresistible in practice is its
sheer efficiency.
Goldman Sachs IT analyst,
Roman Leal, has calculated the savings that Bitcoin could have made in
electronic payment in 2013, if Bitcoin had been used. Let’s start with simple
money transfer – sending money from one person to another.
Consumers currently pay a
fee of about 10% of the total amount transferred if they use a traditional
money transfer network such as Western Union. This fee covers agents’
commissions, forex and access to the network. With Bitcoin, that fee would be
zero – or 1% if you use a Bitcoin service provider. There
were $550 billion of remittances in 2013 generating $49 billion of transaction
fees. With Bitcoin those fees fall by 90% to just $5.5 billion. That would
mean an extra $43 billion actually makes it into people’s pockets.
Image from gettyimages
As for electronic payments
in retail, currently retailers pay from about 2.5% to 3% in fees. In 2013,
global transaction fees were $260 billion on over $10 trillion of sales. Had
Bitcoin been used (again using a 1% estimated figure) the number would be $104
billion – a saving of almost $150 billion.
Leal notes that all
‘merchants would realize sizable savings’ by using Bitcoin, but small merchants
will benefit most. They ‘can reduce their payment processing fees by at least
half’. For a business that runs on low margin that is a compelling
number. These kinds of savings are irresistible.

Then there are those who
are currently shut out of the current financial system. 53% of the world’s
population is still ‘unbanked’ – they have no use of formal or semi-formal
financial services. Most of them will have a mobile phone before they have a
bank account. With Bitcoin – and other forms of digital payment – these people suddenly
have means to make and receive payment over distance. How much untapped
potential is there waiting to be freed when the unbanked start to get access to
basic financial services?
We’re not there yet
The core protocol of
Bitcoin is sound. In fact, it has unprecedented reliability and security. The
edges, however, are vulnerable. Third parties, such as Mt. Gox, have not
figured out how to act like proper financial institutions. Certain operating
systems using the protocol are insecure, rendering bitcoins vulnerable to
theft. There are also issues with programmers who have failed to understand how
the blockchain – the Bitcoin central database – works.
But these are all issues
that will be dealt with as the technology develops. The point is the core
protocol is sound. It – or some replication of it – could send banks to the
same forgotten part of town that the Internet has sent newspapers, as well as
freeing up the possibility for many millions of people to better their lot
through trade and exchange.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Satoshi
bitcoin_in_2016

Bitcoin’s promise goes far beyond payments

(HarvardBusinessReview) Digital currencies like Bitcoin have captured the attention of
the media, entrepreneurs, and regulators. The coverage has described
exchange meltdowns, price volatility, and government crackdowns.
However, the focus on Bitcoin as a currency may distract businesses and
governments from its disruptive impact: as a technology.
Bitcoin is more than just a new way to make purchases. It is a
protocol for exchanging value over the internet without an intermediary.
Bitcoin is based on a public ledger system, known as the blockchain,
which uses cryptography to validate transactions. Bitcoin users gain
access to their balance through a password known as a private key. As a
result, Bitcoin is peer-to-peer and open, yet secure and nearly
frictionless. Much has been written about the payment applications of
Bitcoin, including remittances, micropayments, and donations.
However, Bitcoin could disrupt other systems that rely on
intermediaries with a similarly open, peer-to-peer system, including
property, contracts, and identity management.
Anywhere a transaction between two parties has traditionally required
third party validation, Bitcoin may be applicable. Consider these three
common actions:

Transfer of property. The Bitcoin protocol could
simplify complex asset transfers, revolutionizing the services that
support this industry. Currently, the transfer of large assets requires
significant time and resources. For example, in order to purchase a car
from an individual seller, one has to engage a third party to transfer
the title. Additionally, one has to use services like Carfax to learn
about the car’s accident and inspection history. And who doesn’t like to
spend a Saturday at the DMV updating a car registration?
The blockchain could change all of this. Bitcoins can be qualified in
such a way that they represent real-world assets. Bitcoin entrepreneurs
at companies like Colored Coin
are already working on ways to use small portions of Bitcoin to denote
physical property. A fraction of a Bitcoin would publicly identify who
currently owns that property, and could include a record of both past
ownership and other history about the property. When purchasing the car,
one would be able to verify all accidents and inspections over the
blockchain and transfer the title on site. Similarly, real estate and
financial instrument transactions could all be executed over Bitcoin.
This could soon create efficiencies and reduce friction by allowing
individuals to directly transfer property without the use of a broker,
lawyer, or notary to sign-off on the transfer.

Execution of contracts. Bitcoin could similarly be
used to structure contracts, bringing new efficiency and transparency.
Contracts are typically developed by lawyers on a case-by-case basis
with significant time and resources devoted to negotiation, development,
and enforcement. Additionally, markets based on contracts, including
certain financial derivatives markets, lack transparency, which
complicates regulation.
Traditional contracts could be replaced by code, executing themselves
when a triggering event occurs. In a simple example, a financial
instrument, like an option, could be developed and executed over the
blockchain. In addition to reducing legal fees, this could bring new
transparency to financial markets, as regulators could use the public
ledger to understand the market without forcing individual actors to
reveal their specific positions. It is possible that new
crypto-currencies will emerge to serve these niche purposes.
New ventures, like Ethereum, are creating these capabilities today. Ethereum is developing a network to serve as both the registry and escrow to execute the conditions of a contract automatically through checkable rules.

Identity management. Bitcoin’s cryptography could also transform identity management. Much of identity management, including passports, still operates on a paper-based system.
These documents are frequently forged and stolen. Interpol’s database
currently lists 39 million stolen travel documents. Instead of carrying
paper documents, what if there was a way to create a unique, verifiable
key that was impossible to forge?
A cryptographic network similar to but separate from Bitcoin could be
used to verify individuals’ identities and monitor movement across
borders. When a person travels through a checkpoint at a border
crossing, instead of showing and scanning a paper passport, she could
present her private Bitcoin key. A network privately maintained by the
government could verify the key and register the entry into the ledger.
This system, based on cryptography instead of paper documents, would
simultaneously increase mobility and security. If Bitcoin can be used
for travel documents, it could also be used for other forms of identity
management like social security numbers, tax identification numbers, or
even driver’s licenses.
Property, contracts, and identity management are only a few examples
of how a peer-to-peer, open, and frictionless system could change how we
conduct business in the future. In order to achieve this wider
adoption, Bitcoin will need to address significant questions around
trust, ease of use, and operability. However, the Bitcoin community has
shown remarkable adaptability and is already working to mitigate these
problems. In the next decade, we can expect significant innovation
around the Bitcoin network. Much of that will revolve around payments,
particularly early on. The real value, though, lies beyond.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Satoshi