Bitcoin Plaza

Tuesday, February 24, 2015

Bitcoin and Magic: Is Decentralized Shipping Coming?

Apparently one need only text the word “Magic” to (408) 217-1721 anywhere in the U.S., and if it's available for purchase, a new service called Magic will deliver it to your door on demand. All payabl

Blockchain Aids Investigators as Ex-Mintpal CEO Arrested in the UK

Ex-CEO of the now-defunct exchange Mintpal, Ryan Kennedy, has had his arrest confirmed over non-compliance with a court order requiring him to repay 750 BTC to one of his customers.

Monday, February 23, 2015

Bitrated Unveils Reputation System and Multisig Escrow

Bitrated has announced an online reputation management system for its multi-signature (multisig) escrow service for bitcoin payments. The two innovations combined provide unprecedented consumer protection to Bitcoin users, buyers and sellers alike.

Bitrated‘s bitcoin payment service uses multisig transactions where a trusted third party (trust agent) is nominated to resolve disputes and reverse payments in case of fraud. Two out of three signatures are required to unlock a payment: the seller’s, the buyer’s and the trust agent’s. So if the buyer is happy with the purchased goods or services, the payment can be unlocked by the buyer and the seller alone, with no intervention required from the trust agent. Otherwise, the trust agent will arbitrate the dispute for a fee, and eventually take either the side of the seller, in which case the payment will proceed, or the buyer, in which case the escrowed bitcoin will go back to the buyer.

With multisig, the trust agent is not able to take the money and run, because the payment address is fixed and any decision of the trust agent must still be validated by the seller or the buyer. But as usual, the devil is in the details: a dishonest trust agent could collude with a dishonest seller – or buyer – behind the scenes. Bitrated’s reputation management system addresses this problem.

“We believe that Bitrated holds the key to the next wave of Bitcoin consumer adoption,” said Bitrated CEO Nadav Ivgi . “While disputes about e-commerce are usually settled in a fairly easy process, Bitcoin transactions still hold a major risk of fraud. The new reputation management system is a huge leap forward in consumer protection when combined with the secure payment system, and it can help bring Bitcoin one step closer to the massive numbers of users in e-commerce.”

Bitrated created a marketplace for arbitration services where trust agents can compete for customers by providing quality dispute resolution services, utilizing their domain expertise, building a reputation and offering competitive fees.

“Because trust agents never hold user funds in escrow, we can greatly reduce compliance costs, lower the entry barriers, encourage competition and allow smaller and specialized players to participate in a way that was never possible before.”

To join Bitrated, users need to create a profile like this and link their social network accounts. At this moment, reputation scores are mostly based on the various karma systems and number of friends/followers on the social networks. Later, it’s to be expected that reputation scores will be based on user reviews, successfully completed transactions and dispute resolutions on the Bitrated system itself.

To create a new trade, buyers need to specify what they are buying (a description of the product or service, delivery method and other agreed upon terms), the price in bitcoin, the user name of the seller (an external email address can also be used, in which case the seller will receive an invitation to join Bitrated), a refund bitcoin address, and the user name of the trust agent. Trust agents, who can be found in the Bitrated user database, can specify their fees: a base fee (for example 0.5%) and a dispute resolution fee (for example 2%). If the system catches on, top-rated trust agents whose services are in demand could earn significant fees.

Bitrated is a very welcome addition to the Bitcoin ecosystem, and one that meets an important need. It can be seen as an open and transparent alternative to the native escrow and reputation systems of specific Bitcoin marketplaces – where often escrow and dispute resolution are provided by the operator itself. Bitrated, which is essentially a public marketplace for arbitration services with a crowd-sourced reputation system, is a good solution to manage trust issues in the digital economy.

This Week on Decentral Talk Live

Decentral Talk Live features a diverse collection of guests this week from all over the decentralized and disruptive technology community. Topics include security and regulatory compliance, publishing, branding, web-development, and building features on top of the Bitcoin blockchain.

Balancing security and privacy with regulatory compliance is a tricky business when it comes to digital currencies. This week, DTL talks with Amber Scott, founder and “Chief AML Ninja” of Outlier Services. Scott is a Certified Anti-Money Laundering Specialist (CAMS) and a Certified Privacy Professional (CIPP) with a degree in psychology from the University of Waterloo, where she helped develop the first applied psychology course on criminal profiling. In 2013, she founded Outlier Solutions to provide AML and CTF compliance for financial services (including casinos, insurance, accountants, real estate, securities/investments, digital currencies and more). Among other security-related topics, Scott delves into the complex world of financial regulation and gives tips on dealing with banks — always a tricky problem for Bitcoin companies.

Craig Sellars, the CTO of the Mastercoin Foundation, joins DTL to discuss its communications protocol. Mastercoin uses the Bitcoin blockchain to enable features such as smart contracts, user currencies and decentralized peer-to-peer exchanges. A common analogy used to describe the relation of the Master Protocol to Bitcoin is that of HTTP to TCP/IP. Like the Master Protocol, HTTP is the application layer for the more fundamental transport and internet layers of TCP/IP, such as Bitcoin.

As co-founder and CTO of Tether, Sellars also answers questions about this fiat currency token platform on the Bitcoin blockchain. Tether aims to provide a quick and secure way to store, send and receive real-world currency as if it were bitcoin.

Themes for this week will also include communication and marketing in the Bitcoin space.

Rik Willard, CEO of MintCombine, a think tank and product lab delivering blockchain solutions for brands and causes, will talk about the challenges of navigating the complex economic environment of emerging decentralized digital engagement ecosystems.

Mitchell Callahan, Founder and COO at Saucal, will provide insight into his Bitcoin & web application development firm.

Jeffrey Tucker, Chief Liberty Officer of Liberty.me, a subscription-based, action-focused social and publishing platform for the liberty minded, will share his enthusiasm for sharing and promoting ideas that support freedom.

Decentral Talk Live airs new episodes at 3 pm EST, Monday through Friday, on decentral.tv.

Canadian Exchange, QuadrigaCX, Takes Spotlight After CAVIRTEX Bows Out

On Tuesday, February 17, the Canadian Bitcoin community was surprised to learn that its biggest and longest-serving exchange, CAVIRTEX, was to wind down operations by March 25. Enter QuadrigaCX, heir apparent to the title of Canada’s largest Bitcoin exchange.

An older version of the CAVIRTEX database, including 2FA secrets and hashed passwords, may have been compromised. Their website states, “We believe that damage to the company’s reputation, caused by the potential compromise, will significantly harm our ability to continue to operate successfully.” Kyle Kemper, VP of CAVIRTEX, also cited a difficult banking relationship as a contributing factor.

CAVIRTEX was the second exchange to go down in Canada this year; Vault of Satoshi also declared its intent to close as of February 5th, 2015.

“We’ve definitely seen an increase in new accounts over the past few days,” said Gerald Cotten, CEO of QuadrigaCX. He added that the closure of CAVIRTEX came as a “total surprise” to him. Like everyone else following the Bitcoin news in Canada, he knew about some of CAVIRTEX’s difficulties, but didn’t think they were serious enough to close the company. “Security and banking issues…come with the territory when one operates an exchange,” he said.

Can QuadrigaCX avoid a similar fate?

Cotten places his faith in the company’s security system. QuadrigaCX clients’ passwords are encrypted both server-side and client-side, on-site and in-browser. Even if someone managed to hack in and steal their password hashes, as in the case of CAVIRTEX, those hashes would be useless to the thief.

“Total security is incredibly hard to achieve,” Cotten said. “You make one little mistake and a hacker can and will exploit it. Banks can’t guarantee they won’t get robbed; exchanges can’t guarantee they won’t get hacked. That’s why we keep as little [bitcoin] online as possible.” The rest of the funds are kept in cold storage. Cotten added that QuadrigaCX participates in the Bug Bounty program run by Crowdcurity, so their system is continuously being tested for weak points of entry.

As for its banking relationships, QuadrigaCX appears positioned to keep legacy banks onside. When it comes to banks, said Cotten, an exchange is “always walking on eggshells.” Before its launch on December 26, 2013, QuadrigaCX registered with FINTRAC as a money services business, becoming the first exchange to do so in Canada. While it isn’t strictly required by law, such registration is perceived by banks as a sign of legitimacy, and registration has minimized the number of banking issues the exchange has had to face. QuadrigaCX was also the first Canadian exchange to integrate INTERAC^TM Online.

It also helps to have a little luck. Just before it was thrust into the spotlight, QuadrigaCX began a global marketing campaign to expand its business outside of Canada, targeting more international markets. At the moment, it carries CAD/BTC, USD/BTC and Gold/BTC order books, and accepts clients from most countries around the world. Due to regulatory complexities, however, QuadrigaCX does not accept U.S. clients.

As for the prospect of other foreign exchanges encroaching on the Canadian Bitcoin space, Cotten isn’t worried. He points out that Bitstamp and Bitfinex are already active in Canada, but he doesn’t foresee too many other companies making a push into the Canadian market. “Trading volume is still very low [here],” he says. “It’s not really worth it for them.” And Canadians who might try to migrate toward foreign exchanges are likely to find the process too complicated and expensive by comparison.

To see a recent, in-depth interview with Gerald Cotton, and learn more about QuadrigaCX, visit decentral.tv. For this episode of Decentral Talk Live, Cotten spoke with host Ethan Wilding and guest host Hai Nguyen shortly before the CAVIRTEX announcement.