Wednesday, April 29, 2015
This Firefox Plug-In Lets You Easily Surf the Dot-Bit Web
KNC’s XBT Provider Launches First Ever Bitcoin Exchange Traded Note on Swedish NASDAQ
APR 29 DIGEST: Bitcoin Startup Wins Deloitte Tech Competition, Coinbase Comes to the UK
Western Union ‘Capitulates’ to Crypto with Ripple Labs Partnership
Tuesday, April 28, 2015
Overstock Files Crypto Stock Exchange Prospectus with the SEC
The Salt Lake City-based online retailer Overstock is working on a revolutionary new development: a new independent stock exchange powered by Bitcoin technology. The new stock exchange could sidestep traditional stock exchanges such as NYSE and NASDAQ and issue corporate stock directly over the Internet.
Overstock, one of the first and largest online retailers to accept bitcoin payments, first announced the project in October 2014.
“There is an opportunity to recreate the financial world as we know it in the parallel universe that is the blockchain,” Overstock’s CEO Patrick Byrne told Wired. “We are writing rules for this whole new universe. “ In a recent Coin Telegraph interview, Byrne said that Overstock is building the platform that will let companies issue a crypto-equity, which is a new frontier with many legal obstacles.
On Friday, Overstock got one step closer to implementation. In a prospectus filed with the Securities and Exchange Commission (SEC), Overstock indicated that it may issue up to $500 million in stock or other securities using the blockchain technology that powers Bitcoin.
“We may decide to offer securities as digital securities, meaning the securities will be uncertificated securities, the ownership and transfer of which are recorded on a cryptographically-secured distributed ledger system using technology similar to (or the same as) the distributed ledger technology used for trading digital currencies,” reads the prospectus. “Digital securities are designed to enable trades to settle immediately or nearly immediately, unlike traditional securities, [and] enable the securities holder to hold its securities directly or through its broker-dealer, outside the system for traditional securities.”
“The prospect of using a blockchain-like public ledger to hold securities or other assets is quite exciting and one that should be explored,” Georgetown University professor of finance James Angel told Wired.
The hypothetical language used in the filing shows that it is but the first official interaction with the SEC, which may take some time to digest and give a green light to this novel and potentially disruptive approach to securities.
The filing is a “shelf registration” meant to introduce future offerings to regulators and investors gradually, with more detailed information expected to come later. However, Overstock’s CEO Patrick Byrne is confident: “I wouldn’t have taken all the time and trouble and expense to do this if I didn’t plan on using it someday soon,” he told Wired.
Angel thinks the SEC will approve the filing eventually, but investors will be initially cautious.
The Overstock digital securities would not be listed for trading on existing stock exchanges, but traded exclusively on a specific trading system to be registered with the SEC as an Alternative Trading System (ATS). The prospectus emphasizes that the ATS will operate with the speed and irrevocability appropriate to the immediate or nearly immediate settlement of digital securities, but warns that “the payment mechanics of the ATS are novel and untested.”
The distributed ledger used to record transfers of ownership of digital securities, represented by ledger balances and secured by cryptographic key pairs, will be available to the public and store the complete trading histories.
The ATS won’t use a Bitcoin wallet approach where the cryptographic keys are controlled by the user – at least not initially – but a centralized key management scheme similar to that used by “Bitcoin banks” such as Circle. Initially, either the ATS itself or each broker-dealer participating on that ATS would hold the private keys on behalf of securities holders.
This centralized or semi-centralized model, which may appear as a step back from the decentralized blockchain, is justified because it will enable securities holders to manage their digital securities account with a simple login and password, similar to traditional online brokerage accounts.
The use of the word “initially,” however, indicates that Overstock may implement a more decentralized model in a second phase. Customer protection against dishonest brokers will be provided by multisig: “There can be multiple private keys, any number of which may be required in order to authorize a transfer of ownership of the digital securities,” notes the filing.
Make an Impact: Donate Bitcoin to Projects on the Ground in Nepal
This is a guest post by Elizabeth Ploshay, Connie Gallippi, Victoria van Eyk, and Sarah Martin.
Last week, Nepal was hit with a magnitude 7.8 earthquake – the worst in 80 years. More than 4,000 people died, and hundreds more are without food, water or shelter.
Natural disasters shake not just the core of our communities, but also the core of our humanity. Many of us feel a deep-seated need to reach out and help during major catastrophes. But it can sometimes seem overwhelming when the scale is so large, and hard to know how to make a real difference.
Three leaders in the Bitcoin ecosystem – the BitGive Foundation, ChangeTip, and BitPay – have solutions to help:
The BitGive Foundation is running a campaign to raise donations for Medic Mobile, a nonprofit organization that uses mobile technology to improve health-service delivery. Here’s a message from the Medic Mobile Team:
“The Medic Mobile team is actively exploring how we can help with local, coordinated relief efforts after the earthquake that devastated Kathmandu on Saturday, April 25th. Our third-largest office is based there and very thankfully all of our teammates are safe. The Bitcoin community has already been so supportive of our efforts in the past and we’d be grateful for that support again. Every donation will go directly to our Nepal office and help as we deploy the right technology. Thank you from our whole team.”
Click here for more information about the campaign and how you can contribute.
ChangeTip is encouraging the Bitcoin community to contribute to the Red Cross via Twitter tips. More than 400 ChangeTip community members contributed to the Red Cross from Sunday to Monday as part of an ongoing, weeklong campaign. The campaign currently exceeds more than $3,200 in micropayments.
BitPay also processes donations for Save the Children, an international relief organization mobilizing humanitarian assistance in Nepal. Save the Children began accepting bitcoin donations last fall after a successful 2013 campaign with the BitGive Foundation to raise funds for the Philippines Typhoon Haiyan relief effort. To donate in bitcoin to Save the Children, click here.
How can you help support the people, families, and communities in Nepal? Reach out to more charitable organizations and encourage them to accept bitcoin donations. BitPay charges no (zero percent) transaction fees, and nonprofits receive all (100 percent) of their contributions in their local, fiat currency.
As we all know, Bitcoin is not just a fast and easy way to send money. It’s an incredibly powerful tool to help those most in need. Let’s join together and show the world how Bitcoin can make a meaningful difference in real people’s lives.
Elizabeth Ploshay is an account manager at BitPay and board director at The Bitcoin Foundation; Connie Gallippi is the founder and executive director of the BitGive Foundation; Victoria van Eyk is the vice president of community development at ChangeTip; and Sarah Martin is the head of special projects at the Digital Currency Council (DCC).
Photo via Krish Dulal / CC-BY SA 4.0
Three Easy Ways to Enhance Your Online Privacy (Op-Ed)
Leaked Chainalysis Roadmap Angers Bitcoin Community
Chainalysis offers a service that provides financial institutions with the means to obtain regulatory compliance through real-time analysis of the blockchain. Based in Switzerland and headed by ex-Kraken COO Michael Grønager and former Mycelium engineer Jan Møller, the company provides an API for sophisticated in-depth real-time blockchain transaction analysis.
Chainalysis customers – including regulatory entities, law enforcement and financial service providers – are empowered with unique insight on all transactions recorded in the Bitcoin blockchain and tools to determine the origin of the bitcoin held by any address.
Bitcoin transactions are not anonymous. Every transaction and the full transaction history of any Bitcoin address are permanently recorded in the tamper-proof public blockchain and open to analysis. The illusion of anonymity stems from the pseudonymous nature of Bitcoin addresses, which are not explicitly associated to their owners.
But blockchain analysis can often de-anonymize bitcoin users. For example, if a pseudonymous Bitcoin address often sends funds to another address that can be associated to a person (for example a Circle user), it is highly probable that the two persons are one and the same, or closely related.
Recommended privacy practices, from simple measures such as using fresh Bitcoin addresses for new transactions to strong privacy measures such as dark wallets and mixing services, reduce the risk of being de-anonymized. But the fact that all bitcoin transactions are recorded in the blockchain implies that even one mistake can de-anonymize a user, and especially so when sophisticated blockchain analysis tools are available. In particular, the end-point where bitcoin is exchanged for cash, goods or services is vulnerable.
A few weeks ago, Chainalysis was forced to defend itself after allegations it had disrupted services with a “Sybil attack” that created more than 250 “false” Bitcoin nodes to harvest information on the whereabouts of transactions, which provoked strong and often angered reactions by the Bitcoin community. Grønager told CoinDesk that Chainalysis permits monitoring compliance with applicable money transfer regulations, and therefore helps Bitcoin companies to obtain bank accounts and do business with mainstream financial institutions.
It is evident that Bitcoin is moving toward mainstreaming and regulations, and therefore services such Chainalysis are here to stay, but such services likely will continue to meet opposition from an important part of the Bitcoin community. A leaked Chainalysis roadmap, now trending on Reddit, has been received with anger and hostile comments.
The leaked roadmap sheds light on the current and forthcoming features of the Chainalysis API. For example, Chainalysis customers will soon be able to “search by transaction hash, cluster name, category etc. [which] will allow for faster investigations via known clusters of interest but also for the API to answer specific questions about transactions or entities of interest.” Soon after that, the API will support unconfirmed transactions as well as “Shared multi client repositories for known bad actor reporting,” and an “Advanced Profiling API” is in the works. The roadmap also details Chainalysis pricing plans – for example, Institutional clients will pay $500 per month for a set of features including unlimited investigations, shared fraud databases and full API access.
Many participants in the Reddit discussion are expressing support for strong privacy tools, such as Dark Wallet and the Lightning Network, which may offer better protection against Chainalysis snooping.
itBit Files for Banking License in New York
Bitcoin exchange itBit has filed for a banking license in New York, Reuters reports. Approval for the license may come in the next couple of weeks, people familiar with the matter told Reuters. That could make itBit the first Bitcoin company to be regulated as a bank in the United States.
Founded in 2012, itBit has offices in two key financial markets, New York and Singapore. The company moved its headquarters from Singapore to New York in 2014.
“Bitcoin has become mainstream, the volume of bitcoin trading has grown exponentially, and the majority of bitcoin trading now takes place in the U.S.,” said CEO Charles Cascarilla. “Regulators are getting clearer about their policies, and we’re hopeful that we will be able to serve U.S. investors soon.”
The first Bitcoin company application for a U.S. banking license is part of the general industry trend toward mainstreaming, regulation and full compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements.
“Some highly publicized failures and potentially illegal activity have focused attention on virtual currencies and have highlighted the need for a sound regulatory framework for virtual currencies,” said Cascarilla.
According to the company’s website, itBit is institutional-grade and 100 percent compliant within every jurisdiction it operates, and its strict compliance program ensures the highest level of customer security and protection. Recently, itBit hired Erik Wilgenhof Plante from eBay Inc as chief compliance officer.
Besides Cascarilla and his business partner Emil Woods, the banking license application for itBit Trust Company LLC lists high profile “organizers,” including former Federal Deposit Insurance Corporation Chairman Sheila Bair, former Financial Accounting Standards Board director Robert Herz and former New Jersey Sen. Bill Bradley.
The company is backed by venture capitalists, including Canaan Partners, RRE Ventures and Liberty City Ventures. So far, itBit has received $3.3 million in funding. The application for a banking license is part of itBit’s plan to expand its business into different financial services.
“ItBit is building next-gen digital currency products and services by combining Silicon Valley innovation with Wall Street expertise,” says the company’s website.
The proposed “Bitlicense” regulations for Bitcoin businesses operating in the state of New York won’t be a problem because the final Bitlicense requirements are likely to be, if anything, lighter than those of a standard banking license.
Some Bitcoin financial service companies, such as Circle and Bitreserve, operate with many service features of banks, including audits and insured deposits, and their customers tend to consider them “Bitcoin banks.” Still, they don’t offer the full range of banking services, and therefore they don’t need a banking license and can’t be considered banks.
“Bitreserve is not a bank,” states the Bitreserve website. “Banks make money by loaning out your deposits for interest. This system is called fractional reserve banking. The obligations a bank has to its depositors do not match the assets the bank holds, since most of those assets are in the form of loans made to generate revenue for the bank.”
The requirements for commercial banks in the State of New York are outlined on the New York Department of Financial Services website. In particular, the initial level of capital should be sufficient to support the proposed business plan and the bank’s risk profile. Initial capital should cover operating losses before the bank attains sustained profitable operations, as well as provide a cushion against unexpected losses.
Singaporean Bitcoin Exchange CoinHako Insures Holdings Through BitGo Partnership
Singaporean-based Bitcoin exchange, CoinHako, has integrated the BitGo digital currency security platform and insurance offering and will now be run with multi-signature wallets and a state-of-the-art platform, and their holdings will be insured against theft and hacks.
The insurance offering is through an undisclosed A-rated insurer from XL Group, which covers up to $250,000 of losses for all BitGo customers. Clients can choose to increase the amount with a 1 percent flat fee. The security firm also provides transparency, improved management controls and internal checks for better monitoring of the exchange’s security.
“We’re excited to have CoinHako’s Bitcoin exchange secured on our platform”, said BitGo CEO Mike Belshe. “The team at CoinHako has been a great development partner, and we fully support their focus on security as one of the core tenets of their business. I’m confident that they will be a great contributor to the Singaporean Bitcoin ecosystem.”
CoinHako
The integration comes just after Pramodh Rai, a former graduate analyst at Barclays Bank joins the young startup as lead developer. In addition, the move is to better secure their platform and holdings as they hope to soon expand throughout Asia.
“Security is of utmost importance, particularly in the wake of recent hacks at Mt. Gox and other exchanges,” said CoinHako CEO and co-founder, Yusho Liu. “We have instituted various measures of security within CoinHako to protect our funds and users. This latest integration with BitGo means our funds are insured against theft and hackers. Moreover, this integration has also enabled us to shift to multi-signature wallets, which is the best industry practice currently.”
Bitgo Entering Asia
CoinHako is the most recent Asian partnership for the security firm. Hong Kong-based Bitspark and South Korea-based Coinone, partnered with Bitgo earlier this month, becoming the firm’s first Asian customers.
BitGo’s insurance and security offering is the only one of its kind, and, according to Belshe, it is in high demand and slowly becoming what is expected out of exchanges.
“The first thing users should do is make sure they are using an exchange that’s backed by the best technology – and using multi-signature wallets like those BitGo offers is one of the key tenets of putting this into practice,” he said.
“Beyond that, insurance will certainly play a growing role in securing crypto financial assets on exchanges and elsewhere,” Belshe added. “BitGo insurance-backed offering remains unique in the market, but demand is ramping sharply and we expect that such programs will soon become a baseline expectation for savvy investors and traders.”
On The Road with the Bitcoin Bus: The Bit Mom’s Journal (Part 5)
Bitcoin Price Analysis: Range Bound Within Continuous Downtrend (Week of APR 26)
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