Thursday, August 27, 2015
AUG 27 DIGEST: Patrick Byrne Brings Bitcoin Tech to Wall St. with $30M Deal; California Seeks to Avoid a Repeat BitLicense Exodus
The Gox Effect: Japan Slowly Turning Against Bitcoin Exchanges (Op-Ed)
Wednesday, August 26, 2015
Tim Draper Speaks on Global Equity Turmoil: “I Expect People to Run to Bitcoin the Way They Do to Gold.”
It has been a rollercoaster of a ride for global equity investors over the past few days. Besides the month-long slide in the Chinese markets, the Dow plummeted from approximately 16,459 on August 21st to 15,446 on the 24th.
When the going gets tough, investors have historically flocked toward assets that are considered safer, including cash, gold, and treasury bills. Often times, the asset of choice is gold because it is considered the greatest store of value. However, some think that Bitcoin might one day trump gold as a means of protecting against volatility.
Tim Draper, founding partner of Draper Fisher Jurvetson, a prominent Silicon Valley venture capital fund, believes that bitcoin might one day be the preeminent store of value for investors.
“When bitcoin is mature, I expect people to run to bitcoin the way they do to gold when the market gets scary,” Draper said in an email to Bitcoin Magazine. “Currently, there is not enough usage to make people feel comfortable investing in Bitcoin when they come out of the market. I expect that to change.”
Draper suggests that currently, bitcoin is far too speculative an investment for it to be a store of value. According to Investopedia, a store of value means, “any form of commodity, asset, or money that has value and can be stored and retrieved over time. As long as a currency is relatively stable in its value, money (such as a dollar bill) is the most common and efficient store of value found in an economy.”
Fundamentally, the reason people run to cash when the stock market falls is because they view the small inflation to be a small loss in comparison to what could happen in the stock market. Even more, they run to gold because, as Investopedia says, “they can be counted on to retain some value in almost any scenario, especially in those cases where the store of value has a finite supply (like gold).”
For bitcoin to be considered an efficient store of value, the price of it would need to start rising and stay relatively consistent rather than having significant volatility. Draper explained that the bitcoin ecosystem isn’t in a place, yet, for this to happen.
“There will be pressure on Bitcoin pricing as there is supply to sell as miners get more bitcoin, and less demand to buy as the use cases evolve,” Draper explained. In essence, miners need to sell their bitcoin more to pay for electricity than hoarders and users need to buy. This results in a drop in the price.
“I expect this phenomenon to turn around in about 6 months as use cases become apparent,” Draper went on to say.
Due to the understood finite supply of bitcoin—there will only ever be 21 million coins released—as usage increases and the supply stays relatively constant, the only place for the price to go is up. As the price goes up, investors will potentially see bitcoin as a functioning store of value, which will perpetuate its value.
Jacob Donnelly is a full-time product manager and journalist covering finance and bitcoin. He runs a weekly newsletter all about bitcoin and digital currency called Crypto Brief.
Photo Disney | ABC Television Group / Flickr (CC)
Bitcoin Interest Grows in India From Cross-Border Payments and Corporate Support
Tech giants including Microsoft and IBM have been supporting Bitcoin startups, conferences, accelerators and developers in India. The efforts of these companies are beginning to pay off, as India has seen a gradual increase in the number of developers and freelancers in the Bitcoin ecosystem.
“There is lot of interest from freelancers in India who suddenly are now getting bitcoins from U.S.-based companies, and then they scramble to understand what is bitcoin,” Indian Bitcoin startup Blockonomics founder Shiva Sitamraju told Bitcoin Magazine.
The increase of Indian freelancers’ and developers’ involvement with Bitcoin startups and organizations has created an efficient environment for local people to buy and purchase bitcoins instantly.
“From publicly available sources that display data transparently, like LocalBitcoins and Coinsecure, we see about $4 million-$5 million USD moving in bitcoin in India every month. Apart from that, the forums see few 100 BTC being traded as well,” India’s prominent Coinsecure founder Benson Samuel explained.
Barriers Toward Adoption
Indians are skeptical toward new technologies. It took years for the Internet and smartphones to take off in the country, and it may take even longer for bitcoin to reach mainstream adoption in India.
But, Sitamraju told Bitcoin Magazine, once bitcoin is adopted by a substantial part of the Indian population, it could really explode across the country, especially in rural and underbanked regions.
“Indians are slow technology adopters, and we are far behind China/U.S. in bitcoin adoption. … [O]nce the early adopters/risk [takers] adopt it and enough user-centric applications [sprout]… this stuff really explodes in India. Indians are second-biggest users of blockchain.info, and today, we are seeing growing merchant adoption,” said Sitamraju.
Some of the Indian population’s skepticism towards bitcoin may be due to the Indian government’s tight regulations and restriction for the finance/banking sector. Currently, fewer than 35.5% of households in India maintain bank accounts, and less than 20 percent of the Indian population owns credit cards or debit cards.
“More education and good press coverage is necessary. India has a tightly regulated finance/banking sector and so people/government is a bit weary of new financial instruments,” explained Sitamraju. “It is important to stress than bitcoin is not evil. Tipping people [in] bitcoin so that they can themselves experience the power of the technology is an easy way. Also if major Internet merchants here accept bitcoin it would be a major driving force, as e-commerce companies like Flipkart, Amazon are now booming in India.”
Bitcoin’s Potential
The number of Internet users has been growing at an annual rate of 32 percent, as the cost of smartphones with 3G and 4G data plans and Wi-Fi access have decreased substantially over the last two years. Today, India has more than 300 million Internet users, and the majority are mobile users.
Because of widespread smartphone penetration in India, many users have begun using mobile bitcoin applications such as Blockchain.info and Coinsecure. To continue to this trend, extraordinary bitcoin startups such as Blockonomics emerged over the last few months, to ease the use of bitcoin for the Indian population.
Blockonomics is a simplified wallet watcher that allows users to track transactions and balance of many public bitcoin addresses at one place. Through Blockonomics, users can receive instant notifications and quick overview of pending and confirmed transactions in their wallets.
However, “We are not planning a wallet service, as we believe that the major strength of bitcoin is decentralization and that people should retain control of their own coins,” Sitamraju told Bitcoin Magazine. “We are planning to be a one-stop destination for managing crypto finances having advanced graphs/analytics and eventually becoming the Mint.com of bitcoin.”
Startups such as Blockonomics in HackCoin or bitcoin accelerators recently have been focused on creating Bitcoin applications that could provide users with advanced analytics and data about Bitcoin.
Photo via Coinsecure
Blockstream’s Pieter Wuille Proposes Tree Signatures for Improved and Flexible Multisig Bitcoin Transactions
In June, Bitcoin Magazine reported that Blockstream launched Sidechain Elements, a sidechain development framework with open source code, including an experimental sidechain for developers dubbed Elements Alpha. Now, in the first technical post to appear on the Blockstream blog after the announcement of Sidechain Elements, Blockstream and Bitcoin Core developer Pieter Wuille proposes the intriguing concept of Tree Signatures, an efficient multisig method with enhanced privacy.
Blockstream was formed by renowned cryptography experts, including some Bitcoin Core developers, to accelerate innovation in digital currencies and implement the sidechain concept described in the paper “Enabling Blockchain Innovations with Pegged Sidechains,” released in October. In November, Blockstream closed a $21 million seed funding round with nearly 40 high-profile investors.
Tree signatures, which can be coded only in the extended Alpha scripting language, can implement M-of-N multisig transactions (which required more than one keyholder to participate) more efficiently than Bitcoin scripting. Wuille shows how to combine Merkle trees and Schnorr signatures to implement large M-of-N multisig schemes:
“Merkle tree keys support very large 1-of-N. Schnorr signatures support very large M-of-M. This means that if we can write our spending conditions as a 1-of-(N possible M-of-M’s), we can build a Merkle tree consisting of Schnorr combined public keys.”
An interesting feature of the new multisig scheme is that only the keys actually used for signing are exposed to the public. For example, in a 1-of-N multisig policy, only one key is revealed on spending and the other keys stay hidden.
Wuille gave a talk titled “Key Tree Signatures: A Mechanism for Very Large, Compact, Efficient Multisig” at the SF Bitcoin Devs Group.
“In our first sidechain, Elements Alpha, we introduced several improvements to the cryptography and scripting abilities of Bitcoin,” reads Wuille’s abstract. “In this talk, I will discuss how some of these features can be used to build an improved multisig construction that is more efficient, compact, and flexible.”
A video of the talk will soon be posted online. In the meantime, Wuille posted his presentation slides.
Sidechains are a fundamental innovation because they permit separating the codebase and functionality of a blockchain (sidechain) from its currency. A sidechain can implement all sorts of innovative changes from Bitcoin Core, while still carrying bitcoin as a currency by means of two-way pegs that permit transferring bitcoin to the sidechain and back. Therefore, sidechains permit innovating without threatening the stability of Bitcoin or having to introduce ad-hoc altcoins. Elements Alpha is the first experimental sidechain, and, hopefully, it will be followed by operational sidechains.
Sidechains could put private bitcoin transactions back and adapt to anti-privacy techniques as they are developed. One of the most interesting features in Elements Alpha is Confidential Transactions, a cryptographic tool to improve the privacy and security of bitcoin transactions by keeping the amounts transferred visible only to participants in the transaction. Richard Gendal Brown, an executive architect for banking innovation at IBM UK, who wrote a simple but excellent explanation of sidechains, is persuaded that Confidential Transactions are a good step forward.
“Confidential Transactions are a very clever application of cryptography to hide the value of transactions whilst still allowing them to be fully validated by the network,” wrote Gendal Brown. “Without features like Confidential Transactions (or related technology such as ZeroCoin or ZeroCash), [Bitcoin-like] systems may be unsuitable for those with confidentiality and privacy requirements.” He added that perhaps Confidential Transactions aren’t a full solution, but they are a good start.
It’s important to bear in mind that sidechains will be able to operate with bitcoin as a currency only after suitable hooks are implemented in Bitcoin Core, which might encounter some resistance. A Bitcoin Improvement Proposal (BIP) to allow for bitcoin sidechains is in the works.
Photo by Denise Terry
Interpol Trains Police Officers to Use Cryptocurrency and the Darknet
AUG 26 DIGEST: Big Mining Pools Oppose Bitcoin XT Fork; Tor Vulnerability Suspends BTC Black Market Operations
Tuesday, August 25, 2015
Announcing The Nov 8 – 11 Mobile Payments Exchange
Three days of focused, structured business development and information exchange about the state of mobile payments.
USA: Industry leaders are predicting a drastic climb in mobile payments over the next four years. Researchers estimate that Mobile payment transactions will reach $800 billion by 2019, and that number will continue to grow. As customers continue to demand a convenient and seamless mobile checkout process, merchants are scurrying to keep up with those demands.
Organizations have been spending up to six or seven figures on building mobile apps or mobile sites for the company. These companies have been seeing extensive growth in mobile traffic and engagement, but they lack direct ROI from these upgrades. One of the biggest challenges is the checkout process that takes too long to complete and the technology disruptions that continue to occur. Shopping cart abandonment rate is 97% on mobile devices, and if organizations can get 2% of those potential sales to complete checkout processes, online sales would double.
CIOs and senior technology executives are fully aware of the consumer demands and the need to make these upgrades now. Some key challenges that technology executives have addressed when implementing mobile payments include:
- Integrating technology with legacy systems and determining what technologies will work best with current solutions
- Converting current mobile traffic into sales by implementing a seamless mobile payment process
- Building customer trust around mobile security
- Keeping up with consumers wants and expectations mobile shopping and POS mobile purchases
The Exchange is delivered in a format that is wholly conducive to true peer-to-peer networking. Each Exchange provides opportunities to learn best practices through numerous interactive sessions, listen to in-depth case studies from leading solution providers, and attend one-on-one business meetings.
For Mobile Payment solution providers wanting to increase their presence and truly help these organizations meet consumer demands and drive ROI via mobile technology, the Mobile Payments Exchange is essential.
Visit the Mobile Payments Exchange website to learn more about how to get involved: http://goo.gl/pD7ICL
About IQPC Exchange:
IQPC Exchange is a division of IQPC, which now has offices in major cities across six continents including: Berlin, Dubai, London, New York, Sao Paulo, Singapore, India, Sydney, Tampa and Toronto. Each year IQPC offers approximately 2,000 worldwide conferences, seminars, and related learning programs. IQPC’s large-scale exchanges are market-leading “must attend” events for their respective industries.
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For more information:
Alexander Abell
Marketing Manager – Mobile Payments Exchange
813-658-2566
Alexander.Abell@iqpc.com
Major Mining Pools Make a Stand Against Bitcoin XT Fork, Support for BIP 100 Grows
It has been little over a week since Mike Hearn and Gavin Andresen included Bitcoin Improvement Proposal 101 (BIP 101) into the alternative Bitcoin implementation Bitcoin XT. BIP 101 is designed to create a hard fork in the blockchain to allow for blocks of up to 8 megabytes, doubling every two years.
Despite a major uproar on forums, chat rooms and in the media, not to mention a significant drop in bitcoin’s exchange rate, support among miners is minimal. Bitcoin XT will need 75 percent of newly mined Bitcoin blocks to trigger a maximum block-size increase, but only some 1 percent of new blocks so far included such a message – all mined by Slush Pool.
Moreover, it seems unlikely that the 75 percent threshold will be reached any time soon. A significant chunk of mining pools have taken a fierce stand against Bitcoin XT, while others are very hesitant to make such a switch.
Furthermore, a rapidly growing amount of hash power is now publicly backing BIP 100, the proposal by Jeff Garzik that grants miners the right to vote the block-size limit up or down. Both F2Pool and BTCChina, as well as several smaller pools, have come out in support of BIP 100 in the past few days.
Below is an overview of all known mining pools that had at least 1 percent of hashing power on the Bitcoin network over the past week, and their stance on the block-size issue.
F2Pool (~21%): BIP 100 / 8MB
The mining pool that is perhaps most outspoken against Bitcoin XT is also the one representing the largest amount of hashing power on the Bitcoin network: 21 percent. Instead of BIP 101, F2Pool currently supports BIP 100, which, of course, makes it the biggest mining pool to do so.
Speaking to Bitcoin Magazine, F2Pool administrator Wang Chun explained that the Chinese mining pool is open to other suggestions on raising the block size as well. Chun does maintain, however, that consensus among the Core development team is a requirement, and made it abundantly clear that switching to Bitcoin XT is not an option at all.
“We do support big blocks if it is implemented in Bitcoin Core. But we believe the whole ‘Bitcoin’ XT thing is manipulation,” Chun said. “While the question whether and how to increase the block-size limit is a technical one, the Bitcoin Core and ‘Bitcoin’ XT issue is political. By introducing ‘Bitcoin’ XT, Gavin Andresen and Mike Hearn are splitting the community. Totalitarianism and dictators cannot co-exist with the free and open-source software spirit.”
Chun’s opposition wasn’t subtle.
“Boycott ‘Bitcoin’ XT. Bitcoin Core forever. Gavin Andresen and Mike Hearn should resign,” he said.
Earlier this year, F2Pool agreed on a block-size limit increase to 8 megabytes, in accordance with other Chinese mining pools. This did not, however, include a doubling of the block-size limit every other year, as implemented in BIP 101 and Bitcoin XT.
AntPool (~18%): 8MB
AntPool, the second-largest ming pool on the Bitcoin network with 18 percent of hashing power, is also part of the conglomerate of Chinese mining pools that proposed a raise of the block-size limit to 8 megabytes in June of this year. Additionally, AntPool includes a message in support for an 8 megabyte limit in their blocks. As opposed to messages that trigger a switch in Bitcoin XT, however, the message merely broadcasts an opinion. Whether the message should be interpreted as support for BIP 101, which apart from a bump to 8 megabytes is also set to double the limit every two years, is not entirely clear.
AntPool does seem a bit more willing to potentially make a switch to Bitcoin XT in the future, compared to most other mining pools. Somewhat confusingly, CEO of AntPool’s mother company Bitmain, Jihan Wu, tweeted that AntPool is willing to make a switch to Bitcoin XT if “a majority” has switched. It is unclear, however, exactly what majority Wu was referring to.
Speaking to CoinTelegraph in June, AntPool indicated support for bigger blocks as well, although the pool also voiced concern about a contentious hard fork:
“We like the idea of increasing the maximum block size, but if Bitcoin XT is too contentious, we also don’t want the community to be divided. Doubling the block size every two years may be too arbitrary, we’d like to see the block size grow according to the real needs of the network.”
Bitcoin Magazine reached out to AntPool, but received no response at time of publication.
BitFury (~14%)
BitFury is the biggest non-Chinese mining pool on the Bitcoin network, with 14 percent of hashing power. While the pool supports an increase of the block-size limit as well, it is currently not prepared to run Bitcoin XT and vote for bigger blocks. Despite a conservative approach, however, BitFury does not completely exclude the possibility of switching to Bitcoin XT at some point in the future – but only after careful analysis and consideration.
BitFury CEO Valery Vavilov told Bitcoin Magazine: “The Bitcoin Blockchain is not an amateur project anymore – it is becoming a platform for the Global Economy of Things. Changing the base rules can affect a lot of things, thus, any changes should be done very carefully, gradually, and with with tests.”
He added: “The proposed transition to the alternative client raises some concerns about its security: It is well known that key parts of the default Bitcoin Core client were thoroughly checked and sometimes formally verified, which cannot be said about alternative clients – including Bitcoin XT.”
BTCChina (~13%): BIP 100 / 8MB
BTCChina is part of the conglomerate of Chinese mining pools that proposed a raise of the block-size limit to 8 megabytes in June of this year as well. Since today, moreover, BTCChina has started to sign their blocks in support of BIP 100.
Speaking to Bitcoin Magazine, BTCChina’s Mikael Wang made it clear that his mining pool is not prepared to make a switch to Bitcoin XT. The Chinese pool that contributes 13 percent of hashing power to the network maintains that a consensus should be found among Bitcoin Core developers on how and when to raise the block-size limit.
“We will not support Bitcoin XT,” Wang said. “What the Bitcoin community needs now is stability and growth, and we will not do anything to jeopardize this further.”
BW Pool (~7%): 8MB
BW Pool has not mined any blocks in support of a hard fork switch to BIP 101. The Chinese mining pool that controls 7 percent of all hashing power on the Bitcoin network does, however, include messages in support of 8 megabytes in their blocks. Additionally, BW Pool was also part of the conglomerate of Chinese mining pools that agreed to an 8-megabyte maximum block-size limit in June of this year.
Whether BW Pool’s support for an increase to 8-megabyte blocks includes support for a doubling every other year, as programmed into BIP 101, remains unclear.
Bitcoin Magazine has not been able to reach BW Pool for comment.
Eligius (~5%)
U.S.-based Eligius, accounting for 5 percent of hashing power on the Bitcoin network, is another fierce opponent of Bitcoin XT and has no plans to make a switch. Much like F2Pool, Eligius’ owner who goes by the pseudonym “wizkid057” does not even consider Bitcoin XT a Bitcoin implementation – rather an altcoin.
Speaking to Bitcoin Magazine, wizkid057 said, “I see no reason to mine yet another altcoin: ‘Bitcoin XT’ is not Bitcoin.”
Wizkid057 does agree that the block-size limit should be raised at some point, somehow, but said he prefers a careful approach, and contends that such a step should be taken only when widespread consensus is reached.
“Something should – and will – be done about the block-size limit eventually, but based on real-world data,” Wizkid057 said. “It is definitely not a dire thing to try to force people into today. When a technically sound solution gets at least the most basic of consensus from users, developers, experts, miners and services, then I’ll consider moving in that direction. At this time I see nothing that fits the bill.”
KnCMiner (~5%): BIP 101
Sweden-based KnCMiner – controlling 5 percent of hashing power – is in favor of raising the block-size limit, and endorses BIP 101 in particular. Through a letter signed by seven of Bitcoin’s leading companies – including KnCMiner – CEO Sam Cole has expressed his support for the implementation of bigger blocks on the Bitcoin network. The letter did not explicitly state that this would entail running Bitcoin XT, but it did indicate that KnCMiner will run software in support of bigger blocks by December of this year.
Earlier this year, expressing his support for bigger blocks, Cole told CoinTelegraph: “We would like to see millions of people using bitcoin. To do that we need transaction fees that everyone can afford and is willing to pay. Putting it simply, that means many more paying transactions in each block, not less paying a higher fee.”
He added: “If bitcoin transactions end up costing the same as regular transfers then most of the world won’t see any advantages at all. Add to the fact that MasterCard’s main argument against bitcoin is the seven transactions per second limit … The sooner we fix it the better.”
KnCMiner has so far not mined any blocks that would trigger a raise of the block-size limit in Bitcoin XT.
Bitcoin Magazine reached out to KnCMiner, but received no response at time of publication.
Slush (~5%): optional
The only mining pool that has come out in support of Bitcoin XT so far is Slush Pool, controlling 5 percent of hashing power. While the Czech-based mining pool does not automatically sign new blocks in support of a block-size increase, it does allow its users to choose to do so individually. Currently, some 10 percent of hashing power on Slush is devoted to mining blocks in support of Bitcoin XT, and these numbers are slowly growing. Additionally, Slush is working to inform miners connected to its pool on the pro’s and cons of Bitcoin XT.
Speaking to Bitcoin Magazine, Slush Pool operator Marek “slush” Palatinus said: “At this moment we’re preparing some online materials and articles to explain for our users what exactly BIP 101 is and why they should vote for or vote against this proposal.”
He added: “The hash-rate is rising, and I expect more to come after we publish our articles on the topic. I see there’s lot of misunderstanding and fears about a hard fork, but I’m sure Bitcoin will resolve it smoothly in any way – even if we’ll continue with 1 megabyte blocks or switch to BIP 101 on the first day of 2016.”
21 Inc. (~4%): 8MB
21 Inc, which controls 4 percent of hashing power on the Bitcoin network, has not been mining blocks in favor of a hard fork switch to Bitcoin XT. However, the American mining pool that received a record investment for the Bitcoin industry worth $116 million earlier this year, has been mining blocks supporting an increase to 8 megabytes. Whether this includes support for a yearly growing block size as included in BIP 101 remains unclear.
Bitcoin Magazine reached out to 21 Inc., but received no response at time of publication.
Telco 214 (~2%)
Bitcoin Magazine has not been able to reach Telco 2014, which controls 2 percent of hashing power on the Bitcoin network. The mining pool has not been mining blocks in favor of a block-size increase.
Ghash.IO (~2%)
At time of publication, Bitcoin Magazine has not received a response from Ghash.IO, which also controls 2 percent of hashing power on the Bitcoin network. The mining pool has not been mining blocks in favor of a block-size increase.
Photo Tristan Schmurr / Flickr (CC)
Gem CEO: Bitcoin Regulations are Trying to Fit a Round Peg in a Square Hole
Regulation has always been a contentious issue in the Bitcoin industry. Some members of the community wish to avoid any regulation at all costs, while others want to work closely with regulators to bring clarity to the space as soon as possible. A panel on Bitcoin regulation was recently featured at the American Banker Digital Currency Conference, and it was during this discussion that Gem CEO Micah Winkelspecht, Chainalysis VP of Business Development Jonathan Levin, Chamber of Digital Commerce President Perianne Boring, and Bitcoin Foundation Regulatory Affairs Committee Chairman Marco Santori were able to discuss the various challenges for Bitcoin startups in the face of impending digital currency regulations around the world.
Is the BitLicense Too Broad and Flexible?
The BitLicense has been the center of attention when it comes to Bitcoin regulation since it was first announced by Former Superintendent of Financial Services for the State of New York Benjamin Lawsky, so it made sense that it was used as an example piece of regulation throughout the panel discussion. During an early portion of the conversation, Santori offered his thoughts on one of the core issues with the BitLicense, which is the broad nature of the language found in the regulation:
“What is the difference between a pure software play and a custodial wallet? What kinds of exchanges do act as custodians? These are highly fact-specific questions, and the way that the BitLicense is drafted — for better or for worse — it seeks elasticity. It wants to be flexible. I think that’s, on one side, good drafting. On the other side this speaking in metaphor makes it difficult to apply.”
One of the clearest signs that Bitcoin is difficult to regulate is the elasticity with which the regulation was drafted. As Santori mentioned, there may be unique situations where it is unclear whether or not a startup needs a BitLicense.
Fitting a Round Peg in a Square Hole
Winkelspecht took the issue of broad regulation in another direction when he discussed multi-signature addresses. After explaining what multi-sig addresses are and what they can accomplish, he noted how this kind of innovation could force changes in various legal definitions:
“When you think about this new definition of what it even means to own something, it totally transforms the way we think about solving these problems. One of the problems that we have with the regulations the way they’re written is that they’re really geared for trying to fit a round peg in a square hole, in that they don’t take into account the fact that the entire definition of custody and control can change. And so, what does custody or control mean?”
It’s difficult to force Bitcoin into the current legal framework because, as Winkelspecht noted, certain aspects of the peer-to-peer digital cash system may require completely new legal definitions. Winkelspecht provided one such example during the panel discussion:
“We’ve actually pushed — so for the legislation in California — we’ve actually written to the senate to try to get them to add a line, which just defines what they mean by custody or control. That was actually left out of the recent legislation.”
Raising Startup Costs Decreases Innovation
The problems associated with stifling innovation through regulation were also brought up by Winkelspecht during this part of the conversation. The Gem CEO explained some of the issues that small startups face when it comes to regulatory uncertainty in the Bitcoin industry:
“It’s still very, very murky and very unclear, so from a startup company who’s trying to figure out where you fit in the eyes of the law, it’s very difficult . . . Not having that level of clarity makes it extremely hard to do things like raise investment and actually try to build a sustainable business around it . . . We work every day with brilliant developers who are building solutions, and these are the guys who are actually innovating on things. They need the flexibility to try a lot of things and fail at a lot of things. If you raise the bar of what it takes to just get started, you are massively decreasing the innovation that’s going to come out of that space.”
Boring discussed ways in which a nonprofit incubator could bring along smaller new businesses before they had the ability to comply with the BitLicense. The Chamber of Digital Commerce had submitted the incubator idea to the New York Department of Financial Services as a possible solution to the regulatory issues troubling Bitcoin startups during the second comment period for the BitLicense, but the concept was never rolled into the final draft. During his own remarks, Winkelspecht went out of his way to support Boring’s suggestion.
For now, it appears there is plenty of work to be done in creating more regulatory clarity for Bitcoin companies and ensuring that innovation is not halted in the name of various legal costs.
Photo BTC Keychain / Flickr (CC)
AUG 25 DIGEST: 8 Leading Bitcoin Companies Pledge Support for BIP101; Bitcoin Exchange Rate Falls Below $200
Stefan Thomas: 'One Day We Will Decentralize Ripple'
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