Friday, September 18, 2015
First ETF to Invest in Bitcoin ‘Impressed’ by Price Stability
Thursday, September 17, 2015
Closing the Loop: Australian Organic Farm Creates a Local Bitcoin Economy Among Farmers
Budafoods, a certified organic farm and food supplier located in the Sunshine Coast Hinterland, Queensland, Australia, is attempting to create a closed bitcoin economy among farmers and to encourage its partners, supporting businesses and community to accept bitcoin.
Over the past few years, online payment services and platforms such as PayPal and banking systems have negatively affected businesses in the area, including Budafoods and the local businesses the farm supplies. Apart from the substantial fee for transactions and payments, PayPal and the bank transfers have been extremely inefficient, freezing funds for weeks at their will.
In search for a cheaper, yet quicker, payment method, Budafoods founder Mark Burgunder came across bitcoin, a decentralized currency which enables instantaneous and cheap transactions for merchants and small businesses.
“My main reason for attempting to get others to accept bitcoins is that I love the speed and ease of bitcoin payments and have a distrust of most central banking methods,” Burgunder told Bitcoin Magazine.
“On a deep emotional level, fractional reserve banking feels like cheating to me and has only been successful because it benefited the already rich,” he said. “Additionally through experience with credit card processing and using PayPal I have realized that not only are merchants/sellers charged a substantial fee for accepting money, but we also need permission from the banks, credit card companies and/or PayPal to accept payments.”
Unlike most companies that claim to accept bitcoin, Budafoods is not converting the bitcoin it accepts to fiat money.
“In Australia, a surplus of bitcoins wouldn’t be an issue as we currently have a great service available here called Living Room of Satoshi that allows us to make bill payments and electronic transfers to almost any bank account in Australia using bitcoins. We’ve been using this service on a number of occasions already with the largest purchases so far having been for chicken feed and for mobile electric fencing,” Burgunder told Bitcoin Magazine.
Closed Bitcoin Economy Among Farmers
As computer scientist and cryptographer Nick Szabo stated before, suppliers, businesses and customers must all accept and use bitcoin for it to be effective in an economy. Szabo calls this concept a complete closed cycle: store => supplier = workers => store.
Burgunder attempts to implement this concept into the local farm and business networks in Queensland. Currently, Budafoods is trying to convince local businesses in its community to accept and pay them in bitcoin, as it is faster and cheaper than other online payment methods available in Australia.
“We are supplying one of the local restaurants and would be more than happy to accept payment in bitcoins from this restaurant. We feel this should make it easier to allow the restaurant to accept bitcoins from tourists and, in turn, pay us for supplies with the bitcoins they’ve accepted,” said Burgunder.
The Use of Multi-Sig Wallets between a Supplier and a Business
Burgunder further explained that the use of multi-signature wallets between a supplier and a business will be far more efficient than any other payment method/systems available today.
“I’d envisage in an escrow scenario we’d pay for the purchase into a multi-sig wallet with one of the signatures being ours, with us signing a transaction to release the funds to the supplier once we’ve received the shipment,” explained Burgunder. “With the supplier also having one of the multi-sig keys it wouldn’t be possible for us to just withdraw the funds, giving the supplier certainty that the funds will not disappear on them. I feel this would help incentivize the supplier to assist in speedy and hassle-free delivery as in this scenario it would be in their interest to have the shipment arrive with us in a timely manner.”
Head of Russia’s Largest Bank Admits to Own Bitcoin as ‘BitRuble’ Sparks Controversy
Wall Steet Interest in Bitcoin Grows with ARK Fund Investing in Silbert’s Bitcoin Investment Trust
ARK Investment Management LLC (ARK), an active manager of thematic Exchange Traded Funds (ETFs), announced that the ARK Web x.0 ETF has become the first ETF to invest in bitcoin. ARK has made its investment for ARK Web x.0 ETF through the purchase of publicly traded shares of Grayscale’s Bitcoin Investment Trust.
The ARK Web x.0 ETF trades on the NYSE Arca exchange with the symbol ARKW. Securities within ARKW are related to cloud computing, Big Data, sharing services and social media, digital education, wearable technology, data mining, Internet of Things (IoT) and now cryptocurrencies. Like the other ARK ETFs, ARKW can be purchased by investors through various trading platforms, including Fidelity, Schwab and E-Trade.
“We’re believers in bitcoin, the currency, and Bitcoin, the technology platform. We also believe that current prices present an attractive entry point for our investors,” said ARK’s Founder and Chief Investment Officer Cathie Wood. “Bitcoin is a disruptive innovation, and, while still in its infancy, interest has been growing rapidly in Silicon Valley, Wall Street and Washington, D.C.”
Wood founded ARK Investment Management in 2014. In 2013, she completed 12 years at Alliance Bernstein as chief investment officer of Global Thematic Strategies with nearly $5 billion in assets under management and superior long-term investment returns. New York Business Journal notes that ARK has holdings in LinkedIn, Amazon, Facebook and Netflix, which says much about Wood’s ability to pick stocks of disruptive technology companies with high potential for growth.
“We’ve been watching [Bitcoin] for a long time, not long after Satoshi Nakamoto, whoever he or she is, designed it,” Wood said to New York Business Journal. “We’re looking at something now that’s stabilized.” Grayscale’s director of sales Michael Sonnenshein added that ARK can’t hold bitcoin directly – because bitcoin is considered as property by the IRS in the United States – but can hold Bitcoin Investment Trust shares. “Rather than them purchase bitcoin directly, the way they can purchase shares of Apple and Tesla, they can buy shares in the Bitcoin Investment Trust,” he said.
In March, Bitcoin Magazine reported that Grayscale’s Bitcoin Investment Trust received formal approval for listing on the OTC Markets Group’s OTCQX exchange, with the symbol GBTC. Trading started in the following week.
“We’re excited to receive an investment into the Bitcoin Investment Trust from an innovative firm like ARK,” said Grayscale Founder Barry Silbert. “ARK, a pioneer in the investment community, is in good company. Recent news has highlighted Goldman Sachs, UBS and Citi for their initiatives in the digital currency space.”
“Grayscale is a leader in the bitcoin ecosystem, bridging the gap between digital currency and the broader investment community,” added ARK’s Chief Operations Officer Jane Kanter. “Our investment philosophy is to invest in innovative companies, and we’re glad to be making our own innovative mark within the ETF community.”
Another ETF focused on Bitcoin, the Winklevoss Bitcoin Trust ETF (COIN) to be launched by the Winklevoss twins, is still going through the regulatory approval process.
The ARK investment signals that Wall Street is ready to accept bitcoin as an investment that, as noted by Wood, is now stabilized. Now, ARKW offers investors – including small investors – who are bullish about bitcoin, but prefer not to hold it directly, the possibility to bet on bitcoin with a traditional investment vehicle that anyone can buy.
It’s worth noting, however, that the considerable increase in Bitcoin adoption and Wall Street incestments in Bitcoin (the technology) in this and last year hasn’t increased the value of bitcoin (the currency). In fact, the price of bitcoin doesn’t grow with adoption – if anything, it goes down. A reason is that bitcoin is not only a speculative investment, but also a currency that is increasingly used to pay for goods and services – you can’t buy a beer with Facebook’s stock, but you can buy a beer with bitcoin. Usually, merchants that accept bitcoin sell it for fiat immediately, which brings the bitcoin price down.
Therefore, investors should bear in mind that the growing adoption of bitcoin by consumers and merchants, and the growing Wall Street investments in the Bitcoin system, don’t necessarily result in an increase in the price of bitcoin and the value of investment vehicles tied to the price of bitcoin, such as GBTC and ARKW.
Alt-Options Launches Bitcoin Derivative Market
A group of students from Boston University has set out to build a commodity derivative exchange for digital currencies, allowing those who hold large amounts of bitcoin to hedge against market volatility.
Alt-Options, co-founded in June 2014 by Joe Zhou, Kevin Foo and Marco Cuesta, aims to act as the Chicago Mercantile Exchange for bitcoin, allowing digital currency derivatives to be publicly bought and sold instantly on its platform. The new platform launches in this month with a competition in collaboration with the College Cryptocurrency Network.
For the uninitiated, financial derivatives are simply contracts agreed upon between two parties: whoever holds the asset, in this case, bitcoin, and whoever wants to speculate on the future price of the asset. One of the most popular types of derivatives, a call, is defined as the right to purchase an asset at a preset price, called a strike price, before some date in the future. Should the market price increase above the strike price, the option owner purchases and immediately sells the asset, pocketing the difference.
In exchange for signing the contract, the option purchaser pays whoever owns the asset a small fee. Asset owners enter into these types of contracts for the guaranteed income, and the option purchasers are incentivized with the large upsides associated with this type of trading. Other popular financial derivatives include puts, where the option owner reserves the right to purchase an asset at a specific price up until a period of time, and futures, where the owner must purchase the asset at a specific price on a specific day in the future.
Users can purchase financial derivatives offered by Alt-Options in order to both speculate on large bitcoin price movements and decrease volatility. For instance, if a user believed the price of bitcoin was going to increase above $300 sometime in the next six months, he or she could purchase a call at $300 for a small fee. If the price were to reach $350 before six months passed, the user would exercise his option, the bitcoin would be sold on the open market, and the user would pocket $50. If the user’s prediction proved incorrect, the asset owner who sold him the option would simply keep the small fee.
However, if a user wanted to protect herself from a price drop below $250 in the next six months, she would purchase a put at $250 on her personal balance of bitcoin on the Alt-Options platform, again paying a small fee. Should the price fall below $250, she would exercise her right to sell her bitcoin for the strike price of $250, protecting her from volatility in the bitcoin market. And while this arrangement may not seem revolutionary, calls and puts play an important role in the world market today by allowing large players to hedge against large swings in the market.
Financial derivative exchanges have been lucrative for years. Founded in 1898, the Chicago Mercantile Exchange took in $3 billion in 2010. At the end of March 2008, the notional amount of all outstanding positions stood at $81 trillion, according to the Bank for International Settlements.
While Alt-Options is currently regulated by Financial Crimes Enforcement Network (FinCEN) regulations, it has been able to bypass stricter guidelines by using “strong partnerships with regulated (bitcoin) exchanges,” said Alt-Options co-founder Joe Zhou in a recent interview. “There are no specific guidelines regarding digital assets, but we foresee some sort of regulation or set of guidelines from the U.S. Commodity Futures Trading Commission in the future.”
Alt-Options aims to find the same volume that allowed Chicago Mercantile Exchange to prosper with bitcoin trading. With tools typically found on pro-trading platforms and American-style options for retail clients, a team of students is hoping to revolutionize the way mining firms liquidate assets, hedge risk and manage the incredible amounts of bitcoin they generate every day while allowing casual and professional traders to experiment with bitcoin.
IBM Latest to Adopt Bitcoin's Blockchain Technology for Upcoming Global Project
Uber with Bitcoin Now Possible: Here’s How
DopeCoin Launches GROW Network ‘Pegging’ Crypto to Cannabis
BitPay Hacked for Over $1.8 Million in Bitcoins
Wednesday, September 16, 2015
Coin Center: State Bank Supervisors Proposal Good for Lawyers, Bad for Consumers and Innovators
The Conference of State Bank Supervisors (CSBS) released its model framework for states to use in designing regulations and made it clear it wants to see state governments take a proactive and rigorous approach to licensing and supervising “virtual currencies” businesses.
The Conference report said:
“…CSBS concluded that activities involving third-party control of virtual currency, including for the purposes of transmitting, exchanging, holding, or otherwise controlling virtual currency, should be subject to state licensure and supervision.”
Coin Center, a Washington based-advocacy group for digital currencies, voiced their objections, saying the conference started out with good intentions but didn’t follow through in this final report.
Peter Van Valkenburgh, Coin Center Director of Research, said:
“Unfortunately, we’ve strong concerns about the vagueness of the language they’ve chosen in this final draft: vagueness that could encumber plenty of innovative but non-custodial companies, whom CSBS likely never intended to be regulated at all.”
Coin Center has taken a balanced approach to regulation in the past, for example, working with and supporting California’s digital currencies regulations.
Van Valkenburgh added:
“We urge any state regulators who are encountering these issues to look for a clearer, more justiciable standard of ‘covered activities’…”
In their report, the bank supervisors call for an iron grip on companies, who must get a license and show state regulators the details of their business plan.
In addition, Coin Center notes, the proposed framework covers too wide a scope and includes businesses that don’t directly hold a customer’s funds.
“Covered activities” in the report include: “Services that facilitate the third-party exchange, storage, and/or transmission of virtual currency (e.g. wallets, vaults, kiosks, merchant-acquirers, and payment processors.)”
The Electronic Frontier Foundation’s Rainey Reitman is currently reviewing the proposal, but notes it is a throwback to a different age:
“At the end of the day, cryptocurrencies are distributed software projects that can be accessed from across the world. They shouldn’t be regulated like brick-and-mortar businesses that serve a specific locality or community.”
The Bank Supervisors justify their proposals by saying:
“Licensing and supervision serve as a mechanism for protecting consumers, ensuring system stability, safeguarding market development, and assisting law enforcement …”
The State Bank Supervisors can make recommendations in a model framework, and despite the fact that the organization carries some weight in the banking community, state governments are not required by law to adopt these proposals.
BitPagos Acquires Argentinian Bitcoin Exchange Unisend
Latin American bitcoin merchant payment processor BitPagos has acquired Argentinian bitcoin exchange Unisend, to provide bitcoin exchange and trading services on its bitcoin purchasing platform Gravel.
BitPagos launched Gravel in August 2014 to enable its users to purchase bitcoin at more than 8,000 Argentinian convenience stores. During that time, BitPagos CEO Sebastian Serraon told Coindesk, “You can go to any location, give them your account in Ripio and the amount of pesos you want to get in bitcoins. Boom: You have some bitcoins.”
The acquisition of Unisend will allow the company to operate a fully operated bitcoin exchange on Gravel. “The big change is that … users of the platform will have a new online exchange market in Argentine pesos and bitcoins, connecting immediately offers for buyers and sellers,” the BitPagos team announced in a press release.
BitPagos empowers small businesses and online merchants to process and facilitate simpler transactions internationally. The company believes that easy-to-use bitcoin exchange platforms could be the main factor that affects the growth of the Argentinian bitcoin industry.
“The acquisition of Unisend and the integration of BitPagos onto the Unisend bitcoin exchange platform will result a significant increase in bitcoin transactions, promoting and strengthening the Latin American and Argentinian bitcoin network,” the BitPagos team announced.
BitPagos raised $600,000 in a seed funding round led by Pantera Capital, Tim Draper, Barry Silber and Boost VC in 2014, to boost bitcoin use in South America. At the time, BitPagos processed around $150,000 per month on average. With the acquisition of Unisend, the company hopes to process around $1 million per month.
First Peer-Reviewed Academic Bitcoin Journal, Ledger, Launches and Issues Call for Papers
Ledger, a new peer-reviewed scholarly journal, will publish full-length original research articles on cryptocurrency and blockchain technology, as well as any relevant intersections with mathematics, computer science, engineering, law and economics. Ledger will be published online on a quarterly basis by the University Library System, University of Pittsburgh, as an open-access journal.
“The journal Ledger invites authors to submit their original research for the inaugural issue of the very first peer-reviewed academic publication devoted solely to the field of cryptocurrencies and its related subtopics,” says the first Ledger Call for Papers. “Ledger is the first peer-reviewed journal devoted to the inherently interdisciplinary subject of cryptocurrencies, and is proud to be supported by its distinguished editorial board.”
The Ledger editorial board includes representatives from MIT, Stanford University, Duke University, Cornell University, Oxford University, and New York Law School, as well as Jerry Brito, executive director of advocacy group Coin Center, and Vitalik Buterin, founder and lead developer of the “Bitcoin 2.0” platform Ethereum.
“I’m happy to say I’ll be serving on the editorial board of this new journal along with a distinguished group of academics and experts,” said Brito on the Coin Center blog. “The quarterly publication will have regular calls for papers and will be published in an open access format with transparent peer-review.”
The transparent peer review process will include the publication of peer-review transcripts with all the correspondence relevant to the processing of the manuscript, including referee reports, author responses and editor comments. Ledger wants to put in place a relatively agile peer-review process, with the first round of reviews complete and returned to the author within six weeks. Papers that require only trivial changes could then move from submission to acceptance within a six-week period.
Ledger welcomes papers of up to 4,000 words detailing new ideas and perspectives on any relevant topic, including, but not limited to, the technical, social, economic and philosophical developments and implications of Bitcoin, cryptocurrencies, public and decentralized ledgers, distributed consensus and more. The deadline for submissions for the inaugural issue is December 31, 2015, and the journal will consider submissions after that date for subsequent issues on an ongoing basis.
Motherboard reports that the idea of Ledger was born during a discussion between managing editors Dr. Peter R. Rizun and professor Christopher E. Wilmer on the Bitcoin forum bitcointalk.
“I wanted to build an academic and interdisciplinary communication channel that would allow bright minds in economics, sociology, physics, law and political science to contribute at the highest-level towards the evolution of Bitcoin,” said Rizun.
“I’m glad to see Ledger launch,” said Bitcoin developer Gavin Andresen, “and am looking forward to absorbing the great research that will be published there.”
Ledger will encourage authors to digitally sign their manuscripts, and timestamp the published manuscripts in the blockchain. In a concession to the early underground spirit of Bitcoin, the journal may permit authors to publish under a pseudonym “under extenuating circumstances.” It isn’t clear whether “Bitcoin: A Peer-to-Peer Electronic Cash System,” the original Bitcoin whitepaper by the probably pseudonymous Satoshi Nakamoto, would be accepted for publication on Ledger.
In fact, so far all technical contributions and whitepapers on important innovations in the digital currency space, including Ethereum, sidechains, and lightning networks, have been crowd-published outside of the scholarly journal publishing framework. Therefore, it might be argued that Ledger represents a step back to a more centralized and formal, less spontaneous and ultimately less efficient form of research.
However, only publications in formally established and peer-reviewed journals are recognized as valid scientific credentials, so Ledger is likely to stimulate academic researchers to contribute to digital currency innovations. Ledger has adopted the modern trends in scientific publishing – online publishing, open access, no author fees, and agile transparent peer-review – and might become a bridge between research hackers and the scientific establishment.
Photo the.Firebottle / Flickr (CC)
Subscribe to:
Posts (Atom)