New York to Accept Bitcoin-Exchange Proposals

Last week, I wrote a piece titled: New York Banking Regulator Benjamin Lawsky Thinks Mt. Gox Collapse Could Help Bitcoin. In it, I speculated that Lawsky was positioning New York to emerge as a primary global Bitcoin trading hub. While certain comments from Lawsky in the past have rubbed me the wrong way, he seems to … Read more

New York Banking Regulator Benjamin Lawsky Thinks Mt. Gox Collapse Could Help Bitcoin

Many people have been speculating all day as to why Bitcoin is up so much. The guesses have ranged from oligarchs worried about governments freezing their global bank accounts, to the UK moving away from a Bitcoin trading tax. While both those things may have played a role, I think the primary driver might be be comments from Benjamin Lawsky, superintendent of New York’s Department of Financial Services, on the sidelines of a banking conference today.

I’m not sure what time these comments were made, but it appears Lawsky wants to make sure New York state ends up being a global center for Bitcoin trading. This seems like a big deal to me.

From the UK’s Telegraph:

The collapse of the bitcoin exchange Mt Gox is part of a struggle for survival that could ultimately strengthen the virtual currency industry, New York’s banking regulator has said.

“It’s on the one hand a setback, on the other hand it will cause further improvements in this industry and some more regulatory involvement,” Benjamin Lawsky, superintendent of New York’s Department of Financial Services, told Reuters.

“It’s part of [a] shaking out,” he said on the sidelines of a banking conference in the US.

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What’s Not Being Said About Bitcoin by Coinbase Founder Brian Armstrong

Before I get to today’s excellent article by one of the co-founders of “next-gen” Bitcoin company Coinbase, I want to add a few of my own updated thoughts on the Mt. Gox fiasco.

While I am not at all surprised by the end of Mt. Gox (I predicted it in my piece several weeks ago), it happened much faster and in a much more spectacular fashion than I imagined. So the question here is: What comes next? Well that’s a two part question in most people’s minds, there’s the price action and the future of the protocol itself in the long-term. Let’s start with the first point.

For a while now, I thought the price pattern in Bitcoin might resemble what we saw following the last 10x run up and crash. In that case, we saw a six month consolidation from last spring to the Silk Road shutdown, after which the price exploded 10x again. If such a pattern was to reoccur, we’d be looking at the next move in Bitcoin around June. So we are still very much in a price consolation phase with wild moves within a wide trading range. I continue to work under that assumption.

What concerns me about the “missing” 750,000 bitcoins from Mt. Gox is that we don’t know who has them now. What if it is the feds, or some banking interest? The feds already own a lot of Silk Road coins, so let’s hope this is not the case. That would be the worst case scenario for the price in the near-term. Still, even if they do have these coins, they can only dump them on the market once. It’s also worth considering that the market has already priced this in. After all, the Mt. Gox Bitcoin price was already trading at a massive, bankrupting predicting discount for weeks before the actually filing.

As far as the future of Bitcoin, the protocol itself as well as peer-to-peer, decentralized crypto-currencies in general, I have no doubt the future is extremely bright. It’s the financial equivalent of the invention of the internal combustion engine.

However, this point is much more eloquently made by Mr. Armstrong of Coinbase. So here are some excerpts from his recent article: What’s Not Being Said About Bitcoin.

Over the past few weeks, we’ve seen a string of issues in the Bitcoin space, from the transaction malleability bug that ultimately closed Mt.Gox’s doors to a corresponding distributed denial of service (DDoS) attack that delayed transfers on multiple exchanges and services. These attacks, along with recent phishing scams and money-laundering arrests, have cast doubt on the Bitcoin space and caused consumer panic — which is fair.

But what hasn’t been communicated well is how those who are truly invested in the future of Bitcoin remain totally confident, because with every attack, breach, and arrest, Bitcoin is getting stronger and proving to consumers and businesses it is not going away.

Here is what is not being said about Bitcoin that should be.

Open networks keep growing even if individual participants fail.

It is critical to understand just how different an open payment network is from the proprietary payment networks that exist today. To illustrate this differently, let’s look at another open protocol: email.

Email is a good example of an open network with a standardized protocol; and this standardization is one reason why email is fast, free, and works just about anywhere in the world. There is no single company or country who controls the email protocol (just like Bitcoin), so thousands of different clients and implementations have been created all over the world giving it great reach and driving down prices for consumers who have many email options to choose from. You may have noticed you can successfully send emails between different service providers (such as Gmail to Outlook). This is also due to the open nature of the protocol.

If an individual email provider has a security breach, or loses the integrity of its customers, this doesn’t reflect on the concept of email generally — it merely reflects on the integrity of the individual provider. Further, the beauty of open networks is that they provide a low barrier to entry for competing services to come in and vie for your business as a consumer. Bad actors are quickly weeded out of open networks because consumers have choice — the choice of many new entrants coming on the market to vie for their business. Open networks do a great job of keeping incumbent companies honest, because if they make a mistake and lose their customers’ trust, their customers will be gone in a flash.

Unlike Bitcoin or email, our financial institutions and payment systems today are proprietary. This limits the ability for consumers to easily switch between payment providers and creates less competition for services. If the provider of a proprietary payment network isn’t serving its customers’ needs, where else will their customers turn? There is only one company you can use to access a proprietary payment network — the company that owns it. This higher switching cost has a few side effects: less competition in the market, higher fees, limited geographic reach of any individual network, and less innovation around things like speed of transactions.

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Video of the Day – Hitler Responds to Bitcoin Surviving the Mt. Gox Collapse

Here’s the latest in a long running series of creative Hitler video spoofs, which cover various contemporary topics of interest. This latest one takes on the recent chaos happening in the Bitcoin world, specifically related to the collapse of Mt. Gox (read my thoughts on this topic here). This video covers a lot of ground, … Read more

The Inside Bitcoins Conference is Coming to NYC – April 7-8

Last summer, I attended my very first Bitcoin conference. It was the Media Bistro sponsored “Inside Bitcoins” Conference and it was an incredible experience for me on many levels. To read my summary of the conference check out my post: Inside Bitcoins: Welcome to Satoshi Square. Conference organizers describe the upcoming event as follows: After thousands … Read more

How the Mainstream Media Would Cover “Cash” if it Was a New Invention

Those of us involved in the Bitcoin world are all too familiar with the consistent hyperbolic, fear-mongering so pervasive in the mainstream media’s coverage of Bitcoin.  None of that should be surprising since many of them simply do not understand it, and when you couple ignorance with a natural reflexive response to defend the status quo, you get some pretty terrible reporting.

The death of Bitcoin has been greatly exaggerated many times, including last fall when the Silk Road was shut down. Yet rather than being destroyed by the episode, it came out far stronger. Something I expect to be the case again after the Mt. Gox situation (read my thoughts on it) is behind us.

Meanwhile, if you are sitting on a lot of BTC and want to directly move it into other assets, such as gold and silver (which have been moving sharply higher in 2014), it is really easy to do. Amagi Metals is a Denver precious metals dealer and one of the first to accept BTC.

Now from Ledra Capital is a amusing article demonstrating how the mainstream media might portray cash if it were invented today. The piece is titled “Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide”, and I have provided some excerpts below:

World governments announced a plan today to allow citizens to anonymously carry parts of their wealth on their person and exchange it with others using small pieces of colorful paper printed with nationalistic and Masonic imagery along with numbers that purportedly represent the amount of wealth each piece of paper represents (if the paper is not a counterfeit). These pieces of paper are formally a “note” from each nation’s central bank, but they are also called “cash” by many – this is a technical matter that is too complex to cover in our basic primer; Suffice it to say, that it is representative of the complexity and user-unfriendliness of this new system. 

The launch of cash has provoked an immediate reaction from law-enforcement agencies worldwide that universally condemned the development.

“Cash is a 100% anonymous and untraceable payments technology.   It is like a weapon of mass destruction launched against law enforcement,” said Mike Smith, the recently confirmed FBI Director.  “It is the perfect payment mechanism for criminals, drug cartels, terrorists, prostitution rings and money launderers.   We don’t know how we will be able to combat such a technology and fully expect that a new generation of super-criminals will emerge, working in the shadows of a world where they can conduct their illicit affairs without leaving a trace.” 

Banking Superintendent of New York State, Mike Smith had the following to say: “I can’t think of any reason that a law-abiding individual would want to use cash. At a bare minimum, we believe there should be a licensing procedure for individuals or businesses that plan to use cash, a ‘Cash-License’ as it were. This license will limit ‘cash’ to trust-worthy individuals who keep detailed auditable records of all their cash transactions in order to keep New York safe from criminals.”

Though hard to imagine, cash operates with no consumer protection at all.   If your ‘bills’ are stolen or lost, they are gone forever.

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Bitcoin vs. Apple: Videos of Users Destroying Their iPhones Proliferate on YouTube

Apple unleashed a well deserved firestorm in the Bitcoin community with its decision to suddenly ban the extremely popular Blockchain app. This app was the last remaining user friendly way to facilitate Bitcoin transactions on iPhones and it had been downloaded 120,000 times. Apple has remained completely silent on its reasons for removing the app, … Read more

Meet “FiatLeak.com” – Real Time Map Analysis of Bitcoin Transactions by Country

This site is pretty sweet. It uses data from the three major Bitcoin exchanges for which data is published, Mt. Gox, Bitstamp and BTC China to show you which countries and which currencies are moving in and out of bitcoin in real time. I really like the table at the bottom which keeps a tally … Read more

“Bought with Bitcoin” T-Shirts

Liberty Blitzkrieg is pleased to announce an experiment in Bitcoin related retail.  As regular readers know, I am a strong supporter of Bitcoin as a weapon in free humanity’s arsenal to combat the ever encroaching authoritarian corporate-fascist state.  One of the major gripes about Bitcoin has to do with the limited places in which to … Read more

Bitcoin Goes Parabolic: My Updated Thoughts

Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.

– Nassim Taleb on Reddit yesterday

So Bitcoin has finally dipped its electronic toe into the fringes of mainstream consciousness. The results have been, to put it mildly, explosive, divisive and highly emotional.  I can see why.

While I had been aware of it prior, I never truly became curious about Bitcoin until I read an excellent six page article about it in the New Yorker on October 10, 2011.  I had no clue how the technology worked, but it intrigued me to such a degree that I sent it to my email list of close contacts.  What really struck me was the rationale for creating Bitcoin by its creator, the anonymous “Satoshi Nakamoto.”  This cryptographer was well aware of the cancerous nature of the world’s monetary system and the key role of Central Banking in that system.  This wasn’t just some technology geek playing games with virtual currency, this was a well thought out monetary revolution.

He had thought this entire thing out like a chess grandmaster.  He knew he had to be anonymous and that Bitcoin had to be decentralized, because he knew the Central Bank overlords would fight to the death to protect their money monopoly.  He created a currency that central planners could not naked short to infinity and manipulate with derivatives as they do with the precious metals markets.  It was this foresight that has led to its tremendous success today.

It wasn’t until I started accepting Bitcoin donations in September of last year (donate here) that I truly started gaining a small understanding of the technology and who the major players in the “Bitcoin Economy” are.  It was at 10 back then, it is 73 as I write this today.

BTC

A chart like the one above is nothing short of parabolic, and parabolic charts beget parabolic emotions.  From my end, I have received some complaints from “gold bugs” who seems annoyed that I am highlighting Bitcoin seemingly in preference to precious metals.  To them I have a few things to say.

First, I spent four years writing about gold and silver non-stop.  Sorry, it just gets repetitive and boring.  Never once have I wavered in my conviction on the need to buy and hold these metals; however, the world is dynamic and when new things enter the picture I will formulate new thoughts.  Some of the complaints against Bitcoin are valid, others are not.  The one I hear the most, which is completely untrue, is that Bitcoin is another “fiat currency.”  I’m often shocked that people make this error, as the definition of fiat is: 1. A formal authorization or proposition; a decree and 2. An arbitrary order.  Synonyms include: decree, diktat, directive, edict, rescript, ruling.  Bitcoin is 100% voluntary.  No one is declaring it the “money of the land,” forcing you to pay taxes in it, or invading the Middle East to protect the pricing of oil in it.  So let’s move on.

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