Bitcoin could be worth more than half a million dollars each

Does Bitcoin Need Its Own Silicon Valley?

When Steve Jobs was a boy, he looked up the name “William Hewlett” in his local phone book and was able to reach the founder of Hewlett-Packard at home. The elder technologist offered the future Apple Computer founder advice, some free components and a summer job.

Anecdotes like that make it clear how geographical proximity can help one wave of innovation set up the next. Even now, when it’s unlikely any young entrepreneur will be able to find Mark Zuckerberg in the Palo Alto phone book, hopefuls with ideas still flock to the stretch of towns flanking the San Francisco Bay. The accelerators are there, as are the venture capitalists’ offices, the networking events and the pool of engineers.

Would bitcoin benefit from geographic concentration as much as the tech industry has? Silicon Valley veteran and investor Marc Andreessen raised the idea in a recent article titled “What It Will Take to Create the Next Great Silicon Valleys, Plural”.

“Imagine a Bitcoin Valley, for instance, where some country fully legalizes cryptocurrencies for all financial functions.”

Venture capitalist Tim Draper, who recently purchased 30,000 bitcoins that the US government had seized from the Silk Road, says he already sees Bitcoin Valley forming, within Silicon Valley.

“I believe that the concentration of bitcoin companies around the Boost.vc accelerator will give those companies a real leg up,” Draper said, referring to the San Mateo accelerator founded by his son, Adam, whose portfolio includes BitBox, BitWall, Coincove and other bitcoin startups.

Bitcoin is not high tech

Concentrated talent and easy exchange of ideas would be good for any burgeoning industry. Yet bitcoin is so different from high tech that it’s unclear that what’s good for one would be good for the other. Unlike the chip and equipment manufacturers that sparked Silicon Valley, bitcoin companies don’t need to set up factories or physical R&D labs to do their thing. And it feels ironic to try to pin down a physical headquarters for an industry based on a global, distributed technology whose very virtue is that users’ geographical location doesn’t matter.

“Bitcoin Valley, anywhere you want it to be,” Draper joked in an email to CoinDesk.

Most bitcoin leaders admit to having two minds when it comes to the concept of a Bitcoin Valley. Such a thing might be helpful, but is it really needed?

“Now that the internet already exists, something like that is less necessary because everybody can communicate with everybody else,” said bitcoin evangelist Roger Ver in a recent Skype call from a Tokyo restaurant.

Talent pool is vital

To Hemant Taneja of General Catalyst Partners, even in a distributed world, companies still need to position themselves where the talent pool runs deepest, and for bitcoin that could be one of several contender cities.

“New York would give Silicon Valley a run for its money,” he said, pointing to the depth of financial industry talent in the Big Apple.

He continued:

“You can look at talent one of two ways. If the issue of consumer-oriented parts of the bitcoin stack that need to be created is where the winning companies will reside, it will likely happen here in Silicon Valley. If you think the understanding and appreciation of regulations and compliance and financial instruments is the way the next generation of companies will be built, I’m inclined to say New York is where that talent resides.”

Taneja pointed to Boston, home of General Catalyst payments company Circle, as another strong contender, boosted by the Massachusetts Institute of Technology, which is currently conducting an on-campus bitcoin experiment.

A distributed industry

Meyer “Micky” Malka, founder of Ribbit Capital and funder of Coinbase and other bitcoin companies, sees a more distributed future for the bitcoin industry, with companies cropping up where the user cases are.

With his background in international finance companies, Malka sees a lot of pain points in the developing world; companies in far-flung places may take longer to develop and get funding, but it will happen, he said:

“We’re seeing a lot of good ideas all over the world, but the capital is still very concentrated [in Silicon Valley].”

How to become Bitcoin Valley

It may be possible for any location to throw its hat in the ring to host Bitcoin Valley. Bitcoin insiders advise hopeful local or national governments to skip the traditional measures, such as offering companies financial incentives or building R&D centers, and focus on creating a welcoming regulatory climate for bitcoin companies.

Draper warned:

“Our federal government needs to lighten up on the banks using bitcoin, or we will lose all the business to other countries.”

Other countries could compete with the US as centers of bitcoin innovation with innovative regulatory approaches, some have suggested.

“Allowing more experimentation in financial services could help those in countries that don’t have stable currencies (let alone banks) to more easily save and move their money across borders,” Andreessen wrote. “Some of these places would leapfrog, innovation-wise, through something like bitcoin”

Ver said he is involved with an undisclosed Caribbean jurisdiction, helping it position itself as a potential bitcoin hub.

“Myslf incuded, thousands of bitcoiners are willing to move anywhere in the world” where conditions are favorable, he said.

However, Taneja pointed out that no matter how favorable the local market conditions are to bitcoin adoption, most companies will only locate a headquarters near the necessary talent. If there ever is a Bitcoin Valley, it will probably be in a location that has both benefits, he said:

“States with the right talent will have an advantage if they create an environment for bitcoin adoption in the market.”

Source : http://www.coindesk.com 

Are Fees Killing the Bitcoin Debit Card Dream ?

 

For the past five years, Bitcoin users have been innovating and creating better ways to make Bitcoin accessible to everybody. In the beginning, it was near impossible to exchange U.S. Dollars for Bitcoin. Now, of course, we use one click of a button on Coinbase, and our transaction completes. It’s fast, easy and simple.

There’s another frontier ahead though that puts users in a difficult boat: using their Bitcoin. Sure, when spending money online through Expedia or Dell it’s really easy. One copy and paste and you’re on your way. The next big problem is brick-and-mortar stores; to which the Bitcoin businesses have come up with a plan to overcome. Enter: The Bitcoin Debit Card. It’s too bad the dream is dying before it can even begin, though.

Xapo, an online Bitcoin wallet company, guarded by high-tech vault security, recently announced that they would be producing a Bitcoin debit card. This card would allow for point-of-sale transactions to take place and ATM withdrawals. It would link with your Xapo account pull directly from it whenever the card is used.

ANX, a Hong Kong-based Bitcoin company and exchange, also recently announced their Bitcoin debit card that was ready ship almost immediately; making it the official first Bitcoin debit card in existence. It carried all of the benefits of the Xapo card but was simply ready for take off sooner.

Two companies, one concept. The Bitcoin community has been ecstatic for this innovation and the future it held. Unfortunately, the fees behind each of these cards may put them out of favor before they even become truly integrated.

Xapo Fees

In the beginning, Xapo told users that there was only a $15 shipping fee for them and that merchants would pay their traditional debit and credit card fees as normal. Recently; however, this has been proven to be untrue with Xapo’s new fee schedule. The new fees leave many users to believe this is a “bait-and-switch” technique, and have hard feelings. The fees are as follows:

As you can see, these are very different than the initial promise. In fact, these are completely different. Transaction fees, monthly fees, ATM fees that in combination with double ATM fees from the bank or provider. This shift has left a bad taste in many peoples mouths.

Ever since the release of this fee schedule, Xapo has faced a public relations fiasco that it should be desperately trying to dig itself out of against the Bitcoin community.

ANX Fees

ANX launched their debit card with little time to spare. As an already well-established company, they didn’t need to wait on investors like Xapo may have had to. Ken Lo, the CEO of ANX, sat down with CCN to talk about their debit card in an exclusive interview. They stated their fees outright, but the fact that fees still exist may be a problem for the Bitcoin community.

Their fees are as follows:

The fees are in different places, but they look comparable to Xapo’s fees. While it’s understandable that a company has to make money somehow, the Bitcoin community seems to have rejected the idea or notion of fees in general. In fact, that’s almost the very reason Bitcoin was created.

Will This Kill the Bitcoin Debit Card?

It’s hard having your dreams crushed a bit. It certainly is interesting to see what the aftermath will be after the community makes the decision to either use the card or leave it behind. This does leave an opportunity for companies to battle with their fees though.

Competition has proven well for Bitcoin in the past. The competition between Bitpay and Coinbase has pushed both companies to innovate and bring the community products and services beyond their wildest dreams.

The Bitcoin debit card will not die. This new outrage offers the opportunity for either ANX, Xapo or another company to bring the community a debit card with little to no fees. Whether or not they will is left to the company and the community demand.

Source : http://www.cryptocoinsnews.com

New Index Ranks Argentina ‘Most Likely’ to Adopt Bitcoin

Which markets are most likely to see the fastest adoption of bitcoin?

With over $250m of venture capital invested in bitcoin startups to date, much is at stake in understanding which markets will prove most fertile for bitcoin. In addition, many governments and regulatory agencies are seeking to better understand the economic opportunities presented by bitcoin along with the perceived risks.

The new Bitcoin Market Opportunity Index (BMOI) is the first attempt at providing a rigorous answer to the above question, assembling a new data set to rank the potential utility of bitcoin across 177 countries.

The BMOI can be helpful to entrepreneurs, investors, regulators, economic development agencies, media outlets and anyone who is interested in gaining a better understanding of how bitcoin may progress geographically in the months and years to come.

How should we measure bitcoin adoption?

Sitting at the fast-moving intersection of technology, policy and economics, bitcoin is both a fascinating and complex research topic.

One of the first questions that arises in constructing a bitcoin adoption index is: what type of adoption should the BMOI measure?

For example, should the BMOI focus on where bitcoin is most likely to be used as a store of value?  Or should it measure bitcoin’s commercial potential as a medium of exchange? And which of these two is more likely than the other to influence bitcoin’s geographic progression? The answers to such questions have a significant influence on the choice of index variables and weightings.

The BMOI is intended to measure bitcoin’s total potential adoption and thus includes data which relate both to bitcoin’s function as a store of value and as a medium of exchange, as well as a technology platform.

The data set is, however, structured in such a way that it can also be used to construct alternative versions of the index around different scenarios or more specific use cases.

For example, one may believe that bitcoin does not have as much immediate potential in the international remittances market as compared to its use as an alternative investment vehicle or store of value. Or one may feel that Darkcoin is going to supplant bitcoin as the preferred cryptocurrency in the black market and that therefore the size of the informal economy in each country is not a significant factor in bitcoin adoption. Such scenarios can be incorporated into alternative calculations of the BMOI by removing the corresponding variables and or adjusting weights.

Which data is most closely linked to bitcoin adoption?

On the question of what variables to include in the index it is useful to remember the old joke about how economists go about choosing which data to work with:

A drunk on his way home from a bar realises that he has dropped his keys. He gets down on his hands and knees and starts groping around beneath a lamppost. A policeman asks what he’s doing.

“I lost my keys in the park,” says the drunk.

“Then why are you looking for them under the lamppost?” asks the puzzled cop.

“Because,” says the drunk, “that’s where the light is.”[1]

In other words, economists often are forced to use available data rather than the data which, if it did exist, has a stronger relationship to the subject of study.

With bitcoin it could, for example, be quite useful (and more precise) to examine which cities or regions may see the fastest bitcoin adoption. However, much of the relevant data in this case is only available at country level and, as a result, the BMOI analysis is a country-level index.

A further challenge is that even when relevant data exists it only exists for a small subset of countries. For example, publicly available smartphone penetration data – which could be quite helpful in understanding bitcoin adoption – is unfortunately only available for 48 countries. If we were to exclude countries which do not have smartphone penetration data from the BMOI then the index would lose nearly 130 countries.

Another data point which could potentially be helpful for understanding bitcoin adoption is how quickly social norms spread across different countries. After all, using bitcoin requires at least some change in existing behaviour. However, this particular study only covered 25 countries.

In the interest of trying to ensure the BMOI was comprehensive in terms of countries covered, an effort was made to select index variables with available data for a large number of countries.

The more data the better? How should data be weighted?

When it comes to indexes more data does not always equate to ‘better’ results.

However, given the complexity surrounding bitcoin adoption every effort has been made to include the variables which may have the greatest influence on bitcoin’s progress. Adding additional variables to an index can also help provide a more nuanced ranking of countries.

On the question of how different data should be weighed in the index, can it be reasonably claimed that some variables will be more important to bitcoin’s future than others? If yes, how much more important?

While weighting choices can be controversial, it is often useful in making indexes more realistic, and some variables in the BMOI are therefore weighted more strongly than others.

Some will certainly disagree with the BMOI’s weighting choices, and it is likely that the weightings will be adjusted over time as we learn more about bitcoin adoption. Meanwhile, unlike other bitcoin indexes which do not disclose their weightings it can at least be said that the BMOI weightings and methodology are openly documented.

BMOI data and sources

In constructing the BMOI a high priority was placed on finding both reliable and recent data. BMOI data also comes from a variety of different sources, including governments, multinational agencies, private companies and scholarly research. In total nine principal sources of data were used to construct the BMOI (Table 1).

Table 1: BMOI Data Sources and Time Periods

World Bank (2013, 2012)

Bitnodes.io (July 2014)

IMF (2013)

Sourceforge.net (July 2014)

CIA World Factbook (2013)

Reinhart & Rogoff (2010)

CoinDesk (July 2014)

Elgin and Oztunali (2012)

Google Trends (July 2014)

In some instances the data sets from Table 1 were supplemented or updated to reflect recent events. For example, Reinhart and Rogoff’s financial crisis data were updated with this week’s sovereign default by Argentina.

The BMOI variables

The BMOI is comprised of 39 variables deemed important to bitcoin’s potential for adoption. These 39 variables are grouped into seven equally-weighted categories to calculate BMOI’s rankings (Table 2).

Table 2: BMOI Data Categories

Technology Penetration	Remittances
Inflation	Black Market
Financial Repression	Bitcoin Penetration
Financial Crises – Historical

A full discussion of the relationship between the above categories and bitcoin adoption is impractical here given space constraints but it is useful to briefly outline the relationship between some of the above categories and bitcoin adoption and how that relationship influences the BMOI rankings.

For example, bitcoin is fundamentally a technology and the level of technology adoption in a country, as reflected in measures such as internet use and mobile phone penetration, will have an important influence on bitcoin adoption. The memory of recent financial crises, particularly hyperinflation or a currency crisis, will also have an influence on adoption. The greater the degree of technology penetration, frequency of financial crisis, etc for a particular country then the higher that country ranks on the BMOI.

Why is bitcoin regulation not included in the BMOI?

Just as the choice of variables included in the BMOI must be defended some variables which have been omitted from the BMOI also require justification. For example, one category which was excluded from the BMOI but which could have a significant influence on bitcoin adoption is bitcoin regulation.

The reason why bitcoin regulation was excluded from the BMOI for now is two-fold. First, bitcoin regulation is a recent development and still evolving. Second, and perhaps more importantly, bitcoin regulation may end up cutting both ways in terms of indicating the likelihood of bitcoin adoption.

On the one hand, more aggressive bitcoin regulation in countries such as Ecuador and Bolivia may ultimately serve as a significant barrier to bitcoin’s prospects in those countries. However, aggressive bitcoin regulation could also provide a signal from regulators about bitcoin’s positive adoption prospects in that country, as perhaps is the case in China.

In sum, it is too early to tell how to score bitcoin regulation and this category has therefore not been included in the overall BMOI rankings.

The BMOI sub indexes

The categories in Table 2 also comprise the sub indexes of the overall BMOI, and these sub indexes allow for micro comparisons.

For example, we can compare how strong the correlation is between a sub index like Bitcoin Penetration against all of the other data categories. This particular comparison provides a helpful test on how well the other non-bitcoin data categories are predicting bitcoin specific adoption measures.

While the Inflation category is based on a single variable (consumer price inflation) most of the categories in Table 2 contain multiple variables. For example, the Bitcoin Penetration category contains the following four variables:

• Global bitcoin nodes
• Google ‘bitcoin’ search share
• Bitcoin client software downloads
• Bitcoin venture capital investment (dollar amount by country)

The Bitcoin Penetration sub index is laid out in detail in Table 3.

Table 3: Bitcoin Penetration Sub Index Variables

Category	Variable	Sub Variable	Source
Bitcoin penetration
	Global bitcoin nodes	a) Total Bitcoin nodes	Bitnodes.io
		b) Global Bitcoin nodes per capita	Bitnodes.io / World Bank
	Bitcoin client software downloads	a) Total client downloads	Sourceforge.net
		b) Client downloads per capita	Sourceforge.net / World Bank
	Google ‘bitcoin’ searches		Google Trends
	Bitcoin VC investment		CoinDesk

As noted earlier, not all BMOI variables are equally weighted.

For example, the score for the ‘Global bitcoin nodes’ variable is broken down into two equally weighted sub variables – total bitcoin nodes per country and bitcoin nodes per capita. Sub variables were utilized in this case so that small countries with a high per capita number of nodes, such as Iceland, are not disadvantaged in the overall index ranking due to the small size of their population or economy.

A summary of the BMOI dataset can be found in Table 4.

Table 4: BMOI Dataset Summary

Countries	Categories	Variables
177	7	39

As a point of reference, the widely cited Legatum Prosperity Index includes 89 different variables for 142 nations around the world.

The BMOI Top 10

According to the Bitcoin Market Opportunity Index the 10 countries where bitcoin is most likely to be adopted can be found in Table 5.

Table 5: BMOI Top 10 Countries

Ranking	Country Name
1	Argentina
2	Venezuela
3	Zimbabwe
4	India
5	Nigeria
6	Brazil
7	United States
8	Nicaragua
9	Russian Federation
10	Iceland

Given the BMOI’s criteria it is not surprising to see Argentina ranked number one. The country suffers from persistently high inflation, has a large informal economy and a history of recent financial crises. In addition, Argentina has a relatively high degree of technology penetration and controls on the movement of capital. Argentina also just defaulted on its sovereign debt for the second time in 13 years. While external sovereign defaults have a relatively minor weighting in the BMOI this recent development is reflected in the BMOI rankings.

Like Argentina, number two ranked Venezuela also suffers from relatively high inflation and frequent financial crises, while number three ranked Zimbabwe has the largest informal economy (black market) of any country in the dataset at 63% of GDP.

A country which often features in discussion of bitcoin adoption but which is just outside of the top-10 is China, which is ranked number 13. China’s ranking is brought down by its relatively small black market; according to Elgin and Oztunali (2012) and other shadow economy researchers – ie Buehn and Schenider (2012), Schneider, Buehn and Montenegro (2010) – it is estimated that roughly 10% of the economic activity is conducted informally in China.

In contrast, near the bottom of the overall BMOI rankings at number 167 is Ireland, which recently hosted a high-profile bitcoin conference. While Ireland scores well in some categories, such as technology and bitcoin penetration, the country has wrestled with deflationary pressures in recent years and also has a relatively limited set of restrictions on the flow of capital. Dublin is a global tech hub, however, and the fact that the BMOI does not include a separate tech hub variable brings down Ireland’s ranking.

A full list of the BMOI rankings as well as a more detailed discussion of the index methodology, data and sources is available here.

An impossible challenge?

While indexes like the BMOI can provide a useful reference point to better understand factors which may influence bitcoin adoption it is important to acknowledge the limitations that are inherent in the construction of any such ranking. Countless variables not included in the index will influence adoption, data sets are often incomplete, and index methodology choices can have a significant influence on rankings.

More will be written about the Bitcoin Market Opportunity Index in the weeks to come on CoinDesk and in the State of Bitcoin reports, and the BMOI will also be updated periodically as new data becomes available.

Source : http://www.coindesk.com 

New Bitcoin Exchange Quoine Offers Pro Tools for Asian Traders

A new trading exchange has set its sights on the wealthy markets of Japan, Hong Kong and Singapore, and wants to usher in a new era of professionalism for serious bitcoin traders across Asia.

Quoine is being built by a management team of former and current forex traders who have all worked at some of the biggest names in banking, in the world’s premier financial centers.

With a philosophy that all financial dealings should be treated “like hygiene” in order to function properly, the team is focusing on security and compliance, with an interface designed to be both professional trader- and amateur-friendly.

The need for a local exchange

Mario Gomez-Lozada, Quoine’s CEO and founder, told CoinDesk he was taken aback at the volumes and number of users the exchange had accumulated, despite its beta status:

“I was pleasantly surprised at the level of interest [in Japan] from what I’ve seen. More than I thought, actually. We just launched a couple of weeks ago and we have some volume now. It was quite active yesterday and today, there are guys making markets in Japan, a few people coming in buying a lot of bitcoin.”

He further said statistics showed that about 90% of current users were in Japan, indicating the country’s eagerness to trade bitcoin and hunger for a proper exchange.

Tokyo is still a major global financial center, with all the world’s major financial institutions maintaining a large presence in the city and a population of traders from all over the world.

Previously, Mt. Gox had been the only major exchange that accepted local bank transfers from Japan and approved identification documents in Japanese language without the need for official translations.

“Japan is a huge market and there’s a gap thanks to Mt. Gox. There is a huge opportunity to grow the ecosystem.”

Exchange features and future additions

Since January, Gomez-Lozada has been working with a development team based in Vietnam to build Quoine’s interface and trading backend. Half that time has been spent testing and trying out new features, he said.

Still in beta, the exchange is available in both English and Japanese languages. Additionally, the developers are also working to include Indonesian, in preparation for a launch in that country in the near future.

Quoine is also more focused on trading features than other digital currency exchanges. For now, it supports a range of fiat currencies, including USD, JPY, SGD, and HKD, along with bitcoin.

The aim is to eventually support all fiat currencies using a background conversion system designed by Gomez-Lozada himself.

The site also offers market, limit and range orders, with live market data and candlestick charts, and is now testing a margin trading system that will eventually boost volumes and allow users to make significantly larger trades.

Wallets, payments and smartphones

As is standard with other exchanges, wallet and payment systems are built in. The company is currently talking to partners in Japan about ways to leverage these services to potentially provide local merchant services to compete with local startups like Bitcheck.

Quoine’s clean, two-tone web interface is designed primarily for use on mobile devices and browsers, with a desktop version also coming soon. Gomez-Lozada said the mobile priority was a conscious decision, as most forex traders in Asia preferred to use smartphones.

“This kind of thing you have to be watching all the time, you can’t be sitting in front of a computer. When I was a forex trader I never used a desktop.”

Once the margin trading system is functioning smoothly, the exchange plans to hold an official launch.

Security tradeoff

Quoine says it takes up to 24 hours to withdraw funds, including bitcoins, from user accounts. This is due to coins being stored in cold wallets, which Gomez-Lozada said is a tradeoff to allow users to feel more secure.

Checks and balances are run on a daily basis and performed manually to make sure everything matches up, using a process similar to that of banks.

“As a user, I’d prefer an exchange to be like that,” Gomez-Lozada added.

In the bitcoin closet

Quoine’s management team all come from a forex trading and fintech background, with key members still working at major companies until the time comes when they can ‘out’ themselves as bitcoiners.

Gomez-Lozada said he hopes his own experience working in finance and trading, along with experience working in Asia, give him the qualifications he needed to run Quoine.

Originally from El Salvador, he emigrated to the US as a teenager where he obtained a Masters in Computer Science before moving to Tokyo.

For about 15 years, he worked at companies like Merrill Lynch and Bank of America in Tokyo and Credit Suisse in Japan and Singapore, holding the CIO position at both companies and managing FICC (fixed income currencies & commodities) technology.

Trading interface. Source: Quoine.com

After dabbling in Internet startups, he decided to return to his trading and technology roots and build a “proper exchange” to trade bitcoin, something he and his colleagues were fascinated by.

“We don’t think there’s that many exchanges right now being run by people who came from finance,” he continued.

He also has plenty of experience dealing with regulators and risk control in Japan, and understands what companies need to do in order to stay compliant.

Gomez-Lozada has largely bootstrapped the project from his own savings, but also accepted additional funding from a Japanese angel investor who is a big believer in bitcoin and wanted to join the project.

How will it perform?

CoinDesk was able to road-test the beta exchange and can report that there were no problems getting verified with Japanese language-only documents, funding the account with a local Japanese bank transfer, and buying bitcoin at reasonable market rates.

Withdrawing bitcoins was also seamless, actually taking far less than the cited 24 hours to complete.

Quoine will face immediate competition in its quest to “fill the Mt. Gox void”. BitFlyer, an exchange founded by former Goldman Sachs derivatives trader Yuzo Kano, is currently chasing Japanese business with its Japanese language-only site.

BitOcean Japan, the local arm of Chinese startup and ATM producer BitOcean, is also gearing up to launch a multi-language exchange based in Tokyo this month, through its partnership with Atlas ATS.

Source : http://www.coindesk.com 

Can Bitcoin Deliver on its Promise to the World’s Unbanked?

Jason Tyra is a Certified Public Accountant and ACFE Certified Fraud Examiner. In this article, he evaluates the potential benefits bitcoin offers for the world’s impoverished and unbanked, and outlines what needs to be done to give this underserved population access to its ground-breaking technology.

While many relatively affluent westerners have adopted bitcoin as a political statement, a cost-saving measure or a technical curiosity, a very small portion of its users have done so as a result of the demands of their own political or socioeconomic circumstances.

However, for those that potentially stand to gain the most from the digital currency – impoverished and unbanked people living in developing regions of the world – bitcoin remains largely inaccessible.

An objective look at a few of bitcoin’s characteristics and how these apply to developing countries shows that the ecosystem has some room for improvement before it can gain traction among the world’s poor. By pointing out some of these limitations, I hope to help spur development of innovative solutions to mitigate them.

A refuge from insecurity

Bitcoin is a good option for storing wealth where governments and/or banks are untrustworthy, restrictive, or unavailable. Here I mean untrustworthy in the most literal sense.

In spite of the lack of social justice decried by some bitcoiners, rule of law and sanctity of private property are still reliable assumptions in the United States and most other western countries. The vast majority of people living in developed countries don’t fall asleep at night wondering whether their bank will be nationalized overnight or their house seized by the state.

Wealth held in bitcoins can be securely stored free of transaction fees for an indefinite period. Bitcoins cannot easily be expropriated by the state, or limited in any meaningful way in their movement between jurisdictions by capital controls. They cannot be devalued over time by inflationary monetary policies.

Banking hurdles

Starting with the question of why people lack bank accounts in the first place, bitcoin isn’t necessarily helpful. A World Bank report in 2012 cited cost, distance to a banking facility and bureaucratic hurdles as reasons that more than 2.5 billion of the world’s poor lack a bank account.

 

Among these, cost may be bitcoin’s sole weak point, but it’s a significant one. Cost is not only a measure of the fees charged by banks for the privilege of maintaining an account, but also one of opportunity to consume.

Unless you are a miner, the only way to get bitcoins is to receive them in payment or purchase them with fiat currency. Purchasing with fiat currency usually requires a bank account or at least some way to send money internationally. Having a bank account means that you have official identification (a bureaucratic hurdle) and also that you have been able to defer consumption long enough to have money that you don’t need to spend right away.

The same would be true for wealth ‘stored’ in bitcoin. This can be extremely difficult for people living hand to mouth.

On the subject of mining, the amount of computing power and electricity now required to mine bitcoins places this activity well out of reach of all but the wealthiest enthusiasts. For a citizen of the developing world, mining diamonds or gold is likely to be far easier than mining bitcoins.

Choke points

It is worth pointing out here that remittances are a major source of cash-flow for families in developing countries who have relatives living in the US or other more developed nations. Bitcoin has a niche use here for very low-cost transfers, provided the recipient has a way to spend bitcoins or convert them to fiat.

“If you have no way to get online, then you have very limited ways to send or receive bitcoin.”

Most of bitcoin’s users will eventually need to convert to fiat currency to pay taxes or shop in places that don’t accept cryptocurrency.

In the United States, doing this kind of business with reputable vendors typically requires a bank account, while purchases may also require a credit card. If you don’t have a bank account and credit card in the US, then you are out of luck.

In other countries, street-level money changers may be capable of meeting this demand up to a point. However, money changing and currency speculation are illegal for private citizens in many countries without a license (or at all). Incidentally, these are the countries where bitcoin is likely to be attractive due to oppressive governments.

The features of bitcoin that empower users to ‘be their own bank’ also place it out of reach of vast swaths of humanity.

Today, you must have one of two things to use bitcoin: a computer with an Internet connection that is powerful enough to handle direct interaction with the block chain or the ability to access a third-party servicer (eg: using your own computer, using a public computer, such as at an Internet cafe or library or using a web-enabled cellphone).

Micro-lending and SMS

Bitcoin is perfect for the kind of small-scale entrepreneurship that is advocated by micro lenders (Kiva being a good example) and not-for-profit organizations in impoverished areas.

In essence, small loans or grants may be used to purchase a motorbike, cellphone, livestock, and so on. These items, in turn, are used as capital for small businesses, the profits of which are used to repay the loan. Bitcoin is an extremely cheap and low risk way for nascent entrepreneurs to accept payment, but only when the purchaser and seller both have Internet enabled smartphones running bitcoin software.

According to a survey of 24 developing countries conducted by the Pew Research Center, even where Internet service is available, smartphones are still relatively rare and many of the world’s poor access the Internet using public computers.

Cellphones are commonly used to make payments in these countries, especially using services like M-Pesa, but such services normally use SMS functionality rather than a sophisticated app. While, some startups are now offering services that can allow people to send and receive bitcoin via text, they still have some way to go before being commonly used.

Realistic solutions needed

So, right now, if you have no way to get online, then you have very limited ways to send or receive bitcoin. And, if you don’t have a bank account, then bitcoin is unlikely to be an effective solution to your problem, since bitcoin itself requires a bank account for most users to transact business effectively over long periods of time.

For all of their positive features, cryptocurrencies are mostly inaccessible to the developing world for now. Changing this will require bitcoiners to develop robust and realistic solutions that will put it into the hands of the people who need it most.

Source : http://www.coindesk.com 

Bitcoin in the Philippines, By the Numbers

Luis Buenaventura is the Head of Product at Satoshi Citadel Industries, and “dreams of a world where everyone has access to everything”. 

Satoshi Citadel Industries calls itself a “provider of bitcoin solutions” and manages a range of different digital currency services and sites, including Bitmarket, in-beta exchange Coinage, photo-sharing site Bitstars.ph, and remittance service ReBit. SCI is also rolling out pre-loaded bitcoin cards as another fast way to get bitcoin into newcomers’ wallets.

In many ways, the Philippines is probably the perfect environment for the kind of decentralised revolution that bitcoin has the potential to enable.

It has some of the warmest, kindest, most open people in the world, surrounded with all the hallmarks of the developing world – suffocating pollution, tremendous traffic jams, institutional corruption on all levels, poverty on an unreal scale.

Poverty and remittance

About 90% of our population lives on $10 or less per household per day, a statistic which is most staggering when you consider that the international definition of ‘extreme poverty’ is $2 a day per person.

Not surprisingly, there are about 10 million Filipinos living and working outside the Philippines – so many in the fact that their collective cash remittances account for about 10% ($30bn) of the country’s GDP.

The average Filipino will send $200 home every month, from which international remitters will charge anywhere from 4% to 10% per transaction.

One could say that the bitcoin solution practically writes itself here. Indeed, a handful of young crypto-based services are currently working to drive that figure down to just 1%, potentially upending an industry that has been gouging the market for decades.

Boosting e-commerce

E-commerce has only just started to make inroads here over the past five years, as the number of Internet-connected devices has increased. Smartphone penetration is now at 40%, far outstripping desktops and laptops, which have long languished at about 10%.

The problem is, the majority of online sales in the Philippines are decidedly still offline in their fulfillment. Buyers either agree to meet the sellers at a physical location (a food court, maybe, or a train station), or they make a cash deposit at the seller’s bank and then wait for next-day delivery. This is because only 5% of Filipinos have access to credit cards.

Applying for your average Visa or MasterCard requires background checks and plenty of paperwork, and even then the incidence of fraud and chargebacks are still inordinately high. Again, the alternative that bitcoin presents here is a no-brainer – it’s trustless, irreversible and has close to zero setup time. Furthermore, and importantly, no one needs permission or ID checks to use it.

Digital money is still money

Via our company Bitstars, we created a bitcoin-powered daily selfie contest with small daily cash prizes. Initially, due to budgetary restrictions, they were $5-$10 in BTC for each day’s most popular selfie, but as time went on, that limitation became a very strong audience filter.

To put it bluntly, the only users who competed for $5 were those who could really use $5. They weren’t taking part because they believed in bitcoin as a technology or revolutionary movement – to them, it’s not that bitcoin is better money, it’s that it is money, full stop.

There were never any philosophical arguments with our users about whether bitcoin was a valid currency or why decentralised systems are better. All that mattered was that it looked like money, and we were letting them have some of it.

The bottom line is that bitcoin represents money that 90 million low-income Filipinos could use in areas and situations where the traditional systems have otherwise failed them. They could start sending and accepting bitcoin immediately with just their mobile phones, with no upfront costs, and without having to ask for permission from anyone.

Turbocharging finance

Bitcoin turbocharges a set of financial enablers that these socio-economic tiers have never had access to.

Imagine 150 people from all over the world chipping in a dollar each to put an underprivileged child through school for a year. Or 50 people putting together $20 to help an aspiring street vendor buy enough goods to start an ad hoc business.

Micro-lending on this scale has never been possible before due to transmission costs, and that’s just the tip of the iceberg.

The Philippines is one of the few places in the world where you can buy eight individual sheets of paper, four teaspoons of vinegar, or a single cigarette (in USD, those would all cost less than 10 cents).

Fiat currencies often have a hard time supporting the granularity that entrepreneurship at this level requires, but bitcoin is divisible to an almost infinite degree.

Speculating

It’s difficult to speculate what kind of effect cryptocurrency will eventually have on the population of the Philippines over the next few years. What’s certain is that it already provides us with the tools necessary to make some big changes on all levels of the socio-economic strata.

It will all start with education and distribution. We need to get bitcoin into the hands of as many people as possible, and then support the ideas that naturally come about as a result of diverse adoption. In that respect, at least, bitcoin is exactly like any other nascent technology: it’s all about the numbers.

Source : http://www.coindesk.com

BTC.com reportedly bought for record $1.1 million

Cryptocoins News reports that the high-profile BTC.com domain was purchased by Josh Garza of GAWMiners for $1.1 million.

It was reportedly available for a couple of weeks.

GAWMiners manufactures Bitcoin mining equipment. It states to differentiate itself through its involvement and expertise gained from other ventures such as internet service and advanced telephony. According to their site, they “are not a fly-by-night start-up or some guy working out of his garage and hoping to become successful. We are a real company.”

On its homepage, the theme of green, environmentally friendly mining is emphasized with ads for low power miners.

Visiting BTC.com, the home page says that “something amazing is coming soon”, but that’s the extent of its current content.

The $1.1 million price tag is the most paid for a digital currency domain, beating out bitcoinwallet.com, sold for $250k. The recently suspended auction for Mark Karpeles’ bitcoins.com was estimated to fetch $750,000.

Source : http://dcmagnates.com

Bitcoin could be worth more than half a million dollars each

We spoke to Sime Bakic from Bitkonan, one of the rising Bitcoin startups tipped for success in 2014.

Although BitKonan is EU based, CEO, Sime Bakic, from the very beginning wanted to have product which will attract a client base from all over the world. That was main reason why BitKonan is USD and not EUR trading platform. However, since than some European countries made biggest progress in terms of regulation of crypto currencies and potential of EU clients is growing rapidly everyday. Of course, people from BitKonan, flexible as they are, decided to react quickly and to introduce SEPA transfers for their European clients and for us that was reason to organize an interview with BitKonan CEO, Mr Sime Bakic in their Croatian headquaters.

What prompted you to enter the world of Bitcoin?

Bitcoin is a revolution. Bitcoin verification technology is two steps ahead of his time, and can be mapped to all segments of the business or those who need a certificate of authenticity. 
In this case it is Bitcoin, and tomorrow it may be something else. 
In any case, I see great potential for widespread use and I just couldn’t let such great things happen without me. So I gather a team of top experts from different fields (finance, programming, organisation) and we very seriously started the implementation of the project.

How did you come up with the idea to make BitKonan market?

Bitcoin markets are still very poorly developed and have not yet reached the level of a full range of functions which Bitcoin with its potential deserves. So we decided to use our experience and knowledge and to offer to the Bitcoin community a market that meets the demands of a professional trader who seeks swift execution, advanced functions (stop limit) and visibility. On BitKonan is also very easy to place an order (the key combination buy, sell) and this makes it accessible to any ordinary trader as well.

Bitcoin is very often linked to crime, what do you think about this general perception in public?

I think that’s nonsense. Everything can be linked to the crime.  Criminals use all currencies including Bitcoin. Bitcoin is not anonymous, as some may think, because all Bitcoin transactions are public and visible in the transaction chain.

What do you think about the future of Bitcoin?


Anything is possible. I think the Bitcoin protocol is a revolutionary technology that has a great future, although still belongs to an extremely risky investment. If enter in widespread use, Bitcoin could worth more than half a million dollars each. In the long term I think Litecoin could profile itself as a currency for the broad mass because of the rapid transaction processing and to become a serious alternative to Bitcoin. If we apply 2nd law of thermodynamics, the long-term value of Bitcoin and Litecion will be leveled out. Looking from this point of view it seems that Litecoin is currently better investment for long term investors and speculators. Now it seems impossible, but remember that only a year ago Bitcoin was worth a few dollars, and today about the 650 dollars, same thing could happen with Litecoin.
In any case Bitcoin protocol will leave a deep mark in history … you can bet on it!
We can be happy that we live in a time when Bitcoin occurred and that we are part of it.

What do you think about other crypto currencies? 
We are thinking to introduce shitcoin on the market…. Laugh.
No, I think the market will take what it needs, and that will probably be the LTC and BTC.
All alternative crypto currencies are copies of Bitcoin and Litecoin, so I do not see reason why they should enter in the widespread use.
However, I consider them positive to test various concepts and if some currency brings something ingeniously new and pass the test of the market it can easily take a leading role.

What are your plans for the future of BitKonan market? 


As you mentioned earlier, we are currently working on the implementation of new funding options. 
Except of basic Bitcoin, Litecoin trading options, we think about the introduction of more complex financial instruments, but for something like that we have to wait market to mature.

Of course if the negotiations with venture capital investors start to be more dynamic we can expect it soon… in any case it will be a challenging endeavor, which will require more engagement and resources.
To summarize, our aim is to offer a wide range of services, so that BitKonan take the lead role of Bitcoin industry.

 Source : http://www.coinspectator.com

Meet the company that wants to bring bitcoin to the stock market

Bitcoin rising! Reuters/Lucas Jackson

Bitcoins could be coming to an stock exchange near you.
Bitcoin-mining company BitFury Group is hoping to become the first bitcoin-related company listed on a major exchange as early as next year, reports bitcoin newsletter Crypto Crimson. The San Francisco-based cryptocurrency startup has managed to raise some $20 million in venture-capital funding from those willing to bet that the firm can distinguish itself from the pageant of entrepreneurs hitching their wagons to the risky crypto-currency’s future.

BitFury completed its venture round last month, luring notable investors including Bill Tai and Jonathan Teo, who were early Twitter backers. BitFury’s CEO, Valery Vavilov, said he wants to take the firm public, according to Crypto Crimson: “The success of this funding round validates our strategy and brings us closer to our aspiration of becoming the world’s first publicly listed Bitcoin company.”

Of course, there’s no guarantee that BitFury will launch an IPO or will be successful if it does. However, the idea that prominent investors are putting real money behind such digital currency companies is a vote of confidence in bitcoin after the disaster of Mt Gox, the world’s largest bitcoin exchange, the collapse of which earlier this year led to the loss of nearly half a billion dollars’ worth of bitcoin. Lately other payment companies like PayPal have also been taking a greater interest; PayPal’s CEO said in April that the company is “thinking about” including bitcoin as a payment type.
Of course, there are many alternatives to bitcoin, and new ones are constantly appearing. All of them use peer-to-peer payment networks that aim to take traditional banks and payment systems out of the picture. So far, though, none has proven itself to be a stable currency for doing business in, as opposed to a speculative investment that can go horribly wrong.

Source : http://qz.com