Bitcoin News

Ripple Unveils Next-Generation System for Digital Transaction Consensus

Decentralized systems like digital currencies rely on consensus. This enables the network to agree that certain events – transactions, in the case of bitcoin – have taken place.

Miners are certainly needed to generate new bitcoins. Yet, their role is far more critical in confirming that bitcoins were actually sent from one place to another, thus maintaining an agreed-upon “truth” in the network. This keeps the block chain reliable and, arguably, underpins its very existence.

But, maintaining consensus in a decentralized network isn’t simple. The risk of bad actors disrupting transactions or fabricating new ones is an old problem and the subject of much debate and study. Though, some argue that the bitcoin network’s size and compensation mechanisms account for this possibility.

A recently released white paper from Ripple Labs examines how decentralized mechanisms can prevent bad actors in a block chain payments system from creating fake transactions. The Ripple Protocol consensus algorithm (RPCA) uses a node election system to establish the veracity of new transactions, adding them to a continuous chain of closed transactions that are considered absolute.

David Schwartz, chief cryptographer for Ripple, told CoinDesk that the RPCA is another step in the long evolution of digital money and transaction systems.

He explained:

“Satoshi [Nakamoto], with bitcoin, came up with the first solution to the double spending problem that didn’t require central authority. And that scheme worked, and it allowed bitcoin to be so phenomenally successful. But, it was the first such scheme, and it’s probably not going to be best such scheme and there’s going to be innovation in that area.”

Schwartz suggested that next-generation consensus mechanisms, such as those introduced by Ripple, are pushing bitcoin creator Satoshi Nakamoto’s work even further.

Finding truth faster

The goal of the RPCA is to make it possible for a globally disconnected network to agree without relying on proof-of-work infrastructure.

Each server in the Ripple network is tasked with voting on a new batch of candidate transactions during rounds that take place every few seconds. Transactions agreed upon by the network are confirmed and made permanent once the round closes.

This approach is different from bitcoin’s, for which several confirmations by the mining network are often needed before bitcoins can be used or re-spent. Election node systems have been utilized in other block chain applications in the past, including projects like darkcoin that mix transactions through a network of master nodes.

Trusting the generals

The underlying concept – maintaining truth in a network where the potential for fraud exists – has been discussed for decades.

First labeled as the “Byzantine Generals Problem” in a 1982 study, the problem of keeping a group of connected but separate parts honest is akin to an army attacking a city suffering from an infiltration of spies. Because the couriers carrying messages between generals can’t be trusted, a way must be found to ensure that information coming from the different parts to the army is true.

How does this apply to decentralized payment systems like bitcoin and Ripple? In order to maintain network integrity, a majority of participants must be accepted as truthful. Should someone or a group of bad actors gain control of the network, they have the potential to disrupt it. At the very least, this risk threatens the overall legitimacy of the system itself.

Bitcoin solves this problem by creating a reward incentive, thus promoting good behavior among network participants. The application of incentive to the transaction confirmation process makes miners want to contribute to a successful – and public – ledger.

Accessing global money

As Schwartz explained, the existing infrastructure for sending payments around the world is too onerous and costly for many to utilize. The result is that many are locked out of affordable money and are forced to rely on expensive services.

Finding a way to quickly establish the truth for transactions, then, would enable new methods of sending money abroad to be established. By giving servers the ability to establish transaction veracity without crunching memory-intensive calculations, he says Ripple opens the door to lower-cost avenues for worldwide money access.

Schwartz told CoinDesk:

“I think everybody in the industry knows that international remittances are broken, there’s no good technical reason for why someone shouldn’t have access to wholesale foreign exchange rates. It’s just the way the system developed.”

Source : http://www.coindesk.com

KnCMiner Announces $14 Million Series A Funding Round

KnCMiner has announced it has raised $14m as part of a Series A funding round.

The Sweden-based bitcoin mining company said in a statement that GP Bullhound, a technology-focused investment bank, acted as the advisor for the funding effort.

Creandum, a venture capital fund based in Stockholm that has invested in companies such as popular streaming music service Spotify and mobile payments firm iZettle, led the round.

KnCMiner is one of several mining companies to announce major funding deals in 2014. Earlier this year, BitFury announced that it raised $20m in new capital while others in the space, such as PeerNova, have also raised undisclosed amounts.

In a statement, co-founder Sam Cole said that the new funding will allow KnCMiner to build out its existing services such as its cloud mining offering and consumer-facing mobile tools.

Cole added:

“We are delighted to welcome our new investors and thrilled to have the opportunity to extend our lead within the bitcoin ecosystem. In tandem with our considerable investments in IP, this round of funding will further cement our lead in hardware design and deployment of cryptocurrency services.”

In recent weeks the company has unveiled some of its future plans, which include data center operations in the Arctic Circle and a broader push to grow in what is becoming an increasingly competitive sector of the bitcoin economy.

About Creandum

The company that led the funding round has a broad portfolio of technology companies. Founded in 2003, Creandum’s focus on the digital economy has led to stakes in payments and media firms.

Beyond Spotify and iZettle, Creandum has invested in companies like independent game studio PlayRaven and Vivino, which designed a mobile app that recognizes wind bottle labels. Last month, Creandum helped fund an online auto repair marketplace called Autobutler.

According to its website, the firm seeks to “help build market leaders within consumer, software and hardware.”

Technology bank’s role

GP Bullhound, the investment bank that managed the KnCMiner funding round, has a long history facilitating tech company mergers and acquisitions.

The bank has done business with a number of high-profile companies in the technology and digital sectors, including Spotify and mobile money service Monitise.

In a statement, Per Roman, managing partner for GP Bullhound, said that the deal reflects its belief that bitcoin holds significant promise for the world economy.

He explained:

“We believe bitcoin will have a tremendous impact on a global scale. KnC is already the leading vendor of mining equipment and we are delighted to act as advisor as well as investor to this world-class management team.”

Source : http://www.coindesk.com

BitFury Capital Invests in Bitcoin Security Specialist BitGo

UPDATE (4th September 16:00 BST): A BitFury spokesperson has confirmed that this is the second investment by BitFury Capital.

BitFury Capital, the investment arm of bitcoin mining infrastructure provider BitFury, has announced an undisclosed investment in BitGo.

The news marks the venture capital firm’s second investment in recent weeks, following confirmation that it had invested in an anonymous bitcoin wallet provider.

Speaking to CoinDesk, BitGo CEO Will O’Brien elaborated on the significance of the deal, though he declined to offer any specifics.

Praising BitFury as a leader in the bitcoin mining sector, O’Brien told CoinDesk:

“BitFury is one of the largest companies in the bitcoin space and they’re looking to invest further in global entrepreneurship and really exciting companies in the space. To have the endorsement from your customer, saying they not only want to be a customer, but also want to be an investor, that’s a big deal.”

Although neither company disclosed the size of the investment, O’Brien did suggest that the sum was smaller than BitGo’s $2m seed funding round and $12m Series A.

“We don’t disclose investments unless they’re of a particular size and scale,” he said, adding that securing a valuable client relationship was more important than the capital raised.

In conjunction with the deal, BitFury announced it would use BitGo’s enterprise multi-signature platform for its treasury management needs.

Platinum customer

BitFury is the company’s latest Platinum-tier customer. BitGo says it has witnessed a growing interest in both its product and enterprise financial management tools, which are tailored to the needs of the bitcoin industry.

BitFury CEO Valery Vavilov suggested that the company’s recent expansion was a key driver behind the deal, saying:

“As our business has been scaling rapidly, we were looking for efficient and secure bitcoin corporate treasury solutions that would satisfy our operational needs and meet our corporate governance and reporting standards.”

The CEO added that the company’s diversified operations offer unique management challenges, requiring the right operational tools and accounting transparency.

“This partnership with BitFury Group has the potential to grow and establish new standards for the industry,” O’Brien added.

Growing interest in multisig

O’Brien noted that BitGo is the only company to successfully deploy and commercialise multi-signature technology.

The CEO added that he has seen a lot of interest in BitGo’s Enterprise product since its launch in April. The attention is coming from a variety of clients, including financial services experts, hedge fund managers, investors, e-commerce clients and bitcoin miners, he said.

“At this point, we’ve had over 500 companies sign up for BitGo Enterprise, we’re in the process of enrolling and qualifying them right now. [...] The reality is that people are realising that this is no longer a do-it-yourself industry.”

Many early players in bitcoin tried to develop their own security technology, often with lacklustre results, he added, concluding: “Much like VeriSign provided a brand for Internet security, BitGo is doing the same for bitcoin.”

The Bitcoin Foundation has been contacted for comment on this story but no response has been received at press time.

Source : http://www.coindesk.com

How Bitcoin Brokers Trade Millions Without An Exchange

Exchanges are the most popular way to dispose of bitcoin holdings for fiat currency, with thousands of coins being traded daily. However, when one cryptocurrency startup founder needed to cash in his bitcoin quickly, he didn’t log on to an exchange to do it.

Instead, the entrepreneur started asking around for a broker who could settle the issue with an over-the-counter (OTC) trade. The broker he found, through mutual friends, was Jonathan ‘Jonny’ Harrison, who runs London bitcoin ATM firm Satoshipoint. The two struck up a conversation on Skype and soon agreed to do a deal.

“Someone told me that he wanted to sell 12 grand-worth, we had a chat on Skype and entered an agreement, and so that was the deal done,” Harrison said, recounting the trade.

Harrison charges a 5% fee for an OTC trade. Although he says he arranges such trades only occasionally, other brokers specialising in OTC trades have found a lucrative niche in the market. As the bitcoin price surged last year, wealthy holders eschewed exchanges and turned to brokers to lock in their gains with a single big trade.

Tricks of the OTC trade

Trading over the counter offers several advantages over placing an order on an exchange. For one thing, traders get to protect their capital from the effects of price slippage.

Slippage is what can happen when an investor sells a large block of coins on an exchange all at once. If the sell order is large enough, it can cause the price on the exchange to fall as it is filled. As a result, the seller can lose a substantial chunk of the proceeds by the time the entire order is filled.

Just how much of a trade is lost to slippage is difficult to quantify, according to George Samman, a co-founder of BTC.SX and a former portfolio manager at a New York investment firm. In a hypothetical trade where an investor sold 100 BTC on BitStamp at today’s price of about $490, he or she would stand to lose up to 10% to slippage.

“When someone is trying to put a block trade through and there’s not enough takers at a certain price level, then the price keeps dropping as bids keep getting lower and lower,” he said.

Other factors can come into play. Traders could be laying in wait with ‘false’ orders on the exchange to feel for large blocks coming to market. When some of those orders are filled, savvy traders could cancel the rest of their original orders, sensing that a big block is being traded, and quickly place new orders at lower prices, Samman says.

“Other traders will just snap it away and the price could drop $10, $15, off of 20 coins being traded in a 100-coin block. And they will keep snapping it up because it keeps slipping and slipping,” said Samman.

Trust in a trustless environment

Speed and privacy are the other advantages that OTC block trades offer. Sellers needing fiat currency in a hurry might turn to a broker, as would investors who prefer not to entrust their trading data with a large exchange.

In an ironic inversion of bitcoin’s trustless protocol, OTC trades are a throwback to markets operated by trusted intermediaries. Mark Lamb, chief executive at London-based exchange Coinfloor, who regularly conducts large OTC trades for clients, charging a fee of up to 1% of the traded amount, said:

“What you’re selling is trust. This OTC broker knows what they’re doing, vets the participants and knows the participants are going to settle and the trade is going to go through.”

When a call comes in to sell a block of coins, Lamb hits his address book to look for buyers. When a match is found, Coinfloor draws up contracts between itself and each party. The buyer and seller deal with Coinfloor, not each other. After the contract is signed, both parties must transfer their funds to Coinfloor immediately. Once the broker has received the funds from both sides, the assets are then sent to the appropriate counterparty.

While most of the OTC brokers for big blocks CoinDesk spoke to keep identification documents to comply with know-your-customer rules, OTC traders may believe that they enjoy a greater degree of privacy with their brokers.

“Customers want to do trade with someone they can trust; someone they trust more than an exchange. They might come to a broker because they may not trust the top few exchanges,” Lamb said.

Cashing in big blocks

Brokers are most in demand when prices are volatile. Investors are either rushing to lock in gains by selling a big block, or to accumulate more coins when the price plunges.

Harry Yeh, managing partner at hedge fund and venture capital firm Binary Financial, is a regular OTC broker and only carries out trades of at least 50 BTC. He recalled one episode of manic selling, as clients wanted to turn their bitcoin profits into millions of dollars of fiat, and quickly:

“When the price goes up, the demand for blocks goes through the roof. When the price crashes, everybody wants to sell. Around December 5th, when the whole China thing happened, we had people who wanted to sell $2m–$3m of bitcoin right away.”

Yeh was coy about who his OTC clients were, saying only that he has dealt with “high net-worth individuals and institutions”. When pressed, he gave up precious little information, saying that clients included “hedge funds, family offices and private wealth managers”.

According to Yeh, private wealth managers have been contacting him of late as they seek to diversify their clients’ holdings to include cryptocurrencies. Lamb was similarly vague about OTC clients, saying only that he served “high net-worth individuals”, adding:

“There are people who put a lot of value in executing a full block of 1,000 or 5,000 coins at once.”

OTC trades and the wider market

What effect does all this OTC trading have on the wider market? Brokers say that OTC trades protect the market from exacerbated volatility.

“The whole goal of the broker is not to disperse the coins into the market. It’s to move it between one seller who has decided to sell, to ideally one buyer who would like to get in to hold,” Lamb said. “It reduces volatility.”

Samman, of BTC.SX, said OTC brokers have a role to play because bitcoin investors are too green about managing their trading risk. Instead of using a sophisticated combination of trading orders to reduce price slippage for a big block, for example, traders may try to offload a big chunk of coins with a market order, which is filled at the prevailing price.

“Some of the traders are very inexperienced [...] they’re throwing in market orders and thinking that just because they see the price at one level, they’re going to get that price,” he said.

While many exchanges, including the current top exchange by volume, Bitstamp, offer stop-loss orders which can help mitigate slippage, one exchange has gone further. LakeBTC has released a ‘hidden’ orderbook feature that it calls its “darkpool”, designed to protect investors against ‘financial predators’ waiting to exploit the price distortions created by big trades.

LakeBTC’s darkpool works by hiding big trades of 50 BTC and up from the public order book. Although the rest of the market can’t see the trade, the exchange continues trying to fill it with outstanding orders on the market at the time, the firm’s communications director Lisa Li said, adding:

“You might buy 100 BTC in a single order, but it may get matched with multiple smaller orders, or one single big sell order – it really depends on the sell orders at the time.”

OTC is here to stay

In the opaque world of OTC trading, it’s unclear just how much money is changing hands each day. One gauge might be the activity on LocalBitcoins, which essentially functions as an OTC market.

According to Coinometrics data, LocalBitcoins accounted for up to 5% of daily traded volume in the last year. Contrast this with Bitstamp, has accounted for up to 40% of daily traded volume at times this year.

Physical markets, like the Satoshi Square events, and the Bitcoin-OTC IRC channe are other platforms where OTC trading takes place.

As the bitcoin markets continue to mature, it appears OTC trading is here to stay. As Samman points out, trading volumes have shrunk, even in the established equity and commodities markets, as big trades are increasingly done over the counter.

“The problem with OTC trading is that they are private. People get upset about that and they think there is some kind of manipulation going on. But in the markets today, there is less and less volume. Even in the equity markets, institutions are trading with each other and taking trades offline.”

Source : http://www.coindesk.com

ATM Industry Group: Bitcoin ATM Sector Needs More Oversight

The ATM Industry Association (ATMIA) has released a new report that aims to encourage the nascent bitcoin ATM sector to adopt standards that promote consumer protection and security.

The paper is the second report issued by the non-profit industry association on the subject of bitcoin ATMs this year, following a March release that assessed how both bitcoin and bitcoin ATMs could more broadly affect the traditional ATM market.

Building off the first release, the most recent report suggests that the bitcoin ATM industry needs to adopt methods of self-governance now, before its products are disseminated more widely.

Further, the ATMIA argues that the bitcoin ATM industry should turn to the traditional financial system for guidance as it navigates this process.

The ATMIA wrote:

“Our main conclusion is that there is currently insufficient supervision of bitcoin ATMs. These machines should be brought into the fold of the wider ATM industry, becoming part of the industry, subject, in particular, to security best practices and other aspects of the industry’s code of conduct.”

In remarks, ATMIA CEO Mike Lee stated he hopes the report will encourage the bitcoin ATM industry to join the wider ATM industry, and for the sector to form relationships with traditional ATM operators who may be able to offer valuable expertise.

The comments echo findings from a joint ATMIA and Electronic Funds Transfer Association (EFTA) report issued in May that also suggested a collaborative approach would be beneficial for both business sectors.

Recommendations extended

In particular, the ATMIA issued a set recommendations for how it believes the bitcoin ATM industry could best regulate itself to instill consumer trust and bolster security.

The ATMIA suggested the bitcoin ATM industry should:

Create conditions for a ‘license to operate’ for bitcoin ATMs
Develop international security best practices to fight cybercrime and money laundering
Foster relationships with the wider payments and ATM industry
Start an international accreditation program from bitcoin ATM operators.

The report went on to propose precisely how the industry could self regulate, which included establishing a registry of bitcoin ATM machines with licensing powers for operators and the ability to guarantee deposits, among other capabilities.

The ATMIA added: “We recognize the need for some sort of self-regulation at least for part of the bitcoin value chain.”

An important innovation

While direct in its proposals, the ATMIA praised bitcoin in its report, suggesting that the digital currency could evolve to become an attractive solution for the global remittance market.

The ATMIA wrote:

“In short, we are seeing signs of typical ‘creative destruction’ of a genuine innovation in the payments space.”

Specifically, the report pointed to digital currency startups like ZipZap and Ripple Labs as examples of companies working toward this goal in a way that suggests more innovation to come.

The non-profit went on to state that bitcoin ATM manufacturers and operators could become a vital part of this ecosystem, provided they move to provide transparency and ensure that consumers understand all the risks involved with the use of their products.

The report concluded that the future is bright for bitcoin, even though the bitcoin ATM industry has challenges to confront:

“Looking ahead, the jury is out as to whether bitcoin will ever become a mainstream currency. It does appear to be on track, however, for becoming an important global currency.”

Source : http://www.coindesk.com

Analysis: Bitcoin Price Bumping Up Against Resistance

The Bitcoin price is set to make another high as it approaches $500 in the coming trading sessions. Another marginal low may follow, but we are carefully watching the manner in which price makes its next high for clues that the decline may be over – and has been “over” for several months.

Channeled Bitcoin Price Action

Bitstamp 15-Minute Chart

Price touched the lower channel trendline at label “5″ on 2 September and bounced $15 higher within a few hours. Subsequent price action failed to make a lower low as price began moving sideways and up. By last night, it was clear that a break-out was imminent and a few hours into the US trading session, price kissed the 15-minute 200-period moving average goodbye and surged over $17 in a few minutes.

Advance halted at $493 – the triple confluence of the weekly pivot level; the 1.618 extension of the first wave bounce off the channel bottom, as well as the (then current) 200-period moving average (on the hourly chart.) Subsequent price action has traced out a three-wave correction that may extend to five waves, but a correction nonetheless – giving us the expectation of another high at the 2.618 Fibonacci extension at $508.

Additional High – Low Ceiling

An obstacle and potential ceiling to achieving $508 is formed by the descending upper channel trendline (dark green) currently cutting through $503. It is possible that price may reverse from this trendline and head back down to the bottom of the channel for the last time. Although this outcome seems unlikely it cannot be ruled out until price crosses north of the upper trendline.

Upside Channel Breach

In the event that price action breaks out of the channel and intends to advance there will be plenty of resistance to overcome between $500 and $512. The chart above shows the concentration of the 2.618 Fib extension, the weekly pivot R1, as well as a recent high (on 29 August) in this area. Additionally, the R1 level and the 50% retracement level of the entire advance since April overlap at $510.31. It is going to take a fight to navigate through all of this resistance, and the result will most likely be prolonged sideways action – which could include a reversal back to $500 in the process.

Largest Immediate Bitcoin Orders

Looking at the BitFinex orderbook, the five largest orders above price (left) and below price (right) show even bull/bear interest with a slight bullish bias due to that 514 BTC buy order waiting at $480. It’s unlikely to be filled before price advances again since during price action, buyers are usually entering the market via market orders, in a classic fear-of-missing-the-upside impulse buying manner.

Global Economy

With Bitcoin having spent its fledgling years in complete disconnect with the global economy, the situation is changing as every country’s Main Street and Wall Street wake up to the speculative (and wealth protecting) potential of the Bitcoin Super Commodity. This analyst expects that the daily pushes and pulls on the global economy will start manifesting on the Bitcoin price chart as currencies and commodities lose (and gain) favor within the increasingly frantic trading and investment market. This implies greater volatility in the Bitcoin price, as well as the potential for stupendous rallies and their consequent corrections.

In the past 24 hours, some significant global economic news events have hit the wire, and, ironically, the single Bitcoin-related event to make international headlines has been… “Bad News.” Yesterday, 4 September, Charlie Shrem pleaded guilty “at a hearing in New York federal court to one count of aiding and abetting an unlicensed money transmitting business,” reports Reuters.

“I knew that much of the business on Silk Road involved the buying and selling of narcotics,” Shrem said in court. “I knew that what I was doing was wrong.”

And the Bitcoin price? Well, it went up in confirmation of the view that mainstream news doesn’t determine the Direction of market movement – only the When.

On the currency and commodity fronts the USD/JPY hit a six-year high and Gold – that Old World darling of the aspiring masses – hit a four-month low, as it continues sliding in the face of permanent quantitative easing and Bitcoin’s contention for the title of World Heavy Weight Store of Value.

On a darker note, the European Central Bank has, earlier today, pledged $1 Trillion of stimulus for the ailing European Union economy/banks with more interest rate cuts on the horizon. The current EU bank deposit rate is -0.2%.

Later today, monthly US Non-Farm Employment data will be released – often the cause of much market volatility despite the market’s consensus that the figures are plainly cooked. For now, we may not see much action as a result of these figures (released at the start of the US trading session) on the Bitcoin price, but this analyst will be keeping a keen eye out for potential correlations.

Updates to this article will be made during the European and US sessions should any significant changes come to light.

Ongoing discussion is always available in the CCN Traders group. View our Bitcoin Price Chart here.

Source : http://www.cryptocoinsnews.com

Inside Bitcoins Conference and Expo Returns to Las Vegas on October 5-7 – Get 10% OFF!

Bitcoin Views is excited to be partnering with Inside Bitcoins Conference and Expo, which will be returning to Las Vegas at the Flamingo Hotel on October 5-7, 2014!

The event will explore the way that cryptocurrency has been affecting the payments industry, and will cover a wide range of topics including mainstream adoption, compliance, bitcoin startups, investing, mining, altcoins, equipment, and more. The first 300 paid attendees will receive US$50 in bitcoin.

New to Inside Bitcoins Las Vegas will be a half day of small classroom-style workshops taught by cryptocurrency veterans, which will provide attendees with an interactive, informative setting to learn about various facets of the bitcoin ecosystem.

Session Topics Include:

Afternoon Keynote, The Tremendous Rise of the Bitcoin Industry, with Bobby Lee, CEO, BTC China and Board Member, Bitcoin Foundation
How to Win the Bitcoin Exchange Ecosystem, with Jaron Lukasiewicz, Chief Executive Officer, Coinsetter
(Self) Regulating The Bitcoin Industry, with Marc Barach, CMO, Jumio

And many more! See full agenda here.

We’re pleased to announce that Bitcoin Views is once again partnering with Inside Bitcoins to offer all readers 10% OFF Gold and Silver Passports. Enter code BVIEWS at checkout to redeem your discount. Register before September 10 and save!

Source : http://bitcoinviews.com

How Bitcoin Brokers Trade Millions Without An Exchange

“Someone told me that he wanted to sell 12 grand-worth, we had a chat on Skype and entered an agreement, and so that was the deal done,” Harrison said, recounting the trade.