Monthly Archives: December 2013

Fancy a Pizza?

If you would like a pizza, why not pay for it using Bitcoin, you may think to yourself…

Well, you’re not alone! In Scandinavia, it has just been announced that the largest pizza chain pizza24.se based in Halmstad, Sweden has decided to do just that: accepting Bitcoin payments for pizza orders both online and at the Point of Sale in their pizza chain restaurants.

Beyond the Swedish online store pizza24.se, the pizza restaurant chain are also selling Bitcoin-paid pizza in their Norway and Finland branches.

Public Opinion: Bitcoin’s Slow But Growing Acceptance

Bitcoin in many ways is a libertarian dream come true. It incorporates many of the features, freedom-minded individuals wish for in the money we use. Lacking only a true “store of value” function, Bitcoin is seen by many to be far superior to paper currencies.

Also, a clearer distinction between everyday (paper) currency as “fiat” and other, more reliable, forms of money is provided by the fact alone that Bitcoin is taking the headlines by storm in recent weeks.

Bitcoin is highly predictable in that it is limited in supply, unlike that of centralized or government-issued fiat currency. The total amount of Bitcoins in circulation is estimated to top out in 2140 when the maximum allowed total of 21 million units or “coins” is produced or “mined”.

The open source, peer-to-peer payment system uses PKI (public-key infrastructure) for cryptography and various aspects of its security. Users effect by sending digitally signed messages from their “wallets” that transfer ownership of Bitcoins to another user. Then a decentralized network of specialised computers verifies and time-stamps all transactions. In order to create Bitcoins — or, in fact, any other crypto coins — a proof-of-work system is used, a process called “mining”. The operators of such mining set-ups or “mining rigs” are then rewarded with transaction fees and newly minted Bitcoins.

Mini survey: Do you own any bitcoins?

Results to the ad-hoc poll above are certainly not scientific or in any way statistically representative have been as follows:

  • I have not decided if I want to use them or not (46%, 186 Votes)
     
  • No, I do not trust it (48%, 194 Votes)
  • Yes, I actively trade and use them for purchases (6%, 22 Votes)

It is noteworthy, that among “people on the street” Bitcoin still is a wholly unknown beast and predominantly not trusted — yet.

Total Voters: 402

The low rate of acceptance among the general (investing) population means that for reasons of a user base that still has a long way of expansion ahead, the value of Bitcoin (and other Crypto coins) will likely increase significantly in the medium to long term.

Bitcoin was first noticed by the mainstream media, and thus the TV addict general public, due to some illegal activities and illicit uses. In summer 2013, the FBI shut down the Silk Road online black market and seized funds in excess of $28.5 million in Bitcoin from the alleged mastermind. More recently and with the waking-up of more and more consumers to the use of crypto coins in daily life, particularly in online commerce and overseas transactions, Bitcoin and “alt coins” have gained more traction in the investing community. Today, they can already be used to buy everything from pizza to a Tesla car.

Big-Name Vendor to Accept Bitcoin: Overstock.com

Overstock.com have just announced that the company have decided to accept Bitcoin as payment for their products starting in 2014.

The retail chain will be the first major player in the U. S. to move ahead and accept crypto payments in their operations.

Patrick M. Byrne, the corporation’s CEO, said that their internal Bitcoin project is about to decide for a payments processor and will move ahead from there. Items will be sold for Bitcoin from roughly June 2014.

Precious Metals, Bitcoin: Essentials About Non-Governmental Money

At the core of Bitcoin and other crypto coins as well as gold and silver lies their unique set of properties.

These vary among both groups, with gold and silver being the classical means of  holding and storing value without having to trust any third parties. Bitcoin and other crypto coins allow transferring or sending something of value to someone else without having to trust any third parties.

While the non-necessity of trusting any third parties is common to precious metals on one hand and crypto coins on the other, they are good for very different functions of daily life and commerce.

With Bitcoin having no intrinsic value (out of itself) that could be verified without using an additional (outside) tool (computers, working communications and electricity), it is certainly not a real — i e long-term viable — Store of Value. Precious metals cannot actually be used for larger payments as they cannot realistically be sent in sufficient amounts to someone else.

These limitations of both types of assets boil down to one very simple recipe for the thus different kinds of Private Money outside the realm of government-controlled fiat currencies: Bitcoin for Payments, Gold and Silver for Preserving Wealth.

Europe Positioned to Profit from Chinese Bitcoin Mess — for Now

Earlier today, Chinese officials have moved to take their ban on the country’s commercial banks from using Bitcoin a step further. The so-called People’s Bank of China, outright violating the financial matters of its people, ordered all Chinese commercial banks to stop clearing payments to and from BTC (Bitcoin China Exchange), sending the price for Bitcoin, Litecoin and other crypto currencies tumbling — and destroying a good portion of their own population’s Bitcoin wealth (so much for being a “People’s Bank” as well as for Communism in general)!

Bitcoin businesses on the ground in China said, however, that this still dod not amount to a full ban of Bitcoin in China, they will wait and see how and where they can continue to legally operate inside China in certain areas, and that they are taking developments “one day at a time” for now.

Over in Europe, the slump was not quite as hard-felt but crypto currencies were also sharply down across the board.

Meanwhile, the London-based EBA (European Banking Authority) is set to follow its hands-off approach to crypto currencies the regulators mentioned to be “unregulated” and “not needing special permission” in an obiter to a statement issued on Friday.

This situation for now makes Europe one of the best places to be for all sorts of Bitcoin businesses. It is expected that this will continue until the European bureaucracy issues their own sets of rules — which may well take a few years and give Bitcoin start-ups sufficient room to breathe and meanwhile test and develop their business models freely in a market currently unspoilt by unnecessary intervention.

Bitcoin Officially Confirmed Legal and Unregulated in Europe

Apparently prompted by the sudden increase in virtual currency trading and the fact that virtual currencies are constantly in the headlines, the European Banking Authority (EBA) issued the following statement on Bitcoin:

“Consumers should be aware that exchange platforms tend to be unregulated and are not banks that hold their virtual currency as a deposit. Currently, no specific regulatory protections exist in the EU that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business,” the EBA said in a statement.

Predominantly meant to be a “warning against using Bitcoin”, this statement is a great pre-Christmas gift to the Crypto Coin community. Upon closer inspection, it reveals the official approach taken on the EU bureaucrat level to — surprisingly — okay Crypto payment systems like Bitcoin, Litecoin, Feathercoin and all other similar payments.

In admitting that exchanges and other services are “unregulated”, are “not banks”, and that “no specific regulatory protections” existed in EU countries, the EBA gave de-facto blessing to the status quo but warned that, that being so, consumers needed to look after their own affairs. (What a refreshingly reasonable approach, for once! This is how life ordinarily should be, but we may already have forgotten…)

The EBA’s nod of approval comes as an obiter within the above statement and, sure enough, has been widely overseen by the mainstream media. It has even been falsely interpreted to be “a blow” to Bitcoin. In fact, it is quite the opposite.

The wording “currently” also is a clear indication that the super-state is now starting to move towards forcing its usual mess of regulation upon another area of life on this poor old planet. It may be expected that any results would take at least one to three years before they become effective, giving all parties involved some room to breathe and freely develop their businesses unhindered by unnecessary and cumbersome regulation. Definitely a tremendous opportunity to be seized by Bitcoin businesses now. Worldwide operators of Bitcoin ventures more heavily regulated back home may increasingly be expected to move their businesses to Bitcoin-friendly countries within Europe.

Mis-Information about Bitcoin Abounds

The amount of misunderstandings around Bitcoin and all other Crypto coins resulting in outright mis-information by the mainstream media is a particularly widespread problem.

Insufficiently qualified and often not overly interested in their assigned jobs, many journalists do little to improve that situation but commonly just re-arrange official press statements by governing authorities or copy press releases by industry. Basically institutions of the Industrial Age, and therefore an era gone by, these media outlets simply are doing here what they always do best: copying information that may or may not have been drafted with some covert agenda in mind by its originators, and hardly ever critically evaluating what they are about to publish. “Time is money”, but quality apparently hardly ever matters. Bitcoin and all the other crypto coins, being a purely private system based solely on voluntary and contractual rules between users, may be especially hard to comprehend to parties thus unqualified.

Partly because of the unusual additional concepts of these Payment Systems (sometimes called “currencies”), this adds to the overall uncertainty among consumers who would otherwise accept and use crypto currencies still more widely.

The main areas of error are Crypto coins’ alleged “anonymity” on one hand and the true meaning of regulatory announcements released by many countries’ authorities on Bitcoin. Additionally, the mainstream media’s take on basic matters of good and bad as well as their logical thinking abilities appear highly questionable in light of hyped-up stories on illicit deals (admittedly) going on in this area: one partial area of offers on one platform like “Silk Road” does not mean that all transactions on that marketplace nor the entire platform itself, let alone the overall concept of crypto currencies, were either illegitimate or in any other way doubtful alltogether.

Just for comparison, U. S. cops do make mistakes but, so far, the overall existence of a police force in that country has not commonly been questioned…

Bitcion and other crypto coins are not anonymous at all, but they are pseudonymous in fact. This area will receive more in-depth coverage in our separate Bitcoin Security and Bitcoin Thinktank sections.

Bitcoins and other crypto coins are not a tool facilitating more bad things than all other matters in every-day life. The U. S. dollar has been used to make payments in the Iran-Contra affair as well as unlawfully making a Swiss banker commit drunk-driving offences and be faced with jail time in order to turn him into a CIA informer: yet, nobody seriously tries to abolish the U. S. dollar for these reasons.

Also, the constant headlines about whether or not Bitcoin and other crypto coins are secure paint a picture of some pathetically deep-rooted mis-trust among the general public toward these payment systems — one that the mainstream media is exploiting further by their news selection and wording of yet more headlines and articles; all this in a pathetic attempt to “play” this phaenomenon just for selling more copies and more advertising space for the military-industrial as well as the medical-industrial complexes.

Why Would Anyone Want to Use Crypto Currencies?

Paper currency has been around for hundreds of years — and people are used to it, acceptance is good.

So why would anyone go the extra mile and set up and then use a Bitcoin (or other crypto currency) infrastructre?

Ask the millions of happy Bitcoin users (plus users of the smaller other crypto currencies around the world) to learn why. Main features cited usually include, but are not limited to:

  • low transaction fees
  • an alternative to government-issued (and forced upon by monopoly of power) currencies
  • not a Fiat currency: crypto currencies are not created by government decree, nor formal law, or any other similar rule but by the free market and voluntary in nature
  • very fast clearance at Point of Sale (usually at speed of an e-mail)

Additional advantages (primarily for merchants accepting Bitcoin and similar) include:

  • low or no “credit card processing” fees
  • free for merchant up to a certain (large) threshold (results in roughly 3% off price for customers!)
  • no chargebacks, once confirmed (cleared) transactions are final
  • no waiting
  • not reliant on only one processor and data connection, but P2P high-availability and speed due to very architecture of systems

The list goes on and on, and this does not even include the “thrill” of opting out of government control in another area of every-day life or any similarly “political” reasons for using “private money”.

Add the latter and you would see a much (as in many times) longer list here.

 

Bitcoin — a Ponzi Scheme?

There have been claims that Bitcoin were a Ponzi scheme. These are voiced by old-school economists who probably feel — a bit too hastily though — that the lack of some monetary properties of Bitcoin make crypto currencies a fake altogether.

This fails to recognise that all crypto currencies are primarily a transactional tool, and a very good and economic one at that. (Simply compare them to conventional payment systems.) You would not want to use them as a long-term store of value (although some people may erroneously try to do just that: this does not make Bitcoin, LiteCoin or other such digital currencies Ponzi schemes).

Common credit cards — for their fees and percentages clipped off payments alone — would much rather pass the test as a Ponzi scheme. Supported by the mainstream media and users’ normalcy bias, their existence is questioned by very few people though.

Bitcoin is not what one would call a store of value either. It is important to again stress that it is not meant to be one but that it is a transaction-facilitating mechanism. It can (and cannot, at the same time) be argued that Bitcoin is “money” for it does have many of the basic monetary functions while lacking others at the same time.

Be that as it may, this definitely does not make Bitcoin a Ponzi scheme — and certainly not “the biggest one in history” anyway! So here’s another thought for anyone making these outlandish claims: even IF it were some Ponzi scheme, Bitcoin would hardly be the “largest in history” as this place is firmly secured for the U. S. dollar since 1913.

In light of today’s total volume, there’s no way (yet) for Bitcoin to take the dollar’s “reserved spot” for this dubious honour.

Bitcoin and China: Bloomberg Gets It Wrong Again

Last week, Bloomberg reported that Bitcoin had been “banned by the Chinese government”. The report sent the Bitcoin rate tumbling from $1200 to about $560 in hectic trading before the price recovered and stabilized at around $860.

That “news” by Bloomberg turned out to be an incompetently read misunderstanding by this increasingly dubious outfit though. What really had happened in China was a government ruling that Chinese commercial banks must use Bitcoin for transactions.

This is a completely different thing and something that a competent news agency should be able to understand and interpret correctly.

A definition of the scope of local Bitcoin use inside of China rather than any sort of “ban” by the Chinese authorities against this increasingly popular crypto currency, the ruling is expected give Bitcoin a further boost in China and elsewhere. Bitcoin is already particularly popular in China as well as many other Asian countries and large parts of worldwide Bitcoin transactions take place in that part of the world. Limiting the scope of use by commercial banks on one hand, the ruling contains official recognition of Bitcoin at the same time, a fact that is expected to serve Bitoin’s popularity rather than doing any harm.

Current prices for Bitcoin in U. S. dollars are quoted to the right for your reference.