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Are cracks beginning to show in bitcoin?

In spite of setbacks, Bitcoin start-up founder Jeremy Allaire remains confident currency has a viable future

Jeremy Allaire: “I have long-term savings in bitcoin, though not a huge amount of my assets. It is important that I have long term belief in the currency. I give my sons their allowance in bitcoin and I’ve bought everything from socks to food to electronics with it.” Photograph: Brenda Fitzsimons

It has been a difficult seven days for bitcoin. Last Friday the world’s largest bitcoin exchange Mt Gox halted withdrawals of the digital currency citing a software bug.

“A bug in the bitcoin software makes it possible for someone to use the bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur,” the Tokyo-based exchange said in a statement.

“Since the transaction appears as if it has not proceeded correctly the bitcoins may be resent.”

By Monday, the price of the cryptocurrency had fallen to its lowest level in two months.

On Tuesday, Slovenia-based Bitstamp became the second major bitcoin exchange to halt customer withdrawals, blaming a denial-of-service attack, and Bulgaria-based BTC-E quickly followed suit.

Bitcoin was coming under pressure from hackers launching attacks across the currency’s eco-system, worsened by the fact that the currency is a decentralised digital system of value transfers not governed by any central bank, company or government.

‘Incredibly illiquid’

The currency’s price, which was more than $800 last Friday, plummeted as low as $102.

Even investment bank JP Morgan weighed in on the crisis, saying bitcoin was a “vastly inferior” currency and not a solid investment.

In the report called The Audacity of Bitcoin , John Norman, the company’s head of forex strategy, called the currency “incredibly illiquid” and “extremely volatile”.

“At the risk of sounding like a Luddite, bitcoin looks like an innovation worth limiting exposure to. As a medium of exchange, unit of account and store of value, it is vastly inferior to fiat currencies,” Norman said.

It’s not the first time the cryptocurrency has been the subject of problems.

It was implicated in a huge drug bust last year when the Federal Bureau of Investigation took down the Silk Road electronic exchange.

It experienced regulatory pressure from trading restrictions in China to a recent threat of a complete ban in Russia.

Earlier this month, the Russian authorities issued a warning against using bitcoin, saying Russian law stipulates that the rouble is the sole official currency and that introducing any other monetary units or substitutes was illegal.

The currency also absorbed a decision by Apple to remove all bitcoin-related software from its app store.

However, in the face of all this adversity, bitcoin entrepreneur Jeremy Allaire says he is confident the digital currency will survive.

Allaire, who founded the bitcoin payments company Circle, said the freeze on bitcoin withdrawals imposed by three major exchanges would not cause any long-term damage to the digital currency’s credibility.

“If anything, the recent attacks and response from the bitcoin community, both core developers and ecosystem participants, demonstrate the resiliency and agility of this platform.

“These challenges are driving a greater focus on platform stability, security and scalability, which are important focuses as we move from the early adopter phase into mainstream usage.”

Allaire is one of the people arguing that bitcoin companies should work with governments to establish regulations for the currency.

His bitcoin payments company raised $9 million in venture capital funding and is due to launch later this year, with international operations headquartered in Dublin.

Concerns

“There is no point in dismissing the whole digital currency idea because there are concerns,” he says.

To ensure widespread adoption of bitcoin, he says there needs to be rules around its use.

“There is a strong need to prevent money laundering and criminality with bitcoin. There needs to be rules if bitcoin is going to be big.

Post Source: http://www.irishtimes.com/business/sectors/financial-services/are-cracks-beginning-to-show-in-bitcoin-1.1690576

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Apple Kills Last Bitcoin App

Bitcoin wallets are getting blocked from the App Store

Apple removed the last remaining app used to exchange the digital currency Bitcoin from its App Store on Wednesday.

Blockchain, the bitcoin wallet app, said on its blog that it had no prior warning it would be barred from the store or prompting it to make changes to that app. It said Apple’s only explanation was “unresolved issues.”

Other bitcoin-related apps like Coinbase, Gliph and CoinJar have also been removed from the store. While Bitcoin isn’t illegal, it’s also not recognized as legal currency by governments, TechCrunch notes. This could conflict with section 22.1 of the App Store’s review guidelines, which states that “apps must comply with all legal requirements in any location where they are made available to users. It is the developer’s obligation to understand and conform to all local laws.”

Google’s Android platform still allows developers to create and maintain bitcoin wallet apps.

Source: http://business.time.com/2014/02/06/apple-bitcoin-blockchain-app-store/

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Marc Andreessen Predicts Bitcoin Will Change Chip Design Forever

Silicon Valley venture capitalist Marc Andreessen believes digital currencies could change the way processors are designed.

Andreessen doesn’t exactly need an introduction. An avid bitcoin advocate, he tends to be quite outspoken – putting his money where his mouth is through investment firm Andreessen Horowitz.

Turning data centres into mining rigs

Speaking at the Open Compute Summit last week, Andreessen said that mining is at the heart of bitcoin, as it handles all computation needed to maintain the trust network, reports TechWeek Europe. He added:

“The press reports on mining as a waste of time, but in reality it’s all the proof of work computation that makes a distributed trust network work.”

Andreessen added that cryptocurrency mining is a “very big thing” and that we are still in the very early stages of it. This is where Andreessen sees an opportunity for chipmakers.

Custom mining chips are nothing new, but few people expected the rise of ASICs to transform the mining scene in such a short time. Andreessen believes custom chips will dominate mining for quite a while, but things could take another unexpected turn.

Andreessen told the gathering that his company has already received pitches for bitcoin optimised data centres. However, it is unclear what such pitches would entail in terms of hardware.

Using standardised server racks to add a bit of mining power to existing data centres is one option, as it would essentially add a few ASICs to a huge data centre.

Another farfetched scenario would be the emergence of custom chips that can deal with standard workloads and mining. In theory, this could be done by adding specialized circuits to x86- or ARM-based server parts, but it is simply not practical for the time being, either on-die or in the same chip package.

Opportunities and pitfalls

Although Andreessen is rather optimistic, there are quite a few problems with bitcoin mining hardware that may keep it out of data centres for a while. Economies of scale are the most obvious challenge, the sheer pace of development is another.

Using existing infrastructure for mining is a tantalizing prospect, but with huge performance gains offered by every new generation of ASICs, deploying bitcoin mining hardware in a server setting would be a rather risky investment.

Once the hardware goes out of date, it would practically become a useless drain.Chipmakers go to great lengths to shave off a few watts from their server processors and to increase their life cycle by making them future proof, thus reducing the total cost of ownership. Adding bitcoin mining features to them could have the exact opposite effect.

In addition, the market for bitcoin mining hardware remains limited. Wedbush Securities estimates that the total market for bitcoin mining hardware stood at $200m in 2013.

It isn’t a small market, until you compare it to overall semiconductor sales. To put things into perspective, Gartner puts the revenue generated in the server space in 2013 at more than $12bn a quarter.

Image Credit: Fortune Live Media / Flickr

Post Source: http://www.coindesk.com/marc-andreessen-bitcoin-change-chip-design-forever/

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Luxury Yacht Service Makes its First Bitcoin Booking

Luxury yacht service The Advantaged Yacht Charter and Sales in Miami Beach has received its first booking paid for in bitcoin.

The company officially began accepting bitcoin in October last year, but only made its first booking, paid for with the digital currency, last week.

The company has a total of 26 boats in Miami Beach which it rents out, starting from $1,200 for four hours up to $18,000 for the most extravagant packages. Each one comes complete with a captain, a stewardess and a fruit and cheese platter.

Their first bitcoin deal came about after Tony Gallippi, owner of payment processorBitPay gave the company a shout out during his opening speech at the North American Bitcoin Conference in Miami.

Jessica Londono, co-owner of The Advantaged Yacht Charter and Sales in Miami Beach, was at the conference, as was her first bitcoin client. She explained:

“[Gallippi] just literally said a small little blurb about us, then my client went on and Googled me, saw the website, saw we accept bitcoin and then called me.”

Londono was able to effortlessly process the transaction for her client’s $2,500 charter using BitPay.

“It was literally the easiest transaction I’ve ever done,” she said. “I’ve co-owned the company for about nine years and this transaction took less than one minute.”

Londono sent her client an email with the contract for his charter and the BitPay address. “It’s so much easier than any credit card transaction I’ve ever done,” she added.

Nominal charges

As well as being a much quicker process, accepting bitcoin is also cheaper for vendors, as payment processors such as BitPay require a nominal charge in comparison to credit card charges. Londono said:

“American Express charges about 3.5%, which we lose out of our profits. Bitcoin is essentially free, depending on what service you use.”

Using bitcoin also makes the booking process simpler for Londono’s clients.

Londono first got into bitcoin in March 2012 through her “Apple genius husband”. Now her company, which also deals in yacht sales, is in the process of completing its first boat sale in bitcoin.

She stresses bitcoin is not simply a get-rich-quick scheme for her; it’s about exposure. Going to networking events like the Miami conference has been an opportunity to meet other eager people within the bitcoin community.

“I go to networking events on a daily basis trying to promote my brand, but it was so refreshing to go somewhere where every single person was so happy to talk to you and explain what they do,” she said.

“Everyone’s so excited about bitcoin that it’s just a pleasure to go ahead and get more involved and have more people be part of the bitcoin community.”

She hopes more vendors in South Florida will start to accept bitcoin payments soon.

“We have so many people with foreign currency that this would be an easy way to just unify us all.”

Source: http://www.coindesk.com/luxury-yacht-service-makes-first-bitcoin-booking/

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