Friday, January 31, 2014

Bitcoin

The bitcoin logo
The bitcoin logo (Photo credit: Wikipedia)


I don’t think of America as the ultimate country. This country has enormous deficiencies. I think of America the way Europeans who left Europe for America thought of Europe. I am a Netizen who thinks of the Internet as quite literally a country. And the Bitcoin is a huge step in that direction.

The Bitcoin is the global currency whose creation no government participated in. The Bitcoin has no known creator, and it has no regulators. It is all mathematical, and hence perhaps superior.

I don't think of the Bitcoin as that which will kill the national currencies. May the national currencies live long and give us much joy and pride. But the Bitcoin is the monetary union the world so badly needs. In that sense the Bitcoin is superior to the Euro. With the Bitcoin the national currencies need not go away.

I think of the 2008 Great Recession as a wasted opportunity. The big crisis was an opportunity to reshape the American and the global economy. But that reshaping did not happen. The global financial landscape was not fundamentally remade. But the Bitcoin gives me hope. The Bitcoin I believe will bring about an integration of the global economy over time. It is building trust where trust never existed and never might. Why should complete strangers trust complete strangers? Except it happens all the time. The dollar only has value because we all trust it has value. And we don't all exactly know each other.

Wikileaks, Kim Dot Com and Snowden all get celebrated in many tech circles. Which means the oldest democracy that has long defined what the state's relationship to the individual should be is itself being challenged by the tech diehards. Diplomats should have been tweeting and blogging this entire time. People should be able to watch new movies online, most would happily pay. It is not okay to spy on your own citizens.

If the Internet will move money as easily and as universally as it has been moving information - words, images, video clips - then you can bet a brave new world economy is about to take shape. If everyone on earth had wireless broadband, and everyone had a smartphone to make use of it, and if money could be moved around like the Bitcoin will make possible, poverty will leave the planet like a bad demon. That is how magical I think the promise is.

In a truly global economy, countries - and not just America - will beg for immigration, quite literally beg, like today economies try to outdo each other to bring in financial investments. It will be mind over matter on the scale of hundreds of millions of brains.

Regulating the Bitcoin at this early stage would be a funny thing. You have to understand what it is you are regulating before you can regulate it and not smother it. Hands off would be my plain recommendation.

Tech entrepreneurs are not benevolent dictators who should be given unchallenged power, no way. What tech entrepreneurs do is give The Individual enhanced powers, and magic happens when those newly empowered individuals go and do things together. They see light and they jump the gun.

Most of the so far reported mischief has not happened at the core of the Bitcoin process but along the sidelines. If you lost your Bitcoin "key" or it got stolen, that is a legitimate concern, but that hardly invalidates the basic Bitcoin mechanism. Bitcoin transfers can be used for money laundering, drug deals, and every other nefarious activity imaginable, but since Bitcoin transfers are 100% traceable, the governments that run the world have themselves to blame if the policing is not tight. Most of the iffy zones fall in domains between national governments. It is called not having a world government. It is called not having a global rule of law between nations like there is within nations.

It is magical that the Bitcoin actually allows for national currencies. As in, if you can not manage a currency union, that is fine too, you can just use the Bitcoin and conduct global transactions.

These are early innings. It might be a few years before we get a better grasp of the full implications of this new thing. Right now various social agents are like blind men trying to figure out the elephant. Ecommerce was less mysterious, but legislators kept their hands off ecommerce for the longest time. That courtesy has to be extended to the Bitcoin.

The Bitcoin is the power of innovation taking the lead. It did not come out through some majority vote, or street action. But it stands to fundamentally upend the political process. The Bitcoin gives political fundraising a whole new meaning.

We have cheap enough smartphones. The only missing link in the chain is globally universal wireless broadband. Where are the Google balloons when you need them?

Why Bitcoin Matters
Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014....... Bitcoin at its most fundamental level is a breakthrough in computer science – one that builds on 20 years of research into cryptographic currency, and 40 years of research in cryptography, by thousands of researchers around the world. ..... the question of how to establish trust between otherwise unrelated parties over an untrusted network like the Internet. .... Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate. ..... digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds … and digital money. ...... All these are exchanged through a distributed network of trust that does not require or rely upon a central intermediary like a bank or broker. .... in a way where only the owner of an asset can send it, only the intended recipient can receive it, the asset can only exist in one place at a time, and everyone can validate transactions and ownership of all assets anytime they want. ..... Bitcoin is an Internet-wide distributed ledger. You buy into the ledger by purchasing one of a fixed number of slots, either with cash or by selling a product and service for Bitcoin. You sell out of the ledger by trading your Bitcoin to someone else who wants to buy into the ledger. Anyone in the world can buy into or sell out of the ledger any time they want – with no approval needed, and with no or very low fees. The Bitcoin “coins” themselves are simply slots in the ledger, analogous in some ways to seats on a stock exchange, except much more broadly applicable to real world transactions. ..... The Bitcoin ledger is a new kind of payment system. Anyone in the world can pay anyone else in the world any amount of value of Bitcoin by simply transferring ownership of the corresponding slot in the ledger. Put value in, transfer it, the recipient gets value out, no authorization required, and in many cases, no fees. ..... Bitcoin is the first Internetwide payment system where transactions either happen with no fees or very low fees (down to fractions of pennies). Existing payment systems charge fees of about 2 to 3 percent – and that’s in the developed world. In lots of other places, there either are no modern payment systems or the rates are significantly higher. ...... a way to exchange money or assets between parties with no pre-existing trust .... It’s not as much that the Bitcoin currency has some arbitrary value and then people are trading with it; it’s more that people can trade with Bitcoin (anywhere, everywhere, with no fraud and no or very low fees) and as a result it has value. ...... new technology is not worth much until it’s worth a lot .... Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage. .... Remember, it used to be technically challenging to even get on the Internet. Now it’s not. ..... Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want. ..... Another challenge merchants have with payments is accepting international payments. If you are wondering why your favorite product or service isn’t available in your country, the answer is often payments ..... eliminates the risk of credit card fraud ..... the receiver of a payment does not get any information from the sender that can be used to steal money from the sender in the future .... Credit card fraud is such a big deal for merchants, credit card processors and banks that online fraud detection systems are hair-trigger wired to stop transactions that look even slightly suspicious, whether or not they are actually fraudulent. As a result, many online merchants are forced to turn away 5 to 10 percent of incoming orders that they could take without fear if the customers were paying with Bitcoin, where such fraud would not be possible. Since these are orders that were coming in already, they are inherently the highest margin orders a merchant can get, and so being able to take them will drastically increase many merchants’ profit margins. ...... with Bitcoin, the huge hack that recently stole 70 million consumers’ credit card information from the Target department store chain would not have been possible ....... you are happy because there is no way for hackers to steal any of your personal information; and organized crime is unhappy ..... every transaction in the Bitcoin network is tracked and logged forever in the Bitcoin blockchain, or permanent record, available for all to see. As a result, Bitcoin is considerably easier for law enforcement to trace than cash, gold or diamonds. ..... Bitcoin shares this network effect property with the telephone system, the web, and popular Internet services like eBay and Facebook. ..... (1) consumers who pay with Bitcoin, (2) merchants who accept Bitcoin, (3) “miners” who run the computers that process and validate all the transactions and enable the distributed trust network to exist, and (4) developers and entrepreneurs who are building new products and services with and on top of Bitcoin. ..... many thousands of programmers are using Bitcoin as a building block for a kaleidoscope of new product and service ideas that were not possible before .... One immediately obvious and enormous area for Bitcoin-based innovation is international remittance. Every day, hundreds of millions of low-income people go to work in hard jobs in foreign countries to make money to send back to their families in their home countries – over $400 billion in total annually, according to the World Bank. Every day, banks and payment companies extract mind-boggling fees, up to 10 percent and sometimes even higher, to send this money. ...... Switching to Bitcoin, which charges no or very low fees, for these remittance payments will therefore raise the quality of life of migrant workers and their families significantly. In fact, it is hard to think of any one thing that would have a faster and more positive effect on so many people in the world’s poorest countries. ...... Bitcoin generally can be a powerful force to bring a much larger number of people around the world into the modern economic system. Only about 20 countries around the world have what we would consider to be fully modern banking and payment systems; the other roughly 175 have a long way to go. As a result, many people in many countries are excluded from products and services that we in the West take for granted. Even Netflix, a completely virtual service, is only available in about 40 countries ..... Bitcoin, as a global payment system anyone can use from anywhere at any time, can be a powerful catalyst to extend the benefits of the modern economic system to virtually everyone on the planet. ...... even here in the United States, a long-recognized problem is the extremely high fees that the “unbanked” — people without conventional bank accounts – pay for even basic financial services. Bitcoin can be used to go straight at that problem, by making it easy to offer extremely low-fee services to people outside of the traditional financial system. ...... A third fascinating use case for Bitcoin is micropayments, or ultrasmall payments. ..... Bitcoins have the nifty property of infinite divisibility: currently down to eight decimal places after the dot, but more in the future. So you can specify an arbitrarily small amount of money, like a thousandth of a penny, and send it to anyone in the world for free or near-free. ...... with Bitcoin, there is an economically viable way to charge arbitrarily small amounts of money per article, or per section, or per hour, or per video play, or per archive access, or per news alert ....... fight spam. Future email systems and social networks could refuse to accept incoming messages unless they were accompanied with tiny amounts of Bitcoin – tiny enough to not matter to the sender, but large enough to deter spammers, who today can send uncounted billions of spam messages for free with impunity ..... a fourth interesting use case is public payments ..... Think about the implications for protest movements. Today protesters want to get on TV so people learn about their cause. Tomorrow they’ll want to get on TV because that’s how they’ll raise money, by literally holding up signs that let people anywhere in the world who sympathize with them send them money on the spot. Bitcoin is a financial technology dream come true for even the most hardened anticapitalist political organizer. ...... in 1999, the legendary economist Milton Friedman said: “One thing that’s missing but will soon be developed is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B without A knowing B or B knowing A – the way I can take a $20 bill and hand it over to you, and you may get that without knowing who I am.” ..... almost no country’s regulatory framework for banking and payments anticipated a technology like Bitcoin. ..... Far from a mere libertarian fairy tale or a simple Silicon Valley exercise in hype, Bitcoin offers a sweeping vista of opportunity to reimagine how the financial system can and should work in the Internet era
On the Matter of Why Bitcoin Matters
Bitcoin is the first practical, large-scale mechanism to deal with the problem of decentralizing trust—no parties need know each other nor trust each other for transactions to complete successfully, verifiably, and irrevocably. ..... Bitcoin has a remarkable set of interlocking mechanisms that make it exceedingly hard for any individual or group to accumulate enough power to distort the public block chain, a sequence in which one set of transactions builds upon the next. ..... (Bitcoin’s worldwide computational output is currently nearing 200 petaflops, or 4,000 times the combined capacity of the top 500 supercomputers in the world. ........ these transactions can be proven to have been created by a party who possesses a private key; no other party can create such a proof. (The key can be stolen, thus changing ownership, but that stands outside of Bitcoin’s reliability.) One of the fundamental current software architects of Bitcoin, Mike Hearn, explained to me how such transactions could be used to validate identities for discussion forums and for passports. ...... Transactions with higher fees attached are committed more quickly. As the rate of transactions has increased, the fee has seemingly become more important, as no-fee and low-fee transactions can linger for longer periods without being built into a block and made permanent and thus useful for consummating a deal. This is an ongoing concern ....... Bitcoin is somewhat illiquid and highly volatile, and the fees for moving Bitcoins in and out of legal tender, like dollars, can be in the several percentage point range. It’s not always easy or possible to convert from Bitcoin to cash, and the volatility means the potential loss (or gain) of dollars before the exchange closes. ...... Bitcoin miners receive an award of 25 coins each time they succeed at a computational problem that allows them to add a permanent link to the chain. That’s $25,000 every eight minutes or so right now at the current exchange rate. However, the reward drops in half every four years or so. In mid-2016, it will drop to 12.5 coins. The total number coins that will ever be made is fixed. ....... The system gives up these coins, diluting the pool of money at a fixed rate, to miners, which represents a kind of hidden fee, like issuing new shares in a company and giving them to employees. The speculation and volatility currently hides the effects of coin creation as a dilution. ........ As the production of coins drops, mining fees are expected to pick up the slack. While they will almost certainly not raise to the current scale used in credit-card transactions, they will likely be non-trivial to keep miners rich in incentives to operate their computer gear (which is currently hard to keep profitable because of the rapid increase in computational power across the network) ...... transactions are irreversible after a short period of time and cannot be counterfeited. The system doesn’t prevent theft or misuse. ..... The seller can’t be defrauded. The buyer can. ...... Because a Bitcoin transaction can’t be reversed, it means that the party transferring value has no recourse within the Bitcoin system to reverse or dispute a transaction. ...... Bitcoin doesn’t eliminate fraudulent transactions; it only eliminates counterfeit payments. This can, of course, save many tens or hundreds of billions of dollars a year globally and translate to more efficiency in commerce. But removing the intermediary also removes recourse outside of courts, and the cost and nature of that can’t be determined. ............. When a transaction occurs over the Internet, the odds of recovering one’s Bitcoins when a seller fails to meet his or her obligations is the same as if you’d sent a wad of bills in an envelope through the mail. ....... It also glosses over theft. Because Bitcoin relies entirely on the private retention of secrets (private keys that prove ownership of given Bitcoins), a stolen Bitcoin is only traceable within the system to a certain extent, and thefts of millions and tens of millions of dollars have already occurred. Because committed transactions are irreversible, stolen Bitcoins are valuable and nealry laundered. .......... Companies will have to deal with fraud under the laws of the government under which they operate. If a firm processes a $10m order paid for with Bitcoins, and then it is determined the Bitcoins were stolen—what happens then? ...... fraud ... It’s perfectly possible; it just doesn’t happen at the payment level. It happens a “layer up” in the societal compact in which commerce occurs. ...... With Bitcoin, we already have hard cash and credit cards that can be used for digital transactions, and we can transfer money as bits. Bitcoin is a replacement or supplement for an existing creaky and somewhat broken system that nonetheless works. ...... there are proposals for fully untraceable alternative currencies. Zerocoin, initially a proposal for inserting such capability inside Bitcoin, will launch as a freestanding currency. Using zero-knowledge proofs, people will be able to push coins into Zerocoin’s blockchain and take coins out later without any mathematical ability for outside parties to connect the transactions. It’s a laundering service, without any negativity meant. It breaks the chain of knowledge. ....... the current existence of mobile payments, such as M-Pesa, which provide Bitcoin-like benefits in an existing ecosystem. Bitcoin has to beat mobile payments for ubiquity, ease, and control in such markets. ...... Bitcoin shows a path for massively more secure, reliable, and sensible ways to store value and move it around. As a currency, I have little faith that it will become a replacement for dollars, euros, or renminbi. As a model for a future payment and transaction system, I believe it’s already shown its value.
Bitcoin under pressure
ALL currencies involve some measure of consensual hallucination, but Bitcoin, a virtual monetary system, involves more than most. It is a peer-to-peer currency with no central bank, based on digital tokens with no intrinsic value. Rather than relying on confidence in a central authority, it depends instead on a distributed system of trust, based on a transaction ledger which is cryptographically verified and jointly maintained by the currency’s users. ...... Bitcoin’s mathematically elegant design ensures that the money supply can increase only at a fixed rate that slows over time and then stops altogether. .... Bitcoin began in 2008, at the height of the financial crisis, with a paper published under the pseudonym Satoshi Nakamoto. The technical design outlined in the paper was implemented in open-source software the following year. It came to widespread prominence in 2012 and has been in the headlines ever since. ...... Silk Road, an online forum where illicit goods and services are traded for Bitcoin, was shut down by America’s Federal Bureau of Investigation in October but has since reopened. The Bitcoin price has fluctuated wildly, hitting $230 in April 2013, falling below $70 in July, and then exceeding $600 in November ...... The system is now straining at the seams. Its computational underpinnings have collectively reached 100 times the performance of the world’s top 500 supercomputers combined: more than 50,000 petaflops. Bitcoin’s success has revealed three weaknesses in particular. It is not as secure and anonymous as it seems; the “mining” system that both increases the Bitcoin supply and ensures the integrity of the currency has led to an unsustainable computational arms-race; and the distributed-ledger system is becoming unwieldy. ...... Bitcoin uses a technique called public-key cryptography, which relies on creating an interlocking pair of encryption keys: a public key that can be freely distributed, and a private one that must be kept secret at all costs. The public key is treated as an address to which value may be sent, akin to an account number. Each transaction involves the paying party signing over a portion or all of the value in one of these addresses by using his private key to perform an operation, called “signing”, on the contents of the transfer, which includes the recipient’s address. Anyone can use the sender’s public key to verify that the sender’s private key signed the transaction. All transactions are appended to a public ledger, called the block chain. ...... About every 10 minutes, one lucky miner who has generated the next block is granted the 25-Bitcoin reward, and the new block is appended to the chain. The process then starts again. ...... The Bitcoin system is designed to cope with the fact that improvements in computer hardware make it cheaper and faster to perform the mathematical operations, known as hashes, involved in mining. Every 2,016 blocks, or roughly every two weeks, the system calculates how long it would take for blocks to be created at precisely 10-minute intervals, and resets a difficulty factor in the calculation accordingly. As equipment gets faster, in short, mining gets harder. But faster equipment is constantly coming online, reducing the potential rewards for other miners unless they, too, buy more kit. Miners have formed groups that pool processing power and parcel out the ensuing rewards. Once done with ordinary computers, mining shifted to graphics-processing units, which can perform some calculations more efficiently. Miners then moved on to flexible chips that can be configured for particular tasks, called field-programmable gate arrays. In the past year, bespoke chips called ASICs (application-specific integrated circuits) have appeared on the scene. ...... Hashing capacity has increased so rapidly in 2013 that the practice of hijacking thousands of PCs and using them for mining is no longer worth the effort. The average time between blocks has fallen to between five and eight minutes. ...... with this new generation of ASICs, mining will have approached a point where only those with access to free or cheap electricity will continue operations, and even they will produce a relatively marginal return on investment, rather than the huge multiples (when exchanged into traditional currency) possible even earlier this year. ...... as part of Bitcoin’s design, the reward for mining a block halves every 210,000 blocks, or roughly every four years. Sometime in 2017, at the current rate, it will drop to 12.5 Bitcoins. ..... To head off this problem, a market-based mechanism is in the works which will raise the current voluntary fees paid by users (around five cents per transaction) in return for verification ...... Every participant in the system must keep a copy of the block chain, which now exceeds 11 gigabytes in size and continues to grow steadily. This alone deters casual use. Bitcoin’s designer proposed a method of pruning the chain to include only unspent amounts, but it has not been implemented. ..... As the rate of transactions increases, squeezing all financial activity into the preset size limit for each block has started to become problematic. The protocol may need to be tweaked to allow more transactions per block, among other changes. A further problem relates to the volunteer machines, or nodes, that allow Bitcoin to function. These nodes relay transactions and transmit updates to the block chain. But, says Matthew Green, a security researcher at Johns Hopkins University, the ecosystem provides no compensation for maintaining these nodes—only for mining. The rising cost of operating nodes could jeopardise Bitcoin’s ability to scale. ...... Perhaps Bitcoin, like the internet, will smoothly evolve from a quirky experiment to a trusted utility. But it could also go the way of Napster, the trailblazing music-sharing system that pioneered a new category, but was superseded by superior implementations that overcame its technical and commercial flaws.
Bitcoin - Wikipedia
When paying with bitcoin, there will be no exchange of digital notes or tokens between buyer and seller. Instead, the buyer requests an update to a public transaction log, the blockchain. This master list of all transactions shows who owns what bitcoins currently and in the past and is maintained by a decentralized network that verifies and timestamps payments. The operators of this network, known as "miners", are rewarded with transaction fees and newly minted bitcoins. ..... the United States is currently considered to be Bitcoin friendly compared to other governments
Bitcoin Is Not Anonymous And Is Always Taxable
The Rise and Fall of Bitcoin
Virtual Currency: Bits and bob
The Bitcoin Boom
Bitcoin: The Cryptoanarchists’ Answer to Cash
How a total n00b mined $700 in bitcoins
Why won’t Bitcoin die?
Let’s Cut Through the Bitcoin Hype: A Hacker-Entrepreneur’s Take
Meet the Bitcoin Millionaires
Every Important Person In Bitcoin Just Got Subpoenaed By New York's Financial Regulator
The Bitcoin believers
will one day become a ubiquitous form of payment ..... a new “Bitcoin economy” ..... Mohan is quickly becoming a catalyser of the New York Bitcoin community. He is organiser of a regular “meet-up” group which aims to connect the Bitcoin-curious ...... Mohan wants to get rich, and he wants to wreck government as we know it, too. Through Bitcoin, a currency outside the purview of banks and government control, Mohan sees “a chance to build a financial business with no regulation. Government is coercion and force. You don’t fight coercion with coercion, you just ignore it. Bitcoin allows you to ignore it.” ..... billionaire PayPal founder Peter Thiel, which aims to build a floating city in international waters where “the next generation of pioneers can peacefully test new ideas for government” ...... the extraordinarily persistent Republican presidential candidate Ron Paul, that even war can be eradicated, if only governments were denied the ability to finance deficits through printing money ..... “Would you rather buy a diamond or a blood diamond?” he asks rhetorically. “Obviously a diamond. So, would you rather use a Bitcoin or a dollar? When I gave someone $5 in Bitcoin, I didn’t kill any children in Iraq.” ..... an increasing majority of the people interested in Bitcoin are only “libertarianish”, despairing of government rather than opposed to it. And they are hardly just in the US. ..... Around the world, a generation is growing up whose intellectual framework was forged in an economic conflagration which destroyed the reputations of government, finance and central banks alike. The only heroes in this landscape are the hoodie-wearing tech entrepreneurs with their billion-dollar businesses. ...... At Mohan’s meet-up, it is not politics that is at the fore, but entrepreneurship. There are more than 30 people in the room. Five are women. Probably no more than three are over 35. Many are software developers, sniffing around for an interesting project and preferably a lucrative one. ..... no central bank certifies a “promise to pay the bearer on demand” the sum of anything in particular; no Treasury has declared it “legal tender for all debts, public and private” ..... The price for a single Bitcoin, less than $14 at the start of the year, spiked to $266 before crashing. It now hovers at about $110. ..... Bitcoin was created four years ago by an unknown computer scientist with the pseudonym Satoshi Nakamoto, who conceived it as an alternative to government-controlled currencies and a means to transfer money quickly, cheaply and anonymously outside the slow, expensive and highly regulated international banking system. Transactions are recorded in the “blockchain”, a massive block of code stored across a peer-to-peer network of computers. These computers are called miners because their owners are rewarded for their service with occasional payment in new Bitcoins. The total number of coins will never be allowed to exceed 21 million. ...... An average $30m of Bitcoin transactions are recorded every day..... In recent weeks, high-profile venture capital outfits, such as Thiel’s Founders Fund and Fred Wilson’s Union Square Ventures, have plunked down just-in-case bets on new Bitcoin payments businesses, reinforcing the headlines. Angel investors and business incubators are nurturing new Bitcoin ideas around the world. The financial establishment doesn’t know if the currency is friend or foe: money transfer businesses Western Union and MoneyGram are said to be looking at the feasibility of accepting Bitcoin, but there are suspicions that banks are using concerns about money laundering as an excuse to shut down the accounts of businesses that could become rivals. ..... Charlie Shrem .. at just 23, might be one of the youngest “Bitcoin millionaires”, having amassed his stash long before the latest price surge, and set up one of the first Bitcoin payments-processing companies, BitInstant. His habit of wearing a ring engraved with the codes to his Bitcoin wallet has gained him plenty of adoring press, which he is milking to promote the club ...... the entire stock of Bitcoin: $70bn, or $3,000-plus per “coin”, even if it is used for just 1 per cent of the transactions in the $7tn black market. ..... “Even if there are only 10 people in the club,” he says, “you want to have 100 people outside. Bitcoin has that built in. Scarcity means value.” ..... Rossi’s idea that Bitcoin fans should gather regularly in Union Square to trade in the style of the early brokers who founded the New York Stock Exchange under a buttonwood tree in 1792 ..... He has “never seen anything grow this fast, except bacteria when I studied biology”. .... Bitcoin is a decentralised, black market economy where you can buy drugs online and avoid tax and that undermines so much power. Anyone who tries to deny Bitcoin is revolutionary is living in fantasy,” he says ..... Harrison is one of the organisers of the London Bitcoin meet-ups, regular get-togethers in a Paddington pub that have grown from five people to 50 – tech fans, the curious and, lately, he says, quite a few “suits” from financial industries. ...... has visited Bitcoin communities around the world, including in Israel, Athens and Cyprus ..... Citing rules designed to prevent money laundering and terrorist financing, the US federal government has seized bank accounts belonging to Mt Gox, the largest Bitcoin exchange, and other exchanges. The Bitcoin Foundation no longer expects Mark Karpeles, Mt Gox chief executive, to travel to the US from Japan for its board meetings. ..... Panama has the potential to become a Bitcoin hub in the way that Gibraltar became the jurisdiction of choice for online poker sites when the US acted to drive out internet gaming. ..... “There is absolutely no world in which the large Bitcoin exchanges won’t be regulated. It’s just not going to happen. Mt Gox is clearing $1bn a month. Someone is going to want to know who gets that money.” ..... the illicit and the licit Bitcoin economies can coexist, just as dollars can be used for fair purchases or foul. .... When Preet Bharara, US attorney for the southern district of New York, unveiled charges against the creators of a virtual currency called Liberty Reserve last month, he proposed an update to an old law enforcement adage – “follow the virtual money” ... distributed currencies – including Bitcoin, but also half-a-dozen others including Litecoin, Namecoin and now a new rival called Ripple. With distributed currencies, transactions are processed and recorded across a network of users’ computers and balances are stored on a user’s hard drive rather than in a seizable bank account. .... Entrepreneurs see in distributed currencies an opportunity to shake up the global payments business and land a few blows on the duopoly of Visa and MasterCard. Transferring money across a peer-to-peer computer network costs a fraction of what those giant money movers charge. .....Government officials have been careful not to damn virtual currencies outright, for fear of squashing innovation that could benefit commerce and consumers. Instead, they are homing in on the exchange businesses which swap real money into virtual currency, and insisting that these impose the same money-laundering checks as banks. It is a tension Bharara acknowledges. “The internet is an amazing gift,” he says, “but it also has an ugly underbelly.” ....... Bitcoin aims to make storing and transferring money cheaper, simpler and anonymous. Your stash of Bitcoins is held, not in a bank account, but in a piece of software called a digital wallet on your laptop or smartphone. To pay for something in Bitcoin, or to transfer money to another person, you send a code from your wallet to theirs. Behind the scenes, every Bitcoin ever created, and every Bitcoin transfer made, is recorded in a huge string of code called the blockchain, stored on a network of computers known as miners. These are so called because, in return for completing workmanlike computational tasks, their owners get Bitcoins credited to their accounts.
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Sunday, January 19, 2014

Google And Hardware

Image representing Larry Page as depicted in C...
Image via CrunchBase
Google has been a software company. The king of search sits at the center of all things web. I love Google like some people love Apple. When it first came out I remember embedding the Google search engine on my personal homepage which was hosted on Yahoo’s hot domain Geocities, by now defunct. I have watched it as it has grown. It has been amazing to me that although Google has become big, like really big, it has not stopped innovating. When small innovative companies become big, they slow down. But when Google became big it just started innovating at large scales, it simply started tackling large problems that only the resourceful can.

Social came after search and it can be argued Facebook got that one. But mobile came after social and Google’s Android rules the roost. Big Data is widely perceived as one of the next big things and Google seems well positioned for that phase as well. Robotics is all the rage and Google is making acquisitions left and right.

We have all heard of driverless cars and Google Glass. The Glass is already here, the car is only a few years away. One thing you notice real quick is the dominant software company in the world – used to be Microsoft in the Windows era – is fast becoming a hardware company.

Only a few years back Google was so adamant about staying away from hardware that when it felt vendors were not doing right by its smartphone concept, it brought forth the Nexus line of phones but under the aegis of outside vendors. Even the acquisition of the phone company Motorola was a compulsion. Google really wanted the patents Motorola had to dig in with Android that was being attacked on all sides, primarily by Apple. I never thought Steve Jobs had a case. You can’t copyright the Personal Computer concept, and you can’t copyright the smartphone concept.

But by now the reluctance is gone and Google is unabashed about being a hardware company. What happened? I think what happened was it is not like Google one day decided to give Dell a run for the money and started building PCs as well. What happened was smartness caught up with hardware. Minus the smartness hardware was pretty much junk to Google. But with the smarts every inch of hardware can feel like software. It is the difference between a tongue and a thumb. The tongue, it can be argued, is smart, it is sensitive.

Just like Big Data is right round the corner, the Internet Of Things is right round the corner. And that Internet Of Things is all about smart hardware. Your smoke alarm is smart, your refrigerator is smart, your garage door is smart, your toaster is smart, your car sure is smart. You end up with a smart home. You know the difference between a dumb phone and a smart phone. Extrapolate that and you get the idea. Your home currently is a dumb home.

It is not a sure thing that Google will dominate the next big things like it has dominated search and mobile. But it sure has a clear shot at it. It is poised to be one of the dominant names in both Big Data and the Internet Of Things. As to if will be the top name, the dominant name, that question is up in the air. It is usually extremely hard for the company that dominated one phase of innovation to also dominate the next one. Microsoft dominated the PC, but it did not go on to dominate the web.

It is amazing to me that Larry Page is no Steve Jobs. Larry Page hardly ever makes news, but Google is in the news on a daily basis. Steve Jobs was a dominant personality made for the media. Page stays in the background. But Page’s footprint will likely end up larger at the end of the day, perhaps substantially larger. I think Apple’s best days are behind it, but Google just might end up becoming the world’s first trillion dollar company. But if it does, it will have to hit that mark before 2020. It not, it will have missed it.

That is an interesting proposition because we are living through a time when the relationship between the state and the individual is being redefined. Companies like Google are all about empowering the individual all over the world. All Google users are global citizens at some level, to some degree.

Steve Jobs of course started out his journey saying you have to do both software and hardware. He was proven wrong as Microsoft took the lead by being a purely software company. And then he was proven right as Apple overtook Microsoft in market value on the strength of its iPhone sales. Perhaps the PC was not the right vehicle for the vision. Only a smartphone accorded that fusion.

Robotics should move from the science fiction space to our living rooms in a few short years. Amazon wants to deliver your orders with drones that will fly from their warehouses to our front yards. Giants like Google and Amazon are already competing in that robotics space.

So, yes, the number one software company in the world, Google, now is working to become also the top hardware company in the world. Where does that put Samsung?
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Raising Money For A Tech Startup

Image representing Jeff Bezos as depicted in C...
Image via CrunchBase
(written for Vishwa Sandesh)

Raising money for a tech startup is a Silicon Valley thing, by now done all over the world. You have a great idea, a basic product, and you go raise money. Jeff Bezos of Amazon.com jotted down his idea on a paper napkin. Based on that he raised money.

Google is a great company. But if you had bought Google shares when it went public at $80 per share, your money would have grown only 10 times when those shares hit $800. That is great but not mind boggling amazing.

Probably the best investment of any is coming into the first round of a tech startup that is going to be wildly successful. The first person to put in $100,000 into Google saw that money become a billion and a half in about eight years. The first person to put $500,000 into Facebook saw that money become two billion in six years.

But there are many more mid-level successes that don’t make it to the mainstream press. Numerous tech companies get bought out at valuations ranging from 10 million to a billion dollars. And then there are tech companies that churn out revenues month after month many small businesses don’t manage to.

New York City by now is number two after San Francisco on the tech scene. Used to be Boston, not anymore, although it was great for me to get to meet Rudra Pandey in person this past Friday in his office. Pandey is the richest Nepali in North America. I felt like he was just getting started. Sitting across a table from him feels like sitting next to a bullet train. He is all ready to go. Before Pandey the honor of being the richest Nepali in North America went to Aditya Jha out of Toronto who shares the same home district in Nepal as me: Mahottari. Jha also got his money through the sale of a software firm.

The big companies like Google and Facebook and Apple might all be in the traditional Silicon Valley closer to San Jose, but the center of gravity moved to San Francisco years ago, apparently the pull of the urban lifestyle was too great.

So if you could build a Stanford on Roosevelt Island, as is in the works, there is no way San Francisco could beat New York City on the urban thing. To borrow a phrase from Saddam Hussein who would talk in terms of “the mother of all battles,” NYC is the mother of all things urban. And guess where the biggest venture capital firms in Silicon Valley raise their money from! From the pension funds in New York!

New York City has a decent movie industry and a decent tech scene. But the tech scene is all set to ramp up, although the top venture capitalist in NYC, Fred Wilson, likes to say the city is “decades” behind Silicon Valley in terms of the tech ecosystem thing.

But depends on what it is you are trying to do. If your app is people centric, if your app is big city centric, NYC just might be the place.

Software is going to play a big role in Nepal’s economic transformation, no doubt, and that is why fund-raising in the Nepali community is important. You are trying to contribute to the culture. The thought has to percolate.

Long Island City could be a great place for office space. Several trains stop there. It is right next to Roosevelt Island, where the tech university will be located. It is not in Manhattan, so the rent is cheaper. But it is right next to Manhattan, sure has the Manhattan view. And it is but 10 minutes on the train to Jackson Heights, where all the Desi food is.

Fundraising is about the sense of possibility, of what could happen. A tech startup is of a different magnitude than tech consulting. With tech consulting you are building stuff for other people, for your clients. Often times the project can be small. With a tech startup you are creating wealth.

I remember when FourSquare presented for the first time on stage at the NY Tech MeetUp. I did not “get it.” I thought the check in thing was the weirdest thing. But a few months later I got it, I got it why it was the next Twitter. I got to know the founders of Venmo a few years ago before they had raised any money. Well, they sold the company last year for $26 million. Rumor has it FourSquare’s Indian Co-Founder Naveen walked away with 80 million dollars.

The city’s tech ecosystem sure is building up.

I once met this guy who had sold his company to Google for a billion and a half. When it was my turn to shake his hand, I asked him a question. I said, you got money, why are you still raising money from VCs for your next startup? He said, two reasons. One, VCs giving money is market validation that maybe my idea is a good one. Two, VCs bring way more than money to the table. They bring their knowledge, their contacts.

One hopes the new crowd-funding possibilities will open up the field a bit. But there is no beating the first round, also known as the friends and family round. That is informal. And the founder can bring in anyone. In future rounds, that luxury is no more. Only licensed investors come in.
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Tuesday, December 31, 2013

Paul Graham Is Not That Innocent


Let me state the obvious first. I am a huge admirer of what Paul Graham has built in Y Combinator. And I have drawn enormous inspiration from many of his essays on tech startups. And it was an honor to once get featured in the same BBC article as Paul Graham and Brad Feld. (Paul Graham, Brad Feld, Me, BBC)

And now let me get to the topic at hand. Yes, Paul Graham was misquoted. But that does not change the fact that Paul Graham is guilty of sexism just like I am. I would not accuse him of extreme sexism. I might save that for a ton of men in India. But guilty he is. Why do I say that?

You were there when girls around you were 13. If you did not see sexism then, then you were willfully blind. You very well participated in it. Sexism starts early. Young girls feeding on sexist media do weird things with what they eat. That is sexism.

I don't think there is something fundamental about men and women that makes men head for STEM. Once girls get hit by the pot of sexism early on, they kind of lose their balance, and they end up making weird choices like not going towards STEM with greater gusto than they do.

Paul Graham wondering as to why 13 year old girls don't code more is not exactly like Newton wondering why the apple fell on his head. But sexism IS social gravity. It is all pervasive and all powerful, and all men participate in it, it is only a matter of degree, some more, some less, but we all do.

Sexism is really cutting edge, as is racism. It is as if not more cutting edge than the Internet itself, only the Internet is technology and communications and commerce, sexism and racism are social. It is like I am at this Internet Society event, Vint Cerf and Tim Berners-Lee on stage. And I was and am a huge admirer of the guys. I literally think of the Internet as a new country, a feeling further enforced by a recent Indian Supreme Court decision that is blatantly homophobic. (Homophobia is sick, okay?) And I ask my question of Tim. If the Internet is a country which of you is George Washington, which is Thomas Jefferson? Tim gets offended and says "different race" in an unpleasant way. And I am like, I don't believe this motherfucker. And I made a "mad scientist" remark. (Tim Berners-Lee: The Internet Is Not A Country)

Paul Graham said recently something about "heavy accents," and there he was not misquoted, and I thought that was a racist thing to be saying.

Fred Wilson: Girls Who Code
Paul Graham: What I Did Not Say
Taylor Rose: Girls Haven’t Been Hacking for the Last 10 Years
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Saturday, December 14, 2013

Snapchat

I did not see Snapchat coming, like I did not see Pinterest coming. They came out of nowhere and took over the world. Snapchat is an app where photos you share self-destruct after they have been viewed. Top names have tried to buy it, a recent offer was over three billion dollars, but the Snapchat founders refused. Obviously they feel like they have something fundamental at hand. Yahoo also tried to buy Facebook for a billion dollars at one point. Look where Facebook is today.

The image is being done and redone by app after app. I guess our sight is our most powerful sense. And we cannot get enough of pictures.

On the face of it the idea is fairly simple. Anybody could have done it. Pictures don’t get stored like on Facebook or Instagram. Pictures that destroy themselves are a guarantee you will have your privacy. You don’t have to worry about embarrassing pictures. You don’t have to be image-conscious while sharing.

Snapchat has caught much momentum among teenagers, many of whom think Facebook might have gone out of fashion.

The app economy has caught on. It was an industry that did not exist when we did not have smartphones. Steve Jobs almost did not allow external apps to populate his iPhone. But then he made a last minute decision to make space. And now you have a whole bunch of very well valued companies, and all they are are apps on the phone. They have no web presence. They seek no web presence.

Mobile is as fundamental a phenomenon as the Internet itself was when it showed up for the masses. And the mobile is just getting started. It will be a really big deal when say six billion people have mobile internet. That is almost 100% penetration. At that point the mobile phone will transform many aspects of modern life, including politics, non-profit work, poverty alleviation, and so on. Apps will become more not less important.

What Snapchat does is an ode to our sense of privacy. We want to share, but we also want to stay private. Facebook would have been a terrible home for Snapchat. Facebook over the years has worked to invade privacy. Snapchat’s starting point is total privacy.

I once said to a client. You can build an app for less money than it might take to launch a paan dokan in Jackson Heights, but if it takes off you can overtake Patel Brothers in terms of how much you end up making. Sometimes apps take off. Many times they don’t. But not every app has to end up worth a billion dollars. I think there is room for a lot of middling apps. If you built an app for 20K, and sold 50,000 of it for a dollar each, that is a good margin. 30K is not a billion dollars but it is something.

When Instagram got bought by Facebook for a billion dollars, it had not made a dime in revenue. But I don’t know anyone serious who thinks the deal was not a clincher. Not bought Instagram might have given Facebook itself some competition.

Like photos mobile based messaging also has seen a lot of activity.

Snapchat is a new paradigm, counterintuitive to a Facebook dominated world. And it has seen rapid adoption. Some estimates show that by now the number of photos shared on Snapchat is comparable to the number of photos shared daily on Facebook.

I have tried Snapchat, but I don’t use it myself. I get the concept but it is not part of my daily usage any more than Instagram itself is. Actually I quite like Google Plus for my photo app. Pictures taken on my phone get uploaded automatically. And sharing is easy to do. I can capture photos and videos. The ease of upload and share clinches the deal for me. I am a quantity photo taker. I am a point and shoot kind of guy.

Ephemeral socializing is quite the hallmark online. It can be argued Snapchat is just another social media platform.

The snapchat concept can be applied across many domains, many ideas and many use cases. Data you destroy will not be stolen, will not be compromised. There is a freshness to that destruction. Like we say in Nepali, hinddai chha paila metdai chha. A boat does not leave footprints in the water. Snapchat does not leave pictures scattered around in cyberspace.

That begs the question, as it always does. What’s next? What’s the next Snapchat? What’s the next Pinterest? There always is a next one. And it likely will not be obvious until it is already here, and feels simple and obvious.

I happen to think Gigabit broadband will bring forth a whole new family of apps, this time around video. But Gigabit mobile broadband, sadly, is not right round the corner.

Wednesday, December 11, 2013

Internet Of The Planets And Moons

It is always amusing to me when I read about inter-galactic travel. Light has a hard enough time traveling from one end of the universe to the other end. Who are we? We are overweight humans struggling with nutrition issues.

Even if we were to somehow manage to speed up enough to reach the nearest galaxy we would zoom right past it. How would you apply the brakes?

Recent observations have shown there are perhaps 40 billion earth like planets just in the Milky Way, our home galaxy. I think that makes it a statistical certainty that life does exist elsewhere besides on Earth. It is possible even intelligent life exists out there.

But the laws of physics tell us human travel across the stars perhaps will not happen. What instead we can hope for is that we get better and better at reading signals that come to us. We could send more probes to the planets and the moons in our solar system. We might even send out robots.

Instead of inter-galactic human travel, I think the goal ought to be an Internet of the Solar System, one to which we keep adding satellites and probes and robots. The Internet of Things populated with robots might even allow us to mine space to quench our thirst for energy and minerals.

My Mobile Bookmarks

Saturday, December 07, 2013

Selfie

In honor of one of the newest additions to the Oxford English Dictionary - selfie - I have gone ahead and created a photo album by that name. I think you should do it too!


Friday, December 06, 2013

The Social Media Tetris



It can be argued the world of social media is helping us gradually bring down the number on the famed six degrees of separation that separates everyone from everyone else. If people connect and share more, among people they know, among people they don't know yet, as shared interests and activities are discovered, as people interact more, that number goes down. Right? I think so.

One thing I have noticed on Highlight is when you come across a "stranger" the app tells you have so many common friends and shared interests, data it pulls from your Facebook profiles. The shared interests part is intriguing to me. I still wish AirTime had taken off, because people would talk more. A Skype based "AirTime" might be a better idea than the video based attempt. But is Skype giving API issues?

There are downsides. You can end up with flame wars. People can act nasty online. I am so glad the game Ingress a few days back added the capability for you to be able to block users in the COMM, the Google game's public chatroom, if you will, (although I have uninstalled the app from my phone, but there are still close to 150 portals in the city that bear my name.)

Social media taken to new heights could do for world peace what heads of state holding summits could not. Trade and travel are major peace moves. More people interacting more often leads to a general increase in welfare overall. I think that statement is but common sense.

Facebook Groups should add elements of democracy to it. A group should be allowed to elect its leadership, and vote on issues. I am surprised that feature has not showed up yet. A lot of organizations would thus engage in Facebook voting. Heck, that feature would get really interesting for groups with a million members or more. Skype enabled conference calls for Facebook Groups would be another positive addition.

You have Snapchat for friends. What about Snapchat for strangers? Or a public Snapchat? Photos still destroy themselves, but the world saw it first. And a board for the most popular snaps perhaps?
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