Bitcoin news for December 13-15 , 2013 ..... first the prior thread !
Now today's news and views.....
( if after 175 times you don't succeed ...... )
JPMorgan's "Bitcoin-Alternative" Patent Rejected (175 Times)
Submitted by Tyler Durden on 12/15/2013 17:18 -0500
Earlier in the week, we detailed JPMorgan's attempt to create their own "web cash" alternative to Bitcoin (and Sberbank's talk of doing the same). However, as M-Cam details,following the failure of the first 154 'claims', JPMorgan issued a further 20 claims - which were summarily rejected (making JPMorgan 0-175 for approved claims). As they note, The United States Patent & Trademark Office (USPTO)’s handling of applications like JPMorgan’s ‘984 application ("Bitcoin Alternative") highlights the need to fix a broken system - patent applications of existing inventions need to be finally rejected and not be resurrected as zombies (no matter how powerful the claimant).
“BITCOIN is booming.”...?
On August 5, 2013 JPMorgan Chase & Co (JPMorgan) filed an application for an electronic mobile payment system which has eerie similarities to the popular online currency Bitcoin. Unfortunately for JPMorgan, all of the claims, totaling 175 claims, as of October 18, 2013, for published US patent application 20130317984 (the ‘984 application) have been either cancelled or rejected.
Below is a view of JPMorgan’s ‘984 application.
After the initial 154 claims were abruptly cancelled, JPMorgan’s attorney submitted 20 additional claims which the examiner, Jagdish Patel, issued non?final rejections for all 20 of the new claims in October 2013. This makes JPMorgan 0 for 175 in terms of approved claims.The last 20 claims were rejected for non-patentability and indefiniteness under Title 35 United States Code (U.S.C.) Sections 101 and 112.
However, Mr. Patel might well have rejected the claims because of the ‘On Sale Bar’ rule under 35 U.S.C. Section 102(b), meaning that if the invention has been on sale for over a year then the invention is no longer patentable.Under the ‘On Sale Bar’ rule, the application could be invalid because it closely mirrors Bitcoin with features such as making free and anonymous electronic payments and Bitcoin has been in circulation since 2009.
The United States Patent & Trademark Office (USPTO)’s handling of applications like JPMorgan’s ‘984 application highlights the need to fix a broken system.
Patent applications of existing inventions need to be finally rejected and not be resurrected as zombies.Part of the problem of a system in which one third of patents are seriously or fatally impaired is that companies are allowed to patent items that their competitors have already invented.
Obviously, large financial institutions want in on the online alternative currency action. But they would be well advised to pursue novel and non?obvious approaches that do not duplicate existing commercial options with respect to a virtual medium of exchange.
( Here we go .... )
As Bitcoin Transaction Volume Triples Since October, Europe Prepares To Regulate, Tax The Digital Currency
Submitted by Tyler Durden on 12/15/2013 11:25 -0500
Representing numbers that would put the adoption curve of Obamacare to shame, the Bitcoin equivalents of Paypal, BitPay, announced last week that it has now processed over $100 million in BTC transactions in 2013, has increased its merchant base to over 15,500 approved merchants in over 200 countries, but most importantly, has seen a surge in the number of merchants using its BTC payment pricing plan, by 50% since October while the volume of transactions has tripled. While the surge in the currency adoption has matched the explosive rise in the USD-value of the currency, the news should comfort any lingering doubts whether Bitcoin is a credible payment system.
From the BitPay press release:
BitPay Inc, the world leader in business solutions for virtual currencies, announces it has processed over $100 million in transactions this year, and has increased its merchant base to over 15,500 approved merchants in 200 countries. Since the announcement of the new All Inclusive Pricing Plan in October, along with the integration with Shopify in November, the number of new merchants has increased over 50% and the transaction volume has tripled."This year, the 2013 holiday season was Adafruit's biggest ever. We are delighted to offer bitcoin payments via BitPay to our community and customers. It was fast and easy, hundreds of orders and happy customers getting educational electronics, using bitcoin!" shared Limor Fried, Founder and Engineer with Adafruit.Bitcoin has "clear potential for growth and could become a major means of payment for online transactions” a Bank of America analyst told CNBC. As the number of Bitcoin users continues to increase, merchants such as Adafruit, BTCTrip, Alliance Virtual Offices, and Clearly Canadian, see the value of working with BitPay to help expand their business.
Which explains why Europe, which over a year was the first entity to cry foul about Bitcoin (recall from November 2012: "The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows") when the USD-price of one BTC was still in the double digits, is doubling down in its fight against the fiat alternative, this time as the European Union's top banking regulator is preparing to actively supervise the virtual currency. From Bloomberg:
Trading Bitcoins could bleed you dry, the European Union’s top banking regulator said as it weighs whether to regulate virtual currencies. Thefts from digital wallets have exceeded $1 million in some cases and traders aren’t protected against losses if their virtual exchange collapses, the European Banking Authority said today in a report warning consumers about the risks of cybermoney.Virtual currencies such as Bitcoin have come under increased scrutiny from regulators and prosecutors around the globe. China’s central bank barred financial institutions from handling Bitcoin transactions last week and German police arrested two suspects in a fraud probe into illegally generated Bitcoins worth 700,000 euros ($963,000).“The technology is still relatively immature and lacks the infrastructure, regulation and understanding of the risks that are taken for granted in conventional financial systems,” Matt Rees, assistant director at Ernst & Young LLP, said in an e-mail. “It is not surprising then that thefts, frauds and other deceptions are currently commonplace.”Since Bitcoins exist as software, the virtual currency isn’t controlled by any government or central bank. The digital money emerged in 2008, designed by a programmer or group of programmers going under the name of Satoshi Nakamoto, whose real identity remains unknown.The virtual currency gained credibility last month after law enforcement and securities agencies said in U.S. Senate hearings that it could be a legitimate means of exchange. The price of Bitcoins topped $1,000 as speculators anticipated broader use of digital money.
Because, you see, it is the possibility of theft that has regulators worried, not that alternative currencies could undermine the fiat system (especially in Europe where the artificially common currency is not exactly the world's most admired construct) the world is so hooked on.
So what does Europe propose? Simple: do more of what it truly excels at: tax stuff.
People holding virtual currencies may be subject to value-added or capital gains taxes, the EBA said.The government of Norway, Scandinavia’s richest nation, said it would treat Bitcoins as an asset and levy capital gains tax on them.“Bitcoins don’t fall under the usual definition of money or currency,” Hans Christian Holte, director general of taxation in Norway, said in an interview.For virtual currencies to be regulated in the EU, the EBA would have to get approval from the European Commission, the 28-nation bloc’s executive arm.We “support the EBA warning to consumers on the risks associated with virtual currencies,” Michel Barnier, the EU’s financial services commissioner, said in an e-mail.
In other words, it is only a matter of time before Europe does all it can to make the use of Bitcoin even more prohibitive, which in a Europe that is flooded with bad debt, with a banking sector whose credibility is non-existent resulting in loan "creation" plunging at a record pace, and a banking union "resolution mechanism" that is as improbable now as it has ever been, means more deposit bail-ins in a form that "fall under the usual definition of money" are just a matter of time.
SATURDAY, DECEMBER 14, 2013
Could the intelligence community have a secret exploit for Bitcoin? It's rather obvious that Bitcoin presents a very strong financial incentive to break its cryptography, since such a vulnerability could allow an attacker to claim large amounts of virtual currency for themselves. But given the decentralized nature of the currency, it may also be a target for intelligence officials looking for ways to track its use.
Last week, we learned that the National Security Agency has led an aggressive effort to “break widely used Internet encryption technologies.” The Office of the Director of National Intelligence claims it “would not be doing its job” if it didn't try to counter the encryption used by terrorists and cyber-criminals. There is speculation that many protocols or crypto implementations have been compromised, deliberately weakened, or have had backdoors inserted. In doing so, the NSA has made the Internet less safe for us all, perhaps including those that wish to take advantage of Bitcoin's privacy benefits.
Bitcoin is an open source cryptocurrency; a peer-to-peer (decentralized) electronic cash system. It's also the most powerful distributed computing project in the world. Those two factors have already brought it under government scrutiny.
Earlier this year, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued its guidelines on virtual currencies—which many within the Bitcoin community regarded as an overreach and an attempt to bring it under regulation. In April of last year, an FBI assessment anticipated it would be used by cybercriminals and malicious actors.
Bitcoin has recently landed on the radar of the New York Department of Financial Services, the California Department of Financial Institutions, and Thailand's central bank. In addition, the US Senate Committee on Homeland Security and Governmental Affairs recently sent a letter to the Department of Homeland Security asking for information on how it plans to deal with Bitcoin.
Clearly, Bitcoin is on the government's radar. Knowing how much effort the NSA, amongst others, has placed on cracking encryption, has it tackled Bitcoin too? First, we need to look at how Bitcoin works.
A KEY QUESTION IS WHETHER THE
COMPUTATIONAL CAPABILITY AND BUDGET OF
ANY ADVERSARY WOULD BE ENOUGH TO SHUT
DOWN THE BITCOIN NETWORK OR MAKE IT
Bitcoin employs an ingenious mix of two concepts: hashing and signatures. Hash functions typically generate a fixed-length output that maps uniquely to the original input, while signatures are often used to verify the authenticity of a digital message or document. The integrity of Bitcoin’s blockchain and consensus over the ordering of transactions depend on a hash function called SHA-256, which was designed by the NSA and published by the National Institute for Standards and Technology (NIST).
Cryptography researcher Matthew D. Green of Johns Hopkins University said, “If you assume that the NSA did something to SHA-256, which no outside researcher has detected, what you get is the ability, with credible and detectable action, they would be able to forge transactions. The really scary thing is somebody finds a way to find collisions in SHA-256 really fast without brute-forcing it or using lots of hardware and then they take control of the network.”
Elliptic Curve Digital Signature Algorithm (ECDSA) signatures are used to authenticate changes of coin ownership. A theoretical weakness in ECDSA could allow faster recovery of private keys and thus the ability to steal coins, but only people who reuse their wallet addresses would be vulnerable, Bitcoin developer Gregory Maxwell said. Maxwell insists that attacks exploiting such weaknesses would be detected almost immediately, and that they could deploy a replacement algorithm for ECDSA in roughly a month. “Problems with SHA-256 would be potentially more problematic as we cannot replace it in a backwards compatible way,” he said.
Weak random number generators (RNGs) are also implicated in Bitcoin security, as was the case with an Android security vulnerability revealed last month which resulted in the theft of coins. Cryptographic algorithms require a high degree of randomness in order to “seed” the generation of keys, and therefore RNGs are directly implicated in encryption strength—if you can predict or influence the output of an RNG, then you’re in trouble.
One pseudorandom number generator designed by the NSA, Dual_EC_DRBG, has been confirmed to have a backdoor. While the NSA does have a growing stockpile of cryptographic arms that can be used in cyber warfare, Maxwell thinks that “any break is so valuable they would dare not use it except in the most urgent cases.” Furthermore, certain attacks would only destroy Bitcoin itself—with the ensuing chaos effectively ruining its market value.
A key question is whether the computational capability and budget of any adversary would be enough to shut down the Bitcoin network or make it unreliable. With regard to the NSA, Green estimated, “If you calculate the cost of the mining hardware that would be needed to mount an attack on the Bitcoin network I bet you would get a number that today would be within their reach.”
Computer researcher Dan Kaminsky, who has independently investigated the security properties of Bitcoin, says that “it’s too early to tell whether any of our foundational ciphers have suffered undue influence. They certainly have the ability to mount a 51 percent attack, but then, so does everyone with a modicum of funding for custom chip design.”
A 51 percent attack refers to the scenario when a single entity has more power than the rest of the network combined. According to Maxwell, the amount of computing power needed would only “cost about 14 million dollars at retail,” making it an available option to governments like the US, Russia, or China.
It’s the nature of Bitcoin that the record of all transactions is public—it’s called the blockchain, and you can view it at Block Explorer. Several academic analyses have shown that Bitcoin wallet addresses can be tied to identities, and that users should have little expectation of privacy.
A month ago, Reuters revealed that a secretive DEA unit was using intelligence intercepts and massive databases to launch criminal investigations. Could the NSA be assisting the DEA to identify and investigate operators and merchants on the Silk Road, the illicit marketplace accessible via the Tor network, at this very moment?
Green says he finds it likely that the government is already analyzing the blockchain for cyber-crime, drug trafficking or potential terrorism transactions—it would be surprising if they were not doing so. “What’s concerning to them is it gives an anonymous way for people to exchange money,” he said. Kaminsky seems to hint at the same. “As for analyzing blockchain transactions, there are many ways to track people on the Internet and that’s sort of what the NSA does," he said.
And what about the possibility of backdoors? Keeping software projects free and open source rather than closed and proprietary is widely regarded as a challenge to their insertion, since anyone reviewing the code could discover them.
“There are a lot of people who review the code—but not as many as I’d like," Maxwell said. "It’s unclear how hard it would be to insert a backdoor.”
Maxwell also described how he was once approached by academics to insert tracking code into Bitcoin, and how he not-too-politely declined. Gavin Andresen, the lead developer of Bitcoin and chief scientist of the Bitcoin Foundation, claims that he’s never been approached to do anything that would deliberately weaken Bitcoin. “Sneaking in a back-door way of stealing people’s bitcoins would be almost impossible.” he said.
Cryptography can be used for good or evil; it can create spaces of privacy and freedom or be used to surveil and penetrate those spaces. Snowden’s revelations have confirmed that the NSA considers people who use encryption suspicious, as the FBI does—and they target those communications, retaining and storing them for longer periods of time than plaintext, in the hope that someday, with better cryptanalytic capabilities, they might be cracked.
THE NSA NAIVELY ASSUMES BACKDOORS CAN
ONLY BE USED BY ITS OWN PEOPLE—WHEN
SUCH WEAKNESSES ARE OFTEN
DISCOVERABLE BY OTHER STATE AND NON-
Bitcoin has a thriving attendant economy with many legitimate businesses and startups, and it’s attractive to libertarian and anarcho-capitalist geeks who are passionate about countering the global financial system and banks. But there is more than enough indication that governments see Bitcoin as a threat, and its users are probably no exception to the intel agencies’ criteria for reasonable suspicion.
When asked about those who think the pseudo-anonymity of Bitcoin makes it an antidote to the surveillance state, Andresen responded that “decentralized technologies like Bitcoin or the Internet are powerful forces for good,” but they are not “panaceas that will suddenly turn oppressive surveillance states into transparent bastions of liberty.”
Over the last few days, computer security experts have been pressing for the journalists reviewing the Snowden documents to name specific algorithms and implementations that have been compromised on the altar of national security. The release of that information might also let us know whether we can still trust the security of Bitcoin.
Developers of free software projects implicated in privacy and anonymity such as the Tor Project and Bitcoin say that what’s needed is multiple implementations, more security testing, and more peer-reviewed code to keep such tools robust and safe from subversion. The NSA naively assumes backdoors can only be used by its own people—when such weaknesses are often discoverable by other state and non-state actors.
Nonetheless, the easiest way to steal bitcoins remains hacking a computer and taking the wallet file, so long as it’s not password-protected—which has been the method implicated in most of the large bitcoin heists to date. And if there’s any vulnerability in Bitcoin, it’s more likely to be in the software, or the way people use it, than the protocol itself. Meanwhile, there will be plenty of uninformed speculation on Twitter about whether Bitcoin is actually an NSA plot formulated to distribute the cracking of our secure communications.
Russia's Largest Bank Proposes Bitcoin Alternative
Submitted by Tyler Durden on 12/13/2013 09:58 -0500
Hot on the heels of JPMorgan's "web cash" developments in the virtual currency arena, the CEO of Russia largest bank - Sberbank - appears to be looking for alternatives...
- *SBERBANK CEO GREF SAYS FUTURE BELONGS TO VIRTUAL CURRENCIES
- *GREF SAYS DEVELOPMENT OF VIRTUAL CURRENCIES 'CAN'T BE STOPPED'
- *SBERBANK CEO CALLS FOR GREATER REGULATION OF VIRTUAL CURRENCIES
- *SBERBANK MAY FORM OWN VIRTUAL CURRENCY ON BASIS OF YANDEX MONEY
When a pseudonymous 'Japanese' coder creates a crypto-currency that gains acceptance among thousands of vendors, it's dismissed by the powers-that-be and called a ponzi scheme by the MSM. One wonders what happens when the largest banks of the US and Russia sanction the 'idea' of a decentralized, unregulated, 'money' transfer system.
“We are at a new stage of technological development. I can’t imagine how it can be stopped,” Sberbank CEO Herman Gref tells reporters in Moscow.Gref says virtual currencies need greater regulation“These experiments must end in one or two crashes” before virtual currencies become firmly established, Gref saysSays Yandex Money isn’t “a currency but it’s a first step in that direction”
Of course, the difference is - the banks want to own it...
(Reuters) - People using Bitcoins are on their own when it comes to losses, the European Union's banking watchdog said on Friday in a formal warning to consumers on the risks of using unregulated online currencies.
The European Banking Authority said there was no protection or compensation for people whose "digital wallets" are hacked, a transfer of virtual money goes wrong or a platform is shut.
The warning follows similar announcements from the Bank of France and the Chinese central bank.
The EBA stopped short of telling consumers not to use online currency markets but said if they end up out of pocket there won't be a safety net like the compensation given to deposit holders when a mainstream EU bank goes bust.
"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," EBA said in a statement.
Bitcoin is not backed by any central bank or government, or by physical assets. Its value depends on people's confidence in the currency.
It has been gaining acceptance by the general public and investment community but has yet to become an accepted form of payment on websites of major retailers such as Amazon.com(AMZN.O).
"Cases have been reported of consumers losing significant amounts of virtual currency, with little prospect of having it returned. Also, when using virtual currency for commercial transactions, consumers are not protected by any refund rights under EU law," said the EBA.
The watchdog has been studying virtual currencies for three months and is still considering whether they can or ought to be regulated. It has powers to ban them, though questions remain over how this could be done in practice.
There are about 100 virtual currencies, with new ones appearing every week. Bitcoin is by far the best known.
The price of the bitcoin rose above $1,000 last month for the first time, extending a 400 percent surge in less than a month and fuelling concerns of a bubble.
EU regulatory officials doubt such published estimates as the currency and the platforms that trade it are not regulated.
Some platforms have been closed down amid concerns there could be a risk of money laundering, leaving those who held money on them nursing temporary or permanent losses.
The EBA said there could also be potential tax liabilities for users of virtual currencies.
Producer Of Physical "Casascius" Bitcoins Is Being Targeted By The Feds
Submitted by Tyler Durden on 12/12/2013 22:38 -0500
Submitted by Michael Krieger of Liberty Blitzkrieg blog,
Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…
Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.
But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.
Caldwell doesn’t accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That’s worth about $82 million at today’s exchange rate.Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.
What a complete and total joke this government is. Don’t they have anything better to do?
Full article here.
Bitcoin start-up raises $25m venture capital funding
Coinbase, a start-up that lets people trade Bitcoins, has raised $25m (£15m) in venture capital funding - the largest by a Bitcoin start-up.
Bitcoin, a virtual currency, has been attracting a lot of interest and its value surpassed $1,000 recently.
Backers of the currency, which is not controlled by regulators, have been pushing for its increased usage.
Coinbase said it will use the funding to "educate the market, and promote the mainstream adoption of Bitcoin".
"We are nearing a tipping point for broad adoption of Bitcoin - what we at Coinbase believe to be one of the most important shifts in the global economy in our lifetime," the firm said in a blogpost.Mixed response
Confidence in Bitcoins has grown after a US Senate committee described it as a "legitimate financial service" at a meeting in October.
However, on Friday, the European Banking Authority (EBA) warned about the potential risks of using Bitcoins.
"In particular, consumers should be aware that exchange platforms tend to be unregulated and are not banks that hold their virtual currency as a deposit," the EBA said.
"Currently, no specific regulatory protections exist in the European Union that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business."
China, the world's second largest economy, has also banned its banks from handling Bitcoin transactions, saying they had no legal statusand should not be used as a currency.
At the same time, there have been concerns that the rise in Bitcoin's value has been triggered by speculators looking to cash in on its popularity.
Alan Greenspan, former US Federal Reserve chairman, has called the rapid rise a "bubble".'Easier for consumers'
Despite these concerns, some establishments across the globe have started to accept Bitcoins as a form of payment, just like cash or credit cards.
Coinbase said the number of people who use its Bitcoin wallet had doubled to more than 600,000 in the past two months and almost 10,000 new people were signing up every day.
It said it was also working with 16,000 merchants to provide Bitcoin payments.
"We are making it easier for consumers to buy, merchants to sell, and developers to build," the firm said.
Chris Dixon, of venture capital fund Andreessen Horowitz - which led the Coinbase funding, said in a blogpost that the Bitcoin platform could be used to develop new technologies.
He said the potential applications of Bitcoins include "machine-to-machine payments to reduce spam" and offering "low-cost financial services to people who, because of financial or political constraints, don't have them today".