Overstock.com Becomes First Major Retailer to Accept Bitcoins
Online retail giant Overstock.com has moved forward its plan to take bitcoin payments. The company began taking the digital currency on its site this morning.
About $10,000 worth of bitcoins from about 100 customers has reportedly already been spent since Overstock made the announcement just a couple of hours ago.
The firm has chosen California-based online wallet and payment processing firmCoinbase to handle its transactions, in what must surely be a major coup for the company, which posted the following on its blog:
Less than three weeks ago, CEO Patrick Byrne told CoinDesk that the firm would begin taking bitcoin payments in June or July, and at the time had not signed a payment processor. However, things accelerated after Byrne broke the news, he said.
“I felt I had tipped my hand. I didn’t want someone else to beat us,” Byrne told tech publication Wired.
http://www.coindesk.com/bitcoin-miners-ditch-ghash-io-pool-51-attack/
Bitcoin Miners Ditch Ghash.io Pool Over Fears of 51% Attack
Published on January 9, 2014 at 14:29 GMT | Bitcoin protocol, Mining, News
UPDATED on 9th January at 18:11 (GMT)
Bitcoin miners around the world are starting to leave the Ghash.io bitcoin pool following a significant increase in the pool’s hash share.
According to Blockchain.info,Ghash.io accounted for more than 42% of bitcoin mining power a day ago, but over the past 24 hours its share has dropped to 38%.
The fact that a single pool has such a high share has prompted some bitcoin miners to voice their concerns on social media and the mining community is starting to take notice. If a single entity ends up controlling more than 50% of the network’s computing power, it could – theoretically – wreak havoc on the whole network.
Bad maths
A so-called “51% attack” could, in theory, allow the attacker to reverse transactions, make double-spend transactions, prevent confirmations or even prevent other miners from mining valid blocks. It would corrupt the blockchain and render the whole system unsafe. However, this it is all speculative – as it has never been done before.
In theory, the potential attack would work if the attacker managed to gain control of more than 50% of the network’s computing power. However, even with 40%, an attacker would stand a good chance of overcoming 6-deep confirmed transactions.
If such an attack was to be carried out, the damage would be irreparable.
CEX.io moves to reassure community
CEX.io, the owner of Ghash.io, has come under criticism for its failure to address the concerns. Many miners and bitcoin enthusiasts are urging fellow miners to leave the pool, but so far it does not appear that many of them are ready to heed the warning. Ghash.io has a somewhat chequered track record, as it was used in a double-spend attack last year. However, CEX.io insists that it had no affiliation with the attack and that it condemns such actions, as they harm the bitcoin network.
CEX.io rewrote the Ghash.io engine after it gained control of the platform. Earlier this year CEX.io said it would do “everything possible to prevent pool capacity manipulation in the future.”
This afternoon CEX.io issued a statement in an effort to reassure miners and investors:
Ghash.io insists that it has put in place a plan to ensure that it never crosses the 51% mark. It will temporarily stop accepting new independent mining facilities to the pool and it will implement a feature allowing existing users to mine bitcoins from other pools, allowing them to use CEX.io hardware in the pool of their choosing.
Ghash.io insists that it does not have any intentions of executing a 51% attack, as it would do serious damage to the Bitcoin community, and the company itself. To the contrary, they want to expand bitcoin community and utilise the hashing power to develop a greater bitcoin economic structure. Ghash.io goes on to say that it “sees no benefit” in having a 51% stake in mining.
Preventing 51% attacks
There are a number of ways to eliminate threat of 51% attacks, although technically speaking they should be called 50%+1 attacks. Miner boycotts are proven to work, but they cannot be relied upon all the time. Calls to pull out of Ghash.io seem to be working and it is already back to 38%, down from 42% less than a day ago.
Bitcoin developer Vitalik Buterin told CoinDesk:
Buterin argues that the best way of going about it would be to create a one-click application that installs a miner, then installs the peer-to-peer mining pool and a simple user interface. The application should be cross-platform, covering Windows, Mac and major Linux distributions.
Following this, a simple software package that would allow users to create their own mining pools should be developed and released as an open-source project. This way, anyone would be able to start a centralized mining pool capable of competing with big pools like Ghash.io.
People should then contribute bounties to both, Buterin argues. “If I see a credible effort, I would throw in a few hundred dollars myself,” he added.
Buterin is not alone. Quite a few miners seem to believe that a true cross-platform open-source executable that allows peer-to-peer mining is the way to go. One Reddit user is offering 10 BTC to anyone who develops such a solution, or an open-source pool that allows connections to existing mining platforms, with a peer-to-peer backend system.
Singapore Government: This is How We Intend to Tax Bitcoin
Published on January 9, 2014 at 02:55 GMT | Asia, News, Regulation
Singapore has given guidance on how it intends to tax bitcoin transactions for businesses and merchants, becoming one of the first governments in the world to do so.
Singapore-based bitcoin brokerageCoin Republic received an official response to its requests to the Inland Revenue Authority of Singapore(IRAS) for clarification on how to handle capital gains, earnings, and even GST (aka VAT, or sales tax) on bitcoin exchanges and bitcoin related sales.
Coin Republic provided the IRAS with a number of detailed scenarios to match its business activities, and asked the authority to review the tax implications for each.
As a regional financial services hub and IT center, Singapore could provide a useful model for authorities in other countries to follow. It has also adopted a cautious but sensible approach to bitcoin so far — after initially warning people against using bitcoin, the Monetary Authority of Singapore (MAS) later declared itwould not interfere in people’s or businesses’ ability to transact in bitcoin, essentially opening the country up as a base for bitcoin entrepreneurship.
Defining bitcoin
There were some interesting points in the IRAS’s response. Some highlights were: Companies will be taxed on income based on bitcoin sales, as though bitcoins were products. When used as an investment, though, they are treated as capital gains (Singapore has no capital gains tax for non-property investments). GST rules could vary depending on the level of service an exchange provides (see below).
When accepted as payment for goods and services, bitcoins are counted as barter exchange. This includes digital products like music, but not in-game virtual products unless they are exchanged for money or other goods in the real world.
The IRAS reminded Coin Republic that bitcoins do not fit the definition of ‘money’ or ‘currency’, so supplying them is seen as a good/service for taxation purposes rather than a currency exchange. Also, companies (eg: payment processors) deemed to be overseas companies, or operating from outside of Singapore, will not be taxed.
Moskowitz said he hoped the GST regulations would be reconsidered to prevent bitcoin businesses being double or even triple-taxed: Once upon acquiring the bitcoins, again when using them as payment, and again when selling bitcoins for cash.
Is taxation possible?
There has been much discussion around whether any government even has the power to tax transactions on an essentially anonymous form of money. Libertarian-leaning bitcoin fans often scoff at the idea. More pragmatic businesspeople see taxation as inevitable at some point, arguing that it is another step towards legitimacy and would lead to greater adoption in the business world.
It’s important to remember that business transactions in hard cash are already subject to taxation in most countries, despite the anonymous nature of cash making it impossible to notice every small interaction. Technically, the same applies to any form of payment you receive for goods or services, even if it is barter. Try to run a multi-million dollar business purely in cash though, and you will soon attract the tax authorities’ attention.
Thus it is hard to imagine a significant online retailer or other business accepting bitcoin without some form of tax assessment in place. At least, not without the kind of creative jurisdictional interplay employed by large corporations and offshore small businesses.
Other countries
So far, the world’s governments and central banks have put more energy into persuading the public that bitcoin is risky and not a currency, or restricting its use, than formulating rules to tax its transactions.
A few countries have issued statements where the exact tax rules hinge on whether bitcoin is classifed as a virtual currency, asset, or good. Slovenia (the home of Bitstamp) has said bitcoin is a virtual currency but not a ‘monetary asset’, and bitcoin income would be taxable.
Germany has said it regards bitcoin a ‘private money’ or a ‘financial instrument’, and the Swiss parliament is “considering” a move to have bitcoin officially recognized as a currency.
Here are some more details on Singapore’s tax plans, based on Coin Republic’s email exchange:
Income Tax
Companies in the business of buying and selling bitcoins will be taxed based on the gains from sales of those bitcoins. On the other hand, if the bitcoins are part of the company’s investment portfolio acquired for long term investment purposes, the gains from the sales will be capital in nature, and thus not taxable.
GST (aka VAT or sales tax)
The sale (including the exchange) of bitcoins in return for a consideration in money or in kind is a taxable supply of services subject to GST. If the seller is a GST-registered person, he would have to account for output tax on the sale of bitcoins made in the course or furtherance of his business.
Where bitcoins are accepted as payment for real goods or services (or digitized items like online music), such transactions are treated as a barter exchange. GST should be accounted for on the individual supplies made (ie: the supply of bitcoins and the supply of real goods or services) if the parties involved are GST-registered persons. However if the bitcoins are used to exchange for virtual goods or services within the virtual gaming world, as a concession, the supply of bitcoins will not be taxed until the bitcoins are exchanged for real monies, goods or services.
As bitcoin does not fall within the definition of ‘money’ or ‘currency’ under the GST Act, a supply of bitcoins is not a supply of money and would be disregarded for GST purposes. The supply of bitcoins would be treated as a supply of services as it involves the granting of the interest in or right over the bitcoins.
The GST treatment of the supply of bitcoins will depend on whether the company is acting as an agent or principal in the transaction. If the company merely facilitates and is acting as an agent in the bitcoin trade (eg: bitcoin exchange transfers bitcoins directly to a customer’s wallet), then GST is chargeable only on the commission fees received. However if the company is acting as a principal in the bitcoin trade (eg: it buys and onward-sells bitcoins to the customer), GST is chargeable on the full amount received, ie: the sale of bitcoins and commission fees.
The authors suggest that too much bitcoin usage would lead to a tightening of monetary policy, because it could increase the money supply of US dollars.
This would depend on a couple of factors, though. Firstly, enough people would need to be using bitcoin for it to have an effect. At the moment, the bitcoin economy is highly illiquid, leading to the volatility that we’ve seen in the last year.
Secondly, bitcoins must be used as a currency in their own right. If they are bought into circulation when exchanged for fiat money, and then taken back out of circulation when users ‘cash out’ back into fiat, the effect on the money supply would be small, the authors suggest.
If, however, bitcoins are substituted for dollars on a more systematic, long-term basis, the situation would change, because it would decrease the need to hold dollars, and increase the supply of fiat money. The danger, according to the report, is that this could reduce the demand for dollars, which would affect the rate of circulation. This would confound things for the Federal Reserve, which effects monetary policy by adjusting the banking system’s available dollar reserves.
http://www.businessinsider.com/alibaba-bitcoin-2014-1
China's E-Commerce Giant Alibaba Just Banned Bitcoin
Nicholas Carlson
Alibaba — the e-commerce giant — will no longer allow Bitcoin use on its site.
Alibaba said that as of January 14 it would stop its users from doing any deals in Bitcoins or other virtual currencies such as Litecoins, and would bar merchants from selling any Bitcoin mining software or offering any related products.
The decision was taken to “promote the healthy development of Taobao Marketplace and to more effectively protect the interests of Taobao members,” Alibaba said in a statement. It added that the ban stemmed from the central bank’s ruling in December that prohibits any payment companies or financial institutions from handling Bitcoins.
The whole press release is here (in Chinese).
The price of Bitcoin dropped precipitously late last year after the first signs that China would crack down.
But it hasn't really mattered. The price has proved resilient, and as the FT noted yesterday, trading is springing back to life, as people find a way around the government ban. Given that circumventing government regulations is one of the main appeals of Bitcoin, it was probably naive to think that China's crackdown would have major ramifications.
China’s Answer to eBay Bans Sale of Bitcoins and Mining Gear
Published on January 7, 2014 at 17:05 GMT | Asia, News, Regulation
Taobao, China’s largest online marketplace, will ban the sale of all cryptocurrencies, mining equipment and mining tutorials from 14th Jan, it said in a statement released today.
A CoinDesk translation of thestatement’s major points is below:
The statement specifies three categories of items, including a list of cryptocurrencies and related items:
Following its release, the price of bitcoin on major Chinese exchanges experienced a slight drop from 5,600 yuan to 5,000 yuan, before rebounding to 5,300 yuan within half an hour.
Taobao, a consumer marketplace similar to eBay, claims more than half a billion registered users and daily transaction volumes exceeding 20bn yuan. The marketplace is currently one of the few places beyond the exchanges where users in China can buy bitcoin.
Taobao is owned by Alibaba Group, which also runs Alipay, China’s leading third-party online payment platform. The Chinese central bank last month banned financial institutions from dealing in bitcoin and barred payment companies from working with bitcoin exchanges. The move triggered a plunge in bitcoin prices.
Although Taobao’s statement doesn’t bar merchants on the marketplace from accepting bitcoin for goods and services, financial consultancy Kapronasia reported a drop in the number of merchants willing to take bitcoin payments in the wake of the central bank ruling, according to the South China Morning Post.
German Central Bank Official Issues Another Bitcoin Warning
Published on January 7, 2014 at 16:00 GMT | Europe, Regulation
A German central bank official has issued another bitcoin warning, reiterating the bank’s earlier position on digital currencies.
Last December, Bundesbank’s President Jens Weidmann told Wirschaftswoche that bitcoin was not an alternative to national currencies and that bitcoins were only used as currency in certain niches.
Weidmann stressed that the driving factor behind the demand for bitcoin was the hope of big payouts, which may prove elusive for most investors.
On Monday, Bundesbank board member Carl-Ludwig Thiele told German financial magazine Handelsblatt that bitcoins remain highly speculative, as they are as volatile as ever.
He stressed that regulators and central bankers across Europe are discussing bitcoin and trying to raise public awareness, but so far no concrete action has been taken, apart from public warnings.
Thiele maintains that bitcoins are an exceptionally risky investment. “Because of its design and because of the large volatility, bitcoin [is] highly speculative,” he said. “We do not see that the price is being driven by fundamentals.”
He also pointed out that bitcoin investors have absolutely no guarantee in case something goes wrong:
Thiele added that bitcoins do not pose a threat to financial stability, due to their low volumes and amount of bitcoins in circulation. He said that about 70,000 bitcoin transactions take place worldwide each day, a figure dwarfed by the 59.8 million regular payments made in Germany each day.
However, although bitcoin does not pose a risk to financial stability, the same cannot be said of individual investors.
Thiele’s views are in line with previous statements made by Bundesbank officials and warnings issued by the European Banking Authority in December. However, it should be noted that Germany and most other European countries have a relatively liberal attitude towards digital currencies.
The big question is whether this is about to change, as Thiele points out that regulators and central bankers are starting to discuss bitcoin proliferation and, quite possibly, bitcoin regulation.
China’s Answer to eBay Bans Sale of Bitcoins and Mining Gear
Published on January 7, 2014 at 17:05 GMT | Asia, News, Regulation
Taobao, China’s largest online marketplace, will ban the sale of all cryptocurrencies, mining equipment and mining tutorials from 14th Jan, it said in a statement released today.
A CoinDesk translation of thestatement’s major points is below:
The statement specifies three categories of items, including a list of cryptocurrencies and related items:
Following its release, the price of bitcoin on major Chinese exchanges experienced a slight drop from 5,600 yuan to 5,000 yuan, before rebounding to 5,300 yuan within half an hour.
Taobao, a consumer marketplace similar to eBay, claims more than half a billion registered users and daily transaction volumes exceeding 20bn yuan. The marketplace is currently one of the few places beyond the exchanges where users in China can buy bitcoin.
Taobao is owned by Alibaba Group, which also runs Alipay, China’s leading third-party online payment platform. The Chinese central bank last month banned financial institutions from dealing in bitcoin and barred payment companies from working with bitcoin exchanges. The move triggered a plunge in bitcoin prices.
Although Taobao’s statement doesn’t bar merchants on the marketplace from accepting bitcoin for goods and services, financial consultancy Kapronasia reported a drop in the number of merchants willing to take bitcoin payments in the wake of the central bank ruling, according to the South China Morning Post.
German Central Bank Official Issues Another Bitcoin Warning
Published on January 7, 2014 at 16:00 GMT | Europe, Regulation
A German central bank official has issued another bitcoin warning, reiterating the bank’s earlier position on digital currencies.
Last December, Bundesbank’s President Jens Weidmann told Wirschaftswoche that bitcoin was not an alternative to national currencies and that bitcoins were only used as currency in certain niches.
Weidmann stressed that the driving factor behind the demand for bitcoin was the hope of big payouts, which may prove elusive for most investors.
On Monday, Bundesbank board member Carl-Ludwig Thiele told German financial magazine Handelsblatt that bitcoins remain highly speculative, as they are as volatile as ever.
He stressed that regulators and central bankers across Europe are discussing bitcoin and trying to raise public awareness, but so far no concrete action has been taken, apart from public warnings.
Thiele maintains that bitcoins are an exceptionally risky investment. “Because of its design and because of the large volatility, bitcoin [is] highly speculative,” he said. “We do not see that the price is being driven by fundamentals.”
He also pointed out that bitcoin investors have absolutely no guarantee in case something goes wrong:
Thiele added that bitcoins do not pose a threat to financial stability, due to their low volumes and amount of bitcoins in circulation. He said that about 70,000 bitcoin transactions take place worldwide each day, a figure dwarfed by the 59.8 million regular payments made in Germany each day.
However, although bitcoin does not pose a risk to financial stability, the same cannot be said of individual investors.
Thiele’s views are in line with previous statements made by Bundesbank officials and warnings issued by the European Banking Authority in December. However, it should be noted that Germany and most other European countries have a relatively liberal attitude towards digital currencies.
The big question is whether this is about to change, as Thiele points out that regulators and central bankers are starting to discuss bitcoin proliferation and, quite possibly, bitcoin regulation.
Taiwan Regulators Block Robocoin Bitcoin ATMs
Published on January 6, 2014 at 02:34 GMT | Asia, Companies, News,Regulation
Taiwan’s Financial Supervisory Commission (FSC) has stated it will prevent the installation of Robocoin bitcoin ATMs there, responding almost immediately to the company’s plans to introduce machines in Taiwan and Hong Kong.
Zeng Mingzong, FSC chairman, made the statement in an interview with the Central News Agency (CNA). According to an article published on CNA’s website at 14:56 Taipei time today:
Robocoin had only just announced plans to expand into East Asian markets, designing new user interfaces for Chinese-language speakers. Taiwan was also seen as a bright hope for bitcoin in Asia after mainland China began issuing its own strong statements on bitcoin use in December. As well as having an advanced economy and local high tech hardware industry, it is also one of the few places (besides Hong Kong and Macau) where banks can legally exchange mainland Chinese currency (CNY, or renminbi).
Hong Kong, which retains legal autonomy from the rest of China, has so far refrained from intervening in bitcoin business or adoption.
Taiwan has a buy-sell bitcoin exchange called BitQuick.tw, and digital entertainment company Wayi announced its intentions to accept bitcoin and become an exchange itself last December. Wayi’s online retail arm, Wmall, still features the bitcoin logo prominently on its banner and front page.
Las Vegas-based Robocoin became famous in October last year when the world’s first “bitcoin ATM” went online in a Vancouver coffee shop. Its machines are also bi-directional, dispensing and buying users’ bitcoins for cash.
The company has always stressed compliance with financial regulators as a priority in any market its machines enters. Both biometric information (palm scans and facial recognition) and government-issued ID are required to trade.
The ATMs have been a huge success. The solitary machine in Vancouver reportedly took over CAD$1m and processed over 1,500 transactions in its first 29 days of operation. Robocoin said it has taken “dozens” of orders since then and the company had planned to distribute 39 units internationally in January.
Bitcoin has weighed on the Taiwan FSC’s mind recently. No sooner had calendars ticked over when it issued the world’s first bitcoin warning of 2014, containing all the usual cautions about volatility and lack of legal protections. It then went further by saying the Committee might take “necessary steps” if financial institutions engage in bitcoin operations.
Taiwan’s Financial Supervisory Commission has existed only since 2004.According to the Taipei Times, it appointed and replaced four different chairpersons before 2007 and several high-ranking personnel were involved in scandals over the same period.
ASIC Manufacturer HashFast Faces Legal Action From Bitcoin Miners
Published on January 6, 2014 at 11:30 GMT | Mining, Regulation, US & Canada
ASIC manufacturer HashFast is facing serious allegations from bitcoin miners who placed orders for its Baby Jet mining rigs, which have since failed to arrive.
Consequently, some of the miners affected are planning to take the company to court, according to ExtremeTech. However, the issue is more complicated than it first appears, and the miners may be facing an uphill struggle.
At the root of the dispute was HashFast’s pledge to begin shipping between 20th and 30th October 2013. In the original Terms of Service (TOS), the company also told customers that they would be eligible for a full refund if it failed to deliver the units by the end of 2013.
The relevant excerpt from HashFast’s TOS reads:
Buyer beware?
But here is where it gets complicated. Most miners paid for their Baby Jet rigs in bitcoin, which probably sounded like a good idea when they made the order. However, since bitcoin’s value has soared over the past couple of months, these overdue rigs now look like the worst possible deal a miner could make.
On average, miners who paid with bitcoin appear to have paid 45 BTC per unit. In August, the company was taking orders at $5,600 per unit (around 55 BTC per unit). Since the units were ordered last summer, the overall price of the units was very different, as bitcoin was trading in the $75 to $150 territory.
The rise in the currency’s value since then means that miners would have had a better return on their money if they had simply held on to their bitcoins and sold them today.
HashFast’s CEO Eduardo deCastro told CoinDesk that the company’s delays were caused by problems encountered in the production process, he said:
Additionally, in December the company encountered and debugged problems with their PCBs. DeCastro explained that: “On the eve of 31st December 2013, we still were not comfortable starting bulk production or volume shipments.”
“We remain confident that we will start bulk production soon,” he added.
Refunds
Probably the most contentious part of this story is that the “full refund” section of HashFast’s TOS is not being interpreted by the company as a reimbursement in bitcoin.
Controversially, HashFast is offering to refund the customers in USD [.pdf], based on the dollar rate at the time of their purchase. Needless to say, the miners want this paid in bitcoin instead.
What’s more, the company has reportedly antagonized customers further by failing to protect their email addresses in a mailout sent on 27th December. DeCastro admitted:
“Only customers received these emails, no other customer-specific information was included. We took immediate and decisive corrective action to put measures in place to ensure that this will not happen again.”
“We apologized, and continue to apologize, to all of our customers affected by this error,” he added.
Everyone who has followed bitcoin over the last few months will be aware that one of the biggest concerns raised by regulators and bitcoin detractors is the fact that disputes and refunds for bitcoin transactions are problematic. Bitcoin is not “legal tender” and HashFast is offering refunds in legal tender, in this case US dollars. Pointing out that HashFast ”operates in USD” deCastro added:
The US Federal Trade Commission (FTC) regulations outline several scenarios, all of which involve payment by cash, cheque, money order or credit card – not bitcoin.
The FTC states that companies that must refund the entire amount tendered by the customer, including shipping, handling, insurance and other costs. The rules also cover sales paid for in whole or in part by promotional devices like coupons, but they simply do not cover bitcoin transactions.
Critics love legal ambiguity
In essence, HashFast does not appear to be violating any laws by refusing to pay out refunds in bitcoin. While it may be effectively killing its business in the process by antagonizing the mining community, it’s likely that the company doesn’t have much of a choice.
The funds raised in the pre-order process were used to develop the rigs and the value of bitcoin has increased tenfold since the company started taking orders. In other words, the money was likely spent months ago and refunding miners in bitcoin would mean that the company has to pay out ten times as much as it received.
As if that was not enough, the miners will not be compensated for lost revenue. The rigs were supposed to ship three months ago, when the bitcoin hash rate and difficulty were much lower. Three months later, the hash rate and difficulty have practically tripled.
Although some observers believe the increase in difficulty diminished profitability, this is simply not the case, as miners with the right ASICs turned a handsome profit in the last quarter of 2013.
HashFast anticipated this, so they offered to install additional capacity to compensate for difficulty increases. Oddly enough, the company reportedly told one customer that it would refund them in bitcoin if they failed to deliver, but there are two ways of interpreting this promise – either they would compensate them based on the BTC price, or the USD price converted back into bitcoin.
HashFast declined to comment on this claim, saying:
This is bound to remain a very controversial subject for weeks and months to come. Bitcoin critics will undoubtedly use it as an example of bitcoin transactions gone wrong, with limited legal recourse. Worse, the transactions were made by bitcoin enthusiasts and professionals rather than average consumers.
For the time being, it isn’t clear whether the dispute will end up in court and whether the miners will actually find a judge who is willing to rule that the refunds must be paid out in bitcoin, as this would be a landmark ruling.
Lesser-Known Chinese Bitcoin Exchange ‘Gox BTC’ Announces Closure
Gox BTC, a bitcoin exchange based in Mainland China, announced over the weekend that it will cease its operations on 18th January.
The company cited “increasing operational costs and legal uncertainty” as key catalysts for its closure.
In a statement published on its website, the exchange said:
The statement also instructed users to withdraw their deposits as soon as possible, as no withdrawals will be allowed after the website’s scheduled closure date on 18th January.
The company concluded by stating that the website may open again if “opportunity is ripe”, though it refrained from making a commitment as to when this will happen, if at all.
User Reaction
Gox BTC, launched in May this year, is one of the lesser-known cryptocurrency exchanges based in Mainland China. On 4th January, the exchange’s website indicated a 24-hour trading volume of just 2.87 BTC, which has dropped sharply from its usual level of around 100 BTC per day.
In comparison, China’s leading exchange Huobi.com, saw a trading volume of 100,737 BTC during the same period.
The news of Gox BTC’s closure has created unease among Chinese Bitcoiners, who have grown wary of government interference, after the nation’s central bank barred banks from working with exchanges last month.
On Sina Weibo, China’s leading microblog service, some users posted “condolences”, while others praised the website’s timely update as act of responsibility.
Most people attribute the exchange’s closure to increasing competition in the industry. At the moment, all major Chinese Bitcoin exchanges don’t charge trading fees, which makes profitability an unattainable goal for many.
Credit Cards Have Not Evolved With the Internet. Enter Bitcoin.
Published on January 5, 2014 at 11:57 GMT | Analysis, Companies,Merchants, Technology
The credit card has a lengthy history. One of the first iterations of plastic was actually made of sheet metal. It was called the Charga-Plate, developed in 1928. It was issued to frequent customers by merchants in the same way that department stores today give out credit cards.
To record a transaction a merchant would place the Charga-Plate into a device that allowed a paper charge slip to be laid on top of it. An inked ribbon would then be run on top of the paper, creating a record of the sale.
This method of credit card processing was used for years until the digital revolution arrived. After that, electronic card readers could harness the information from swiping magnetic strips through a machine, providing easier record keeping.
Then, the internet came along. And it didn’t accept cash, only payment information in the form of credit or debit cards. The credit card companies didn’t evolve their product along with the internet; they pretty much kept it the same. This has created a number of issues that prove how outdated the credit card has really become.
Transaction Fees
A major challenge in the internet era has been how media companies make money on this new platform. Advertising has played a major part, but its long-term effectiveness has been questioned.
Sure, e-commerce is an effective method of generating money on the web. But paying small amounts for media content has been a much harder challenge.
Consider the plight of many media companies that did not anticipate the digital age. If there were an easy way for them to accept tiny payments for their content, they would.
But credit cards don’t easily allow for that. Many processors charge a fee of $0.30 plus a percentage off the top of a transaction. And payment processors often consider a microtransaction as a payment of less than $5.00 yet that really does not seem “micro” at all.
Credit card processors must make money in the form of transaction fees. That’s their business.
But their ongoing model for small payments is outdated. This is evident when you go to a store that charges a fee for a particular transaction threshold, such as for less than $5.00.
In a world where cash is becoming scarce as more people prefer plastic, credit card companies must learn to adapt to a newer fee model, or be overtaken bydigital currencies like bitcoin.
Privacy
Another problem with credit cards is all the information that is contained within them. Companies increasingly want to boost revenues by collecting purchasing information.
The theory goes that with this information they can glean insights on customers that will help to sell more goods and services. More goods and services can mean more revenue, which keeps stockholders happy.
The problem with that is many customers don’t want to have that information given out to other companies that then might try to get them to buy additional products and services.
Yet credit card providers already have been selling advertisers credit card purchasing information, a veritable treasure trove of data for marketers to mine through. The Washington Post has previously reported that companies have nicknames for ranking customers:
Consumers have very little choice in this matter. After all, how can you pay for things on the internet without a credit card?
One company, called MaskMe, allows users to create disposable credit card numbers when making purchases online. But that’s a time-consuming method.
Many merchants accept PayPal linked to a bank account, yet many still are uncomfortable with a direct link to their banking data.
Fraud
Credit card fraud continues to be a problem. In fact, this has been an issue since the 1990s when AOL wasn’t even confirming credit card numbers at the time of sale.
Vinny Lingham, the CEO of gift card purveyor Gyft, has to deal with credit card scammers all of the time. He has regularly told audiences during events he speaks at that his company sees zero fraud from accepting bitcoin as a method of payment.
Yet Gyft must contend with credit card fraud on a daily basis.
Gift cards are a resource for thieves to transfer the value of stolen credit cards over to something that appears more legitimate. What this means for the consumer is higher costs overall, for everything, because of all of these scams.
The recent news of the Target theft of payment details from over 40 million credit/debit cards also highlights this problem.
That so much information was stolen shows just how fragile the existing system is as it stands. eWeek reported that the magnetic strip on the credit cards was the Target vulnerability.
Richard Crone, a payment consultant, recently told PaymentsSource regarding the hack:
Conclusion
Credit cards were not built for the digital world that we live in today. Rather, they have been adapted to become the standard that we use for buying things online.
We don’t even need the cards to buy things online; this is why digital currencies like bitcoin offer so much promise. Yet in the eyes of the banks and credit card processors, they pose a problem.
The payments industry may have no choice but to start from scratch.
Many credit card companies are now realizing that mobile and contactless payments are the future. Yet the prospect of personal information being sold or even hacked in new and different ways is still a threat with this new paradigm.
This is why the disruptive qualities that bitcoin presents to banks should actually be considered as an opportunity rather than a threat. It’s a value proposition for merchants who are fed up with chargebacks.
It can be a more private method of payment than what the credit card companies are currently offering.
The fact of the matter is that there is always going to be that risk of fraud or theft. But as a purchasing method, bitcoin should be considered an innovative framework that could be more successful over current payment options for the internet today.
Thanks for sharing this useful information with people.......
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