Tuesday, March 25, 2014

Bitcoin and Crypotcoin news updates March 25 - 26 , 2014 .. h/t The Atlantic , IBT , Coin Desk and Cryptocoin news -- MT Gox might have found another 670,000 bitcoins ......Internal Revenue Service to Treat Digital Currencies as Property for Tax Purposes , discussions as to what this might mean ....... Zip Zap suspends BTC transactions ..... Auroracoin Airdrop: Will Iceland Embrace a National Digital Currency ..... Kraken Bitcoin Exchange Passes ‘Proof of Reserves’ Cryptographic Audit ..... Exchange Vircurex Freezes Withdrawals, Claims Lack of Reserves ..... ECB says Bitcoin is ‘economically insignificant’ ( Is that fear that I smell in the air from the ECB )

Crypto-Coin News.......


BTC China CEO: Most Countries Will Defer to US 

on Bitcoin Regulation

Posted 5 hours ago 

Bobby Lee Bitcoin Regulation
Bobby Lee has a theory on why most countries aren’t enacting new Bitcoin regulations.
While there are currently many different countries around the world making their own recommendations when it comes to how Bitcoin should be regulated, the reality of the situation is that most central banks and regulators are looking to the United States for guidance on this matter. Although many Bitcoin entrepreneurs in the United States have denounced their country’s stance on Bitcoin thus far, the truth of the matter is that New York City is still the financial center of the world. There has been a lack of real action from most countries around the world when it comes to Bitcoin’s legality as a currency or payment system, but we could see that change as the BitLicenses are sorted out in New York. For better or worse, most countries look towards the United States for guidance on AML, KYC, and other forms of financial regulation, so it would be a surprise to see this trend break when it comes to Bitcoin.

Waiting for the United States to Take Action

BTC China CEO Bobby Lee has stated that most countries are “probably mentally deferring to the United States” when it comes to Bitcoin regulation, and it would be quite difficult to find a source closer to the regulatory environment around cryptocurrency than the guy who is running one of the world’s largest Bitcoin exchanges. There was a bit of a panic in the Bitcoin community after China seemingly banned all Bitcoin transactions back in December, but it turns out that theChinese government is simply keeping banks out of the mix for now. This makes sense in a country that likes to have immense control over the economy in order to prevent large bubbles that lead to epic collapses. Whether or not these kinds of restrictions actually work is another story. At the end of the day, most other states in the US will likely look to New York for guidance when it comes to new Bitcoin regulations, which means Financial Superintendent Ben Lawskycould be the most important man in the world when it comes to Bitcoin regulation right now. What he and the rest of the New York Department of Financial Services decide to do will have a ripple effect through the United States and the rest of the world.

More Harsh Words for His Competitors

In addition to commenting on the regulatory environment in China and the rest of the world at CoinSummit, Bobby Lee also had some harsh works for his competitors in China. He has claimed that certain exchanges, such as Huobi, have faked trading data in the past, and he is definitely not backing down from those claims. While many people see China as a controlled economy, it’s still in Wild West territory when it comes to Bitcoin. Lee stated that he’s seen magnifications in the Chinese Bitcoin exchange market of anywhere between 10-20x in recent weeks. He also stated that some other exchanges simply add 20k or more of artificial volume to their exchanges each day, and it’s easy to spot when you take a look at the daily charts. It seems that MtGox may not be the only exchange where manipulation is taking place on a regular basis.
Tuur Demeester has had great coverage of the CoinSummit event on Twitter, and I definitely recommend following him for future updates.




CryptoRush support worker leaks inside info

Posted 13 hours ago 

CryptoRush support worker releases inside info
CryptoRush support worker DogeyMcDoge leaked inside information on the exchange. He included this screenshot as proof of the troubles CryptoRush is facing.
Big stories often take some time to emerge. When they see the light, it’s usually just the tip of the iceberg.Mt. Gox was like this and CryptoRush is just the same. Another leak appeared today, this time from one of the exchange’s support workers.

One month of hacking

DogeyMcDoge has been working for CryptoRush since late February. When looking back on his first month, it’s clear that this was an exciting job to say the least. In only a month’s time, he saw the exchange get hacked twice. On top of that, the owner’s ways of recovering losses was ‘unorthodox’.
“Around the 11th of March, I received a message from Devianttwo: “had something bad happen. All I’m saying.” I was brought into a Skype call and told that we had been hacked. I was shocked. They told me the amount, and I did not sleep well that night.” 
The first hacking he witnessed cost the exchange 950 Bitcoins and 2500 Litecoins. A large amount considering CryptoRush is one of the smaller exchanges.
“Someone with an IP from Ukraine. They were looking into it, thought they found the guy. Thought they could get the BTC back. Maybe it was shock. Maybe it was just me being naive. But I believed them.”
When you work at a place like this, you feel responsible about the many customers that place their funds in your hands. Even as a support worker, you’ll feel guilty whenever something like this happens. You know how it would feel if your coins would suddenly disappear. You’ve seen exchanges get hacked before, but this time, you are part of that exchange. So you try to replace that feeling of guilt by something else. Some form of hope in a happy ending. You know it’s naive, but it’s damn well better than accepting the truth and who knows…

So-called solution

The next stage is the so-called solution. Something has to be done, and anything will work as long as people get their money back.
“I was informed of the plan to announce CryptoRushShares, a currency that would pay % fees to holders. And the kicker? Fyrstikken would announce 60% ownership of them. But in the back room?
[3/14/2014 10:48:15 PM]
  1.  :basically
  2.  : he’s helping me gain capital back from share buyers
  3.  : he started by announcing 60% shareholding
  4.  : but he actually owns only 10%”
I guess it happens often. A ‘small lie’ in order to get things done. Nobody would give a damn if it worked so why bother? Beats doing nothing. Obviously a small lie remains a lie, especially in a situation like this. Full transparency would be what every hacked exchange should go for, but that’s rarely the case. It’s probably harder when you’re on the other end of the table, trying to restore faith into your exchange.
Unfortunately, the lie didn’t help CryptoRush.
“And so time goes on, and things look OK at first. But then the BTC wallet runs out. Alex123 and fraggyb did not know of our insolvency. Daemon problems we were told was the answer. 
The guilt was starting to build up inside of me. I answered very few tickets the week of the 16th. I was conflicted, but I worked at my full time job >40 hours that week, so it kept my mind off of things a little. The issues continued. I kept suggesting ways we could maybe get some BTC back, arbitrage, etc. We didn’t even have enough funds for that. I wanted so bad for the exchange to stay afloat, thinking “Maybe tomorrow will bring us back our volume!” But alas, the problems with Zeit, and BTC withdrawals killed our volume. There was no coming back.”
As if their problems weren’t hard enough, another drama unfolded. The one we witnessed yesterday. Due to a wallet that wasn’t updated fast enough, people were able to withdraw more Blackcoins than they had in their account. Drama unfolded; the rest is history.
DogeyMcDoge’s confession is real. CryptoRush’s admins provided proof for this by tweetingabout it.
#CryptoRush @TheCryptoRush Official announcement coming in the next 24-48 hours in regards to DogeyMcDoge’s information le


From The Atlantic.....


http://www.theatlantic.com/technology/archive/2014/03/why-bitcoin-can-no-longer-work-as-a-virtual-currency-in-1-paragraph/359648/





Why Bitcoin Can No Longer Work as a Virtual Currency, in 1 Paragraph

A single bitcoin no longer functions like a $20 bill.
More
Reuters
On Tuesday, the Internal Revenue Service ruled that it would tax Bitcoin as a property, not a currency.
Some see the move as helping to bring the medium into the mainstream. Now that bitcoins can be taxed, they’re reportable, and the legal ramifications of buying and selling a coin are clear.
The IRS’s decision, though, may end one of the great dreams of Bitcoin. The U.S. government will now subject owners of individual bitcoins to capital gains taxes: What they gain on buying or selling a bitcoin, they must pay taxes on.
That’s a big deal, perhaps bigger than it seems, because—as a new blog post byGeorgetown Law professor Adam J. Levitin explains—it means Bitcoin can no longer function as a digital currency.
To tax Bitcoin as property, he says, destroys its fungibility: One Bitcoin can no longer be exchanged for another.
This was one of the original intents behind the service. Bitcoin aimed to function as a kind of digital money, meaning it had to work as a unit of account, a medium of exchange, and a store of value. In reverse, that means:
As a store of value, Bitcoin’s price had to be predictably stable, such that you could neglect to spend a single bitcoin and know its value would not fluctuate wildly. In late 2013, many argued that Bitcoin’s quickly rising price kept it from functioning as a dependable store of value, but there were no technical or regulatory reasons it couldn’t function as such eventually.
As a medium of exchange, Bitcoin must be commonly desired. People must want to have Bitcoin; others must want to spend it. (Thus, it avoids the ‘coincidence of wants’ problem—in order to trade, both people don’t need to want something the other person has. Instead of trading rent for food, for example, you can rent living space from a landlord with money, and your landlord can use that money to buy food.)
Finally, as a unit of account, Bitcoin had to have a standard numerical value to be used to measure profits and settle debts. It had to be divisible (which it was, since smaller units of bitcoin could be traded); it had to be verifiable (which it was—this formed the basis of its cryptosecurity), and finally, it had to be fungible, meaning that every bitcoin was the same as every other bitcoin.
And that’s where it gets interesting.
Something like a $10 bill, for example, is fungible. The $10 bill you got from an ATM is the same as the $10 bill you got back as change at the ice cream parlor is the same as the $10 bill you (on a very lucky day) find on the street. It does not matter which $10 bill you spend.
So $10 bills, in other words, are interchangeable. This is why we don’t use horses, bananas, or hand-painted ceramic ashtrays as currency. (The hand-painted ceramic ashtray you got from an ATM is unlikely to be of the same quality as the one you found on the street. This is also why art doesn’t make a good currency.)
So,” asks Levitin, “what does this have to do with Bitcoin?”
The price at which a particular Bitcoin was acquired (and this is traceable) determines the capital gains on that particular Bitcoin when spent.  If I spend Bitcoin A, which I bought at $10, but is now worth $400, I’ve got a very different tax treatment than if I spend Bitcoin B, which I bought at $390. […] This means Bitcoins are not fungible, and that makes it unworkable as a currency. 
And then:
If I have to figure out which particular Bitcoin in my wallet I want to spend and what the tax treatment will be, Bitcoin just doesn't work as a commercial medium of exchange.
It still works as a speculative medium, Levitin writes. But one bitcoin, per Levitin, no longer equals one bitcoin no longer equals one bitcoin. Every bitcoin you own is a little different. 




http://www.ibtimes.co.uk/mtgox-confirms-police-involvement-search-missing-bitcoins-1441927



MtGox Confirms Police Involvement in Search for Missing Bitcoins

Mark Karpeles, CEO of MtGox, Confirms Police Investigation
MtGox CEO Mark Karpeles announces the request for bankruptcy protection, blaming "a weakness in our system."Reuters
MtGox has confirmed for the first time that a criminal investigation is taking place around the loss of millions of pounds worth of bitcoins at the troubled exchange.
In a brief statement on its website on Wednesday, Mark Karpeles CEO said that following MtGox's application for bankruptcy protection in Japan at the end of last month, the exchange "consulted with the metropolitan police department with regard to the disappearance of bitcoins which was one of the causes for said application."
According to Reuters, MtGox has been working with the police on this for the last two days.
The announcement was not the one which many customers of MtGox had been hoping for, following a tweet from Eren Canarslan, a Turkish investment banker who said he had been in touch with Karpeles, suggesting MtGox had discovered another 670,000 bitcoins.

Within a few days(or hours) @MtGox will announce that "they found ~670.000 & may release some BTCs to the victims. @PatronaPartners

















UK Cash-for-Bitcoin Service ZipZap 

Suspends BTC Transactions

 (@southtopia) | Published on March 25, 2014 at 09:47 GMT | CompaniesNewsStartups
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Global cash payment network ZipZaphas temporarily halted digital currency transactions, after partner and non-bitcoin payment processorPayPoint said it needed more clarification on surrounding regulations.
ZipZap CEO Alan Safahi told CoinDesk the company had not ended its relationship with PayPoint, adding that it was still working with them for non-digital currency clients, and to add more payment locations. He said such issues were a fact of life for bitcoin businesses who needed to operate within the traditional fiat world. He added:
“They only halted digital currency processing until they have better legal clarification from government which we hope to have within weeks. Meanwhile, we are pursuing other options as well.”

Cash for bitcoins

ZipZap had allowed customers to buy bitcoins with cash by first registering at its site and verifying ID, printing out a barcode on a payment slip and then taking it to a cashier at a physical location to hand over the money.
The service operated in five countries and customers could also login via existing accounts with BittyliciousBuyBitcoin.sg and BIPS Market, using exchangesANXBTC and ANXPRO. ZipZap had plans to also include KrakenCoinMKT andBTCX.se.
There were 28,000 physical stores for customers to pay – all of them PayPoint clients.

Processor stopped deposits

PayPoint had reportedly halted deposits to ZipZap until the UK government and the financial conduct authority provide legal clarity on digital currencies.
Though the process of printing slips and visiting a store might seem a cumbersome way to acquire such currency, it remained simpler and much less risky then dealing with online bitcoin exchanges.
Identity and address verification requirements for exchanges have increased markedly in the past year and even seasoned bitcoin users have become reluctant to trust them with large amounts of money or customers’ personal banking details.
ZipZap allowed customers to transact within their own country, as long as it was one of the five, and with registered businesses.

Banks OK, others still wary

The company had apparently had no problems with its partners in the traditional banking world, but payment processors like PayPoint and PayPal have been treading far more cautiously with digital currency related activities.
If a solution cannot be found with PayPoint, there may still be other payment processing options for ZipZap in the UK. There hasn’t been any overt pressure from the UK’s authorities for either financial institutions or the public to avoid bitcoin transactions.
Despite hints about eliminating sales tax, there is also no legislation related tobitcoin in the UK as yet, which appears to leave businesses free to try new models but which can actually stifle innovation, as entrepreneurs and investors become reluctant to enter the unknown territory.
ZipZap, still a relatively new business, has been trying to grow across the UK and other European markets. However, it may now focus on other overseas markets (like the US) after finding Europe’s environment too challenging.
The company’s site lists its headquarters in San Francisco, and it also has operations in India and Argentina.


Auroracoin Airdrop: Will Iceland 

Embrace a National Digital 

Currency?

 (@danielcawrey) | Published on March 24, 2014 at 20:28 GMT | AltcoinsNewsPrices
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Auroracoin, the “cryptocurrency for Iceland”, will begin distributing auroracoins to the country’s citizens this week, starting tomorrow, 25th March.
The distribution, which is being called Airdrop, will send 50% of the total auroracoins in circulation to the country’s populace. Icelandic residents that enter their permanent resident ID on auroracoin’s official website will receive 31.8 AUR (roughly $385 at press time).
The fourth-place digital currency in terms of overall market cap, Auroracoin quickly rose to prominence amongst the myriad new digital currencies for its unique approach to community building. Further, as it climbed up the market cap leaderboard, auroracoin spawned a wave of imitators that has so far includedscotcoin and spaincoin, among others.
Part of the reason for the interest was the altcoin’s strong nationalistic message.
Auroracoin’s creator, Baldur Friggjar Óðinsson, told CoinDesk the purpose is to give Iceland an alternative form of money to the Icelandic krona, or ISK:
“They [the government] want to force people to use a ruined currency, the ISK, of which they have printed way too much and which will be heavily sold when people will be free to do so.”
This idea that digital currency could be a liberating force, quickly spread.
But, this week’s Airdop may have the final say on whether or not it has a lasting impact on Iceland and the digital currency community in 2014 and beyond.

How the Airdrop will work

In a detailed Airdrop blueprint section of the auroracoin website, there is a strategic plan in place to distribute the altcoin to Iceland’s residents in stages.
Over the next four months, everyone in Iceland with valid permanent residency ID will be able to obtain 31.8 auroracoin. After that, there will be two additional stages where remaining AUR will be distributed. That amount will come from the remainder of the total premined 10.5M AUR set aside for Airdrop.
The stages are:
  • Stage 1 – Every Icelander will be able to claim a gift from me [Óðinsson] of 31.8 AUR, commencing on midnight March 25th. This stage will last 4 months. 
  • Stage 2 – The Airdrop is reset. Every Icelander will be able to claim a part of the coins leftover from Stage 1 in the premine addresses. The amount of coins shall be calculated in the following way: (Stage 1 remaining coins / 330,000 = coins awarded). In this stage and the following, both the original recipients of the coins will be able to retrieve their gifts, as well as other Icelanders. This stage will last another 4 months. 
  • Stage 3 - The Airdrop is reset again. Every Icelander will again be able to claim a part of the coins, leftover from Stage 2 in the premine addresses. The amount of coins shall be calculated in the following way: (Stage 2 remaining coins / 330,000 = coins awarded). This stage will last 4 months. At all stages the claimed coins will be a irreversible gift with full transfer of ownership. 
Óðinsson warns on the blueprint page itself that there are uncertainties with Airdrop:
“I can not guarantee a 100% fair outcome of the Airdrop and no claim can be made against me if there are imperfections in the process.”

Experts offer predictions

Auroracoin is an intruiging effort to many, not in terms of technological innovation, but in how it could mark the beginning of a new precedent for digital currency dispersion and marketing.
Travis Skweres, the CEO of altcoin exchange CoinMKT, addressed this point when speaking to CoinDesk:
“One of the biggest problems that bitcoin faces is distribution. If [auroracoin] is wildly successful, I think we will see this model emulated in the future, it could be a very very big deal.”
Auroracoin is challenged by a lack of awareness, however, argues Dan Held, co-founder of Zeroblock and a product manager at Blockchain.info.
“I think the concept of adding cryptocurrency as a meta layer on top of a pre-existing demographic is a cool idea, [but] I highly doubt more than 1% of the Icelandic population even knows about it.”
Others indicate that auroracoin’s core technology will be its biggest obstacle.
Peter Bushnell, the founder of feathercoin, noted that scrypt ASICs, which may lead to centralized mining operations, are coming soon.
“I remember several SHA-256 coins being devastated by SHA-256 ASICs when they turned up. I am not sure why auroracoin or any other coin right now would launch scrypt coins.”
Still, until it proves successful, some simply view it as an interesting novelty.
Adam Draper, whose Boost VC incubator accelerates bitcoin startups, summed up this view, saying:
“Like bitcoin it is an experiment, however, they are claiming a nationality. I think that is an interesting concept.”

The case for auroracoin

Still, there is a powerful incentive for the country to embrace auroracoin.
In the wake of the 2008 global economic crisis when Iceland’s banks defaulted on $85b, the Iceland government enacted capital controls to protect the krona.
Over the past three years, Iceland’s rate of inflation has been over 4% annually.
Since enacting capital controls, Iceland has maintained a larger money supply. Source: Trading Economics
Since enacting capital controls, Iceland has maintained a larger money supply. Source: Trading Economics

In 2009 the IMF published a report that Iceland’s capital controls were actually helping the country, but that over time capital outflow restrictions should be removed gradually.
But, the government has not acted on this advice yet, and there are concerns that the continued controls could cause massive sell-offs of the Krona in the future. A mix of annually high inflation numbers with anxiety about capital controls is the impetus for auroracoin as an alternative for Iceland’s population.
Óðinsson says that auroracoin is a tool to give some power back to Iceland’s people:
“One of the most important power in society is the power over money. That is why the government monopolizes the Icelandic currency.”

Government views

For now, it’s clear that the existing digital currency community has been the most receptive to auroracoin’s message.
Auroracoin’s relatively small number of coins in circulation has created a speculative market for it, and at one point it was more valuable by market capitalization than litecoin.


10-day AUR/BTC on Cryptsy, one of the most popular auroracoin markets. Source: Cryptocoincharts
10-day AUR/BTC pair on Cryptsy, one of the most popular auroracoin markets. Source: Cryptocoincharts


Whether because of speculation or the country’s capital controls, the powers that be in Iceland are suspicious of auroracoin.
On March 14, the country’s Parliamentary Economic Affairs and Trade Committeeheld a closed meeting to talk about the altcoin. No official notes regarding the meeting’s agenda were made public on the Parliament’s website.
Vice Chair of Economic Affairs and Trade, Pétur Blöndal, told a media outlet at the time that ”consumers were not warned of this medium,” as a method of exchange, while the chairman of the committee, Frosti Sigurjónsson, has written on his website that he believes auroracoin is a scam.

Predicting the results

Theories abound on how tomorrow’s airdrop will be received. Given that the general public in Iceland probably knows very little about auroracoin, much less digital currencies, many are anticipating tepid results.
Of course, a number of people could go claim their coins, dump them on the market and fill up the sell order book, dropping the price. Though counterintuitive to the purpose of auroracoin, the fact of the matter is, it’s free money for people living in Iceland, and those inclined will see the opportunity to cash out.
Exchanges see the opportunity, too. UK-based bitcoin buying and selling service Bittylicious has announced today that it will be bringing on auroracoin. Others will do so as well.
Auroracoin, in effect, will allow Icelanders to circumvent currency controls. The question is whether it will cause the price of each coin to drop precipitously.



Kraken Bitcoin Exchange 

Passes ‘Proof of Reserves’ 

Cryptographic Audit

 | Published on March 24, 2014 at 10:45 GMT | ExchangesNews
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Bitcoin exchange Kraken has passed a cryptographically verifiable proof of reserves audit with flying colours.
The audit, which was carried out by Stefan Thomas on 11th and 22nd of March, proved that more than 100% of Kraken’s bitcoins are held in reserve.
The process was designed to allow the auditor to verify that the total amount of bitcoins held by Kraken matches the amount required to cover an anonymized set of customer balances.

Covering all balances

Thomas said the audit was very strict, but at the same time it maintained “absolute privacy” for customers. He also added that Kraken have expressed interest in conducting regular audits in the future, with different auditors each time. Thomas said:
“I am attesting to is the root hash of a merkle tree containing all balances that were considered in the audit. If you are a customer of Kraken, you’ll be able to verify using open-source tools that your balance at the time of the audit is part of this root hash. If it is and if you believe that I am trustworthy, then you can be confident that your balance was covered by 100% reserves at the time of the audit.”
Using the ‘Merkle Tree’ technique originally proposed by bitcoin developer Greg Maxwell, the auditor went on to explain the gritty technical details. He was provided with a JSON file from Kraken, which contained the list of the exchange’s addresses and balances. The file was then compared against a copy of the block chain.
The results were in order, Thomas concluded: ”The actual holdings were very slightly (< 0.5%) above the required holdings, meaning Kraken had greater than 100% reserves at the audit block height.”

A competitive edge

Following the Mt. Gox crisis, many exchanges are keen to distance themselves from the troubled exchange and other bitcoin outfits with a chequered track record. Security and transparency have become selling points, hence exchanges appear to be doing their best to reassure investors on a regular basis.
Earlier this month UK-registered bitcoin exchange Bitstamp released the results of its own financial audit, which found that it held 100% of its validated BTC balance and USD funds. No issues were raised by the auditors.
Bitstamp CEO Nejc Kodrič told CoinDesk that his company plans to perform regular audits, with quarterly results posted on the Bitstamp website.
As investors demand more security and transparency, exchanges have to oblige or suffer the consequences and lose their competitive edge. Low fees are just one way of remaining competitive, but transparency and sound reporting practices might prove more important in the long run.


Exchange Vircurex 

Freezes Withdrawals, 

Claims Lack of Reserves

 (@southtopia) | Published on March 24, 2014 at 00:01 GMT | CompaniesExchanges,News
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Beijing-based virtual currency exchange Vircurex has frozen most of its digital currency withdrawalseffective immediately, claiming it no longer has the reserves to cover customer requests.
The freeze will affect all bitcoin, litecoin, feathercoin and terracoin withdrawals. A message on Vircurex’s site says it will create a new balance type called ‘Frozen Funds’ covering all balances in the aforementioned currencies. The company maintains it won’t be shutting down, saying it intends to “gradually pay back the losses”.
That Vircurex had a reserve shortfall had been known for some time, though not the exact amount. It froze BTC/LTC withdrawals in January 2013 after reporting that wallets had been compromised, but still allowed deposits in those currencies to continue. The attacker had apparently exploited a vulnerability in Ruby on Rails posted online just the day before.
The company pledged to cover the losses from its own income and had been doing so until yesterday, when “large fund withdrawals in the last weeks” completely depleted its cold wallet reserves.

Similarities

While Vircurex’s volumes and deposits were nowhere near Mt. Gox’s levels, the story is significant thanks to the similarities: hackers supposedly lift thousands of bitcoins from an exchange, the exchange desperately tries to cover the loss before users sense something more serious is up and start a run, leading to a withdrawal freeze.
It has raised questions about exchanges operating fractional reserve systems, either openly (as in Vircurex’s case) or covertly, in both cases due to a theft.

Proof of reserves

There are now calls for online exchanges and wallets to prove their reserves somehow, possibly using a cryptographically secure proof of inclusion and proof of reserves system such as a Merkle Tree, or hash tree.
South Korean exchange Korbit announced recently it would be the first major exchange to offer such a service with its opt-in ‘BitTrust’ system. Since 21st March, 57 of Korbit’s users have signed up to participate, covering a total balance of over 580 BTC. It has kept BitTrust opt-in only for now due to trade-off in transparency vs. 100% balance privacy.

Long standing exchange

Vircurex opened for business in October 2011, and traded between BTC, USD or EUR, plus up to 18 other cryptocurrencies against each other, eliminating some less popular coins over time.
Users on bitcointalk first started noticing bugs interfering with trading and withdrawals around late February and early March, which grew in number until this week’s problems. The site then apparently stopped any-to-any currency trades late last week before announcing the freeze.
Losses will be paid back according to a ‘top-down/bottom-up’ distribution logic, according to the site announcement. That means 50% of available funds will be used to pay the largest balance holders and the other 50% the smallest, meeting somewhere in between.
“All users will eventually receive their funds, though the timeframe depends on the monthly volume available,” the announcement continued, saying the logic guaranteed new users would not be penalized and thus supporting the platform’s operations until all amounts have been returned.


Cryptocoin news items......


ECB says Bitcoin is ‘economically 

insignificant’



Posted 2 hours ago 

Yves Mersch calls Bitcoin unimportant
ECB member Yves Mersch called Bitcoin ‘unimportant’ in a prepared speechn, saying “it won’t affect ECB policies because of its insignificance.”
We have seen several countries taking a stance on Bitcoin in the past few months. Some would rather see it disappear while others carefully embrace the concept. Today, the European Central Bank issued a remarkable statement.

Economically unimportant

The European Central Bank (ECB) has always remained silent on the topic of virtual currencies. Strange because, as a European, I know how the ECB likes to have an opinion on all financial things happening on the continent. One would think the growing adoption rate of Bitcoin would urge the European monetary authority to take a stand on this. Especially given the fact that we’re talking about Bitcoin here, a virtual currency that authorities tend to find controversial.
This changed on Monday, when ECB board member Yves Mersch delivered a prepared speech to a conference held by the Bank of Italy in Rome. Everyone was expecting another speech on how dangerous cryptocurrencies are and why people should steer clear of Bitcoin and the exchanges. Imagine the surprise when Mersch called Bitcoin economically unimportant.
“Bitcoin has gained significant value recently. Even so, the ECB stands by its 2012 report where it concluded that these alternative currencies still remain economically unimportant.” Said Mersch. This statement means that the ECB won’t change any of the bank’s policies because of the presence and usage of Bitcoin.
“In Europe, virtual currencies do not pose a risk to price stability or financial stability,” said Mersch. “Nevertheless, we are closely following developments and keeping in touch with other authorities.” He added that they “are an interesting phenomenon and should not be ignored or dismissed.”
After calling Bitcoin unimportant, ignoring the size of the cryptocurrency’s growth over the last year, he started on the obligatory words everyone was waiting for. “The ECB wants to repeat what other banks have said already. We want to warn people about Bitcoin. Speculation, security vulnerabilities and price volatility pose significant risks to consumers and investors.” said Mersch.
The Federal Reserve and the Treasury Department have confirmed what Mersch said in his speech. They also put focus on ‘Bitcoin’s insignificance’ to monetary policies, claiming this is the main reason the United States haven’t regulated Bitcoin yet.

Not all bad news

It seems some authorities are going with this ‘we don’t really care’-approach now. Calling Bitcoin unimportant and claiming it poses no threat whatsoever to the banking system could take it out of the spotlight. When you want something to lose its appeal, you simply make it abundant. Most Bitcoin fanatics will see through this, but maybe other people won’t.
The ECB and Federal Reserve are not the only authorities talking about Bitcoin at the moment. Last week, Thailand warned its people (again) for the potential risks involving Bitcoin; Columbia may be banning Bitcoin and China wants to strengthen oversight of Bitcoin. This last one was, wrongly, interpreted by the community as a ban on all Bitcoin transactions and pushed Bitcoin value down. Price volatility may be what governments are warning for, but it seems the authorities themselves are often cause of it.
Not all news is bad though. The Netherlands, for example, take a rather positive stance towards virtual currencies. They’re not openly shouting how good the concept is, but with initiatives likeBitcoin Boulevard in The Hague and a minister who openly dismisses an appeal to ban Bitcoin, it’s clear that the dutch don’t see Bitcoin as a threat. Australia shows Bitcoin can be great for business as well. With these recent developments in mind, the ECB’s stand on Bitcoin seems a little ignorant.