Friday, May 16, 2014

Bitcoin Updates May 16 , 2014 - Brook Pierce controversy underlines how messy The Bitcoin foundation has become .....Bitcoin Foundation Members Resigning Over Brock Pierce Controversy – Is TBF Necessary ? Good question.......... Overstock CEO Delivers Historically Charged Keynote at Bitcoin2014

China blocking ?

China May Be Disrupting Access to 

Major Bitcoin Websites

 (@pete_rizzo_) | Published on May 16, 2014 at 16:24 BST | AsiaNews
The Chinese government may be moving to suppress bitcoin adoption by limiting access to popular industry websites such as Blockchain, BTC-e and Coinbase, sources say.
The reports follow the revelation that the Chinese government had sought to limit domestic media coverage ahead of last week’s Beijing-based conference Global Bitcoin Summit, and that more extensive press restrictions have been implemented domestically.
Speaking to CoinDesk, Bitcoin Foundation board member-elect and BTC ChinaCEO Bobby Lee confirmed that local web users had reported difficulty accessing certain popular bitcoin websites via PC computers:
“The blocking of these websites seems to be selective, affecting different parts of China at different times, for different durations.”
He suggested that the Chinese government may be mounting an effort to destabilize these sites to give the appearance that they are unreliable.
He further noted that the actions are not unprecedented, as China has previously taken steps to block users from accessing websites such as Google.

Affected sites

Though the full number of websites potentially affected by these issues is not yet known, sources told CoinDesk that a handful of the more notable bitcoin companies were affected.
Eric Gu, co-founder of venture capital firm BitAngelsClub, said that news of the website issues was first reported yesterday, explaining:
“Some people weren’t able to access Blockchain wallets, and then we realized that BTC-e, and Coinbase were also on and off.”
VC investor and CoinDesk contributor Rui Ma also took to Twitter to list some websites that were suspected of having been affected, noting that the issues were not observed on the companies’ mobile websites.

China has GFW'ed (Great Fire Wall'ed/blocked) @blockchain @coinbase even @anxbtc on PC, still ok via mobile. Overreact much?

Potential impact

While another troubling development from one of bitcoin’s more important markets, Gu told CoinDesk that the website issues will likely have little effect on a community that has become used to dealing with setbacks.
“Most prominent bitcoiners are expert at crossing firewalls, and beginner bitcoiners don’t really use Blockchain and BTC-e anyway.”
He went on to report that he still plans to attend an upcoming meetup in Shanghai, and that despite any actions from the government, 200 people are expected to attend to hear Ethereum‘s Vitalik Buterin speak.

Crypto Coin News......

Bitcoin Foundation Members Resigning Over Brock Pierce Controversy – Is TBF Necessary?

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BTCF-Brock-Pierce-sm-170x190On May 9th, the Bitcoin Foundation (TBF) announced election results for two new board members to replace Charlie Schrem and Mark Karpeles. Only 102 Bitcoin Foundation members were eligible to vote, of those 31 abstained. Bobby Lee, head of BTC China, was brought on board with 79% approval. Also elected, with 65% approval, co-founder, Brock Pierce. KnCMiner is currently the sole purchaser of TBF’s $100,000 platinum membership.
As per TBF’s announcement, Pierce co-founded three other Bitcoin companies and “angel-invests” in Bitcoin startups. Conspicuously unannounced was Brock’s questionable history in regards virtual currency and proximity to child abuse. And that he owns Sunlot, a company seeking to acquire the remaining assets and records of Mt. Gox. This information was instead broadcast over Bitcoin Talk and Reddit. The ensuing controversy still rages.

Patrick Alexander Leads A Wave Of Resignations

It’s clear that the election of Brock Pierce has caused a rift within the community and the Foundation, with 9 people so far having publicly renounced their current or future membership in response. One company has revoked its sponsorship. A former lifetime member even pledged to pay the $100k platinum upgrade fee if Brock Pierce is removed from the board.
To place the number of resignations in context, TBF membership currently approaches 1,500 according to their site. Yet certain resignations represent a tangible financial loss. Also to be borne is mind is that the tally of resignations may grow in the weeks and months ahead, especially if TBF fail to satisfactorily address the evident problem.

Brock Pierce Dismisses His Detractors, Doubts Remain

In this brief clip, Brock Pierce replies on the record to the controversy stirred by his election. He makes the point that 15 year old allegations prove nothing and goes on to imply that those who question his recent appointment are stupid sheep.Indeed, there is no definitive proof of the worst allegations. Apparently some individuals have since confessed to making false charges in this regard.
Yet there remains Brock Pierce’s business history as the founder of IGE. Internet Gaming Entertainment made (then lost) a fortune in trading MMO virtual currency and items for fiat currency. Notably, IGE traded World of Warcraft gold and items farmed by Chinese “players” and bot-operators, for wages verging on the exploitative. Blizzard, creators of the game, blamed IGE for inflation and disruption within the virtual economy. WoW’s lack of hardcoded rules to limit currency issuance, as any Bitcoin campaigner will tell you, made such inflation inevitable. Yet it was chiefly Brock Pierce who exploited the opportunity. Many within the WoW community felt IGE’s practices so detracted from the enjoyment of their $15 per month subscriptions that they filed a multimillion Dollar class action lawsuit against IGE… Which they subsequently won, but not before IGE was gutted and Brock Pierce had migrated to fresh ventures.
The parallels between Bitcoin and MMO currencies in the above history should be apparent. The last thing Bitcoin needs is further industrial-scale harvesting of monetary resources for short-term corporate profit, undertaken without regard for greater economic consequences. This history alone should have disqualified Brock Pierce, no matter how lavish his angel investments or prestigious his affiliated company’s paid platinum membership.
Concerning the more serious legal charges; circumstantial evidence (police discovered child pornography in a raid of a Spanish residence shared for over two years by Brock and his partners) and the social phenomenon of guilt-by-association have undeniably tainted Mr. Pierce’s reputation. Justified or not, a majority of TBF voters either failed to thoroughly vet their candidate or failed to anticipate the backlash to his election.

TBF-logoThe Foundation’s Funding

According to my napkin math (see below heading, “The Bitcoin Foundation’s Flawed Membership Structure”), the price of the 1500 current memberships combined with donations to TBF’s Bitcoin address have raised nearly $3 mil.
TBF apportioned some of these funds towards the salary of Gavin Andresen, whose former position as lead developer is now held by Wladimir van der Laan. Few in Bitcoin would begrudge such recognition for those who tirelessly advance the code, often against uninformed or biased opposition. Certainly, no core developer will starve while they retain the goodwill of the Bitcoin community, whose generosity is well-known (2). Perhaps it would even be to a developer’s financial and reputational advantage to request donations or pursue bounties directly from the community, rather than tie their fortunes to a troubled third party like TBF.
Exactly how TBF’s funds have been disbursed among developers, lawyers and other parties is not a matter of public record.

The Bitcoin Foundation’s Flawed Membership Structure

TBF was formed in September 2012 by Gavin Andresen, Jon Matonis, Patrick Murck, Peter Vessenes, Roger Ver, Charles Schrem and Mark Karpeles. It is headquartered in Washington DC. Their memberships costs run as follows:
  • Platinum: $100,000
  • Gold: $25,000
  • Silver, large: $5,000
  • Silver, medium: $2,500
  • Silver, small: $1,000
  • Lifetime: $250
  • Individual: $25
  • Anonymous: $25
Basing membership to a trusted organisation solely on the payment of fees practically ensures the organisation will become untrusted over time. Fraudsters will balance the fee against the trust it brings to their scam. As TBF speaks to government and media as perhaps the most authoritative voice of Bitcoin, the fee to trust ratio will favour scammers until such time as TBF restructures or accrues an overwhelmingly bad reputation.
Butterly Labs and Mt. Gox are but two prominent examples from a lengthy record of trust purchased prior to trust betrayed. At no point has TBF apologised for its direct or indirect promotion of such scams.
That industry members also buy voting rights is another obvious problem with TBF’s structure. As TBF seeks a position of significant influence over Bitcoin’s value, image and direction, it’s unconscionable that the overwhelming majority of Bitcoin users go unrepresented within the organisation. This situation is the polar opposite of the ideals which informed Bitcoin’s design.
One must question whether TBF retains sufficient community trust to remain central to Bitcoin’s code development and legislative interface. Whether any such centralised agency is necessary, or a dangerous point of failure inevitably in conflict with the culture of a decentralised project, is another vexed question.

The Bitcoin Foundation Must Enact Meaningful Reforms Or Disband

The election of Bobby Lee was a step in the right direction of greater international representation. I advocated for his election here, as at least superficially promoting Bitcoin as a politically non-alligned currency.
Unfortunately, the appointment of Brock Pierce makes it a case of one step forward, two steps back. That the Foundation electorate were either unaware of Brock Pierce’s murky past or didn’t anticipate a related backlash are equally disturbing prospects. If the latter case, then there’s a gulf between the interests of Foundation members and the wider network.
Most users realise the foolishness of giving ammunition to Bitcoin’s detractors, particularly media-incendiary ammunition. This suggests a total disconnect between TBF and popular social hubs within Bitcoin. Contrast the public image obsession of r/Bitcoiners envious of the Dogecar marketing stunt against the Mr. Magoo media fumblings of the credibility-card-carrying “industry leaders” who endorsed Brock Pierce. Clearly, there is no communication between these two groups.
If TBF seeks to retain popular support, it should flush Brock Pierce and open its elective process and membership decisions to the community. There is an established reputation system waiting to be leveraged for the selection of honest, clean members. Even the simplest implementation of community-derived measures of trust into TBF’s membership and elective processes would greatly improve the current arrangement in which those with deep pockets are privileged irrespective of their character.
It pains me to say all this, as I recognise many sincere and talented members within TBF. This is a sad case of a few bad apples spoiling the bunch. Nonetheless, it needs saying. That several of my colleagues here and at other publications were unwilling to report on this story for fear of damage to their careers is anecdotal proof that TBF has become a dangerously centralised entity. Time will tell whether I’ve lowered my odds of interviewing certain industry players. Frankly, I’d prefer that outcome to Bitcoin being led over a cliff.

The Bitcoin Foundation, Misguided Or Malicious?

TBF’s decision-making process appears flawed to a degree that resembles sabotage. They’ve made too many poor decisions of which the current fiasco is but the latest example. Mircea Popescu alleges that TBF have deliberately hindered protocol development and specification, introduced a hard fork in March of 2013, and advocated the inclusion of Heartbleed-vulnerable code into the protocol. Damning accusations indeed, yet Mircea declined a request for supporting evidence.
Still, if the financial crisis has proven anything, it’s that banking interests are adept at regulatory capture. If they deem Bitcoin an obstacle to their oligarchic spree, state-capitalists would soon identify and likely attack the network’s weakest point. Infiltration and subversion of the closest thing Bitcoin has to a regulatory agency would likely bring the greatest bang for the buck. That intelligence agencies would assist their paymasters in such endeavours should surprise nobody.  So, as the Bitcoin protocol was designed to be resistant to technical interference by such sophisticated adversaries, it stands to reason that any key Bitcoin organisation should be similarly structured. TBF must decentralise lest it become a major liability.
Several compromised, high-level members means TBF has lost credibility as a group capable of withstanding powerful external pressures. While most within the community were willing to give Charlie Schrem’s indiscretions a pass, especially in light of big banks getting away scot-free with far worse misdeeds, the revulsion against Mark Karpeles left TBF fragile. The appointment of Brock Pierce comes as the final straw for many, this reporter included.

“The Bitcoin Foundation Is A Scam” Banners

These graphics serve to express criticism of TBF in a conveniently condensed format:
bitcoin-foundation-scam-240x240bf-scam-250x250It is my personal opinion that the honest, decent majority of Bitcoin users deserve far better from any group claiming to represent them. For legal reasons, I should note that these images do not reflect the official position of CryptoCoinsNews.
Additionally, I hope that TBF will enact meaningful reforms, as when Mike Hearn’s leaked “redlisting” proposal led TBF to open their forum, in which case I will update my opinion accordingly.

 Devil’s Advocate

We should acknowledge that TBF is operating in a new and difficult field. There’s no Idiot’s Guide to successfully establishing and maintaining a trustworthy centralised community to guide the development of a decentralised financial technology with massive disruption potential. Rich, powerful adversaries are legion. Further, any objective assessment of TBF would include its successes as well as failures. If this fresh controversy spurs the many talented and sincere TBF members to patch the organisation’s flaws, TBF 2.0 may well fulfill the stated goals of standardising, protecting and promoting Bitcoin.


Bitcoin Foundation hit by resignations over new director

SAN FRANCISCO Fri May 16, 2014 1:01am EDT
A Bitcoin sign is seen in a window in Toronto, May 8, 2014. REUTERS/Mark Blinch
A Bitcoin sign is seen in a window in Toronto, May 8, 2014.


(Reuters) - As the most prominent trade group pushing adoption of the electronic currency Bitcoin begins its annual conference on Friday, it is being roiled by controversy.
At least 10 members of the nonprofit Bitcoin Foundation have resigned over last week's election of onetime Disney child star and current Bitcoin entrepreneur and financier Brock Pierce as a new director, officials at the group said.
Some of the members cited Pierce's troubled past. That includes allegations in lawsuits from three employees of Pierce's first company, bankrupt web video business Digital Entertainment Network, that he provided drugs and pressured them for sex when they were minors.
Pierce has denied the accusations, which first surfaced in 2000.
"The allegations against me are not true, and I have never had intimate or sexual contact with any of the people who made those allegations," Pierce told Reuters via email.
Court records show 33-year-old Pierce, who played the title role in Disney's "First Kid," paid more than $21,000 to settle one employee suit, and he said others dropped their claims without money changing hands.
While Bitcoin Foundation officials played down the defections, several members who resigned from the Foundation assailed its governance track record.
"The track record of prominent Bitcoin Foundation members has been abysmal," said Patrick Alexander, a resigning Foundation member in a post on its discussion pages. "I no longer want to be associated with these people." Attempts to reach him for additional comment were unsuccessful.
Though it is highly volatile, the value of the electronic currency in existence has skyrocketed into the billions of dollars as the number of businesses accepting it has increased and investors have sought to create new ways for it to be used.
More than 1,000 Bitcoin investors, business people and enthusiasts are expected to attend the conference in Amsterdam.
The programming effort that governs how Bitcoin works is led by Gavin Andresen, who is chief scientist at the Foundation and gets a salary from it. The Foundation also plays an important role for Bitcoin in lobbying on its behalf in various jurisdiction as authorities grapple with how to police the semi-anonymous currency.
Other members who resigned called on the board to more carefully vet future candidates as well as remove Pierce from the board.
Bitcoin Foundation General Counsel Patrick Murck said that his group had more than 1,500 members and would bounce back from the latest controversy.
"Democracy is messy sometimes," Murck said. "If in the future members decide they want to have a vetting process, that's great."
Some Bitcoin Foundation members say they weren't aware of Pierce's past until after the election, when others circulated media accounts concerning the allegations.
Pierce was voted in by the Foundation's industry members, who pay higher dues, to fill one of two spots vacated by others who had resigned: Mark Kapeles, chief executive of the bankrupt top Bitcoin exchange Mt. Gox, and Charlie Shrem, who has been charged with conspiring to launder money for users of the shuttered Silk Road underground drug bazaar.
Pierce has made a splash in the insular Bitcoin world by backing more than a dozen startups, speaking frequently at conferences, and leading a bid to buy Mt. Gox for one Bitcoin, currently worth less than $500.
Bitcoin startups have attracted investment from some venture capital firms and from individuals through "crowdfunding," in which many amateurs support projects, often with small investments and without the due diligence typically conducted by professional investors. Pierce has been a major beneficiary of the trend, garnering pledges of more than $700,000 for his investment syndicate on the crowdfunding site AngelList.
Cyan Banister, a startup CEO who made a nonbinding pledge of $5,000 to Pierce's investing syndicate, after learning of the allegations said she would withdraw from his group.
Phil Sanderson, an IDG Ventures investor in San Francisco who follows Bitcoin, said that the currency's growth was being hindered by the lack of effective public faces. "Bitcoin hasn't really had a strong, vocal leader with a great background," he said.

Coin Desk items...

Bitcoin 2014 Conference ....

Overstock CEO Delivers Historically 

Charged Keynote at Bitcoin2014

 (@roopgill) | Published on May 16, 2014 at 12:26 BST | Bitcoin FoundationEventsNews

The Bitcoin2014 conference kicked off today in the Netherlands with a keynote address from Overstock CEO and bitcoin enthusiast Patrick Byrne.
Byrne delivered his keynote speech to a large portion of the 1,100 registered participants at the conference gathered in the Passenger Terminal in Amsterdam.
The talk was an information-heavy lesson in the historical context of bitcoin and cryptocurrencies. Byrne used historical great thinkers like Marx, Hegel and Kant, as well as modern-day academics like Francis Fukayama, to explain why he backs the cryptocurrency revolution.
“As much as I love bitcoin, I am all about the crypto revolution,” said Byrne, who has been previously called the ‘Bitcoin Messiah’.
Today he was introduced as a “true pioneer” and a “leader in exposing Wall Street corruption” by Jon Matonis, the Executive Director of Bitcoin Foundation and CoinDesk Contributing Editor.

Jon Matonis and Patrick Byrne during the Keynote Address at Bitcoin 2014 in Amsterdam.
Jon Matonis and Patrick Byrne during the Keynote Address at Bitcoin2014 in Amsterdam.

Bitcoin2014 is organised annually by the Bitcoin Foundation. The previous event was held in San Jose, and Matonis has revealed that the Foundation is looking to Asia for next year’s conference.
The 1,100 registered participants at the conference come from more than 50 countries.
“We truly believe this is the bitcoin event of the year to go to,” said Matonis.

Bitcoin philosopher

Byrne, who is a self-confessed libertarian and ‘Austrian economist‘, drew on his triple degrees to deliver a philosophically rooted argument about the importance of bitcoin.
The two centralized institutions that were most undermined by cryptocurrencies were the central banks and central counterparty clearing, he argued.
Byrne became the poster boy for bitcoin when he announced late last year would start accepting bitcoin. He had originally made an offhand remark in an interview last December, saying he was considering bitcoin for the business. The news blew up and he delivered on his promise.
Today, he joked about that and said:
“I said maybe by the end of 2014 [we would accept bitcoin]. I said it off the top off my head, but that mention started appearing in newspapers around the world.”

Big plans

Staying true to his style, during the question and answer round today Byrne revealed that he had plans for potentially listing his company on “a block chain kind of a stock exchange.”
Watching his words, he said: “I would already be interested in issuing a bond or something, so we could be the first to list this sort of security.”
He revealed that Overstock was in the early stages of looking at the legal propriety of dual listing on NASDAQ and another stock exchange. While they have not ironed out any concrete plans, he said:
“We could either issue securities in bitcoin and translate those and collect funds in dollars. I am less interested in that than just taking it and listing it and maybe even creating a new security and issuing it through such an exchange. Or we could take our security, which is already publicly registered and publicly traded and just get it dual listed on somebody’s technology.”
Byrne is still weighing his options, but there might be a concrete announcement from his company in the next couple of months, he indicated.

Participants in the Amsterdam Passenger Terminal at Bitcoin 2014
Conference participants at the Amsterdam Passenger Terminal venue

Overstock is one of the world’s largest online retailers, making more than $1.3bn in annual sales under Byrne’s leadership. When Overstock first accepted bitcoin, it was suggested that Byrne was doing so to get publicity, a point that he also addressed in today’s keynote, saying:
“A lot of people suggested that I got involved in bitcoin for the publicity. I hope my talk today has dispelled this.”
Wearing a Shanghai Tang suit, Byrne even showed off his Chinese language skills during the Q&A round.
Drawing on his business expertise, scholarly training and bitcoin enthusiasm, he set the right tone for rest of the conference.
Matonis and Byrne were only two of the 120 speakers slated to speak this weekend. For the full schedule, see the Bitcoin2014 website.

Odds and ends on Bitcoin....

Shutdown of China’s FXBTC 

Exchange Leads to Customer 


 (@pete_rizzo_) | Published on May 14, 2014 at 18:52 BST | AsiaExchangesNews

Some former customers of the now-defunct China-based digital currency exchange FXBTC are reporting that its operators are still holding customer funds, and that their attempts to retrieve their holdings have been unsuccessful.
Reports suggest these customers did not receive word that the exchange was shutting down, and as a result, did not withdraw funds before a deadline set by FXBTC.
The exchange announced it would close due to pressure from the country’s central bank on 2nd May, informing customers at the time that they would haveuntil 10th May to withdraw funds from the exchange.
Caixin‘s Li Xiaoxiao, who first broke the news that the People’s Bank of China would seek to more tightly enforce bitcoin restrictions, however, is reporting that some site users have also reported difficulty obtaining funds prior to this deadline, writing:
“The website notice stated that the website would be open until [10th May]. However, as of 24:00 on [9th May], the FXBTC website was shut down, and some users had not yet withdrawn their money or coins in time, but the website’s customer support was already unavailable.”
Exchange users have reported the incident to Shanghai’s Xujiahui District Public Safety Bureau, though reports suggest that this agency still needs to formally accept the case in order for former users to seek restitution.

Withdrawal issues

Withdrawal issues began prior to 10th May, when the rapid removal of funds from FXBTC accounts caused the price of BTC to decline rapidly on the platform.
By 8th May, reports say, the price of bitcoin on FXBTC was 500 RMB (0.18 BTC or roughly $80 at press time) below the price listed on other exchanges.
Customers who left money in the exchange say they have not received word from the company as to if and when they can retrieve their holdings.
The total amount of customer funds allegedly being held by the exchange is not yet known, though sources told CoinDesk the overall value of bitcoins and litecoins could be between $8,000 and $13,000.

Next steps

Notably, members of China’s bitcoin community had previously raised concerns about the exchange’s closure and subsequent plans for the distribution of customer funds, including BTC China and Bitcoin Foundation board member-elect Bobby Lee.
China-based media outlets are reporting that attempts by former exchange users and reporters to contact FXBTC have been unsuccessful.
One source told Xiaoxiao that he is optimistic any remaining funds will be returned, though, saying “this website has been pretty low-key, and probably wouldn’t maliciously run away with funds”.

ButterflyLabs Customers Appeal 

to FTC for $1 Million in Missing 


 (@joonian) | Published on May 14, 2014 at 20:41 BST | Butterfly LabsMiningNews

A new report reveals that ButterflyLabs customers have submitted 283 complaints against the company – worth more than $1m in combined refunds and late orders – to the US Federal Trade Commission (FTC) since 2012.
According to documents revealed byArs Technica, the complaints against the Kansas-based ASIC miner manufacturer are for orders totalling $1,016,243 across a period of about 17 months (see the report data here).
The first complaint was filed in September 2012, with the most recent complaint having been submitted on 15th April of this year.
Notably, one entry made a claim for $30m with no date attached. This entry has been omitted from our tally of orders claimed from ButterflyLabs.

Complaints over delays

The FTC complaints range from outstanding orders to refunds that have not been received.
One customer in Hawaii, who paid $30,247 to ButterflyLabs last March, but is still awaiting their shipment, wrote:
“Please! Somebody help us, I’m not the only one trying to get a refund from these crooks. I beg you, please someone look into this!”
According to Ars Technica, ButterflyLabs lost a civil case last November, with the plaintiff receiving an award of $13,000. The company is also facing a class-action lawsuit filed last month to recover an alleged $25m in customer pre-payments.
Noah Wood, one of the lawyers representing the customers, wrote in a post announcing the suit:
“Stopping the bad actors and staying vigilant against consumer fraud is absolutely necessary for the successful development of the bitcoin ecosystem.”

Federal penalties possible

The FTC complaints are only the first step in a process that may see Butterfly Labs investigated by law enforcement agencies.
The firm could also face civll penalties imposed by the FTC, which is charged with enforcing a variety of antitrust and consumer protection laws, including fraud.
However, there is no guarantee these customer complaints will result in any form of restitution, according to a FTC spokesperson, who told Ars Techina:
“Complaints are used by FTC and partner law enforcement agencies to detect patterns of fraud and abuse, which may lead to investigations and eliminate unfair business practices.”