A recent paper out of Cornell University’s Computer Science Department describing a theoretical attack on Bitcoin, in which “rational miners” may join in on a practice referred to as “Selfish Mining,” turns out to be just that: Theoretical.

To break down the theoretical selfish mining attack further.  Let us imagine that such an attack is happening right this second, with a selfish mining pool [technically one large node] that currently has 25% of the total network hashrate and said pool operator starts selectively relaying blocks so as to disrupt the other 75% of the network.

Eyal and Sirer would have you believe that “neutral nodes” would join with the selfish mining pool because they would be able to generate more revenue from mining by doing so.  While the attack put forth by Eyal and Sirer is theoretically possible, it is only remotely plausible if one makes assumptions about miners that do not hold in reality.

From bitcoinmagazine’s article on this topic:

In practice, most Bitcoin miners act altruistically to support the network, both out of ideological considerations and because they do not want to destabilize the source of their own revenue. Such higher-level economic concerns are beyond the scope of Eyal and Sirer’s paper, but they seriously reduce the chance that this economic attack will work in practice.

The specific higher-level economic concern that Eyal and Sirer have failed to take into account is the simple fact that neutral nodes, or miners, would have zero incentive to participate in an attack that could destroy the integrity of or the public’s faith in the Bitcoin protocol.  The marginally larger profits, and more importantly the very incentives,  from “selfish mining” are entirely wiped out if the bitcoin exchange rate takes a plunge on news of a hard fork in the blockchain, which it is wont to do.  In short, Selfish Mining isn’t tenable for even the most selfish of Bitcoin miners.  Such attacks on Bitcoin intrinsically damage Bitcoin’s integrity and as such no “rational miner” [their words not mine] would ever partake in such an attack.

Eyal and Sirer have pointed out a potential vector for an attack on Bitcoin that has hitherto not been pursued completely; however, the only “new” danger to consider is botnet use of Sybill nodes, and Eyal and Sirer have presented an easy fix to the Bitcoin protocol that would allow the difficulty of their prescribed attack vector to scale properly with the size of the Bitcoin network.

Now that 25% attack is in everyone’s vocabulary, comparisons to the previously lauded 51% attack may lead some people to incorrectly conclude that Bitcoin is at best only half as secure as it was before the publication of this paper.

For more information: http://arxiv.org/pdf/1311.0243v1.pdf

Advertisements

In this week of firsts, BitTradeAustralia has recently announced an essay competition for $1000 in Bitcoin as the prize.  

The essay prompt is simply:

“Digital Currencies and the Future: Will Bitcoin change the world?”

The scholarship is targeted at university students, bloggers, and tech minded individuals but you must be based out of either Australia or New Zealand.

I hope other organizations in countries around the world start to offer these services to the rising youth.  Put your bitcoins to good use!

 

 

For more information please visit their site: https://www.btradeaustralia.com/about/essay-competition/

November 1, 2013 – Havelock Investments (HavelockInvestments.com), a leading Bitcoin Denominated Investment Fund, announced today that it has executed a definitive agreement to be acquired by The Panama Fund, S.A, a fully licensed and registered Panamanian Investment Company.

The acquisitions creates the world’s first, fully licensed, Bitcoin Denominated Fund Exchange, where companies from around the world will be able to raise capital directly, through the exclusive use of Bitcoins.
With this acquisition HavelockInvestments.com will be able to maintain its current Funds, as well as expand its operations, while attracting new opportunities in the rapidly expanding Bitcoin Marketplace.
The original HavelockInvestments.com team will remain in place and will play a key role in the future growth of the company.

Havelock Investments has been with the Bitcoin community for over a year now and holds the distinction of being one of the last remaining high profile “Bitcoin Fund Exchange” that still allows US citizens to trade on its site.  Two major competitors have since left that arena, Bitfunder (Based out of Europe) has made moves to block those found to be accessing the site from within the United States and btct (Based out of Oregan) preempted regulatory action by halting all trading early last month.

In a follow up post to the breaking news, havelock also posted:

…there will be no changes to existing user requirements (ie US users are fine).

It is fitting that the home to the world’s first Bitcoin ATM might also become home to the world’s first fully licensed Bitcoin denominated fund, eh.

 

Those interested may view the original announcement here: https://bitcointalk.org/index.php?topic=323077.0

Those interested in participating, go here: http://www.havelockinvestments.com

Many brick and mortar small businesses seem to think that accepting Bitcoin is too complicated and not in their best interest.  This happens due to misconceptions about Bitcoin and money, as well as previous experiences with POS systems and the cost of NFC equipment.  As I have written about in my previous post (https://bitbybitbybitcoin.wordpress.com/2013/10/11/why-your-small-business-should-accept-bitcoin-paypal-vs-google-wallet-vs-coinbase-vs-bitpay/), accepting Bitcoin by signing up with an existing Bitcoin payment processor has significantly lower per transaction and monthly fees and restrictions than if you were to use Paypal or an equivalent service.  Furthermore, businesses can choose how much exposure they would like to have to fluctuations in the Bitcoin exchange rate, and a vast majority take their Bitcoin earnings in their native currency at the end of each day via bank deposits courtesy of Coinbase and Bitpay.  While the benefits of a larger consumer base and elimination of overseas internet credit card fraud are more pronounced with businesses with online facing storefronts, accepting Bitcoin at a brick and mortar business such as a restaurant or a bar has little to no setup costs and will increase your revenue and hence your profits by attracting new Bitcoiners eager to spend their money in real life.

 

Both Coinbase and Bitpay have apps for both the Android and IOS platforms as well as tools on their website that make accepting Bitcoin at any brick and mortar business, especially a restaurant or a bar, very very simple.  All that is required is an internet connection and an existing internet enabled device [tablet, desktop, laptop], or a smartphone with 3G or 4G data.  Around the world, these are fast becoming staple items in any business’s arsenal.

 

Even if the business does not have a reliable internet connection and none of the regular employees have smartphones that can the provided applications, Coinbase’s Charles Lee has created an SMS interface to interact with Coinbase that negates the necessity for even a smartphone or internet connection to accept bitcoins.  After setting up an account with Coinbase, a bartender could simply text ‘req customer@drinksheretoomuch.com $20’ to 1 (650) 316-5555 and a request for $20 worth of bitcoins at the current Coinbase rate will be received by the customer.  The customer may complete the transaction via SMS as well or any method he or she may choose.

 

Accepting Bitcoin at your restaurant or bar through a Bitcoin payment processor is the ideal method for streamlining the process by eliminating confirmation time waits and allowing the merchant the option to receive the payment in their native currency, all with significantly lower per transaction fees.  

 

PS: It would not be unreasonable for brick and mortar businesses to require that bitcoins spent at their location come from an established Coinbase wallet if they use Coinbase as their payment processor.  The benefits of this arrangement go to both the business and the customer: Neither have to wait for transaction confirmations and neither have to pay a transaction fee to the miners: this is an example of an off-the-chain transaction that relies on a trusted third party.

 

If your restaurant or bar would like any help accepting Bitcoin, feel free to email me at bitbybitbybitcoin@gmail.com

Don’t forget to buy your ‘BITCOIN ACCEPTED HERE’ stickers: http://www.btcgear.com/bitcoin-sticker-bitcoin-accepted-here

Over the last 12 hours, Bitcoin has taken its largest single day surge in exchange rate value in several months.

On http://www.btcchina.com, China’s largest Bitcoin exchange, bitcoins are now worth over 1000 CNY.

What exactly does this mean?

 

It wasn’t many months ago when Bitcoin broke 100 USD and the 100 Euro mark one after another in a crazy run up to the current all time high of 266 USD/BTC (About 1621 CNY/BTC); however, it became clear to many of us during that… first moon landing… that there was some strength to the claims of psychological barriers associated with these large numbers.  Some sort of bastard combination of Benford’s Law and the Efficient Market Hypothesis led the laggy Bitcoin traders from atop mount Gox to venture down to the giant sell walls and lay waste.

While western traders are scratching their heads in bewilderment, there are many traders in China and HK smiling in their sleep as I type this.

 

This potential third Bitcoin bubble is in the making; and you know, “Third time’s the charm.”

Late yesterday while everyone was inundated with the suspense of spectating the great sport of American brinksmanship, an article was released in China: (http://finance.sina.com.cn/money/lczx/20131017/071917018288.shtml)

This well researched article features an interview with a real life Chinese Bitcoiner, the professional opinions of Economic professors from leading Chinese Universities, and surprisingly even a comment from the China Banking Regulatory Commission (CBRC)

“近期没有出台针对比特币监管政策的计划。”

This has been maybe a little too optimistically translated as:

“no plans to introduce regulatory policies for bitcoin.”

However, the translation more correctly reads:

“As of today, there are no regulatory policy plans directed against Bitcoin.”

This is definitely better than “NO COMMENT;” However, tomorrow is another day.

Western readers must realize that the Chinese government is perhaps even more skilled than the American government in disseminating half-truths.  Don’t be blindsided when the China Banking Regulatory Commission, in the near future, enacts regulation that effects Bitcoin and/or Bitcoin users somehow, likely by targeting exchanges.

Why then, would the CBRC allow their staff to pass on such a statement to the press?

A few months ago, a fellow member of the Alliance for Financial Inclusion (AFI), the Bank of Thailand, allegedly told a Thai Bitcoin Exchange to shutter its doors because under current laws Bitcoin transactions are technically illegal due to an absence of established regulatory policies regarding it.  This led to over-exaggerated claims that Thailand had banned the digital money (http://www.cnbc.com/id/100923551).  In reality, Bank of Thailand Governor Prasarn Trairatvorakul has called for time for the Bank of Thailand to “look at the issue first” and the majority of Bitcoin businesses in Thailand have continued operating without interference from the Bank. (http://asiancorrespondent.com/111332/has-bitcoin-been-banned-from-thailand/)

Whether intentionally or not, the CBRC’s statement has fed fuel to the Bitcoin fire, and set a precedent on how to address the legality Bitcoin in your country and according to your banks.  To all the high level banksters and 3rd world country leaders reading this article: Please take China’s example not Thailand’s example.

The CBRC is one of the more prominent members of the AFI, whose stated goal is to “advance the development of smart financial inclusion policy in developing and emerging countries.”  Specifically, the AFI aims to do this by utilizing a “peer-to-peer learning model to connect, encourage and enable financial policymakers to interact and exchange knowledge on policy initiatives such as consumer protection, mobile financial services, financial integrity, agent banking, formalizing microsavings, data and measurement, and general financial inclusion.”

Given China’s prominent position among developing and emerging countries, It will be interesting to see in the coming months what the other 88 member nations of the AFI release to their public regarding Bitcoin. To this author, “smart financial inclusion policy in developing and emerging countries” and Bitcoin seem like a match made in Heaven.  Whether or not this match has the explicit blessings of the Chinese Government remains to be seen.