Daily BTC – PBOC edition

Well, on a few exchanges we’re already gone below $700. Currently at 698 on coindesk. $740 gox. So my Dec 17th prediction is looking pretty good (lucky). From what I can tell there was a meeting amongst Chinese regulators and payment companies in which China banned 3rd party payment companies from doing business with bitcoin exchanges. ““PBOC, in no uncertain terms, directed third-party payment companies not to do business with bitcoin exchanges in China,” they explained.” At the moment, these claims are still rumours, as neither the PBOC nor any payment company has issued a statement to confirm what was discussed and what the outcome was. However, our source revealed they got their information from various channels, including those people who were at the meeting. “The writing’s on the wall,” said our source… They went on to say that if and when this happens, people will still be able to withdraw their money from Chinese exchanges, they just won’t be able to deposit new funds.
Also, BTC China (the major btc exchange in china) rescinded their 0% (no fee) trading promotion and has reverted to the 0.3% fee. So the China-induced bubble is over. I don’t think the news from China can get much worse, once the dust settles and the tea leaves get fully transcribed, the China news will get priced into btc. This looks like a standard retrenchment of the btc price post-bubble (as happened w/ earlier bubbles), the big difference being that a major country has issued very restrictive regulations, which hadn’t happened before. I suspect the price will settle into a range around half the recent peak of $1200. Somewhere from $500-700 until the next major breakout. Regulation remains the biggest threat to btc. and could push the price dramatically in either direction…
According to bloomberg poll, 42% of Americans know that bitcoin is a digital currency
An attempt at bitcoin humor (4min standup routine on btc)
bitcoin in space: a redundant mining node in space. duh.
NYTimes on Bitcoin - decent piece on the ideology / politics of btc. NOTE to LA residents (Matt – Elizabeth Ploshay will be in LA on Jan 15, I’ll be there. Another great event onWed Jan 8)
canadian billionare Ned Goodman: “dollar is about to be dethroned as world’s reserve currency…” (he’s canadian though… so feel free to ignore)
Electricity cost of bitcoin mining per day? On the order of $15M. (up 10x from April 2013) Miners are currently losing a shit ton of money at these prices. Hash rate (the measure of mining difficulty) has EXPLODED recently. Not sure what the implications are… but I’d guess that either the price needs to rise to make mining profitable again or miners will start dropping out.
First bitcoin ATM in europe (Finland)
Kurzweil on bitcoin (and other stuff)
Bitcoin forensic analysis tools emerging: “the complete history of all transactions ever performed in the Bitcoin network, called blockchain, is public and replicated on each node. The data contained into the network is difficult to analyze manually, but can yield a high number of relevant information.” NSA is all over this.
Great video on bitcoin and freedom of speech - it’s long (53min) but it also is a solid discussion of the link between freedom of speech and financial transactions.
Barry Silbert, SecondMarket CEO on the five phases of bitcoin (1) hobbyist hackers, (2) early adopters and entrepreneurs, (3) VCs building infrastructure on top of protocol, (4) Wall St involvement and major institutional players (currently most investors in the BIT trust are Wall St folks but their institutions have no mechanism for getting involved in bitcoin, turning btc into an investable asset class is in the works now), (5) mass consumer adoption.
Cameron Winklevoss predits btc = $40k - The twins filed for an IPO in July, still pending.
Contrary to what I said last week, some say the Mt Gox premium is increasing. (they’re not looking at it as a percentage tho… which seems dumb) They also look into measures of volatility and show that Gox is more volatile than the other exchanges.
_________________________Long Stuff (at a minimum watch the 7min video by Andreas)_________________
There are at least two levels of wow that come along the bitcoin learning curve, the first is tied to understanding bitcoin as a currency and store of value. In this use case bitcoin is initially a competitor to the Western Unions of the world, Money transfer fees are high, international transfer fees are very high and bitcoin is either more efficient or way more efficient than existing competitors. Once people begin to understand this and the tools (like bitpesa (a bitcoin-based version of mpesa, the airtime-based payment system popular in east africa)) then it’ll start to eat away at Western Unions slice of the pie. And it’s worth noting, that aside from regulation, we’re operating in an environment w/ historically low friction – the cost of switching away from western union to bitpesa (or similar), is as low as downloading a new app and a bit of account setup… So once it catches on, the transition could be swift. And beyond Western Union, there are a lot of similar scenarios in the world of payment and finance, like credit card payments, where bitcoin is considerably cheaper (1% fees vs. 2.5-3.0%). Here bitcoin acts as a lower cost competitor to the traditional payment infrastructure. So that’s potentially pretty big, if bitcoin takes even a small slice from PayPal, Visa, Mastercard and the rest. And then there are the political/macroecon implications of this, of creating an alternative to fiat currencies and limiting government in their ability to abuse their position as a central bank/issuer of currency.
So that’s the first bitcoin wow. and at this moment, barring draconian regulations, it feels pretty likely that bitcoin or some other synthetic/designer currency(ies) will become effective competitors to existing fiat currencies, perhaps even becoming dominant after some time.
The second wow, and I only started waking up to this over the summer, is the potential for bitcoin (a software-based protocol) to do much more than act as a currency. Synthetic currencies could, as add-ons to bitcoin or as stand alone vehicles or both, do some pretty crazy things – smart property, contracts, web of trust/reputation, voting, challenge stock/equity markets, etc… And I’m still figuring much of this out but I do think that the recent rise in value – from $100 to $800-1200, was precipitated in part by this new frontier opening up. These second-level implications have now been well explored by the pioneers and are starting to be built out (mastercoin, bitrate, colored coins, etc…). It’s taken some real effort to wrap my head around this but it’s powerful stuff. A number of the updates deal with this second level stuff.
7 min on the big picture w/ Andreas M. Antonopoulos. Good stuff
Chris Dixon (Andreessen Horowitz) on bitcoin: One of the interesting things about Bitcoin is the contrast between how it is portrayed in thepress and how it is understood by technologists. The press tends to portray Bitcoin as either a speculative bubble or a scheme for supporting criminal activity. In Silicon Valley, by contrast, Bitcoin is generally viewed as a profound technological breakthrough.

The Internet is based on a set of core protocols that specify how information such as text, photos, and code should be transmitted. The designers of the Web built placeholders for a system that moved money, but never successfully completed it. Bitcoin is the first plausible proposal for an economic protocol for the Internet.

This matters for two reasons:

1) It fixes serious problems with existing payment systems that depend on centralized services to verify the validity of transactions. These services are both expensive (roughly a 2.5% tax on all transactions) and prone to failure (Internet payment fraud is rampant).

2) More importantly, Bitcoin is a platform upon which new technologies can be developed. Developers have created some early applications, and speculated about future applications. Some potential applications include: a) micropayments as a replacement for banner ads or subscription fees, b) machine-to-machine payments to reduce spam and denial-of-service attacks, c) a way to offer low-cost financial services to people who, because of financial or political constraints, don’t have them today.

Another long video, this one on the future of bitcoin, extending the protocol beyond currency/store of value to contracts, smart property, etc…
Add curecoin to the list of cryptocurrencies doing some positive work (in addition to creating a currency). Curecoin distributes computing problems over a sea of computers, like the SETI@home project. Each computer is given a little problem to solve to productively use your computer’s spare cycles/computing capacity. There can be millions of computers working together to solve the problems so that in aggregate they’re doing the equivalent of a few supercomputers and producing legitimate results. CureCoin is currently focused on protein folding, but can apparently be modified to solve any scientific problem.
“Network security from hashing is good. Making money is great. Curing Cancer, Alzheimer’s, Huntington’s, preventing viruses, and designing next-level pharmaceuticals is awesome. What if we could put these together, to build a coin secured and run by crypto, mined with SHA256, and supported by cancer-curing research?”
And they’ve come up with an interesting way to split the earnings (coin rewards) so that both ASIC mining and CPU/GPU mining are supported: “Most currencies are either in the CPU/GPU stage, or in the ASIC stage. CureCoin can be earned with both. Folders use high-end GPUs and CPUs to fold proteins, earning a proportional portion of coins set-aside automatically by the minting process for their contributions. Miners mine with SHA256 ASICs as usual, securing the blockchain for the CureCoin network. Whether you are heavily-invested in ASIC equipment or still have GPUs and CPUs, you can participate. Due to the nature of folding (diverse, constantly changing, not easily predictable), GPUs and CPUs will both always be relevant, so an investment in consumer hardware isn’t wasted.”
Note: There should be a catchy name for crypto-currencies that do real work, whatever they’ll be called I suspect that these will (a) be most likely to dethrone bitcoin and (b) will replace the stock market.I do recommend actually clicking on the link and reading the whole piece.
One option used on reddit: AltruCoins (altruistic coins)
And some more introductory materials: If you’ve made it this far and you want to firm up your understanding of btc, follow these links
Basics:  Finished reading this over the weekend and it’s long but the best intro to how bitcoin really works. http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/

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