Rare Pepe Fomo And The Alt Pump & Dump Cycle

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Sideways, to the right, more sideways. Traders looking for btc volatility since the days after the BFX hack have experienced just about as much pain as individuals following this year’s US election. It’s been a while since our last post, but the crypto space has been nothing short of drama free. The two biggest events to note in the preceding months have been: ETH fork/ETC inception and the BFX hack. While the ETH/ETC debacle is worthy of analyzing, the WSJ, Forbes and other publications have done a thorough job thus-far, and us covering this probably won’t happen until we can end the post with an actual obituary for ETH. The BFX hack is/was very newsworthy, but the lack of information being distributed by all involved parties allows for very little opportunity to study the attack without significant speculation.

If you haven’t given it a listen yet, it’s worthwhile to spent some time absorbing the latest Whaleclub Hangout from earlier this week, with Mike from BitGo.

As we’ve seen since it’s inception, the crypto space is never short of individuals daring to be innovative and creative. Periods of sideways bitcoin tend to lead to enhanced output from these individuals, and seemingly contribute to the notable altcoin pump and dump cycle. While the price of btc continues to increase in fiat terms, many individuals or institutions seeking to increase their hoard turn to alternative methods besides buy and hodl. With no shortage of opportunities to profit in the space, events like a 300%+ increase in the spot price of a shitcoin in 24 hours aren’t uncommon. The use of leverage and derivatives has become more prevalent and accepted, and these market moves are only amplified by the use of such instruments (as are traders profits and losses). Throw in an ever increasing number of exchanges globally, some of the more popular shitcoins being listed by these exchanges and ludicrous levels of fomo – we have ourselves a market Charles Ponzi himself would be jealous of. With pumps oftentimes sparked by “news” that isn’t really news, shitcoin markets are a playground for electronic trading and straight up rape of individual’s account balances who don’t understand all good things come to an end.

The history of crypto is littered with the corpses of pumps that became dumps, and bagholders are still kicking themselves for not identifying an opportunity early on and profiting. Most recently, Monero (XMR) became the king fomocoin, topping the shitcoin kingdom in both (possibly fake) volume and it’s presence in the news cycle. Launched on April 18, 2014, XMR flew under the radar of most traders for years, and was rarely mentioned outside of very niche parts of the already niche crypto space.

In August of this year, whispers of darknet markets considering the usage of XMR began to leak out. Hastily, speculators began to pile into XMR, which had been clearly accumulated at what would soon be rock bottom prices, for months.

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One of the most fascinating aspects of analyzing the irrational behavior of traders/speculators (and soon to be bagholders), is that they rarely take the time to think critically through the fundamentals behind their latest self administered remedy for fomoitis. Monero may have certain properties which make it more ideal than other cryptocurrencies for darknet use, but is Pablo in South America going to PGP encrypt his XMR address and e-mail it to vendors in the dnm space to pay for their wares? Are exchanges where you can exchange XMR for other cryptos with decent liquidity terribly centralized? Are there any other real on/off ramps for XMR other than centralized services? After thinking through some seemingly obvious questions like these, any rational person would quickly realize that XMR is good for a quick pump and dump, and not a viable long term investment once the price left rock bottom (if ever). Without a self sustainable ecosystem, with a somewhat stable price, it is unrealistic to think that any anonymous crypto will gain enough traction to become an independent major player any time soon. The need for on and off ramps, limited adoption, small volume of transactions and dependence on centralized services are all factors which detract from the perceived anonymity these coins promise.

The usual early to mid-pump deluge of “news” began to hit the public, further compounding the irrational behavior of traders globally. “Credible” news site, The Merkle, published a piece that reads as if someone bought the local top. Bitcoin Magazine, produced a slightly more in depth read, but still didn’t cover all of the relevant aspects surrounding XMR’s integration into the darknet. Even Bloomberg covered the Monero phenomenon, reaching a wider and more diverse audience. The most realistic viewpoint on the situation was taken by Vice (Motherboard), which presented a fairly balanced article. From Vice:

For example, Vessenes wrote me in an email, the fact that there’s still only a relatively small number of Monero users means that any massive transaction will stick out like a sore thumb: there just won’t be many others of a similar size to mix with. That would defeat the coin’s promise of privacy, especially for drug vendors moving large amounts of product.

“If you think about moving say $2 million in a currency like this, you’re going to have a lot of trouble,” Vessenes wrote. “Monero works by sort of combining up your transaction volumes with other similarly sized transactions in round amounts—it’s going to be pretty hard to find people to do those large-scale moves with you.”

If Monero takes off on AlphaBay, it could create the critical mass needed to deliver on its own promises. It’s a bit of a self-fulfilling prophecy: widespread use on dark net markets might drive increased investment in and usage of Monero, thereby solving the privacy problem created by a relatively small pool of users.

This isn’t the first time a cryptocurrency promising better privacy than bitcoin has tried to break into the markets, making some users skeptical about the promise of Monero. Dash, a cryptocurrency that formerly went by the name Darkcoin, received substantial media attention when a few mid-sized markets implemented it in 2014. Two years later, Dash hasn’t been implemented on any online dark net markets worth noting.

“The switching cost from just using bitcoin to using Monero is going to be high, since not only is there a tech shift, a trust issue, there is also greater volatility,” Levin wrote. The $20 million overnight jump in Monero’s market cap, while potentially indicating increased usage and thus greater anonymity, also means that the currency’s value is highly volatile.

Realistically, there was never any chance Monero would rise overnight to become the flagship currency of the darknet market space. Of course though, this didn’t prevent the marketplaces themselves from aiding in the dis-information campaign to assist in pushing the price higher. Given the activities that the markets themselves facilitate, and the numerous questions surrounding the life and death of current and previous marketplaces, is it unexpected that there may be other factors at play here?

Alphabay posted on Reddit regarding their implementation of Monero, ending the post with:

We expect this to cause a spike in the price, so if you are an investor, now
is the time to purchase Monero.

Well if that isn’t a telltale sign that “someone” has been accumulating, not sure which version of reality you’re living in.

Observant Reddit users dug a little bit deeper, and noticed some unusual activity in the days preceding the Oasis announcement of XMR integration. This one chart just about sums it all up:

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A quick browse through Bitcointalk topics discussing Monero, shows significant skepticism around the meteoric rise of the currency. There are the usual moonkids, but anyone with half a brain has trouble making sense of the parabolic rise in price. Multiple posters provide their insight, oftentimes leading to similar conclusions as this user:

I did a little research, because mostly this price surge is argumented with DNM’s getting in the currency, which i still do not believe.

On Alphabay in median 1,9% 2737 are accepting XMR in drugs and chemicals from total 136877.
On Oasis in median 6,9% 264 are accepting XMR in drugs and chemicals from total 3813.

The last 0,018 hype on polo had over 100kBTC volume, with now residing somewhere at 0,014 with ~24kBTC volume.

So if 3001 vendors are responsible for over 100kBTC volume, every vendor in median had to have ~33BTC for playing wiht XMR, now somewhat around ~8BTC each if every vendor is actively trading –> possible but not likely.

Why, simply because these 100BTC to 800BTC buy walls would to have been built, in median, buy more than one vendor at the same time –> possible but not likely.

Even if, let’s say 10% of the active vendors are actively trading with the new XMR (multiply the figures buy 10) which i still do not believe, this would be more unlikely to happen at the same time on the same place. The lending figures intensify my claim and theory of a single entity playing around and making the market to the contrary argument of “natural” growth

Think about it

Screenshot as well:

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A few short weeks, and many rekt accounts later, XMR has begun free-fall. Oasis apparently exit scammed, running with a minuscule amount of coin, estimated to be around150 btc worth of users drug money. Given the facts outline above, the most plausible scenario we can develop is:

  • Darknet markets decide that they aren’t generating enough btc through their traditional illicit activities
  • Market owners/insiders accumulate large amounts of XMR, and establish leveraged long positions
  • News “leaks” that markets may be integrating XMR, initiating fomo stage 1
  • Confirmation of XMR integration and instigation by markets themselves that traders buy XMR fuels fomo stage 2
  • Traditional news sources cover the non-event, providing confirmation bias for soon to be bag holders
  • Market owners/insiders dump their XMR, and walk with the profits
  • Less than 7% of vendors on a small market place actually end up offering the option of accepting payment via XMR
  • Bubble bursts, tears are generated. Too bad, so sad.

The global shitcoin market cap has been making lower highs, and appears to be rolling over. Monero may have just exit scammed the alt coin pump cycle, just in time for the next period of btc volatility.

Source: Coin Market Cap

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What does all of this have to do with Rare Pepes? What the fuck is a Rare Pepe? How can I obtain as many as possible?

As exhibited time and time again in the cryptosphere, irrational exuberance is a cornerstone of the markets that we know and love. Oftentimes though, this severe overpricing of assets and bubble mentality is backed by very little other than hopes and dreams. The hot fomo shitcoin of today will be forgotten about weeks or months from now, as another speculative asset takes it’s place. An inherent risk with almost all of these portfolio “diversification” techniques, is that buyers/investors are taking on additional layers of unnecessary counterparty risk. As exhibited by the recent round of ETH attacks, many of these projects may contain flaws, any of which could lead to a disastrous outcome. What we have yet to see, is significant fomo surrounding projects or assets based on the bitcoin blockchain, secured by the hash power and nodes of the most secure network. Every time an exchange is hacked, everyone jumps on the “we need decentralized exchanges” (dex) train. Hello? There already is a fully functioning decentralized exchange, which has been blowing up right in front of you. The Counterparty protocol (XCP), which runs on top of the bitcoin blockchain, has been chugging away since 2014. Besides the fact XCP actually accomplishes what it promises, flawlessly, it’s native DEX has been picking up significant volume in recent weeks. BitGirls and Spells of Genesis are two contributing factors, which will only act as compounding components in any XCP fomo. We believe though, that the catalyst which will ignite this rocket is something that everyone can relate to: Pepe the frog.

Recently portrayed as a symbol of white supremacy, harmless Pepe has been providing us with lulz for years. Even Buzzfeed has even covered Pepe multiple times, and in an article which surprisingly isn’t titled “10 Things  You Need To Know About The Market Value Of A Rare Pepe”, Rare Pepes and the idea of assessing what their market value may be are discussed.

To backtrack a step – a Rare Pepe is a meme. Pepes can be directed at any audience, from music, to sports, to politics and anywhere in-between. Most Pepes exist in the virtual or digital domain, although physical Pepes do exist. Like all rare items, there is an established market for Rare Pepes. Until recently though, there has been no actual method of verifying that your Pepe is actually rare. Although we have feelings of disdain for Buzzfeed and their social media feed polluting tactics, the article referenced above actually produces some insightful (although now invalidated) thoughts surrounding the possible market value of a Rare Pepe.

Quotes from the article:

To find out how an actual market value for a rare Pepe might work, I asked experts in the field of digital art.

Michael Connor, artistic director of Rhizome, a digital arts organization affiliated with the New Museum: “A piece of digital art can definitely be rare. Consider, for example, Constant Dullaart looking for images of the vacation photograph of Jennifer Knoll that was widely used as a Photoshop demo image. However, rarity is a complicated way to assign value to digital works.

“Unlike a Picasso painting, which has a kind of built-in rarity because each one is one of a kind, a digital artwork that has widely recognized value can only maintain its scarcity if it is lost or if it is protected in some kind of legalistic way. Owning digital art either means having the original files as well as certain kinds of legal rights to use it, or it might mean owning the only copy of something and hoarding it like Gollum.

“One very nice way that artists can protect the scarcity value of their work is by assigning it a specific URL. For example, there can be many copies of a particular .swf file, but in some sense there can be only one jellotime.com.”

Michael Duca, co-founder and CEO of NeonMob, a digital art sharing and trading site (think more like DeviantArt and less the Museum of Modern Art): “Ownership and viewability when it comes to digital art are two separate things. Ownership is who legally owns a particular work of digital art. Viewability is who has the ability to see it. Programmers can limit viewability with some tricks, but completely preventing people from sharing digital art is close to impossible. That doesn’t mean the underlying work has no value or that people won’t spend money to own it.

“In short, yes, it is possible to have a rare Pepe that is actually worth money. You’d want for the original work to be sold on a platform that recorded the buyer and allowed for future transactions of that digital work (e.g., via trade or resale). You would want to authenticate the work was original and ideally the artist would be the one selling the work. You would have to be OK with assuming the image would be shared more widely. But still, just like software or physical goods there would be one or more owners, depending on the number of authentic, original prints sold, and they would have a finite scarcity corresponding to some monetary value, which is determined by the market demand for that print.”

Magdalena Sawon, owner and director of the Postmasters Gallery in NYC, which specializes in new media and net artists: “Selling memes, GIFs, and other internet-based material is complicated and at this point frankly next to nonexistent because if the work itself belongs and functions exclusively online; it is counter to its nature to have it removed from that ‘habitat’. And if you do not, what exactly does the ownership mean?

Well, guess what? On September 9th, 2016 at 01:46:42 (UTC), history was made. Verifiable on the blockchain, all this talk from supposedly creative people (above, from Buzzfeed) was invalidated. The first Rare Pepe, in virtual/digital form, with an integrated, transferable, immutable certificate of authenticity, was created.

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This seemingly small and still mostly unnoticed development, may end up being one of the most significant public facing aspects of real life integration the Counterparty project has seen to date. Following in the footsteps of Satoshi, the figure depicted on the very first Rare Pepe, an anonymous bitcoiner produced the first Pepe which is verifiable as rare, transferable, immutable and scarce. In addition, the Counterparty DEX is an extraordinarily easy to use venue where Rare Pepe traders can establish a mutually agreed upon value for each Rare Pepe card, priced in XCP under free market conditions.

In response to the statements that “experts” in the field of digital art made to Buzzfeed:

However, rarity is a complicated way to assign value to digital works.

“Unlike a Picasso painting, which has a kind of built-in rarity because each one is one of a kind, a digital artwork that has widely recognized value can only maintain its scarcity if it is lost or if it is protected in some kind of legalistic way. Owning digital art either means having the original files as well as certain kinds of legal rights to use it, or it might mean owning the only copy of something and hoarding it like Gollum.

Rarity WAS a complicated way to assign value to digital works. Until the advent of the Counterparty protocol. Able to be traced easily, Counterparty tokens act as a digital and transferable certificate of authenticity for any piece of artwork, collectable or essentially any physical or digital object imaginable. Hell, you can even make a token that says “my shit” and sell it to others if there’s a market.

How can this be extrapolated to the “real life” rare art world? Let’s say I own a Picasso, or any other piece of art which has “built-in rarity”. A Counterparty token can be generated representing ownership of that piece of artwork. Along with the physical art itself, then token can then be transferred to a buyer as proof of ownership. Unlike a paper certificate, ownership of this token can be tracked via the blockchain to show all previous sales/owners, and that history can not be changed. Rare art can always, and is sometimes counterfeited, but techniques such as radiocarbon dating can easily be employed as they are today to verify authenticity.

“One very nice way that artists can protect the scarcity value of their work is by assigning it a specific URL. For example, there can be many copies of a particular .swf file, but in some sense there can be only one jellotime.com.”

Sure, this sounds ideal in theory. But why take a risk with a simple URL when advanced cryptography methods can be employed? There can be many copies of an image file, but not of a Counterparty token unless specified during creation. Once created, the token can be locked to prevent further issuance. Taking this one step further, into the digital realm – if an artist generates a digital piece of art, a hash (let’s just say md5 for sake of argument) can be generated from the digital file of that completed piece of artwork. The hash can then be integrated into the Counterparty token which is created, and there can never, ever be a question of ownership.

“Ownership and viewability when it comes to digital art are two separate things. Ownership is who legally owns a particular work of digital art. Viewability is who has the ability to see it. Programmers can limit viewability with some tricks, but completely preventing people from sharing digital art is close to impossible. That doesn’t mean the underlying work has no value or that people won’t spend money to own it.

Of course, ownership and viewability are two different things when it comes to digital art. All certified Rare Pepes can be viewed on the Rare Pepe directory, and any internet user can easily download these images to whichever device they may be using. Using Counterparty tokens as easily transferable certificates of authenticity, a programmer or artist has no reason to limit viewability. In this fashion, completely preventing people from sharing ownership IS impossible. If you don’t own the private keys which control the address where the token is assigned, you don’t own the art. This method detracts individuals from implying that there is value in just the art, but rather that there is value in ownership of both the digital art and token. People won’t spend money to own an image file which can be shared or viewed easily, but they will certainly pay for ownership of a token generated by the artist which provably shows they are the owner of that piece of art. People can, will and already have spent considerable amounts of money on Rare Pepes via Counterparty tokens on the DEX (or even via OTC sales).

“In short, yes, it is possible to have a rare Pepe that is actually worth money. You’d want for the original work to be sold on a platform that recorded the buyer and allowed for future transactions of that digital work (e.g., via trade or resale). You would want to authenticate the work was original and ideally the artist would be the one selling the work. You would have to be OK with assuming the image would be shared more widely. But still, just like software or physical goods there would be one or more owners, depending on the number of authentic, original prints sold, and they would have a finite scarcity corresponding to some monetary value, which is determined by the market demand for that print.”

Finally, a statement from someone that understands basic economics and supply/demand. Does this person have a time machine to look into the future? Because oh, wait… this is real life now.

“Selling memes, GIFs, and other internet-based material is complicated and at this point frankly next to nonexistent because if the work itself belongs and functions exclusively online; it is counter to its nature to have it removed from that ‘habitat’. And if you do not, what exactly does the ownership mean?

We don’t blame Magdalena for being so oblivious with the statement she made. Rare Pepes and Counterparty still exist in one of the most remote corners of the internet. But hey, all of these problems have been solved.

At this point, most readers probably think that this is at the very least unconventional, or maybe even a joke. It isn’t. The Rare Pepe community takes their Pepes and the project very seriously, and community led contributions have come from far and wide to enhance the Rare Pepe experience.

A directory of all expert approved Rare Pepes can be found on the Rare Pepe Directory – http://rarepepedirectory.com/

There are fraudulent Rare Pepes, imitations and tokens which are named to mimic actual Rares. If a Pepe isn’t listed on the directory, it isn’t certified rare.

There are rules which must be strictly adhered to when creating and submitting a new Rare Pepe for approval. Those rules can be found on the directory, but are listed below as well.

Rules:
1) Pepe’s must be 400 x 560.   They can look like trading cards but it is not required.
2) Cards can be animated gif’s but try to keep them to 1mb or less in size.   Use Compression.
2) Issuance must be locked  so your Pepe cannot be inflated.

3) Your Pepe must not be divisible.
4) Make sure your artwork at least has something to do with Pepe.
5) No NSFW content please.
6) When making your token it must have at least 100 shares.

Submissions must be ORIGINAL.  Our rareness quality team examines each Pepe for rareness. (no stealing!)  If you have been caught stealing someone elses rare Pepe  your submission fee will be sent to burn address, never to be recovered.

Our experts understand that lots of Pepe’s borrow  from each other to an extent, but try to ad as much Original content as possible… be creative!

 

Storing your Rare Pepes in Counterwallet is perfectly secure, and if you’re a regular XCP user you can manage all of your Counterparty assets from Counterwallet. If you would like to keep your Rare Pepes safely housed in their native environment so they feel at home, yes… there is a Rare Pepe wallet as well – https://rarepepewallet.com/

Here’s what your Pepes will look like in the wallet once you begin to accumulate –

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What would a world of Rare Pepes be without it’s own blockchain based currency? No worries, the community has that problem solved as well. PEPECASH is the currency of Pepes, and can be used to pay for new submissions, to speculate with or to be used in p2p transactions. With the token locked at 1 billion shares of PEPECASH, it lacks the inflationary aspect of a currency like dogecoin, while still maintaining the same meme friendly madness. Just over 30% of all PEPECASH has been burned, increasing the scarcity of this asset.

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Still think that we’re absolutely bat shit crazy? We might be, but the Rare Pepe fomo is real. There’s no better place to see this for yourself, or even take part, via one of the Rare Pepe auctions. The auctions take place in real time via the Telegram group, and bidders go full degen at times to get their hands on the rarest of Pepes. Even though crypto is the wild west, Rare Pepe auctions adhere to a strict set of guidelines in order to ensure the process runs smoothly.

Details on the next auction, which is Monday, and auction rules are below –

**RAREPEPE BLOCKCHAIN CARDS AUCTION**
MONDAY 6PM EST

PM me to submit your RAREPEPE for auction
Link to directory
Amount
Lowest Price that you want to sell for

Buyer/Seller Rules
Auctioneer/Escrow takes 20% of final sale for service fee
Payment for Sold RAREPEPE is made to seller minus fees
Card will be held in escrow until auction is over
All payments must be made within 24 hours

***AUCTION RULES***
-ALL AUCTIONS ARE IN XCP , DO NOT ASK IF YOU CAN PAY IN RAREPEPECOIN OR OTHER SHITCOINS!
-Auction Increments are as follows 1-5 XCP Min Increment 0.1 5-10 Min increment 0.5 XCP
10 and above min increment 1 XCP
-please keep chat noise down, we will have plenty of time to chat after
-if you would like to have your rarepepe auctioned please send the auctioneer a pm
with this info: assetname, link to directory, amount to auction, start price
-all sales are final and as is, please inspect the RAREPEPE BLOCKCHAIN CARDS before bidding
-all sales will be handled via PM after the auction is finished, payment due in 24 hours or less
-After: Going Once, Twice, Three times , SOLD the auction is over
If there is a bid then it starts over and we are at “Going Once”
-ALL SALES ARE FINAL, INSPECT THE ITEMS AT YOUR OWN RISK
***

Theo, who is the auctioneer of the events mentioned above, recently took part in an episode of Coin Interview to discuss the Rare Pepe craze.

If you tune in to around the 49 minute mark, Theo is presented with the statement/question – “…it’s not uniquely associated with the image. For one of these images, you could just as easily replace it with a different image and leave the token totally the same… If on this image, you change this image to a different image and don’t touch the token at all, everything is the same. Except now the token is representing this image instead of that other image… Is the image actually coded in the blockchain though?”

Would you be surprised if we told you, the Rare Pepe community has developed solutions to this as well? So far, two unique methods have been used to preserve the association between a Rare Pepe token and the image of the card it represents.

Method 1 – JSON in the enhanced asset information

This is outlined in the Counterparty documentation.

Enhanced Asset Info

When initially setting or changing your asset’s (token’s) description, you can enable enhanced functionality (such as an token image and a longer description) by providing a URL to a specially formatted .json file (e.g. http://www.mydomain.com/foo.json) as the description. This allows the token owner to provide enhanced information to the token’s holders, and enhances the user experience for these holders for wallet implementations that support this spec.

Although this method is reliable, it is dependent on the URL where the .json file is stored being up and easily accessible in the future.

 

Method 2 – Generate a hash of the original card image, and include that hash in the token information

This method was recently implemented for the first time, in a card named CHYNAPEPE.

The card artist generated a md5 hash of the completed card image, and included that hash in the description field of the Counterparty asset. This hash can easily be viewed by anyone, using a Counterparty block explorer, and used to verify the authenticity of their CHYNAPEPE.

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A file checksum can easily be generated by readily available online tools, and that checksum can be compared to the value associated with the Counterparty token.

screen-shot-2016-10-09-at-4-01-08-pmUsing this method, any card can be verified as authentic in the future, even if the Rare Pepe directory or sites where .json files are stored somehow disappear. This method is very similar to the way that software packages are verified today, in order to ensure they aren’t tampered with.

 

Tying this in to the Buzzfeed article mentioned above. Digital artists, and art buyers, now have a way to guarantee scarcity and authenticity of any works. The Counterparty token system also provides a secure way to transfer ownership, without the use of a trusted third party (unless you consider a decentralized exchange to be a third party) or escrow service. In addition, the history of every token can be tracked through the blockchain, allowing the owner to track the history of their art.

What are the implications of this moving forward?

Just like bitcoin, blockchain based Rare Pepes are just an experiment at this point. So far, this experiment has not only proven that digital art can be successfully associated with a digital, blockchain based token, but it has also shown that there is a thriving market for these tokens. Just as bitcoin was laughed at, challenged and finally is becoming accepted, we expect the use of blockchain based tokens to represent both digital and physical art to become much more prevalent in the coming years.

The chart below shows year to date metrics on transactions taking place on the Counterparty protocol. Although there are many other assets which exist besides Rare Pepes, it is clear that asset issuances and orders on the DEX have been steadily increasing year to date. To be clear, this is not the result of just Rare Pepe, but displays the overall increasing acceptance and usage of the Counterparty protocol, and issuance/trading of blockchain based tokens in general.

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In Conclusion –

A shitcoin pump and dump is always a lot of fun for fast paced trading, quick gains and to satisfy that degenerate gambler itch. With a plethora of pre-mined scam coins which have an inherent counterparty risk associated with dependence on their own mining networks, individuals often overlook trades/investments/speculation which are backed by more solid fundamentals. Most traders/investors do not factor exchange risk into their investment thesis, which can be detrimental as evidenced by the BFX hack and subsequent haircut. If you don’t hold it, you don’t own it. Luckily the innovations cryptocurrency has facilitated, allow anyone to hold an increasing number of assets, just by owning the private keys.

Hidden somewhere in this post is a Rare Pepe. Good luck on your quest.

 

Disclaimer: This is not investment advice, and we don’t give a fuck what you do with your money. There are only going to be 21 million bitcoins ever produced, and we’re all in a race to collect as many as possible. If you want to “invest” in some shitcoin pump and dump on a questionable exchange, be our guest. We’re holders of a bunch of different Rare Pepe cards, and will probably be the ones selling to you much higher once price discovery kicks in.

You Can Call Me Wright, Craig Wright…

JYY4TdBThanks to cxn from tv for the image.

 

Well, that escalated quickly. Hours after the latest round of Satoshi Wright shit storm events, things went from weird to weirder. Gavin claims that he wasn’t hacked after losing commit access, and a slew of additional pieces of information have become available. Does Gavin forget though, as evidenced by Kevin Mitnick, the most effective and simplest hacks sometimes don’t even involve a computer?

The community has been quick with their research, and are beginning to see that maybe this whole thing isn’t as simple as first thought. Duh… anyone who didn’t imply that after watching his BBC interview is probably a r/btc regular (seriously, those guys are hilarious), or just oblivious.

When asked: “Why have you decided to identify yourself as Satoshi Nakamoto?”

Wright answers: “I didn’t decide. I had people decide this matter for me. And they’re making life difficult, not for me, but my friends, my family, my staff. … None of it’s true.” (… is where he says something else in-between).

Full video here:

The first thing that we’re going to be attacked for is adding in the … above, and told that this is taking what he said out of context. With the situation as weird as it already is, would reading between the lines make things any weirder? Is the simple obfuscation tactic of “hiding in plain sight”, and injecting real data in-between semi-related statements that far fetched? Fuck, we did it at the very end of our last post.

For the sake of argument, let’s be fair and assume that it’s the “extortionists” that Ian Grigg (yeah, that guy again) mentions in December 2015. This is the most plausible scenario based on their public statements:

So these “extortionists” or “hackers” are after Wright’s “money”, and are still pursuing this even after it was widely established that the coins are held in the “Tulip Trust” until 2020, back in December 2015 as well? We’ll just disregard the fact that he’s bankrupt, because the hackers would clearly be after the coins.

As a community, bitcoiners globally have been contributing what they can via different internet outlets in an effort to put together the truth. While the full truth may never come to light, each piece of evidence potentially brings the community one step closer to realizing the vast scope and nature of this increasingly complex puzzle. While we always promote research, critical thinking and out of the box reasoning, we do not think that it is productive of the community to draw unreasonable conclusions without any type of supporting evidence. Fortunately, this time around, some have done their homework, and started to put forward some reasonable scenarios as to what they believe is happening. Additional pieces of information, such as Wright purchasing coins over $1,000 on Gox just don’t seem to add up. It’s public information via the ATO (Australian Taxation Office) that Wright claims to have mined around $5,000 btc at 3-4 cents. Assuming a generous 5 cents a piece, this would amount to at least 100,000 btc, but not much more. Unless, of course, his accountant is intentionally deceiving the tax authorities.

Read the full transcript here. Of course, they’re redacted. Additionally, here’s a PDF of the same conversation.

JC: We understand. Craig Wright took the Bitcoins that he had mined offshore. At the time, it
was worth 3-4 cents. The total value of this was around $5000. He then started up W&K Info
Defense LLC (W&K) with Mr Dave Kleiman. W&K was an entity created for the purpose of
mining Bitcoins. Craig Wright is a forensic computer expert. He is constantly updating himself
attending courses, workshops and training sessions. He is also a university lecturer at Charles
Sturt University and conducts courses. He even provides services to some Australian
government agencies including the ATO and the Defence Force. However, this is all done on a
very high level.

Disregarding the fact that there’s a blatant conflict of interest given he provides “services” to government agencies, including the one investigating him, the ATO. His story mathematically makes no sense, as it is widely known that Satoshi controls the keys to at least 1 million btc.This is implied later, in the exact same conversation, by Wright’s accountant John Chesher. How is it possible to overlook this? How easy is it to move to Australia and pay taxes there if the ATO is this bad at math (we’re interested, heard it’s nice)?

Craig Wright had mined a lot of Bitcoins. Craig then took the Bitcoins and put them into a
Seychelles Trust. A bit of it was also put into Singapore. This was run out of an entity from the
UK. Craig had gotten approximately 1.1 million Bitcoins. There was a point in time, when he had
around 10% of all the Bitcoins out there.

Craig “mined a lot of Bitcoins”. The wording of Chesher’s statement would imply that the majority of these coins were moved into a Seychelles Trust, with the minority (“a bit”) being put into Singapore. Craig “had gotten” approximately 1.1 million Bitcons. Is this mis-direction, a slip up, the truth? Did Craig mine 100,000 btc as suggested initially, and receive 1 million in another fashion? Did he mine 1.1 million, and his accountant blatantly lies to the ATO?

It isn’t hard to find these shell companies that he used via public tools. And there are significant questions surrounding all of them.

The American Lawyer outlines the motives undertaken by these parties, in case you need another source.

Included in the documents cited by Wired and Gizmodo is an email sent on Jan. 8, 2014, by someone using the account satoshi@vistomail.com who signs off on the missive as “Craig (possibly…).” Others included in the correspondence, which seeks to lobby Australian Sen. Arthur Sinodinos into adopting a more tax-favorable treatment of bitcoin in the country, are Wright’s wife, Ramona Watts; Wright’s accountant, John Chesher; and Clayton Utz’s Sommer.

In his response to the email a day later, Sommer said that he was happy to reach out to Sinodinos, but suggested that it was probably best to keep “Nakamoto-san’s involvement in the background for now.” Gizmodo and Wired obtained a transcript of a Feb. 18, 2014, meeting between Sommer and Australian tax officials, as well as the minutes of a subsequent gathering between both parties on Feb. 26, 2014.

The purpose of the meetings seems to be to convince the Australian government to treat Wright’s bitcoin holdings as currency, as opposed to another asset taxed at a higher rate. Sommer has been at the forefront of attempts to get Australian tax officials to treat bitcoin and other cryptocurrencies as a commodity for tax purposes.

 

Just a few lines down, in the same ATO  document, things begin to get even more interesting:

Craig Wright was speaking in a conference in Melbourne. He was giving a talk about Bitcoins
and mining. He was then approached by a man by the name of Mark Ferrier and that was how
they met. This was how the relationship was formed. They started talking. Craig Wright told Mark
Ferrier that he wanted to start up a Bitcoin bank. They then started emailing. Mark Ferrier told
him that he knew someone who could help him start up the bank. This was all done in early June
2013. Everything was done very quickly- most of it was done in one weekend. Craig Wright, with
the help of Mark Ferrier, agreed to purchase banking software from Al Baraka. Mark Ferrier also
convinced him to purchase gold ore. He also offered Ian Ferrier’s services to Mark Ferrier. Ian
Ferrier is Mark Ferrier’s father. Before engaging in Mark Ferrier’s services, Craig Wright had
conducted lots of checks on him and everything came up clean. So in essence, Craig Wright
wanted the banking software and Mark Ferrier wanted Bitcoins.
Around mid-July/August, Craig Wright released funds from an entity located in the UK to MJF
Consulting. This was all going through a server located in Central West Africa.

Some additional research reveals that Wright paid a sum of 380,203 bitcoins to Ferrier in 2013. Where is this on the blockchain?

The 380,203 Bitcoins Wright paid to Ferrier was worth nearly 5% of all existing Bitcoins in 2013.

From Business Insider.

Of course, maintaining the weirdness of this situation, Ferrier is then arrested. Wright’s accountant corroborates the fact that the tx hit the blockchain, as he states to the ATO “This was all going through a server located in Central West Africa”, and this is all we hear.

How did Wright send over 300,000 btc to Ferrier in 2013, if the majority seem to be locked up in a trust? Again, where is this tx or series of tx on the blockchain? Where are the missing Gox and SR btc?

Almost a month ago, a strange Reddit post appeared from /u/whistleblower5470541(now deleted). Archive.is in case that disappears too.

The entire thing reads like a terribly written fantasy, but it’s worth a few minutes of your time. Pulled from the story:

What the Hack?

When the titan Prometheus offered this human the fire, I saw the heat. I knew that heat would burn away my life. I loved my life and did not want it burned. I’ve lived that life.

However, as a servant of the truth, this event must be recorded…

I’ve been attending the Netherlands quadrennial hacking conferences since HIP97.

Prometheus… where have we seen that before?

It wouldn’t surprise us if Craig Wright was part of some “secret” Prometheus project, as the name does have all the hallmark traits of his arrogant and overzealous personality. Come on, just read some of this joke of a person’s online ramblings and ask yourself – would you hire or work with this guy… ever? Keep in mind the intellectual capacity at which Satoshi was working, and the fact that it is widely known that he only made one spelling error throughout his tenure. This is even noted by The Guardian:

Behind it all was this anonymous figurehead, Nakamoto. But who the hell was he? The bigger bitcoin grew, the more people wanted to know. He has a Japanese name, a German email address and writes in almost impeccable British English. In the 80,000 words (more than a book’s worth) he wrote online as bitcoin was developed, I found just one spelling mistake (ideological was spelt “idealogical”).

At one stage he was estimated to have a net worth over a billion dollars. He was an immensely talented coder, a skilled mathematician and a meticulous writer, with an immense knowledge and ability in a wide range of subjects. He was also extremely practical. How could anybody with this much ability not be known to the world? He was even nominated for a Nobel prize.

Moving on – On May 5, perhaps the least understood and most underappreciated event in this entire saga took place. In an unexpected, but extremely insightful reveal by Bitcoin Magazine.

JVP then “confirms” on Twitter –

If you need to re-read the piece on Bitcoin Magazine, please do so to refresh yourself.

In the interview, which took place via the internet, in real time JVP makes some very interesting statements. Keep in mind, that these answers were given in real time, in a period purportedly lasting 30 minutes. JVP’s language is deliberate and precise, unlike that of the Reddit post we mentioned earlier by /u/whistleblower5470541 which looks like it was meant to come from him. At shitco.in, we believe that one of the most underappreciated and underutilized tools that the community has available to them is the analysis of language.

From Bitcoin Magazine:

Aaron van Wirdum: The main question I have right now is: If Wright is Satoshi … why would he publish fake proof? Any idea?

JVP: I have some very good ideas. If I were in Dr. Wright’s position, I would do exactly as he has done.

I also have a message for Dr. Wright from the trustee of the Tulip trust that is controlling the coins that he wants to move. Not yet announced:

The Tulip Trading Trust trustee, appointed by Dave Kleiman as of Oct 12nd 2012. It has been rumored that Craig Wright will need to access Tulip Trading Trust assets. Trustee acts in the interest of the beneficiary alone and must defend against undue influence by others. In order to authorize movements of trust assets the beneficiary must come forward and make a direct request of the trustee our wayNOT via 3rd party nor any intermediaries. Any coin movement affecting the trust asset without prior authorization will be considered a trust violation and invalid irrespective of any claim of constructive bailment. The Trust alone has control over its assets. Tampering or manipulating with trust assets by anyone (including the beneficiary) might have material legal and tax implications. Beneficiaries are invited to a conference call 12:00 UTC Friday to discuss interests. Principals only.”

AVW: Why do you have this message?

JVP: He will know why.

AVW: Why are you sharing it with me?

JVP: It will also be shared with some selected cryptographers.

VW: How does sharing that message help?

JVP: He is following a wrong path, because he must. He is doing it the least-wrong way possible. He is on Meifumando. It is as it has to be.

AVW: What is the wrong path? And what is the right path?

JVP: The world can learn much from what he has done and how. He is showing what cryptography does and does not do. It is a lesson that the world needs to learn before mass adoption can occur.

AVW: Mass adoption of Bitcoin?

JVP: The world was not ready for Bitcoin when it appeared. When the world learns these simple lessons, it will be more ready.

AVW: Why is Bitcoin not ready for mass adoption?

JVP: People do not understand what cryptography does and does not do. People do not understand pseudonymous. Having a key means you have a key. It does not mean you had it previously, or that you will have it in the future.

AVW: Right … So?

JVP: He is forced on a stage, so he provides a masterful lesson that many who call themselves cryptographers seem to have forgotten.

AVW: In what way is he forced?

JVP: He said it himself, the decision to appear was made by others. Did you not even watch his video on BBC?

AVW: Of course I did.

JVP: Watch it again. You missed a lot.

AVW: But he didn’t say in what way he was forced, did he? Or how, or why …

JVP: I will say this much. If I were in his situation, I would have done as he did, though probably not even as well as he did.

AVW: You realize all of this is a really weird story, right?

JVP: Yes, and you have seen only the snowdrift on the tip of the iceberg. The level of weird is off the scale.

AVW: Do you know the full story?

JVP: I doubt even Craig knows the full story, but I could fill about 20 books.

AVW: No offense, but: Why should I trust any of this? Why should I trust anything you say?

JVP: Do your own research. Keep on your quest for knowledge. When you find someone who can teach you, listen carefully. When you find someone that can learn from you, be kind.

AVW: You’re skilled at avoiding questions through what sounds like ancient wisdoms.

JVP: You are a reporter, the ancient wisdom is multiple sources, so … do your own research …

 

First, it seems that JVP is straight up sending a message, and that message isn’t just contained in the initial statement to Wright. The message is the entire interview. If true, you sir, should get an MVP award, and very clearly would have done better than him if you were in his position. Perhaps, that’s why you aren’t?

Make note of JVP’s closing statement, as it is one that we mention continuously.

And then this Tweet. What’s going on?

Why does everything out of some players seem so desperate and on a whim, while other parties have a much more graceful and tactical style. Something reminiscent of an old bitcoin favorite, Plural of Mongoose/Variety Jones? Let us be clear here, we are NOT, in any way, attempting to draw a link between these parties. This is simply an illustration of variations in language, that can tell a lot about an entity and their intentions.

Some Reddit posts with additional information, not just in the original posts, but also in the comments.

Post 1 (although it seems like the author’s interpretation of what JVP is saying is incorrect)

Post 2

Post 3

Also, for reference, here are archives of two Wright publications which are widely linked to, but now scrubbed.

Post 1

Post 2

 

Now to take a trip down memory lane:

In December, 2010, PC World published an article titled – Could The Wikileaks Scandal Lead to New Virtual Currency?

When posted on BitcoinTalk, this article prompted Satoshi’s second to last post ever:

It would have been nice to get this attention in any other context.  WikiLeaks has kicked the hornet’s nest, and the swarm is headed towards us.

As if the community needed more doubt that Wright isn’t actually Satoshi, let’s firm up that conclusion a little bit more. And, the best part, have a few really, really good laughs in the meantime.

Luckily for us, Craig Wright is an incredibly arrogant person, who is no stranger to internet rambling. Perhaps, that’s why he is finding himself in the situation he’s currently facing.

Among many other sites, he was a regular at The Conversation.

His most revealing series of posts on this particular site, are comment replies under an article that he wrote himself, titled – LulzSec, Anonymous… Freedom fighters or the new faces of evil? Which was posted in August 2011, eight months after Satoshi’s departure.

Archive of that site in case it’s scrubbed.

Hilariously, and ironically, the article which is written by Wright himself includes and then ends with the following:

In making the decision to utilise the service (or not) you are making a choice – in effect, you are “voting” with your dollars.

This is freedom.

What groups such as LulzSec and Anonymous do is attempt to stop the average person having a choice at all. In engaging in a Distributed Denial of Service (DDoS) attack against a business, so-called hacktivists are not promoting freedom: they are using force to promote their views, and removing the choices other people would have made.

As LulzSec and Anonymous grow, their goals and ideas grow in scope as well. At the moment they seem to be pursuing what can only be described as a “nebulous” freedom, but as they engage in attacking the ties that bind our societies, is this even what they’re doing?

Both groups promote their views through force and coercion yet say they want freedom.

Adolf Hitler expressed the same sentiment in 1926: “What we have to fight for is the freedom and independence of the fatherland, so that our people may be enabled to fulfil the mission assigned to it by the creator”.

Force and coercion do not create freedom – they only create fear, uncertainty and doubt.

At the end of it all, when hacktivists attack critical systems to force their views, we all suffer.

 

If only he knew what he would be in the middle of years later.

But things get even better. In the comments section, we have some gems which we will screenshot and post below. Readers can visit the actual post for additional context, and form their own thoughts.

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So, there you have it. That’s the person we are being told is Satoshi. In a nutshell, Wright is, at the very least, an arrogant, self righteous prick, clueless of the real world and so over-indulged in himself and his perceived intelligence level that it’s almost as unreal as his claims that he’s Satoshi. Wright made more spelling errors in one page of replies than Satoshi had made in his entire tenure.

Any person with an internet connection has the resources to decisively prove to themselves that he isn’t Satoshi, but the “hackers” and “extortionists” who are presumably (from Ian Grigg’s statements) the ones pressuring him to do this (aka: possibly made the choice for him) didn’t have access to ANY of the information that the community has dug up? Come the fuck on. Let’s assume that the absolute worst case conspiracy that Reddit has compiled is true, that Wright and his Prometheus group are working to disrupt bitcoin. Who works in your HR/hiring department? Has that person lost their job yet? Do you people do ANY homework? Given their credentials, it would be very difficult to perceive them taking such missteps.

Perhaps, these highly visible character flaws are again, why Wright is finding himself in the situation. Is it possible that he is not only being exploited by one actor, but multiple? Has this whole thing blown up so far out of proportion, due to desperation and lack of preparation by one or more actors, that some of the involved entities (read: people, companies, groups, etc… not just individuals for “entities” or “actors”) be playing both (or more) sides, in an attempt to smooth the situation and keep this from unnecessarily blowing up any further than it has?

Back to the title, to clear up any further misconceptions. We don’t think that Craig is some secret agent, at least not in that sense. Judging by his actions and all facts which are publicly available on him, he clearly might think he is something similar. We like to be funny, and this was an easy joke. r/btc, don’t go too nuts.

Given the bizarre events and stature of the actors who have put much at stake in this game, it’s hard to believe that this is just a simple tax scam by Wright or (based on his personality and past) a megalomaniacal and extremely short sighted con. The roots of this complex and apparently (for at least one of the parties involved, but as it appears, not all)  not well thought out deception dates back to early 2011, which was another important time in bitcoin history.

The story will continue, and of course we will relay events as they unfold. We hope that the above information is enough to get you started in unraveling the Satoshi Wright mystery.

 

The Actual Current State of Bitcoin

MortalKombatFatality

We have stated since inception, our purpose is to promote positive energy, and critical thinking within the Bitcoin community. As evidenced by our previous work, the community has been positively receptive and have changed their unbearably passive attitude to be more critical in analyzing the many moving parts of the ecosystem. Although we have taken a much needed, but personally acrimonious break from our contributions, we have been following intimately as the events surrounding the block size debate, R3/Hearn/Gavin drama and Craig Wright the Satoshi imposter have unfolded.

Much to our pleasure, the community has become more aware, skeptical when necessary and objective overall in their views of the events surrounding the attempted XT hijacking, spam attacks, absolutely atrocious social engineering ventures and other perceptively nefarious behavior. Unfortunately, for the opposition, the internet is a very powerful tool, and a few seconds with your preferred search engine will yield surprising results. Our task is to outline relevant items/events and provide timelines and evidence (always supported with sources). The community is left to piece the rest together, which to our satisfaction, they have done at an exceedingly brisk pace. Whether it’s a community member contributing a blog post, info graph, meme or slightly off color but educational comment; every attack on bitcoin in the last six months has been successfully deflected by the increasingly vigilant community. Hats off to you, keep up the great work.

The close of 2015, and onset of 2016, left the community at large pondering some exceedingly questionable events. For the sake of brevity, we won’t outline all of them here, only the most relevant. As always, we recommend using a search engine of your choice to independently educate yourself on the details surrounding each independent event, as there are various news sources (aka: slants/views) reporting on them.

Please remember to keep in mind, that throughout this time period, various attempted social engineering attacks took place within the community. Many of these attempts have been exposed or theoretically discussed via Reddit and other sources. Use your favorite search tool to further educate yourself on this topic as well.

The following list is not inclusive of all events which took place within the span of time denoted, but events which we consider to be important to make note of:

August 2015 –

September 2015 –

November 2015 –

December 2015 –

January 2016 –

February 2016 –

March 2016 –

April 2016 –

May 2016 –

  • Further debunking continues

And.. now we’re here, right now, at this point in time. Left thinking: What the fuck is going on?

There are conspiracy theories (and sometimes facts) which are most often disclosed of in an unintelligent fashion via various internet outlets. Although thought provoking many times, these pieces of information are often misinformed, or hyperbolic in nature to support a certain viewpoint. As we always state, the internet is your friend, and a few key words typed into your favorite search tool will yield much better (and factual) results than a bunch of financially and emotionally invested entities who’s true identity and intention are cloaked via the interwebs.

It would be hypocritical of us to say this without stating (again) our viewpoint and intentions: To entice the community to think critically through the “issues” currently facing bitcoin, and form their own opinion based around their findings.

From JP Morgan’s bailout of the US Treasury (yes, it’s on their website), to The Marshall Plan (yes, from the same outlet which promotes Craig as Satoshi), to The Bretton Woods System and even High Frequency Trading (and various other examples), financial history is littered with attempts to co-opt control ,or gain an edge over others. Due to the inherent underlying nature of the existing financial system, there is no accountability, in many cases no public record or oversight and new flaws which we see exploited almost on a daily basis now.

At the most basic level, what is the difference between QE and removing the coin cap of a specific cryptocurrency in the future? Would the worlds largest mining pools for that crypto be any different than today’s TBTF institutions? Maybe transactions weren’t fee based, blocks got too big and the miners couldn’t support their operations due to a lack of competitive fees. In this future world, the theoretical blockchain has been established as the backbone of the global financial system. It’s efficiency has been recognized in almost every facet of our daily lives, and like the internet today, the world would come to a standstill if miners had to shut down operation. The only solution? BE: Bit Easing.

By design, bitcoin eliminates these flaws, removes the need for a trusted third party and enables a plethora of additional opportunities which are beyond the scope of this piece. The ONLY way to co-opt, or gain any sort of edge, is to hijack the code itself. We sit here every day talking about Sajcandles, discussing what’s critical in the next two weeks and coming to the satirical conclusion that Satoshi is actually an alien. But, does anyone stop and think about what’s going on behind the scenes? If we’re actually fucking around every day, in and out, with the next global reserve asset, why would this time be any different?

To be clear and fair, this isn’t just applicable to any parties those mentioned in this piece. The logical assumption must be made that any entity, could and would attempt any type of nefarious action against bitcoin at any time. This whole thing may be the result of a 16 year old troll (yeah, ok) or a complex Craig Wright actually is Satoshi scheme for some yet to be disclosed purpose (shitco.in headquarters is running out of canned unicorn farts, so if anyone has a source please e-mail us), so be sure to have an open mind when assessing the situation. Do the same with any future squabble, which may seem out of place.

Cleverly placed near the end of yesterday’s Economist article, anyone who doesn’t need a tl;dr saw the following:

 

It pays, too, to bear in mind that Mr Wright’s outing will most likely be of benefit to those in the current bitcoin civil war who want to expand the block size quickly, whose number include Mr Matonis and Mr Andresen. Mr Wright says that if he could reinvent bitcoin, he would program in a steady increase of the block size. He also intends to publish mathematical proof that there is no trade-off between the mass adoption of the cryptocurrency and its remaining decentralised. Simulations on his supercomputer show, he says, that blocks could theoretically be as large as 340 gigabytes in a specialised bitcoin network shared by banks and large companies. And he is already trying to undermine the credibility of the faction that wants bitcoin to grow only slowly. In an article in the press kit accompanying the publication of his blog post, he takes aim at Gregory Maxwell, one of the leading bitcoin developers, who first claimed that the cryptographic keys in Mr Wright’s leaked documents were backdated. “Even experts have agendas,” he writes, “and the only means to ensure that trust is valid is to hold experts to a greater level of scrutiny.”
This heightened scrutiny will now fall on Mr Wright as well. Whether people will believe he is Mr Nakamoto will largely depend on what he does next. He does not appear to have a clear idea of what his role should be. After proving his identity, he says, he wants to disappear again—“just like Satoshi”. But he also seems to have big plans to influence the evolution of bitcoin. He is poised to release several pieces of research on how to improve the inner workings of the bitcoin system. Should these contributions be as brilliant as Mr Nakamoto’s white paper, even sceptics may come to accept that Mr Wright is indeed the inventor of bitcoin.

 

Which we will leave for the reader to interpret in whichever way they would like.

A clever Redditor found a prelaunch cached version of Wright’s blog:

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Who are the “we” that he constantly refers to? (and wouldn’t his language be slightly better given his academic credentials)?

 

In conclusion: Any and all types of attack on bitcoin should be considered the norm at any time. If this isn’t your way of thinking, change it. While certain entities in the space have put forward positive scale-ability solution proposals, others have devoted time and resources to intentionally mislead and discredit the community at large, while seemingly pushing a larger agenda. A realistic view of the future may be that LN and Plutus are players in the space, with BitGo Instant, Coinbase and Circle the way that major credit card processors or ACH/SEPA (even something like Chase QuickPay) compete today for their stake in the transaction processing realm. Maybe all of these will become obsolete, and a newer, yet to be invented solution will take hold. Of course the block size debate is more complex and political than this, but even the grossly misinformed msm should be able to pick up on some non-drama concepts in the bitcoin space. Any bitcoiner knows that still, today, there is absolutely no problem sending a transaction through the network with a proper fee. This hasn’t changed in years, and with the exception of bullshit attacks, probably won’t change for months, or years to come.

Bringing us back to the title: The Actual Current State of Bitcoin

Bitcoin, at it’s core, hasn’t changed. Hearn gave us some cheap coins, and Wright probably 20x shorted $470 and is pissed he didn’t get a Hearn dump. A few people made fools of themselves, and seemingly, without provocation, confirmed at least some conspiracy theories are actually conspiracy fact. Whether this is an act of desperation or stupidity, we may never know. But, as a community, we can thank certain entities for exposing themselves and their true intentions. The community is a cleaner, and much more positive place without them. In the end, does it matter who Satoshi is? Has he done anything to harm or co-opt bitcoin since his departure? Why would Satoshi Wright go to the “media” instead of the community, as Satoshi Nakamoto had always done?

The ironic part in all of this is that the coercion and attacks have only brought the community closer together. With the exception of a few deflectors, the more macro-minded in the community see the larger picture and are moving forward in a productive manner to continue bitcoin propagation globally. We don’t expect this to be the end of bitcoin drama, by any means. Any future attempts at co-opting the protocol will likely be more sophisticated, given the epic fail nature of what appears to be an attack, based on this recent, widely publicized series of events. We do thank everyone though for the increasing media exposure bitcoin has received as a result. If Satoshi ever decides to unveil himself/herself/themselves, it won’t be through a coordinated media dis-information blitz, and months of hype surrounding a complete non-story (oah wait, duh.. that’s their standard protocol). In the meantime, doesn’t it make sense to focus on the more important issues?

Or, as Andreas closed his Reddit post on the topic – Back to work.

 

Just a few side notes to close things out:

  • What’s the deal with the multi exchange and charting site DDOS in the days leading up the the pathetic Wright dump?
  • Can OK Coin please verify their cold storage. We’re still waiting.
  • Whoever the fuck is trying to send spam e-mails through our server, we get it.. you’re pissed. Now give it up.
  • What ever happened to the missing 300k SR coins?
  • Does anyone remember this?

 

We’ll Be Back Soon

Missed us yet? It’s been a while, but we have been watching, reading and listening. The community has been doing an exceptional job working together, and bitcoin still hasn’t changed at it’s core.

After a few (admittedly, too many) beers, some relaxation and a bit of sunshine, we’re excited to enjoy 2016 with you.

Be back soon.

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China Unbans Bitcoin

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It’s been fun watching rampant speculation and inaccurate, lazy reporting regarding the most recent rise in bitcoin price. Conspiracy theories are running wild, and tin foil hat traders are petrified that they will get burned again when the “ponzi” collapses. Guess what guys? Unlike last time, that shit probably ain’t gonna happen anytime soon.

We have no idea who the fuck started the MMM ponzi meme, but good job. You have the entire community up in arms with some dubious information. For starters, this entire thing was based off of a few tweets from BTC China, starting with:

Days later, the CoinTelegraph article we linked to earlier was published. We are not suggesting that BTCC is lying in anyway, or that their customers have not received dubious investment solicitations involving bitcoin… but how on earth is a “ponzi” (aka MMM) that has been around since April 2012 sending us somewhat parabolic right now? Common sense would say, it isn’t. Besides that, bitcoin isn’t actually part of the “ponzi”. Those who have done their research know that it is just a way to fund your “ponzi” account. You can also link to your bank account, which is much more convenient for most normies.

Traders have been intrigued by the spread between western exchanges and China. There has been unfounded speculation that this could be because Chinese are moving money out of the country and cashing out on western exchanges. While this is most likely true, is this really the main catalyst for the rapid price increase? Doubtful.

Logic tells us that we must investigate this a bit further, to find the real reason the bulls have been on parade.

Let’s see… Could it be that China UNBANNED bitcoin? Fucking finally?

Umm.. YEAH!

From the Cyberspace Administration of China:

Screen Shot 2015-10-19 at 6.58.30 PM

Full text:

US Commodity Futures Trading Commission (CFTC) has for the first time the Bitcoin virtual currency and other commodities defined, announced that it would Bitcoin futures and options trading supervision. Shortly thereafter, on suspicion of money laundering use Bitcoin trading platform, CFTC called on Tel Aviv to a Bitcoin trading platform swaps were punished.

Coincidentally, the United States State bank regulators Joint Committee recently recommended that the third-party electronic money transfer transactions or conduct of the company, included in the scope of duties of state banking regulators. Although still at the proposal stage, but it will promote economic regulation of electronic money or active processes.

Changes in the regulatory level of attitudes, for stormy markets Bitcoin is twofold impact. On the one hand, a variety of use bitcoin be illegal speculation and speculative behavior of money-laundering, will gradually usher in tougher “long supervision.” In fact, compared with around Bitcoin transaction itself, the risk Bitcoin development of various types of derivatives and structured products based on greater, and this is the reason Bitcoin is classified as commodity management lies. On the other hand, in a regulated environment for development, Bitcoin is also possible to gradually get rid of “bad boy” image, the evolution of a stable to choose a modern financial portfolio.

The current has entered the “post Bitcoin era”, away from the ups and downs, Daxitaibei towards rational and norms Bitcoin into the mainstream of development. In fact, more innovative value bitcoin block chain behind reflect its (block chain) technology. This is a series of related data using cryptography block-linking method, each data block contains the information in the last 10 minutes all Bitcoin network transactions, used to verify the validity of the data block and generate its information. Block chain provides a decentralized try, for various industries including financial, including providing a way to re-establish an information verification, credit constructed. Recently more and more attention to the technology of traditional financial sector. For example, according to the European Banking Association (EBA) in the latest report, the block chain technology with lower costs, improve product supply and improve the speed potential.

Although some people think bitcoin block chain and its technology was not stable, but it can not ignore its revolutionary changes brought about pay for. Traced the Internet and new technology development has brought the expansion of distributed payment and settlement mechanism, which may push financial transactions distributed innovation. Even relatively “stable,” the Federal Reserve, in early 2015 also released a report, to create conditions for direct clearing between financial institutions facilitate public IP networks, because this is more likely to reduce costs.

In the “post Bitcoin era”, although many are not virtual currency is closer to real money property, but in the relatively stable development path, through to payment and settlement functions to explore the core of the currency, but it will help to explore the real Innovative electronic money. However, the pace of innovation behind have followed from the regulation. (Tao)

Let’s look at the date and time on this release:

October 13, 2015 09:35:18

Screen Shot 2015-10-19 at 7.01.23 PMAnd when did the China pump start?

Seems like it’s probably not a coincidence.

And to top it off, Harvard Business Review China hosted the 1st Global Blockchain Summit, in Shanghai, on October 15-16, 2015.

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About the summit (typos are theirs):

TCP/IP protocols led us to the age of free information transmittion, and the latest blockchain technology will lead us to the age of free information notorization. Blockchain, a critical milestone in information technology, will restructure the conventional ways of production and organization of the human society.

As the first professional blockchain technology institution in China, Wanxiang Blockchain Labs sincerely invites all interested parties to join our first global blockchain summit,. During the summit, we will discuss the applications and opportunities of blockchain technology in areas, such as Online Payment, Internet of Things (IOT), Securities Trading, and Digital Assets Management. We are expecting around 200 guests attending from various backgrounds, including banking, manufacturing, information technology and academia, etc.

More information can be found on 8btc, here.

In summary: Is this small bull run just a blip in this annoying as fuck 200-300 range? Based on the fact that it appears China has just officially unbanned bitcoin, probably not. After two long years, put on your mother fucking moonsuits. We’re about to head much higher!

Obviously we may have no idea what the fuck we’re talking about, and this shouldn’t be considered to be financial advice. We’re long. Are you?

Bitcoin’s Role During The Upcoming Financial Crisis

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Almost exactly seven years after the 2008 financial crisis, it appears as if the world’s current financial system is on the brink of outright collapse once again. If you are reading this blog, you probably aren’t oblivious to the recent fx volatility, emerging market bloodbath and constant dewm narrative now being pushed by the msm. With a possible fed rate hike (or maybe even QE4eva) looming in just a few hours from now, general tension and unease can be felt globally as investors struggle to position themselves for the coming weeks and months. A rate hike is likely to trigger a market collapse, while moar QE will pretty much give the fed and its funny money absolutely no credibility.

While most people’s retirement accounts and home value were rekt in 2008, there are some identifiable positives which came out of the crisis. Three we often contemplate are:

  1. Interest in financial education by the general public
  2. Zerohedge
  3. Bitcoin

One of the largest (possibly) unintended consequences of the crisis was the desire of the general public’s attempt to become more “financially savvy”, or at the very least learn why their net worth was more rekt than an OKC margin call cascade. Since the collapse of the dot-com bubble, high speed internet and smartphones have spread like wildfire and large amounts of information is readily available to anyone who seeks it. Sure, most folks nearing retirement age still can’t accurately tell you what QE is; but generally, more of the public and world at large began to educate themselves about the absolute mess that our current financial system has become.

A huge contributor to this education effort is Zerohedge (and other alt-media sites), which has proven itself to be more on point than the msm. Mom and dad probably don’t read ZH, but those who decided to dive down Alice’s rabbit hole are probably regular readers. While some articles are pure fluff, and others may contain inaccuracies, some of the most valuable information is often found in the snarky comments where these issues are debated and sorted out. A little Google-fu (can we change this to DuckDuckGo-fu now?) of your own, and you feel like – “A whole new world!”.

For those of us who are really out there (I guess), we stumbled upon (great app btw) bitcoin, which probably expanded that initial and once so vast rabbit hole into the Kingdom of Narnia. Many sleepless nights later and epiphanies later, it’s likely that your views of the world and finance have been turned upside down.

 

Why will bitcoin matter in the upcoming financial crisis?

Obviously, each community member has their own views on this topic. How though, can this information be conveyed to Mom and Dad at the most basic level? In essence, each of us hodlers is front running the crash, while newly enlightened and “financially savvy” Joe Public is still fucking around with inverse ETFs and volatility options trying to time the next crash and “retire”. Sorry to “bust your bubble”, but good luck retiring with that stack of worthless fiat if you can even cash out once the fire exits are locked. If you are the type of person who quietly chuckles to yourself at cocktail parties while listening to “savvy” individuals talk about the market while you are compulsively checking ZeroBlock, you probably already know this though.

Americans have long enjoyed the privilege of having the world’s reserve currency as their national currency. Because of this, they have never faced or had to live through a currency crisis, as many nations around the world have in recent decades. Citizens of some other countries whose currencies are pegged to the dollar have thus been transferred this privilege as well, and are subsequently also living in oblivion. On the other hand, some countries such as Panama and Ecuador go as far as using a process known as dollarization, making the USD their official national currency. Most individuals fail to consider that many (but decreasing in number) securities and financial instruments are USD denominated, meaning that traders/investors need to hold USD to buy them and are given USD when they are sold. As the USD faces ever increasing competition from both other fiat currencies and digital currencies (cryptocurrencies included), where are these parked USD going to move? Obviously, things are much more complicated than this and many other factors come into play; but when the shit starts to hit the fan, where will all this money move?

Because of the status of their national currency as the worlds reserve currency, Americans do not fundamentally understand inflation the way most emerging nations do. To most Americans, inflation is only a measure of how much more their beer and hamburger cost y/y July 4th BBQ. They do not understand how the value of their currency will behave vs superior forms of money, especially when fiat currency is overtaken by a superior form of money in a so called “speculative attack”. More on this speculative attack in a bit, but for now, let’s introduce readers to Gresham’s Law:

Gresham’s law is an economic principle that states: “When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”[1] It is commonly stated as: “Bad money drives out good”.

This law applies specifically when there are two forms of commodity money in circulation which are required by legal-tender laws to be accepted as having similar face values for economic transactions. The artificially overvalued money tends to drive an artificially undervalued money out of circulation[2] and is a consequence of price control.

Gresham’s law states that any circulating currency consisting of both “good” and “bad” money (both forms required to be accepted at equal value under legal tender law) quickly becomes dominated by the “bad” money. (For a formal model see Bernholz and Gersbach 1992). This is because people spending money will hand over the “bad” coins rather than the “good” ones, keeping the “good” ones for themselves. Legal tender laws act as a form of price control. In such a case, the artificially overvalued money is preferred in exchange, because people prefer to save rather than exchange the artificially demoted one (which they actually value higher).

Gresham’s Law was developed during a time when physical coinage was most prevalent. With the advent of digital currencies though, what if this law was extrapolated to include the digital space? Could sound money such as bitcoin be viewed as “good money”, while freely printed fiat paper promises start to become recognized as “bad money”? Believe it or not, for many of us, this has already happened.

The first part of understanding how bitcoin will fit into this mess is understanding why the upcoming financial crisis is going to be different than the rest. Sure, we have the 630+ trillion derivatives bubble, frothy stocks and real estate, COMEX registered gold at a record low and many other hazards to navigate, but what many normies fail to consider is the stability of the actual currencies that everything in the world that they know is priced in. With headlines like Fed Enters Rate Hike Meeting With First Headline Deflation Since January being pumped by the usual msm culprits, we can completely understand how Mom and Dad are left scratching their heads, not understanding what the fuck is going on. A few weeks ago we’re worried about inflation, now we’re worried about deflation? After enough of this, the only inflating you want to know about is that of your stomach, with alcohol. Maybe that’s the point actually. To confuse the shit out of Joe Public so that he would rather not pay attention because it makes no sense.

Regardless of inflation or deflation, we believe one important statistic to look at is the increase in money supply over time is through the M1 and M2 Money Stock Measures, presented by the St. Louis Fed.

First we will take a look at M1

What is M1 a measure of? From Investopedia:

A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency. It does not contain “near money” or “near, near money” as M2 and M3 do.

Screen Shot 2015-09-17 at 1.20.29 AMAs is clearly illustrated, M1 is currently 3,041.4 Billion USD. Shaded areas represent US recessions. See that hockey stick looking thing on the right hand side? The M1 measure has nearly doubled since the 2008 financial crisis. Doubled, in 7 years.

For a more detailed look into money supply, let’s take a look at M2.

What is M2? From Investopedia:

A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money” in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.

Screen Shot 2015-09-17 at 1.20.46 AMM2 hasn’t hockey sticked quite like M1 has, but the pace has clearly picked up in recent years. The take away from looking at M2 is noticing that this figure includes savings deposits and money market mutual funds. That’s over 9,000 Billion USD, of “near money” that may need to seek shelter somewhere, at some point soon.

The argument can be made that an increase in money supply does not equal inflation in the price of goods and services. While this can be true in the short term, this is not the point that we are attempting to illustrate. As we will discuss later, rapid inflation is likely to come only when fiat currencies undergo a speculative attack by a superior form of money, at a later date. All that readers should take away from the figures above is the dramatic increase in M1 over the last seven years, and the large amount of near money that comprises M2. Specifically, keep in mind that this near money includes savings and money market accounts.

During times of financial crises, money tends to seek shelter in safe haven investments. The history of crises will show us that these safe havens often include precious metals, fiat denominated bonds, physical cash (fiat), “cash” money market accounts, put options priced in fiat and a variety of other “vanilla” investments. Joe “Savvy” (after 2008) is likely to take a more aggressive stance, positioning himself short, going long the VIX and using insane leverage against central banks virtually unlimited supply of fiat. The common thread tying most safe haven investments together is that unless they are something physical, most are worthless fiat paper promises or a bunch of fiat 1s and 0s inside a computer. Most people fail to realize that in an ever evolving world, their fiat will one day be worthless, and that day is probably sooner than they think.

The past shows us that “cash” is often considered by most to be a safe haven during economic downturns. Years of investing experience have shown the normies that if they time the cycles right and BTFD, fiat riches are to be made. Again, this is an extreme over simplification of markets, but the goal is to get Mom and Dad to understand why this time actually is different. The easiest route for most normal investors or traders to take is to buy low, sell high. Rinse, repeat. This same behavior can be exhibited in retirement accounts, as folks attempt to prepare for possible economic downturn. Have you ever looked at what “cash” in your trading or retirement account actually is though? Chances are, you are actually investing that “cash” into a money market account with your broker. Again, we will get into this in more detail later.

After every boom, comes a bust, and it’s only a matter of time until the US stock markets are in full meltdown mode again. We aren’t in the business of making predictions of when this will happen, but at some point everyone will rush for the exits at once. Given the msm’s recent coverage, we’re sure it will be blamed on HFT, hacking or something else of the sort.

What makes this time different is the fact that society has been given an alternate safe haven in which to safely store their wealth and transact. With many advantages over both fiat currency and precious metals, the performance of cryptocurrencies (bitcoin is the largest) has not yet been tested in the face of financial collapse or economic downturn. Bitcoin was conveniently released during the depths of the last crisis, quietly suggesting “problems solved”. For the first time since it’s invention, fiat has a formidable opponent.

From the Chicago University Law School paper that we refer to later in this post:

Screen Shot 2015-09-17 at 11.26.33 AMFor a bit more detail, view the video below:

 

If bitcoin hasn’t proven it’s performance in the face of a financial crisis, what do we think it’s role will be?

As events in Cyprus and Greece have shown us, capital controls are no joke and often appear simultaneously as a crisis occurs. In the real world, life and business must go on, and forward thinking individuals are likely to use bitcoin as a means of conducting exchange in an environment that may not permit so otherwise. Our friends at BitMEX recently outlined the role that bitcoin could play for the Chinese, as the government actually begins enforcing capital controls.

As we saw in Greece, domestic transfers were not impacted by capital controls, and luckily Circle and Coinbase offer a great ACH service to US based customers if they should experience such an event. Similar exchanges exist in most countries globally. The prevalence of trusted exchanges in most economies provides a quick and easy on/off ramp for those wishing to convert bitcoin into their national fiat trash cash. If international capital controls are implemented in the current financial system, individuals could simply purchase bitcoin on their local exchange to send abroad, hassle free. The receiver could convert that bitcoin into their local currency if they wish, or leave it in their digital wallet for later use.

At the very least, should the speculative attack against fiat currencies be mitigated, bitcoin will provide a seamless method of exchange for international business to be conducted in the face of capital controls. Who wants to mail precious metals or cash to buy something from a vendor when they can scan a qr code from their smartphone?

The role of bitcoin during a financial crisis is not limited to just circumventing capital controls though. This is just one example which can be illustrated by recent news events that Joe Public can relate to. In our view, the biggest advantage of bitcoin over fiat which can be realized by the ordinary person is going to be it’s use as sound money/a store of value over the longer term. In turn, leading to the behavior recognized by Gresham’s Law.

 

What is this speculative attack that we keep speaking of?

The scenario of a speculative attack against fiat currencies, and the potential relevance of this phenomenon to the IMF is outlined in this University of Chicago Law School paper:

Screen Shot 2015-09-17 at 11.16.46 AMScreen Shot 2015-09-17 at 11.22.21 AM

Now it might be easier for Mom, Dad and Joe Public to put the pieces together – Gresham’s Law, Bitcoin and a speculative attack against fiat currencies? Although anything can spark inflation, the most likely scenario is that a sudden distrust in fiat money will send a sudden wave of investors seeking shelter in safer assets. In such a scenario, we would expect the “bad money” to begin to hit the streets, as the “good money” (including bitcoin) is hoarded. This sudden increase in the supply of “bad money” is the most likely driver which will cause inflation, as the masses realize they have a choice. As we have seen time and time again, individuals without access to or knowledge of precious metals and bitcoin directly, will likely seek physical assets, in hopes that they will retain more value than their fiat or can be traded for sound money/currency at a later time.

Although covered in the video above, let’s revisit the three functions of currency, and how they relate to bitcoin.

From the same Chicago Law paper:

 

Screen Shot 2015-09-17 at 11.47.24 AMScreen Shot 2015-09-17 at 11.49.48 AMScreen Shot 2015-09-17 at 11.50.01 AMScreen Shot 2015-09-17 at 11.50.22 AMBringing this back to the M1 figure illustrated above, we ask the question. When faith is lost in fiat currency, where is all of that money going to go? We see bitcoin as being a prime candidate.

As for M2 and the money market accounts. Many “savvy” individuals failed to take notice when the SEC implemented new money market rules a few months ago. MarketWatch outlines some of the changes:

The SEC regulations aim to prevent an investor exodus from money-market funds like the one that happened during the 2008 financial crisis, when the federal government had to step in with financial backing for the industry.

One requirement under the new rules is that the shares of money-market funds that cater to institutional investors and invest in corporate or municipal debt must float in value, like the shares of most other mutual funds. That’s a change from the stable $1-a-share value traditionally maintained by all money-market funds. The idea is that investors will be aware of changes in asset values as they occur and be able to adjust their holdings accordingly, rather than stampeding out of funds when they suddenly become aware that their shares aren’t worth $1.

For a bit more on the subject, feel free to read this paper by the NY Fed. With investors trapped in money market funds which are declining in value, where can we see some of that money going? Our belief is that some of it will move into bitcoin by gaining exposure via any proxy available to investors at the time: GBTC, BTCS, ARKW, etc. Savings are also included in the M2 figure. It is likely that some of those savings will move into bitcoin as well, via the current ACH (or similar domestic) system and Coinbase/Circle (or other competitors globally).

In summary: Financial crises are often triggered by “black swan” events, that few see coming. As much as everyone wants to time the crash, this is not a smart or sustainable investment strategy. Taking a deeper look into post-2008 events, and virtually unlimited money printing by global central banks, it appears as if this time really is different. What makes it different though, is the fact that investors and the general public have a new safe haven asset class where they can retreat (bitcoin). This asset class may be unconventional to some, but to others it is the next logical step in the journey of money through time. The world is about to witness the greatest wealth transfer in history, which side will you be on?

 

Whether or not Janet decides to raise rates today is left to be seen. If she does though, we are left wondering. Could the real reason be to stave off a speculative attack?

From the Chicago Law paper:

Screen Shot 2015-09-17 at 11.54.58 AM Screen Shot 2015-09-17 at 11.55.31 AM Screen Shot 2015-09-17 at 11.55.49 AM

Is ChangeTip Changing Anything Anymore?

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For years, there has been non-stop talk in the community about what “bitcoin’s killer app” will be, but what most fail to realize is that the bitcoin protocol itself is the “killer app”. Transacting online has been cumbersome and risky with legacy payment methods (cc fraud, hackings, etc), and the internet was clearly designed with a payment layer in mind. What is that whole 402 payment required thing for? In essence, the “killer app” is already here. What is lacking though, are many practical uses for bitcoin which are easily within reach for those of us who aren’t hoarders/traders. Yes, anyone can easily download Mycelium and send their friend half of the dinner bill, but those p2p (practical uses) are between current bitcoiners, which offer no new exposure for the technology.

So how do we, as a community, show the world that bitcoin isn’t just for drug dealers, money launderers, the t word and now Wall Street? How do we show the every day person that using bitcoin is not just fun, safe and easy, but also can add value to their everyday lives? As a community, it’s our job to take up this challenge, and creatively bring bitcoin to the masses.

Enter – ChangeTip

When they first entered the bitcoin space as ChangeCoin we were convinced that their innovative service was going to help fill this void. Not only had they developed a genius way to seamlessly transmit micropayments via social media, but the community support behind their effort was incredible. From Tipping Tuesday (within our community) to the semi mainstream acceptance of bitcoins superiority over PayPal via Millionaire Makers, ChangeTip was on fire. In December 2014, with an investment of $3.5 million from Pantera Capital, it seemed like the ChangeTip train was unstoppable.

Fast forward a few months later, and it seems as if the train has slowed considerably, and is in much need of some upgrades. While they are the current market leader, lack of innovation could easily void ChangeTips first mover advantage, as others rush to fill the unmet needs of the world at large.

But how did we get here? Part of the problem may be two situations which can be singled out as having received much negative media attention:

  1. ChangeTip’s solubility was questioned, to which they promptly responded. We commend the community for doing their due diligence, but as usual, this FUD just created lots of Reddit entertainment.
  2. Privacy issues were raised about connecting social media accounts with bitcoin addresses. The linked article provides additional insight into some criticisms of ChangeTip. Additional information can be found in this Bitcoin Magazine article.

Some quotes from the above articles:

The first one is the linkage between our social network identities and our Bitcoin addresses. Bitcoin is anonymous but traceable, and it would be invaluable to annotate different wallet addresses with twitter/reddit/facebook/google account names. Well, with your tipping help, they can. And that’s worth something. Before you claim that you’ll create new addresses and tumble your coins or whatever, we all know how lazy people are from the way they install flappy bird apps on their phone with enough privileges to launch nukes. Real people will be readily identifiable.

Tips contain fingerprints, and someone is actively collecting them.

Second, they have the linkage between multiple social networks. Unless you exercise an enormous amount of online hygiene and maintain a separate changetip account per social channel, ChangeTip can connect your identities across services. For instance, they would know that your gag account on reddit, the one whose username includes a garden vegetable and an anatomical reference, is linked to your Google account. Or the Discus account you use to harass academics who found flaws in Bitcoin is connected to your real identity as, say, a failed academic at, say, the National University of Singapore.

Of course, even assuming that ChangeTip can remain solvent, and stick to its current business plan, and maintain the safety of its accounts, and provide its privacy guarantees as promised, there’s still the possibility that it will get hacked and have its business data leaked. They have taken measures to protect their holdings by partitioning out a cold wallet, but they need to keep all of their valuable business data online for their own operation. This data stores precious information on which accounts are associated with each other, and it needs to be online, where it’s vulnerable.

[from Bitcoin Magazine]

Some users have raised concerns about the amount of personal and social data that ChangeTip is collecting. For example, ChangeTip collects information about every social network where its users send tips. This means that ChangeTip could potentially be able to link a private Facebook profile to a Reddit account or a withdrawal bitcoin address for a user.

 

In regards to ChangeTip being insolvent. This turned out to clearly just be FUD. In our opinion, ChangeTip gave a better response to this accusation than the “worlds leading bitcoin exchange” (oah wait, they haven’t yet). The privacy concerns though, while they have been transparent (here and here), are real. Anyone who has an understanding of social media, big data, etc, knows that not much information is needed in order for privacy to be compromised. Are we accusing ChangeTip of any such nefarious behavior? No, not at all. The truth is, customers using any service should assume that they have no privacy whatsoever, especially over the internet.

So, why do we think that the ChangeTip train has stalled? Clearly two small FUD event’s couldn’t have done that much damage. Our opinion – lack of new features which will engage the community, and (especially) those outside of the community.

The introduction of ChangeTip itself was a tremendous success, and clearly showed that their concept worked and was viral. Adding a few new platforms which people can tip on with a small personalized message though? Not the type of innovation the community needs in order for this to go mainstream. Ok, we’ll credit them with some of their other ideas, like paper airplanes too. But outside of being fun, how exactly is this going to help ChangeTip spread as virally as when they first launched?  Especially after the shitstorm of FUD ChangeTip has endured, the community as a whole needs to see a revitalization of that energy that appeared in the second half of 2014. Truth be told, their April Fools joke is probably the most creative and innovative thing we have seen since their launch. (video below)

Why are we writing this piece? What can be done?

Within a day or two of the news breaking that ChangeTip was receiving VC money, we e-mailed them inquiring about possible opportunities. To us, the power of the platform was obvious and immense. ChangeTip has the possibility to change how society as a whole uses, and interacts with the internet. To our pleasure, we received a response rather quickly, and begun a series of e-mails (and even had an hour long Skype call) where we shared some of our ideas.

Months later, we have seen a few small advances, but mostly just ChangeTip dying.

Take for instance their integration with Twitch.

ChangeTip made it extremely easy to start accepting BTC tips from Twitch by making it literally as easy as clicking a button. Once logged into ChangeTip—by using any social media that the platform supports, including Twitch—it’s as easy as hitting “ACCEPT” on a page that asks if you want to give ChangeTip permission to access your stream.

The ChangeTip platform then sends a ChangeTip tip bot to watch the chat and viola: integration complete.

From then on any watcher can use a modified ChangeTip tipping format of “!ChangeTip give $1 to @Kyt” in the chat and it will automatically fill the ChangeTip address of the recipient. On Twitch the bang (or “!”) is used often to begin a command to a bot.

This seems remarkably similar to their integration with other platforms. With the amount of Facebook viruses people have had to deal with when they thought they were getting free headphones, does anyone outside of our community really want to deal with this shit? This is not being innovative, and is not helping to bring ChangeTip and bitcoin to the masses. With the negative media spin put on bitcoin, most normies probably scroll past mewn screaming idiots tipping on Twitter (usually to popular media influencers) thinking – “there’s that bitcoin scam thing again”.

We won’t argue that some of this tipping exposure outside of our community is positive, but for someone who isn’t a bitcoiner, we doubt it means much.

Some of our thoughts/ideas that were outlined to ChangeTip (summarized for brevity and privacy):

In order for “tipping” to go mainstream, users need to be able to realize the value of their tip by immediately receiving something tangible that is of value to them. Sure, there will always be people sending bits for funny comments, but Joe Public doesn’t care about a “coffee” that he received when all he actually can do is stare at some numbers on a website. Your average Twitter user is the type of person who brings their monitor into the computer repair shop when it doesn’t work. They certainly aren’t going to take the time to learn about bitcoin/ChangeTip, unless they receive some sort of immediate gratification or “tangible reward” in their eyes. Fortunately, ChangeTip is in the prime position to capitalize on these opportunities.

Obvious integration ideas (to us at least):

  • News Site Paywalls – How many times does someone post a link on Reddit that is paywalled? Yeah, someone copies and pastes the content generally, or you can Google the title in most cases, but this isn’t the case for every article, that might appear in every subreddit. Wouldn’t it be great to be able to say – “/u/changetip next 10 views are on me”. Or to send an article view to an individual via a ChangeTip queue, and have a personal link messaged to them?
  • Video Site Paywalls – Same concept as above, but this could be integrated into both premium sites and free streaming sites. On free sites, users can use their ChangeTip balance to skip all ads, or on Premium sites, users could use their balance to pay in order to view the content. Taking this a step further, wouldn’t it be great for a video creator (or anyone) to post their work to Reddit and say something along the lines of “/u/changetip the first 10 minutes are free for the first 500 views”.
  • Streamium Integration – Streamium is already bitcoin only! Any combination of the above ideas into Streamium could easily launch ChangeTip into the stratosphere, and bring back that 2014 rush. Although this is likely to attract current bitcoiners only at first, Streamium is easy enough to use (and everyone loves streaming video) that the sheep will flock to it with enough great content.
  • Integration With Coinstar – ChangeTip is trying to promote purchasing bitcoin through their site, but why? There are already enough credible players in the space (Circle, Coinbase, etc), and isn’t ChangeTip (from Wikipedia) – “a micropayment platform built by ChangeCoin, Inc., an American corporation based in San Francisco, California, which specializes in online micropayments using the digital currency bitcoin.”  Let’s say ChangeTip really wants their users to have the ability to purchase bitcoin through them. Why not integrate with Coinstar? There is no competition in this space at all, and it would be a great marketing gimmick, where users can “change their change”.
  • Integration with paid music providers – Same ideas as above, but for music.

 

Any of the first three ideas above would allow ChangeTip users the ability to immediately recognize the value of their tip. This value can be easily recognized by anyone who is semi-computer proficient, which will spur their interest in the technology. Because payment would be sent from ChangeTip directly to the paywall provider, users who aren’t current ChangeTip customers won’t even have to sign up for the service in a “/u/changetip the next 10 views are on me for free”. Yet, they will immediately be able to recognize the value of the service that they just used. Some cute wording from the ChangeTip bot would obviously advertise what is happening, and this would likely spur additional interest from non-bitcoiners. Who doesn’t like free shit? Payments could be sent in bulk from ChangeTip to each paywall on a set interval, which could be tracked through the blockchain and verified by all parties. ChangeTip could secure a solid revenue stream, something many startups badly need, through taking a fraction of each micropayment as the middle man (not possible in today’s world).

 

ChangeTip’s recent integration with Gyft was the motivating factor to finally finish this blog post. Maybe they tried to implement some of our ideas, maybe this was something they had on the table for a year. Who knows, but either way it’s an epic fail. Seriously? From the Coindesk article:

Until now, ChangeTip users could top up their accounts via Coinbase, bitcoin or credit/debit card, however they could only cash out in bitcoin. Following the firm’s announcement yesterday evening, they now have the option to redeem gift cards from Starbucks, iTunes, Xbox and Amazon. They range from $1 all the way up to $2,000.

This is awesome, now I can take my magic internet money and go buy a gift card that I can send to my phone and then use that to buy something in a store (or from an online vendor)? How many 100 bit tips do you have to collect in order to buy a coffee at Starbucks? And how is bitcoin acceptance doing at Gyft? It used to make up 90% of their sales, but now makes up 10%. Seriously though, you probably couldn’t buy a Whole Foods gift card even if you were present for every Tipping Tuesday. Sure, ChangeTip gives out larger tips to promote their company, but how many people get (or accept) those?

Gift cards through Gyft do not give users immediate gratification. They add complicated steps for new bitcoiners, and anyone who is already using bitcoin to buy cards from Gyft is going to use their current method, not ChangeTip.

 

Where does this leave us?

It is evident that ChangeTip is focusing on attempting to draw developers to their API. It is also evident, that no one is building anything worthwhile or else it would have hit the community already with the impact of the original ChangeCoin. ChangeTip has already proven that their concept works, but there have been no attempts to integrate the technology in a way that individuals outside of the bitcoin community can use to recognize value. If bitcoin is going to be recognized as useful and perceived as valuable by the everyday person, they need to be able to interact with it in a way that actually solves a problem in their life (other than being a highly volatile speculative instrument). ChangeTip has been poised to fill this void, but it seems like they just want to put the “tip” in.

Ps, along that line of thinking: Did anyone actually approve this image for publishing or was it just sent out? Anyone else see something dirty?

eDyFlJMLkb5ZGd0ieNyvHMLnbZpB9Tm9SFvn5TCjm-A

The Bitcoin XT Trojan

Trojan_Horse

With the block size debate raging for weeks now, bitcoin has proven (again) that it is has grown up and is now subject to the unfortunate realities of the world, and politics. While we have been following the debate closely, we felt that it was not worthy of reporting on because of the childish behavior, remarks and slander which are completely unproductive when you are trying (as a community) to build the next global financial system. The sock puppets, censorship and social engineering fuckery have gotten way out of hand, and the community is starting to stray from the cohesion which it has maintained for so many years. While we don’t expect this to be the end of bitcoin, by any means, it it isn’t going anywhere fast until the current issues are sorted out and consensus on the block size is reached.

It is clear that there are certain agendas at play, and our goal is to help readers see through the bull shit to gain a clearer picture of what is actually going on. As we have stated multiple times, we are bitcoin believers, and our goal is to educate the community. The traditional bitcoin news sources are highly censored, controlled opposition or worse, and we strive to provide an oasis away from that garbage, for the intellectually inclined.

Our belief has long been that bitcoin’s only potential Achilles Heel (but not fatal flaw) lies with the politics of the developers. While it is an open source project, and anyone can view or modify the code, the developers are the “controllers” of bitcoin in a sense, and therefore are often viewed similar to political figures. Just like the conversations you unfortunately have to hear when walking down the street about Hillary or Jeb, Reddit is littered with posts of love, hate, passion and disdain for all of the core devs. It’s literally a minefield on some days (well, until censorship). In the “real world”, it has been shown time and time again that by influencing those in control, certain agendas can be carried out, often with little or no push back. Fortunately for bitcoin though, the open source nature of the project allows anyone with a computer and internet to audit the code. In the end, the “controllers” are only perceived to be in control, while the actual control lies with each and every one of us, the community.

A series of abnormal events have occurred in the last few months, which we will lay out below. While it may be clear to some what is going on, most of the community is still in the dark (as usual, what else is new).

1) The regulatory landscape surrounding bitcoin has been changing dramatically. The NY BitLicense has been implemented, many companies and exchanges are refusing to comply, and we can expect more regulation to be introduced in other parts of the globe sometime soon. Anyone reading this blog has read everything associated with these events, so we don’t feel the need the outline them further here.

As we know, bitcoin itself can not be regulated (unless it is hard coded, more on this below), so these current regulations are a patchwork of misdirected attempts to apply traditional regulatory logic to a vastly contrasting system. The at the “core” of the issue, is the bitcoin core itself, and the fact that without actually modifying this code, it is impossible to regulate bitcoin in any effective fashion.

 

2) The stress test in early July was a blatant attempt to draw the communities attention to the ongoing block size drama. After a series of less stressful stress tests, someone with a very thorough understanding of the bitcoin protocol performed a tx spam attack which slowed transaction time for many considerably. QnP4v32

More in:

Bitcoin Magazine

and some excellent coverage on Medium

The common thread that seemed to tie all media coverage together, especially “mainstream”, was that something needed to be done with the block size. Reddit was ablaze with people saying dumb shit (and some insightful things), and, as usual, no one saw through the fact that this all was just a big game of social manipulation. Sucks, huh?

 

3) Coinwallet.eu entered the scene a few months back, and immediately questions began to surface. Their about us page is shady, at best, and the business address which they list (78 York Street, London), is a virtual office. Reddit posts outlining this can be found here and here, with more details. Supposedly, their phone number doesn’t even work, their executives are all anonymous and it doesn’t seem as if they have are any satisfied customers (or customers at all).

After the first stress test, Coinwallet claimed responsibility, and more information became available. Finance Magnates does a great job covering that here. They also bring the anonymous aspect of the company to light for those who don’t compulsively check Reddit:

Others pointed to the fact that Coinwallet.EU, previously unheard of in the industry, is using the test to make its name known. Skeptics alleged that the company seems to have come into existence solely to conduct the test. Its website lists no physical address, and does not disclose the identities of its principals.

 

4) The introduction of Bitcoin XT has introduced about as much volatility into the community as the price has recently experienced. One of the most hotly debated aspects surrounding XT though (until now), has not been the software itself, but the blatant censorship and social engineering/manipulation which has occurred in every corner of the community. This clearly concentrated effort has just pissed off most people, but if you have a half a brain, you would think more into the situation. Why might this be going on? Why is there this HUGE push by some to stop XT in it’s tracks, while others are so eagerly pushing it along? What could each of their agenda’s be? What else could be at stake? Like everything else in the world, is this huge debate just cover for a much larger issue?

Before the spam attacks, the block size issue was raised by Gavin as being “urgent”. Until then, it was known to the community that modifications would needed in the future, but there was no sudden sense of urgency.

Is it a coincidence that the first Coinwallet.eu attack began shortly after Gavin started pushing the block size debate? Seems a little too well timed for us to think so. To be clear, we are NOT implying that Gavin has anything to do with the stress test. There are many other players to consider though.

 

5) The next spam attack by Coinwallet.eu, which is now being pushed by the msm. Some quotes from that article:

UK-based mining service CoinWallet is gearing up to conduct a stress test of the Bitcoin network in early September, which it said will likely render most standard wallet software “worthless” and create “nearly a 30-day backlog”.

A CoinWallet representative told IBTimes in an email exchange: “I don’t have a set date, but it will be early September. I’m too busy this month to fully devote a large amount of time to executing the ‘test’.

“As part of this test, I will be reconsolidating more than 150 Bitcoin that currently sits in these wallets.”

CoinWallet conducted a transaction to demonstrate what this will look like.

“As you can see from the transaction, there are 20 tiny inputs, with half going to miner fees, and half going to one of my CoinWallet addresses. This transaction is approximately 3kb, or 1/323rd of a block. In other words, for every ~323 of these I send, I fill up a block.

“These 20 servers push approximately 1 transaction per second. The plan is to fill them up to 50-100 Bitcoin in total. In theory, if all things go as planned, we will create a nearly 30-day backlog.”

“Of course, this won’t cripple Bitcoin entirely. Those who are smart enough to increase their fees will still manage to push transactions through. However, it will make it prohibitively expensive, and will likely render most standard wallet software, ranging from Multibit, to Mycellium, Blockchain.info and others completely worthless.

A debate has been raging for months over whether or not to increase the maximum size of a transaction block of data beyond 1 megabyte.

Bitcoin core developers Gavin Andresen and Mike Hearn are spearheading the drive to increase the block size, and have developed Bitcoin XT client to allow miners to opt out of the current 1MB limit. The majority of miners must adopt the protocol upgrade or else no change will come into effect.

“The fact that the XT fork hasn’t occurred yet is ridiculous,” CoinWallet said.

 

So “a Coinwallet representative”, but throughout the entire article he is quoted as referring to themself as “I”. Sounds like a one man show to us. The “representative” is very careful to outline the fact that their “test” attack will render most wallet software useless. Fear mongering, anyone? Their plan is to create a 30 day backlog in transactions, which they believe will shift perception towards the need for larger blocks, now. The end quote is just the icing on the cake, and clears up any conspiracy theories that community members may have had about Coinwallet’s intentions. They are pushing for an XT update, and flexing their digital biceps in order to push their agenda. How much more fucking political can you get with this? The kicker, they plan to start this “test” attack in early September, so like in a week and a half.

 

So, why does this all matter?

It appeared as if Gavin and Mike were doing the right thing by pressing forward with a solution when no one else would. They put a solution out there, and gave the community the right to decide how to move forward. Until a consensus is reached, the network will not be an XT alt, and we are safe. But piecing all of this together, there seems to be some sense of urgency to force users to switch to XT. Anyone who regularly sends coin, knows that the network works as promised at all times other than when these malicious events are taking place. Since the last stress test ended, the mempool has been pretty much empty, with the exception of what looked like a pre-test to this upcoming attack about a week ago. If there wasn’t going to be another stress test attack, people wouldn’t have any problem completing their transactions until bitcoin organically grew, and the user base started consistently filling 1mb blocks. The point being, other than this Coinwallet.eu FUD and their stress tests, there is no need for larger blocks right now, and there is no reason for anyone to rush and update to XT. So what is the ulterior motive?

 

As it turns out, some conspiracy theorists believe bitcoin has been hijacked. They feel as if a player has identified and attempted to exploit the one weakness which might actually harm the honey badger. Crashing price? No. Hackings, Goxxings, Ponzis and scams? No. Hijacking the code itself, creating FUD/a media shit storm surrounding the issue and then “creating a 30 day backlog of transactions” because the “fact that the XT fork hasn’t occurred yet is ridiculous”,  sounds like some Stuxnet style shit to us. An urgent (and artificial) timeline is being pushed on the community, to update their software in a rush, to a package which has much controversy surrounding it.

But has the code itself been hijacked? Is this just a conspiracy theory, or conspiracy fact.

In this linuxfoundation e-mail from yesterday, it is noted:

Bitcoin XT contains an unmentioned addition which periodically downloads
lists of Tor IP addresses for blacklisting, this has considerable privacy
implications for hapless users which are being prompted to use the
software. The feature is not clearly described, is enabled by default,
and has a switch name which intentionally downplays what it is doing
(disableipprio). Furthermore these claimed anti-DoS measures are
trivially bypassed and so offer absolutely no protection whatsoever.

Connections are made over clearnet even when using a proxy or
onlynet=tor, which leaks connections on the P2P network with the real
location of the node. Knowledge of this traffic along with uptime metrics
from bitnodes.io can allow observers to easily correlate the location and
identity of persons running Bitcoin nodes. Denial of service can also be
used to crash and force a restart of an interesting node, which will
cause them to make a new request to the blacklist endpoint via the
clearnet on relaunch at the same time their P2P connections are made
through a proxy. Requests to the blacklisting URL also use a custom
Bitcoin XT user agent which makes users distinct from other internet
traffic if you have access to the endpoints logs.

There is a great bitcointalk thread about the issue, which highlights the topic.

Some quotes from that thread:

Mike Hearn says it’s to ban people who use DoS attacks from the network, but obviously it can be used to blacklist anyone.

https://github.com/bitcoinxt/bitcoinxt/commit/73c9efe74c5cc8faea9c2b2c785a2f5b68aa4c23

I’m combing through the code and it’s not looking good.

Basically they will disconnect you if your address has ‘low priority’, which might hurt new addresses. If you have a negative priority score that means you’re an attacker according to them, and you are disconnected.

Also mapping the tor network, lots of code aside from this to break through the anonymity of TOR.

These changes are massive and BitcoinXT has not mentioned them at all, clearly the block size debate is a distraction.
We should start referring to XT as ‘PanoptiCoin.

This is disgusting, pages of code for the blacklist.

They’ve been mapping tor for months to get ready for this…. over 1000 IPs listed

 

And some of the more colorful posts from that thread:

Screen Shot 2015-08-19 at 3.43.33 PM Screen Shot 2015-08-19 at 3.44.44 PM Screen Shot 2015-08-19 at 3.42.45 PM Screen Shot 2015-08-19 at 3.43.19 PM Screen Shot 2015-08-19 at 3.52.45 PM Screen Shot 2015-08-19 at 3.53.10 PM

There are also some arguments against the supposed findings, we outline the most important and conclusive later in this article.

So after all of that conjecture and possible FUD, let’s break down the situation into it’s simplest form:

1) Gavin initiates and pushes urgency of block size issue

2) Regulations are put into place (BitLicense)

3) First spam attack takes place

4) Much community discussion takes place regarding block size

5) Larger spam attack takes place, Coinwallet.eu takes responsibility

6) Bitcoin XT is pushed out by developers and released in a hurry

7) The MSM pushes the XT/block size issue, after mostly negatively portraying bitoin in the past (but blockchain positively)

8) Coinwallet.eu threatens another spam attack, which will back up the network for 30 days. They also support and promote upgrading to XT immediately opently.

8) Questions arise about the purpose of some of the code in XT, or how it can be modified in the future for other/nefarious purposes. Is this an attempt to “regulate” the bitcoin core?

 

In all fairness to Mike and Gavin, we have to present the most compelling piece of evidence for their inclusion of the new features into the XT code.

Check out this link for the full thread.

The most important response from Mike:

This patch fixes the issue. It adds code that only runs when the node is full. As nodes are not supposed to get full unless there’s an attack, this code should ideally not run, or hardly ever run. If a node reaches its -maxconnections limit instead of rejecting all new connections, it calculates a priority score for each connection and if there are any lower than the new inbound connection, that lower scoring peer is disconnected to make room. And it adds a starting rule that gives Tor connections a lower score than clearnet connections. Hopefully there will be many other heuristics added over time.
The result is:   if and only if your node has run out of resources, and it has connections via Tor, then it will kick out the Tor connections one at a time to make room for non-Tor users.
This reflects the reality that Tor is much more attractive to attackers than real users:  nobody is going to DoS bitcoin from their home internet connection but people use Bitcoin from such connections all the time.
My patch is a tiny first step towards fixing a long standing problem with the design of Bitcoin’s DoS protection system:  it works by attempting to ban IPs that engage in “misbehaviour”. This has two problems:
  1. It’s possible to DoS a node without triggering the misbehaviour rules
  2. It assumes 1 IP = 1 person
The latter assumption isn’t valid for lots of users, like users on mobile phones, at hotels, at conferences, at some universities ……. and users behind Tor!
One of the misleading things I’ve seen a Blockstream employee say is that the Tor prioritisation patch “risks network partition”, which is a fancy way of saying users behind Tor might get disconnected entirely from the main network.
I have a problem with this argument for a couple of reasons.
The first is that anyone can already trigger such a partition. All you have to do is connect to each Bitcoin node from every Tor exit, and then “misbehave”. The exit will then get banned for 24 hours. New connections are then no longer possible. Existing nodes will keep their connections intact, but eventually people will have to restart their nodes, and then they’ll end up banned too. This results in a kind of slow motion network partition. The best fix for this is to replace the notion of banning IPs with something else …. like a more advanced form of priority.
The second is that it suggests Bitcoin should just not care about the attack I outlined above. The guy who has been saying this also believes that non-Bitcoin-Core P2P wallets are a bad idea, which is consistent with Blockstream’s vision of Bitcoin as a kind of clearing network between quasi-institutional entities. So, no surprise that he doesn’t care about attacks that affect mobile P2P users.
However, the Bitcoin XT project does care about them.
The third reason is that to force Tor users to be disconnected and make a partition unique to this patch, you would have to flood the network from non-Tor IPs. As you are probably breaking the law by doing that, you need to find some other shield. The framework is general so if someone does this via some other proxy network, we can give those networks even lower priority than Tor. Problem fixed.
Then you’d have to use botnets and the like, but I know from my time fighting hackers at Google that this is much harder to pull off than using something like Tor. Attacks getting harder, riskier and more expensive? That’s progress.
The new framework is very basic. There are many other heuristics we can add to make it work better, and eventually remove the Tor specific logic entirely.
One idea is to raise the priority of nodes that are doing useful stuff, like relaying us data.
Another idea is to extend the P2P protocol so clients that don’t have long lived connections and can’t provide services to the network (i.e. phones) can gain priority by proving they own bitcoins. It makes sense that a user who has 500 BTC in a 12 month old saving wallet should take priority (if need be) over a user who has no bitcoins at all.
Another quick heuristic is to do dialback on connect. One issue with connection prioritisation is that we have to decide fairly quickly and with low resources whether to service a new connection or not. A quick check if the connecting IP is accepting port 8333 would identify not only Tor but all proxy and botnet services    (running custom software on botnets is much harder/riskier than using their predefined services). Of course it’d also identify mobile/NATd users. So we’d want to combine it with the new protocol above and get wallets to implement it first.
Obviously, in a mostly anonymous system like Bitcoin, any heuristic can be gamed by an attacker who is willing to spend enough resources to simulate real users. All we can do is raise the costs.
So with those ideas combined we’d have a pretty nice general framework that doesn’t need any hints about specific IP ranges anymore. But it’d take a lot more work.
Outside of the fact that we now see a public disagreement between Mike and a Blockstream employee, he outlines an excellent reason for the inclusion of the new changes. It does seem to make sense on the surface, but we definitely see how this can be a very slippery slope which the community should be aware of. The inclusion of prioritizing by IP addresses, and future plans of possibly prioritizing by days destroyed (number of coins * days held in wallet) does open up very real privacy issues. Mike does say that this is just a framework, and that further changes will be made moving forward. What are those changes? Could a simple DDOS protection (which is clearly an IP white/black list scheme) evolve into something more elaborate and targeted? For the time being, we aren’t really concerned about these issues, as everything seems to be in the clear. This situation does bring up interesting questions though, and lots of thoughts for what the future of bitcoin might hold. As of now, there are lots of conspiracy theories, but with the unusual media coverage and coincidence of these events, will we some day find out that there is some conspiracy fact behind what is going on?
In the end, it is a bit shady that what seems to be a front company is threatening to create a 30 day backlog of transactions, essentially if people don’t update to XT. What else might researchers find in the XT code as they dig deeper? We hope nothing, but combined with the other events in recent months, we are left questioning the agenda’s being pushed. We hope that the community works together to maintain the original vision that Satoshi had for the project.
The following was aired on Bloomberg today (click image to bring you to video page):
Screen Shot 2015-08-19 at 6.13.47 PM

Symbiont Updates, XCP Rocket Ignited

rocket-clipart-nicubunu_Toy_rocketWhile it’s no secret that the world has been starting to see the light with “blockchain”, it has been pretty obvious from the multiple attempts by the msm to cover bitcoin already that this is going to take a while. Everyone else has their training wheels on, but for those of us who scoured bitcointalk years ago, got burned buy not selling AM shares near the ath and even those who have been around as recently as the Gox implosion, we don’t need to hear any more about miners solving complex math problems. We get it, and get where this is going. There is no blockchain without bitcoin, and once the sheep finally catch on to that, they still need to learn about alt coins, side chains, etc.

The point being, it’s going to be a while before the mainstream hears about, or cares to hear about something like XCP (Counterparty) (that’s cool though, we won’t mind selling to them). So, if this is the case, why has such as obscure corner of the digital cryptocurrency playpen been receiving massive attention from high profile Wall Street players and a significant amount of investment capital? Duh, it’s the future. Among many other initiatives in the space, SWIFT has a call for proposals out which is looking for information on blockchain securities settlement.

Just to cover this again. In plain English. Counterparty, and decentralized asset settlement in general, will become a backbone of the new financial system currently being built/deployed.

For a refresher, let’s visit Bloomberg:

Some Financial Heavyweights Just Invested in a Trading Platform Linked to Bitcoin

Symbiont, which plans to use bitcoin’s underlying technology to make it quicker and cheaper to transfer assets between buyers and sellers, has won the backing of several financial industry heavyweights.

The company, according to a statement Tuesday, has raised $1.25 million from a group including former New York Stock Exchange chief Duncan Niederauer, former Citadel LLC executive Matt Andresen, and two co-founders of high-frequency trading firm Getco LLC, Dan Tierney and Stephen Schuler.

 

A few weeks ago, we discussed the possibility to Front Run The XCP Pump. Here we are, a few weeks later, in the midst of what we at shitco.in believe to be the first leg of a major XCP pump (to continue on announcement of Series A funding). In our last XCP piece, we outlined that there would be a Series A round of funding coming in Q3 this year. Fast forward until last week, and Symbiont just received another round of funding from two more VC firms.

From PR Newswire:

Atlantic Merchant Capital Investors, LLC announced today that it has made an investment in conjunction with Celeridem Capital Management, LLC into Symbiont.io, Inc.

“The team at Symbiont is enthusiastic about our new capital partnership with Celeridem and Atlantic,” said Mark Smith.  “The capital they and other investors have provided will allow us to deliver production technology and clear the way to a Series A round later this year.  We are also excited about the opportunity to work with Shiv Govindan and Jeff Hunt [principal at Atlantic].  They bring more than capital to the table.”

Symbiont expects to issue the securities associated with this funding via its proprietary blockchain technology.

Most people only read headlines, and few will actually read an entire article or press release because, ADD. That part in bold up above is something that all investors should be paying close attention to. This latest round of fundraising (for an unspecified amount) is just leading up to their Series A.

Another interesting piece of information from Tampa Bay Business Journal:

Symbiont’s board now includes SenaHill Partners founder and former Goldman Sachs (NYSE: GS) global head of REDI product development Neil DeSena as well as Duncan Niederauer, former CEO of the New York Stock Exchange.

Can you get any more bullish than this? These guys literally live and breathe for money, and not only are they investing in, but are now on the board of Symbiont. Remember guys, the people who founded Symbiont are the same team that created Counterparty (XCP). While they have openly stated they are going to be working with many different solutions, we think that they are probably going to have the best results with the one they are most familiar with, the one they built.

Chart of the price action around both of the last investments can be found below.

Screen Shot 2015-08-02 at 2.15.25 PMWith their Series A coming up, what else have the Symbiont/Counterparty guys been up to?

Everyone was focusing on Blythe Master’s linguistic performances at the American Banker Conference, but few took the time to realize that the Symbiont team was heavily represented as well.

Bitcoin addresses with XCP have been on a steady rise since inception, and show no signs of slowing down.

Screen Shot 2015-08-02 at 3.13.31 PMDeloitte is exploring Counterparty:

Professional services firm Deloitte has revealed it is seeking to use blockchain technology to automate client auditing and crowdsource its consulting efforts, among other applications.

Piscini indicated that these clients are currently exploring different protocols built on top of bitcoin, including Blockstream, Counterparty and Factom. A key question that persists for many is whether to partner with these firms or build a private blockchain.

As for its own projects, Piscini said Deloitte hasn’t determined one specific working thesis for the technology, suggesting the firm is willing to select the blockchain best for its specific use cases.

“Our point of view, is ‘Let’s find use cases, where you can generate more revenue, generate a different customer experience or cut your costs.’ Then we can find the technology stack to address them,” he said.

So far, Deloitte has launched Rubix, a software platform that allows its clients to build applications on top of blockchain infrastructure.

The official website for the service lists four areas of interest, including reconsolidation between trading partners, real-time auditing, land registry and loyalty points. Internally, the company is focused on automating some of its auditing processing via a solution currently in stealth.

“On the consulting side, I think we’ll see the ecosystem adapt and change and move toward blockchain-based solutions,” he continued. “The potential for us is around the ability to source consulting services through a P2P crowdsourcing platform. Instead of saying, ‘Deloitte help us with that strategy’, you can request that service on the blockchain and the blockchain would match you with the right individuals to do that.”

Over time, Piscini said he sees the blockchain becoming a foundational layer for asset transfer, smart contracts and voting, but that different blockchains may be created that specialize in each of these use cases. He also suggested that he sees cryptocurrencies such as bitcoin will likely continue to play a role in the management of blockchains.

Although they are working with multiple possible solutions, we all know that Counterparty was the first working protocol. We also know that this gibberish about private blockchains is just them trying to borrow the bitcoin source code because it’s open source, pissed off they didn’t invent it themselves. Save yourselves some time and money guys, its not worth it.

There was a Counterparty update on July 24th, further cementing the point that Symbiont would be using XCP:

Over the last year and a half, Counterparty has evolved into the most advanced platform for creating financial instruments on top of Bitcoin, used by an increasing number of innovative projects. During the last couple of months, our goal was to wrap up the large scale improvements to the Counterparty software suite, complete comprehensive security audits, and once the protocol reaches a mature state start focusing on and building tools and services around it. Symbiont is a step in that direction, developing products that will be utilizing this technology, and we’re very excited to see it be put into use in systems that power modern finance.

 

Some interesting projects on bitcointalk/GitHub.

An interesting Reddit post, in which this comment stands out the most:

HFT is often about taking advantage of arbitrage opportunities and moving enough stocks to get fee discounts, so that money can be made even on small changes in price. The stock market is a network of connected stock exchanges etc. Nowadays this is all existing in the realm of highly regulated, centralized operations. In the future I’m confident that stocks will be tokenized either ontop of existing blockading such as counterparty on Bitcoin or on separate blockchains using technologies such as Peershares (/r/peershares) because its just so much more powerful. http://www.coindesk.com/smart-contracts-platform-symbiont-raises-1-25-million/ the question: “why would a company that is making money on inefficient stock markets invest in the next gen stock market? ” my guess would be that they are fully aware of what is about to happen. What is the difference between a stock IPO, VC investing in a startup and say Kickstarta? Save for the juridical differences there is a lot of differences, but that’s about to change as social communities and Bitcoin tech is about to merge. There are already several examples: Nubits, Etherium, Counterparty that is giving a glimpse of what is about to happen. This Bitcoin stuff doesn’t ask for permission and the killer app is the many ways in which it will creep into every aspect of our lives.

Last, but not least, this SEC filing which shows Symbiont sold 1.235 million in debt starting on June 30, 2015.

Screen Shot 2015-08-02 at 3.44.40 PM

For those of you unfamiliar with Form D:

Form D is a form to be used to file a notice of an exempt offering of securities with the Securities and Exchange Commission. Commission rules require the notice to be filed by companies and funds that have sold securities without registration under the Securities Act of 1933 in an offering based on a claim of exemption under Rule 504, 505 or 506 of Regulation D or Section 4(5) of that statute. Commission rules further require the notice to be filed within 15 days after the first sale of securities in the offering. For this purpose, the date of first sale is the date on which the first investor is irrevocably contractually committed to invest. If the due date falls on a Saturday, Sunday or holiday, it is moved to the next business day. The SEC does not charge any filing fee for a Form D notice or amendment.

 

All of you that are reading this blog can see the impact that “blockchain” is going to have on the traditional world of finance. If we didn’t, we clearly wouldn’t be involved in this absolutely insane world of bitcoin day in and day out. Each of these new protocols (except Etherium) relies on the bitcoin blockchain and a small token of btc to carry out each transaction. Naturally, this will slowly create a demand for btc and create more upward pressure on the price. At this point, it is safe to say that all major banks who have stated they are exploring blockchain technology are holding bitcoin (they couldn’t run their tests without it), which itself is a major milestone for the technology.

As we saw with the msm coverage of the NYSE outage a few weeks ago, the sheep are still being herded and misdirected. Nanex compiled this excellent report which is a must read. The ex-CEO of the NYSE investing into Symbiont during times like these is just too perfectly timed for us to believe it’s purely coincidence.

Interesting times we live in.

As earlier stated, we have been long XCP from the bottom and plan on selling some once the rocket takes off. Obviously we are also holding some as a long term investment.

The Wuestenrote (Wusitanluo) LTC Ponzi Was Crushed

With yesterday’s LTC pump, many traders have been talking about the possibility of another moonshot. In our experience, group think generally should be approached with caution, and traders should sort out the facts on their own before making any moves. With the possibility of making or losing a significant amount of money in the game of ltc hot potato, we decided to dig a bit deeper into the “Chinese Ponzi” that we outlined in this post.

Unfortunately, for traders, it looks like the fun might be over for the time being. It appears as if the suspected ponzi actually was a ponzi, and the people who were running it incurred massive losses and are now on the run. With over 400,000 ltc still in this address, we wonder what their next move will be. Without the upwards pressure of the ponzi on LTC, will the market collapse, or will other pumpers come in to take advantage of the hype around the block halving.

The first piece of information to focus on, this post from the group themselves which was made on July 22nd. We understand that it is a bit hard to read, but that’s Google Translate’s fault. You can easily get the idea of what is going/went on, and it isn’t good.

Wusitanluo Network Announcement:
Dear coins circle and investors you are good:
Since litecoin great investment value, recently sought after by the market, trading activity, rising rapidly. Frequent exchange transactions across multiple platforms, leading after the rapid rise, some investors eager to cash in quickly after frequent cause is thrown down.
The company has been the case of the parties conducted a survey research, set up an investigation team for the entire event carried out a detailed investigation. The occurrence of such a huge market fluctuations things, on behalf of the company for failing to deal promptly remind investors of risk and get the best revenue opportunities, deeply apologize! The company will serve as a reminder that in the future the investment process, to better improve service, increase opportunities and investor communications, increase litecoin trading knowledge training. However miss this opportunity, as well as heavy losses to investors caused by currency circle, we must acknowledge the error, it is wrong leadership of the company, things have happened, companies know that no amount of explanation is useless, only adjusted for market development at the same time in favor of the interests of investors all litecoin program. So please rest assured that the majority of investors! The existence of the event management problems, the company to extend my most sincere apologies to the members.
About uproar MLM event Wusitanluo litecoin recent online fund transfer, the company made the following explanation:
1. litecoin – digital currency in silver, five national ministries issued a document has acknowledged the same nature of virtual currency and stamp investment products;
The company did was to maximize the benefits to our own members, members to participate in the store come in the company to do buy low sell credits for the company and members of the benefit, but after the incident that we deeply appreciate the company’s promotion and incentives does have loopholes, the company is now working on improvements, will be promptly corrected, and safeguard the interests of members and coins circle stable and sustainable development. Increase the propaganda and investor training instructions explain litecoin development environment, the company operating conditions, so that investors from different sectors of society, we have a full understanding, differentiate the company is definitely not an illegal pyramid scheme organizations and other institutions. If the company deliberately fraud, no company disclosed the truth, so please credits circle of investors and members of my friends believe that: The company will gradually improve the business long-term orderly and healthy development continues!
The problem for business, we reflect on the comprehensive, currency experts gathered in the circle, the company’s practitioners admire your moral and technical level, you who are veterans, we circle the deficiencies currency, please timely corrected, we would like to fully cooperate for the greatest degree of meeting customer requirements, to achieve a win-win, and let us improve faster. We are willing and credits between companies in the same industry circles to establish a good cooperative relationship; analysis of everyone’s long-term sustainable development of a steady stream of money to bring new impetus to the development circle, currency prices rose only virtual currency using the procedure we have developed a necessary process, we increase investment late, modify extension model allows the company to achieve a virtuous cycle, please rest assured!
Since the 7.10 incident currency Circle in short Zapan cause our losses, we make the following summary: We have never experienced such an event, there is no ability to timely response and to corporate clients who bring serious losses, our market environment is too optimism did not adjust the tempo. About Wright currency fluctuations, we realized: favorable currency price rises for everyone; short only on a small part of speculators to bring short-term profit, most investors can not share the real benefits brought by the development of virtual currency. Many people even do not know the risks of leverage, resulting in greater losses! So our next step will be an effective and mutually beneficial and win-win to stay in business, please credits circle of colleagues and jointly create a harmonious market environment, maintaining good litecoin healthy development is our responsibility!

Here, also deeply grateful to all of concerned friends! In fact, the company was informed that after the incident, in addition to feel very ashamed and apologetic outside, but also gain a more moving and trust, thank the majority of investors have high hopes for the company! The future development of the company, and we closely co-prosperity loss, we already are familiar with the family, so I can better understand that you do not want us to make mistakes in their mood. You were criticized, is the driving force of the company can do better! We will gradually consolidate the business, scientific management company’s business development, allowing companies to develop more robust! & Nbsp; & nbsp; Our company is totally worth everyone has the strength to believe, as the new company litecoin industry, the company has a very strong economic and technical support. Business is like a child, growing up, will inevitably wrestling, make mistakes, then the parents will help one, carefully educate him. The company today, you need to like the parents who help a help, what help us to grow up healthy and strong! & Wusitanluo network announcement!

Source: 8btc

Secondary Source: BTCMan

Further on in the thread, information about the supposed leaders is posted, along with their pictures.

Screen Shot 2015-07-25 at 4.31.23 PMScreen Shot 2015-07-25 at 4.32.10 PMThe Chinese BTC media had been covering the story since earlier in July, more information below:

July 10, 2015, Wright currency prices from a month ago, hovering at 11 yuan, skyrocketing to 54 yuan, or nearly 400%. Investigate its soaring reason, most likely related to a strong sales organization suspected of pulling the disc. After the litecoin surge stirred the entire digital currency industry, in July 2015 at 10pm, litecoin suddenly began to fall from 54 yuan, as of press time, litecoin prices hovering at 27 yuan from top to bottom.

The previous day’s surge, probably only because a video.

Reporter join MLM organizations suspected of QQ group: Wusitanluo – litecoin

Just one day time, group number rose to 435 from 100 people up and down, and still keep up the trend. A large group of files named “Wusitanluo litecoin Fund Projects” “litecoin registration process” file.

Suspected MLM organizations to promote PPT

Wusitanluo litecoin Fund Project Description:

1, sentence description of the project The project requires investors to the market on their own (fire credits net) at market price to buy 500 litecoin, then 500 litecoin Wusitanluo to finance and investment companies, the company returned to 3 per day to 5 litecoin to your virtual currency wallet (fast purse), now return 5, after deducting 10% of the fee actual return 4.5, can be returned litecoin fire credits net trading cash to be held currency to be up.
Note: The contract with the company for 1 year
500 litecoin to the company of the night (the next morning) the return of the company will be able to receive 4.5 credits litecoin is the world’s second largest virtual currency, in China there are 12 exchanges of fire most traded currency net .
Fast is the most secure virtual wallet purse money, safe, convenient and compatible bitcoin
2, to help companies to promote Award
A, all of their recommended straight people can get 50% per person per day
B, straight recommended 10 people became broker (also available in their 5500 litecoin buy directly into the broker)
C, will become a broker, obtain the following rewards:
1–5 dezh dividend of 10%
5% dividend 6–10 dezh
11–15 dezh dividend of 2%
Note: Direct Push 1 get 2nd generation, direct push two people have two generations, direct push three people have three generations, so get up to 15 generations, every day, every day the dividend, too.
Your income = ROI + Promotion Rewards
3, Wusitanluo is a German company, is a diversified financial conglomerate, located at 1156 Forbes Global 2014 companies list, ranked 37 in Germany.
4. What is Wusitanluo litecoin fund?
International litecoin profitable global trading platform to buy low and sell high
5, this model is MLM it?
Your investment in a first, the company received on time if you return the money, proved to be true in the future, who would you most like to pass? You most certainly would like to vote on several accounts under his first order to obtain greater benefits. Their investments much more income than pull people to join.
6, there is no risk of such an investment?
Any investment has risk, but in this era of fast money, to get the maximum benefit is to grasp the opportunity in the short term.
7, was asked: I do not know you, money is how do you cheated?
A: You are mistaken, your money and coins not through my hand, you buy 500 litecoin litecoin directly with your wallet (fast purse) to call the company, I just recommend you to join it, you register Corporate Member When I will use my membership number.

Being thought of these, to be fleshed out later! Other issues your own Baidu, Baidu Post Bar has Wusitanluo it.
This is the latest investment projects, domestic just beginning, very few people do this, have not formed a team like Vicat currency, seize the opportunity to put their achievements as Vicat currency render such a successful teacher.
I am determined to do Wusitanluo first person in China, of course, you can also set up their own team, beyond their own!

OKCoin has been aware of the situation since at least July 11th, but has only made a full statement (that we could find) to their Chinese customers. I.e.: Something that said more than “don’t put yourself in traps”.

They also mention that this is just the latest of their investment projects, and the beginning of domestic projects. What does this mean? We suspect that they may have lost a substantial amount of funds due to their failed pump, and aren’t too convinced that there will be subsequent pumps yet. If anything, we would expect the market to deflate a bit while the ponzi tries to get things back in line, but do they have the buying power to pull themselves out from underwater.

These ponzi masters have gone so far as to imitate a German company, register the .com version of their domain name and put up a fake website in order to cover their tracks.

The companies correct website is: https://www.wuestenrot.de/

The fraud site was: https://www.wuestenrote.com/

Again, from 8btc:

Germany seems to really have the online search Wusitanluo this company, also great. However, and this litecoin MLM is certainly nothing to do. This is the MLM websites http://www.wuestenrote.com/ .
In million net Search Domain Information:

Oh, April 10, 2015 was registered.
However, some people may say is to not promote litecoin MLM ah, ah just registered! !
I continue to dig.
The bigger sites do actually quite bluffing. For example, the login screen can select the language. Very fast hardware thing, after all, is large international companies!
But I chose English actually let me choose it, people look down on the Asia-Pacific do not know English? ? ! !


Then I see the website source.
Develop people to effortlessly Reprogramming a German and English pages, when you want to change the English and German pop up directly not to change!

Yes, it is a direct pop, will not determine the country where ip oh ~

A Baidu thread with the ponzi “founders”, shows they have a very creative way of looking at what they are doing.

Screen Shot 2015-07-25 at 5.59.13 PM Screen Shot 2015-07-25 at 5.58.36 PM Screen Shot 2015-07-25 at 5.57.59 PMWe then turned to bitcointalk for information, and found plenty. Here is the most interesting and informative thread:

http://translate.google.com/translate?hl=en&sl=zh-CN&u=https://bitcointalk.org/index.php%3Ftopic%3D1126935.0&prev=search

You can view a video of the schemers promoting here – http://v.qq.com/cover/l/l9njr6tdhnl6nl2.html?vid=a0159sgq8mp

And for those of you wishing to see the ponzi schemer’s presentation (source):

123456789101112131415161718192021222325So what do we expect from here? Probably a ltc dump as this news propagates through the west, and traders realize that might be bag hodling for a while. If the ponzi group or another pump team step back into the market place though, we could be in for a wild ride.

The bottom line is that the ponzi pump team didn’t execute their pump as expected, and it appears as if they are now on the run after incurring massive losses. Whether this is true, or FUD to get the ltc price back to a level where they can buy back in and pump is to be seen. With the upcoming block halving, and OKC double witching in September, we have some dates on our calendar to watch.