BFX Bot Gone Wild

It appears as if trading is slowed or suspended on BFX, after a rogue bot seemingly took over ltc/btc trading for a period of 35 minutes. The intense volume and consistent range of the trades suggests that this was not human error (unless they were wasted).

Screen Shot 2015-07-17 at 12.07.57 PM

The impact could be seen on the ltc/usd market, as correctly functioning arb bots (which were obviously also trading the ltc/btc pair vs the rogue bot) took advantage of the situation. Quick traders using their old fashion fingers certainly took advantage of the opportunity as well.

 

Screen Shot 2015-07-17 at 12.08.33 PMThere was some funny activity in the drk/btc market as well, but nothing conclusive. Could have been a bot, could have been a fomo trader.

Now back to your regularly scheduled programming of watching OKC lead the LTC market.

#rekt

The LTC Pump, Dump and ? A Post-Mortem For Both Bulls And Bears

Mickey_Mouse_normal

In our last post, we outlined some of the shenanigans that were occurring in the LTC marketplace (specifically on BFX). A week and a half later, both bulls and bears are in tears, after some of the most extreme volatility the LTC market has seen in years. We don’t expect this volatility to die down any time soon (a gift for traders), but we feel that the community at large should have a more thorough understanding of the underlying fundamentals of the price action that we have been seeing.

We have been performing a thorough analysis of the different market forces acting on the LTC (and to a lesser extent BTC) markets over the last few weeks, and are attempting to assemble the pieces so that traders can make an educated decision on what their next trades should be. There is a worrisome element to all of this (outlined in 1, below), and the last thing that the crypto community needs at a time when it is finally going mainstream is more traders/investors to get burned and have disdain for the crypto community because of a malicious actor.

1. The Chinese LTC ponzi (surprising, eh?)

2. Pump Team 6

3. Return of old players

4. New interest in Crypto/media coverage/Greece = new money

5. Irrational exuberance and margin trading

 

Of what we outlined above, we only consider point 1, the ponzi scheme, to be a malicious actor. The others are viewed as forces in the free market.

More details on each below:

1. The Chinese LTC Ponzi – Our friends over at BitMEX published an excellent blog post two days ago outlining the ongoing LTC ponzi scheme in China. This is the address which is being used for the scheme, it has now received over 8.5 million LTC. Bitcoin Magazine goes a bit more in depth on the scheme, and the statements different exchanges have made in response.

An analysis of the wallet address shows that the deposits and withdraws are still increasing dramatically, so the scheme is still ongoing.

687cbd1b-db5c-4645-9074-78eb93461120h/t: @Legion for the data, you can view it for yourself here

As stated in the Bitcoin Magazine article, some of the more customer oriented exchanges have taken steps to mitigate any damage from the ponzi, and have reached out to traders/investors to warn them of the unusual trading activity. Huobi posted the attached.

While we believe that the LTC ponzi group has contributed partially to the dramatic LTC price and volatility explosion, we believe that the other market forces acting in parallel have amplified both the upward and downward moves of LTC, creating a potentially hazardous trading environment for those who are ill-informed.

It is our belief that the LTC ponzi masters are the least sophisticated of the actors involved in the market gyrations.

 

2. Pump Team 6 – Starting on May 22, 2015, it started to become clear that LTC was beginning to undergo a somewhat sophisticated crypto pump. The coin had been beaten down during the bear market, and was primed for some upward movement. Subsequent pumps in PPC and NMC seem to exhibit similar characteristics, which may be a coincidence or may be totally unrelated.

The pump team seems to be extremely sophisticated and precise with their actions, utilizing a variety of strategies across multiple exchanges in order to achieve their goals. It is our belief that the primary goal of the pump team is to accumulate BTC, with USD gains coming secondary.

Between May 22 and July 9, 2015, we saw the btc price (on bfx) rise from $240, to ~$296. This is a roughly 23% increase.

Screen Shot 2015-07-13 at 2.41.00 PMDuring the same time period, LTC saw a substantially more dramatic rise from $1.50 to ~$8.90, a roughly 493% rise.

Screen Shot 2015-07-13 at 2.40.38 PMTraders have been talking about the “decoupling” of ltc and btc over the last few weeks, but is it coincidence? Our take is, no. Watching the market action over the last few weeks during the ltc pump, it became clear that an actor was cashing out cheap ltc that they had purchased for btc, with 1k – 5k ask walls on ltc/btc strategically placed the entire way up. Similar size ask walls were chewed through on ltc/usd, providing some small breathers in the bull market. At the same time, iceberg btc asks were being thrown on okc and hidden btc asks on bfx during periods of significant upward ltc price movement.

What would the purpose of this be? If the pump team was able to successfully hold down the bitcoin market while pumping ltc, their btc earnings from the pump (via the ltc/btc pair) would be significantly greater than if btc were to pump at a somewhat steady rate during the same time period. One advantage of using leverage and/or futures to suppress the bitcoin market is that a player can have a significant impact with a small number of coins (this is why market manipulation in most markets ie: precious metals, is through futures). As long as the number of coins the pump team was accumulating through their ltc pump and subsequent ltc/btc sells was significantly more than what they were throwing at the market, it would be worth their while to perform this tactic even if their “shorts” were to be margin called later.

Around the time of OKC futures settlement last week, the speed of the ltc pump began to die down, and traders started to wonder when it would end. News of the Chinese ponzi was leaking out, and mysteriously, exchanges began to be DDOSed. It was clear that the pump team had made their exit, and margin traders high on hopeium started to sober up to reality, and realize that they were going to be fucked when they couldn’t close their FOMO long in time to escape.

As we believe that it was the ultimate goal of Pump Team 6 to acquire as many btc as possible, this is where we believe the second part of their plan came into play. Like we saw with their earlier ltc actions (reserving all swaps then pumping), these guys are experts. It is our belief, that at this time, they begun closing all of their btc “shorts”, while simultaneously pumping btc with the usd that they had earned during the ltc pump. You can see a large number of shorts which were closed at the time.

Screen Shot 2015-07-14 at 1.00.38 AMThis generated a large amount of btc buy volume across all exchanges, which coincided with DDOS attacks and the situation we are all too familiar with regarding OKC’s margin calls.

Our question is, did someone else realize what the pump team was up to, understand that they may be in a position to incur massive losses, and orchestrate some events in an attempt to mitigate getting rekt? New money is clearing coming into bfx, which has been leading the market as shady Chinese exchanges fade into obscurity. As victims (oops, we mean “traders”) migrate to other platforms, what lengths might actors in the bitcoin eco-system go to in order to attempt to save themselves?

These questions may go unanswered for the time being, but as more information leaks in, it is beginning to seem as if some of the tin foil theories might not be too far off.

 

3. Return of old players – There has been a recent return of old players to the crypto community. Fontas is a regular on tv, and his return alone has hyped traders up enough to jump on the ltc bandwagon. While we feel that this impact may be minimum, it is important to note because there definitely has been a buzz around buying when he is present. Maybe this is just the newbs that weren’t around for his first rodeo, but either way this element can’t be ignored.

4. New interest in crypto/media coverage – This one should be obvious. Check out /r/bitcoin any day and you will see coverage by every major news media outlet. The situation in Greece, possible bail-ins and the msm pushing bitcoin have definitely had an impact on the market place. How much new money is actually flowing in? This is difficult to tell, but we suspect it isn’t a large sum at this time. As the bull market continues, we expect to see more new money flow in, and geo-political/financial events can always have a sudden positive impact in the amount of money flowing into crypto.

5. Irrational exuberance and margin trading – As with any mania, tears are shed by those left holding bags when we get a 404 buyers not found error. Combine the ease of margin trading in the crypto space with inexperienced traders and you have a recipe for disaster. Many got rekt buying the top, and hopefully will not be turned off to crypto forever from the experience.

 

So, where do we go from here? What should we expect?

The Chinese LTC ponzi doesn’t seem to have slowed down, but we question what their end game is. All ponzi’s must collapse some time, but what is their proposed exit strategy? Were they screwed when everything collapsed? Did they realize that LTC was being pumped at the same time by other actors? The continuation of transactions to their wallet suggests the scheme is ongoing, but the price action in the market place (specifically on exchanges which made statements regarding the ponzi) seems to show that they are struggling with their own scare walls, and less dynamic forces acting on the market.

We saw the ltc price continue to dip after the initial shock, suggesting that many traders cut their losses, but how many?

Screen Shot 2015-07-14 at 1.23.48 AMWe expect there to be some pretty massive overhead pressure on ltc for the time being, but don’t discount the possibility of a move up as btc continues to gain traction. Our suggestion to new traders is to play the ltc/btc pair, unleveraged for the time being, in order to take advantage of price movement in the market place. For more experienced traders, play the markets as you normally would, but be cautions of the potential forces you may be dealing with. Although we all love making money off of that guy who buys our asks on the ponzi spike, the overall health of the crypto community is more important than making a few dollars. Every trader that is turned off to the space after being absolutely obliterated, is one less player in our daily game of stealing each others money. While we don’t suspect that the pump team planned on this collapsing as hard as it did, we wonder exactly who else knew what was going on? These questions should be answered in the coming days, as more information comes in regarding the “Mouse Group” and how OKC is going to end up settling with their customers. So far, as is clear on Reddit, everyone is getting shafted.

 

Underlying FOMO + Creative Thinking = LTC Pump

21.-ops.-Scrooge-McDuck.-Azizonomics

After weeks of almost completely flat trading, and and months of the $220-$240 range, it looks like at least some crypto volatility is back. Although Greek people are not buying bitcoin en masse, the psychological implications of a Greek bank holiday have triggered buying from other parts of the globe. We outlined what you can expect in the US/UK here, in our last post. There is an underlying FOMO in the crypto markets.

With traders back on exchanges, bitcoin was up to it’s usual pumps, dumps and general fuckery. While the MSM has been covering bitcoin, the real action has been in Litecoin (and some of the other alt-coin markets – which we don’t trade).

On Monday, there was a massive upward move in Litecoin (specifically on BFX), which ended up closing (possibly via margin call) a large number of the actual shorts which were open on the exchange. We are going to dig a bit deeper into this move, the previous tests which had been run on the exchange to see if it would be possible and how to identify such behavior in the future.

First, let’s take a look at the overall move (5m chart shown):

Screen Shot 2015-07-01 at 7.51.21 PMThe nearly 20% move mostly occurred during a short 20 minute time span (hey 1%/minute isn’t bad), congrats to those who were able to catch it.

So, why did this happen? What else was occurring? Bitcoin was feeling generally bullish, the (incorrect) msm stories of Greece buying bitcoin were flowing in, and everyone was screaming moon. With some underlying momentum, and general LTC bullishness after large recent gains, this was the perfect time for someone to execute their “plan”.

We first were clued into this person’s activities on June 14th, when we saw some unusual activity in LTC swaps on BFX.

Screen Shot 2015-07-01 at 7.45.52 PMAt this time, we saw a LTC pump (more below), accompanied with a large, rapid rise in LTC swaps, and then a subsequent rapid decrease in swaps. It immediately seemed clear what was going on, and it is absolutely genius. Anyone who trades on BFX knows that if you try to place an order on margin and there aren’t enough swaps left, you order vaporizes. If a person who is “bullish” (aka pumping) reserves all of the LTC swaps, then any asks in the order book will vaporize when they are reached, resulting in a far less stacked order book than appears on the surface. Couple that with underlying FOMO, stop loss triggers and margin calls, you are setting the market up for a nice move upward.

We then saw the same thing 2 days later.

Screen Shot 2015-07-01 at 7.45.59 PMAnd then the most recent (and hopefully not final) pump:

Screen Shot 2015-07-01 at 7.42.41 PMLined up with price, we can see the impact of this trader’s actions:

Screen Shot 2015-07-01 at 8.01.34 PMSo what actually went on here, simplified:

1) Trader borrows all of the LTC swaps available on BFX.

2) Trader runs panicbuyltc.exe (starts panic buying) LTC on BFX.

3) Any asks which aren’t actual LTC, but were to be placed on margin, disappear as the order book and stop losses are eaten through.

4) Profit

 

It appears as if the goal of this actor was to force margin calls/stop losses. If so, they succeeded massively. With LTC more than doubling in price, in less than a month, this actor has created themselves a nice Scrooge McDuck pile of cash to dive into. Thank you random trader, for you have helped bring back some excitement and volatility to the marketplace. If you were short, our condolences, but come on. There were over 200k LTC shorts on BFX a few weeks ago, and the price was maybe ~$2? You can only short something until 0, so what the fuck are you doing short a coin that actually has a community behind it, and has been battered down from ~$50 highs? Sorry bears, but you have had your fun, and definitely will again, but that number of leveraged shorts at this price is beyond silly.

Is Greece The Only Country About To Get Cyprussed?

Everyone is focused on Greece. We obviously didn’t have to tell you that, because you have internet connectivity if you are reading this. Bubble talk has already begun in the bitcoin community, and the pumps and dumps of the last 48 hours may be remembered as “the Reuters roller coaster” (although they should fact check before publishing). A novel idea, but we don’t believe that many Greeks are moving their trash cash into BTC at a rate that’s likely to impact the market. If you are Greek and reading this though, we suggest you head over to Coinbase and secure your wealth. While the msm is going to have a field day trying to tie bitcoin to Greece (as they did with Cyprus), let’s dig a bit deeper into the possible global implications of the upcoming (possible) “Lehman weekend”, and why not just the Greeks should be buying the coin hand over fist.

The capital controls narrative has been pushed all week, so it would be surprising if they weren’t implemented soon after all of the conditioning and herding the sheep have been going through. Of course, they are for our own protection, but for those who like to have control of their wealth, there is always plan ฿.

Let’s refer to the following paper:

Resolving Globally Active, Systemically Important, Financial Institutions

We recommend reading the entire document, as it contains a large amount of good information. The paper outlines both the US and UK’s bail-in plans, and how the failure of a SIFI (systemically important financial institution) will be resolved. A quick Google search will result in similar results for most, if not all, G20 nations. See Canada and Australia.
Note: Investopedia definition of an unsecured creditor – An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan.
I.e.: Anyone who has fiat money that they “deposit” into a bank.
From the paper’s executive summary:
Screen Shot 2015-06-18 at 8.55.10 AM
Screen Shot 2015-06-18 at 8.55.18 AM As the paper notes, “The unsecured debt holders can expect that their claims would be written down to reflect any losses that shareholders cannot cover”. This is mentioned again, a page later.
Screen Shot 2015-06-18 at 9.02.09 AM
Note (in the following excerpt), that the goal is to “[avoid] the need for a bailout by taxpayers”.
Screen Shot 2015-06-18 at 8.56.49 AM Screen Shot 2015-06-18 at 9.02.17 AM
And again, more about the strategies being developed, and how losses will be apportioned to shareholders and unsecured creditors. The goal is clearly stated, that such a resolution will not have any cost to taxpayers (via government bail outs). Why go after money after it has been paid in taxes, when you can just grab it right from accounts?
Screen Shot 2015-06-18 at 9.02.33 AM Screen Shot 2015-06-18 at 9.03.11 AMAnd then that miserable, hyphenated word shows up, “bail-in”. This is in reference to the UK regime’s strategy.
Screen Shot 2015-06-18 at 10.24.23 AM
And, although wordy, the US strategy is equally bad, if not worse (if you are a creditor or equity holder of any kind).
Screen Shot 2015-06-18 at 10.28.24 AMNo need to summarize any of this, it’s all written in their own words.
There is plenty more of interest in the document, but for the sake of brevity let’s stop here.
Now how does this all relate to Greece? Whether or not capital controls are implemented or bail-ins are initiated this weekend, when it happens, it shouldn’t be news. The writing has been on the wall for years, and anyone with a little Google-fu can find the relevant information on the internet, sourced directly from the Central Banks and financial institutions themselves. While the MSM is pumping “this weekend” as some type of big event, they are kind of like the weather man in the sense that they can always be wrong and never get fired. But, just like the weather, that freak storm is going to come one day.
Unless you are already in Bitcoin, you don’t own your money. At least they are nice enough to tell you that though, right on the paper it says “note”.
DEFINITION of ‘Debt Instrument’A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower.Debt instruments are a way for markets and participants to easily transfer the ownership of debt obligations from one party to another. Debt obligation transferability increases liquidity and gives creditors a means of trading debt obligations on the market. Without debt instruments acting as a means to facilitate trading, debt is an obligation from one party to another. When a debt instrument is used as a medium to facilitate debt trading, debt obligations can be moved from one party to another quickly and efficiently.
In summary: While the people of Greece may not have a significant impact in BTC buy volume in the coming days, the psychological impacts felt globally after they are Cyprussed should start to push educated investor’s money into non bail-inable crypto-currencies. When we look back on these interesting times we live in, many will wish they bought BTC at $1,200 and rode it all the way down (then back up again), rather than having unspecified amounts directly taken from their bank accounts. As the famous saying goes, “if you don’t hold it, you don’t own it”. Holding bitcoin, and your own private keys securely, is an excellent hedge against upcoming financial turmoil. Just remember, if you decide to go boating, don’t bring a paper wallet. If you do, make sure it’s laminated. We wouldn’t want any accidents to happen.
Screen Shot 2015-06-18 at 11.14.21 AM

Life Is A Pump And Dump, Front Run The XCP Pump

Spend enough time in the right niches of the bitcoin community, and you are bound to hear “life is a pump and dump” almost too frequently. Unfortunately for traders, the only pumping bitcoin has been doing recently has been in the amount of outstanding USD swaps and margin longs on BFX. Three months of stability, but not everywhere. Some of the more savvy traders have moved over to 1broker to take advantage of the side effects of Central Banking Gone Wild (Summer Edition), but there has still been plenty of action in crypto. A quick look at the Altcoin section of Bitcoin Wisdom shows that quite a few of the “leading” alts have been pumped, and are now being dumped, by bitcoiners with a lot more free time on their hands than we have.

Screen Shot 2015-06-13 at 2.53.50 AMOur focus at shitco.in is on the technology that will revolutionize finance, not some shitty, illiquid altcoin that’s going to be dumped on a new cryptocoiner, likely giving them negative feelings about the whole space.

Last week, while everyone was Reddit arguing over the block size non-issue, a rather substantial piece of news slipped under the radar.

But one thing first about the block size argument, because the drama there is almost worse than the OKC drama (we are waiting for more). Keep arguing and making yourself look bad people, it’s excellent theater. If a suitable conclusion isn’t reached, I’m sure Satoshi will re-appear (re: Dorian situation) and give us the answer (and maybe even GitHub the code for us).

Anyway, so back to that news headline: Symbiont Raises $1.25M Seed Funding from Former NYSE CEO for ‘Smart Securities’ on the Blockchain

We recommend reading all of these full articles for full context.

As Bitcoin Magazine reports:

In March, Bitcoin Magazine reported that Counterparty founders had joined with MathMoney f(x) and its founder Mark Smith as co-founders of the new fintech company Symbiont

Symbiont has announced that it has secured $1.25 million of seed funding from influential financial market leaders including Duncan Niederauer, former CEO of the New York Stock Exchange (NYSE). A ‘Series A’ round of institutional investment is expected to close in the third quarter of 2015.

So why is this a big deal? Anyone who follows Counterparty would have seen this post on March 10: Announcing Symbiont – Building the Next-Generation Platform for Financial Markets

From that blog post:

[in regards to Counterparty]

With the approaching release of the Turing Complete smart contracts system on mainnet, we are at the point where less work needs to be done on the core protocol and more on tools and services that make use of it.

Symbiont is our next step in that direction. Because Symbiont’s technology platform will be based around Counterparty, the core Counterparty technology will remain open source, and will benefit from the greatly increased resources and sustainability this change brings.

We’re all very excited about the potential positive impacts not only to Counterparty, but to the blockchain’s adoption in the systems that power modern finance…

And then on March 31st, this was released: Symbiont Creates Ripple Gateway for Counterparty XCP

Symbiont.io, the blockchain based FinTech startup bridging the gap between mainstream finance and crypto-financial technology, has announced its first product: a Ripple Gateway for Counterparty, over which XCP, Counterparty’s native currency, or any other Counterparty asset may be sent.

“Symbiont is proficient with all of the most advanced technologies in crypto-finance, and is always ready to use the right tool for the job. With this marriage of the Counterparty and Ripple networks, each benefits from compatibility with the other, and the whole is greater than the sum of its parts,”…

In summary, Symbiont is working with all of the leading technologies in crypto-finance (so others besides Counterparty too). Being that the founders of Symbiont are also the founders of Counterparty, we would expect a large number of their projects to be XCP based. They also have an intimate knowledge of the technology, being that they built it.

For anyone who doesn’t know the intimate inner workings of Counterparty, here is a fact worth knowing (in regards to scarcity):

XCP is the fuel for smart contracts. When smart contracts are running, fuel is used for each execution step. Appropriately enough, this fuel is burned (destroyed). This means that the supply of XCP is continously decreasing. However, the cost of fuel adjusts proportionally as the supply of XCP goes down, so that it cannot reach 0.

So how does this relate to pumps and dumps? While everyone was busy fucking around with worthless alt coins, investors who look at the fundamentals and pay attention to worthy news, were busy accumulating XCP.

In addition to the data points mentioned above, also consider this. On February 4, 2015, Coindesk confirmed that the Counterparty developers had left Overstock’s Medici project.

Screen Shot 2015-06-13 at 3.33.17 AMFor perspective, here is the all time XCP chart:

Screen Shot 2015-06-13 at 3.55.56 AMIt’s pretty clear, with the XCP price near all time lows the last few months, that anyone who believes in the Counterparty technology should have been taking advantage of the sale. With a $1.25m seed round from very prominent investors, and a Series A coming in Q3 (estimated), Symbiont has plenty of funding and backing to pursue a variety of Counterparty based projects. The XCP all time high spike was caused by the Medici news, which was far less significant than the recent news regarding Symbiont, and the relationship they have with Counterparty. Granted, that ATH spike was definitely attributed to some FOMO from the simultaneous BTC bubble, we see at least some upward movement from here. We don’t have a target, don’t care to make one, aren’t investment advisers and don’t give investment advice.

By the way, can someone please make a decent charting website for XCP?

Disclaimer: We are long XCP. While everyone was out chasing unicorn dust in alts, we have been accumulating XCP, bitchez.

X – The Future Of Food Supply Chains

A little over a week ago, Coindesk came out with an excellent article titled: How Bitcoin’s Technology Could Make Supply Chains More Transparent

The piece outlines the potential future uses of bitcoin/blockchain technology, in respect to increasing transparency of supply chains (the article specifically refers to food products). If you haven’t given the article a read yet, we definitely recommend you do in order to grasp the full scope of this post (we aren’t going to rehash the article).

Exactly a year ago (this week), the Shitcoi.in staff were in Barcelona on a debaucherous journey. Somewhat pissed off, after looking for two bitcoin ATMs and turning up empty handed, we decided to grab food. As frequent Barcelona visitors, we have our favorite places to eat, but are always on the lookout for something new. Our preference is to only eat organic, locally sourced and sustainable.

The common theme of conversation on that trip was the ongoing decentralization of everything, and its direct impact on our lives. Our indecisiveness on where to eat led us to start drinking, and a few Estrella’s later we came up with the framework for what we would later decide to name – X.

X (which usually marks pirate treasure on a map, duh), was what we decided to call “reverse Uber for food”. That reverse Uber part might need a little bit of work, but we’re willing to adjust.

The idea is to create a phone app for finding local food that actually works, i.e: doesn’t show “eye candy” as a characteristic of the restaurant you are looking at (re-reading our notes actually made us lol at that part). Part of the solution was creating an intuitive interface with which the user could view hoards of data, including entire supply chain information. The other part of our solution is our sustainable revenue model, which is not ad based.

Here are some of the notes that we took originally.

Challenge: Eating healthy is tough in itself, eating healthy in a rush or while on vacation is even more challenging. While a Michelin star or a restaurant run by a student of Ferran Adria may denote an acceptable food consumption venue for some, these indicators are not an end-all for most. Today’s food app solutions are based around a centralized, crowd sourced “internet 1.0” architecture. Rather than attempt to fix this flawed model (as many have done in the past), we propose: building a new, decentralized system. In essence, re-inventing instead of repairing.

All of today’s apps (especially revolving around food) are terribly centralized, full of fake reviews/false information, can be out of date and don’t provide the information that most healthy hungry people want to see. Opening TripAdvisor is just about as useful as skimming through Time Out XXX, with “eye candy” apparently a relevant indicator of food quality.

Part of this re-inventing includes a viable revenue model, something many startups in the social media/app/tech space lack today. Restaurants typically pay a minimum of 2-5% (sometimes as much as 10% or more) in credit card fees to their credit card processors. By requiring our customers to pay via Bitcoin (directly in the app), we can still take a fraction (micropayment) of the total from each bill and save the restaurant money on their bottom line. The user is incentivized to use the app because of a) the content and b) a free item, which will be given to them by the restaurant for dining with them any booking/paying with X. The savings in credit card fees subsidizes the free item for the restaurant, and there is no worry of chargebacks.

What we are seeing today is the de-centralization for everything. From transport (uber), to energy (solar, wind, urban renewable) to food (urban gardening/local-organic) and across many other areas. As the details of the modern food industry, GMOs, antibiotics and corporpations etc…. add more here have been divulged to the general public, more people have sought to maintain a healthy lifestyle and avoid many types of products. Talk about Pacific ocean fish here. People are seeking fresh, natural, locally grown food. Today’s apps might show us what is “popular”, but gives us no way to actually judge the quality of the food we are eating.

Our “solution” would consist of 3 different pieces. What we would like to produce is a software package.

  • software at the customers site (could possibly be inventory tracking and realtime revenue tracking) Re: Moto – Chicago
  • cloud based processing and database – store and process all of the relevant data
  • app for smartphone – for the customer to interface with the cloud data

 

The goal is to keep things as simple as possible, as we believe simplicity = success.

 

What are consumers looking for?

  • Non GMO/Organic/Grass Fed
  • How fresh are the ingredients
  • Where is each ingredient sourced from
  • Can I research each of these on my own to verify
  • Where is the closest place I can get the best of all of the above?
  • ?? Maybe it can show how many tables are open??

Our software would require each restaurant to keep track of their ingredients via their “terminal”. This would be constantly updated to the cloud database for processing and retrieval via the app. The app would simply show a map of the users location and the closest restaurants that were “partners”. The different restaurants would be ranked via a proprietary algorithm, which would take into account the freshness and “organic’ness’” (we could create some key word here that could also be part of our app name) of each product that the restaurant used.

The goal is to stay away from the traditional metrics that we see on EVERY food site today (grubhub, tripadvisor, etc). We may want to also include a $, $$, $$$ ranking, but should try to keep the filters as simple as possible.

There is the possibility of programming a revenue tracking section to the “terminal” that would be housed at each restaurant. This would be used to help track revenue loss from expired ingredients and could be used to model future purchases from vendors.

OUR REVENUE MODEL:

Currently, restaurants pay anywhere from 2% – 10% in credit card fees to their processors. Using Bitcoin to pay, there will be a ~1% fee for transactions. An additional ~1% can be added on top of that (our processing fee) and there is still enough money left that promotions could be added without any loss for the restaurant. At this point, Bitcoin has passed the threshold into the mainstream, and the simple fact that using Bitcoin IS our revenue model will attract a large amount of media attention. The additional incentive for the restaurant owners is that there are no chargebacks with Bitcoin.

We even threw together some fun slides (here are a few of them):

X (food app) Presentation 1 X (food app) Presentation 2 X (food app) Presentation 3 X (food app) Presentation 4Obviously the idea is unfinished, we would love to revisit it. Just to clarify (in case you were wondering), yes, this is what we do for fun sometimes… Any VCs want to throw some money our way and move this forward? misinfo@shitco.in

Bears Dump On Bitlicense

Lawsky and the NYDFS released the final version of the Bitlicense today. While bitcoin community members have been internet fighting over regulation, the bottom line is that it was coming one way or another, deal with it. If individual companies feel that the current framework is too restrictive, Lawsky stated that the NYDFS would be willing to re-visit the license and amend it as necessary.

Taking a look through the license, there are a few things that we feel are important to point out.

Final Bitlicense can be found here.

Screen Shot 2015-06-03 at 12.21.15 PMThis is great news for anyone worried about their exchange running a fractional reserve, trading with customer funds, etc. What it also appears to mean, is that US based exchanges can soon begin running a BFX style swap system.

Screen Shot 2015-06-03 at 12.22.50 PMThis aligns with FinCEN’s previous statement, which can be found here. While one day we hope that bitcoin will be recognized as legal tender, the regulators aren’t there just yet.

Currency vs. Virtual Currency

FinCEN’s regulations define currency (also referred to as “real” currency) as “the coin and paper money of the United States or of any other country that [i] is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance.”3 In contrast to real currency, “virtual” currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction. This guidance addresses “convertible” virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency.

 

What we find to be the most important piece of the new Bitlicense is something that most will overlook. In the 2014 version (here), there was a part at the bottom of page 14 that caught our attention.

Screen Shot 2015-06-03 at 12.25.46 PMScreen Shot 2015-06-03 at 12.25.52 PM

 

 

Sneaky, sneaky… so once hyperbitcoinization sets in, and no one wants that dirty fiat, the original plan was to use the trash cash to continue supporting the ponzi.

This is NOT in the new Bitlicense, and we thank you for that Lawsky. Overall, this is an extremely exciting day for Bitcoin. Although not all welcome regulation, the proposed framework does not seem too restrictive business wise. Anyone with $5,000 per application (to pay for your background check and associated fees) is now free to send in their fingerprints and completed forms to the NYDFS to review.