Dollars

March 2015


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Henry Sapiecha

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Henry Sapiecha

bit coins in focus image www.acbocallcentre.com

AntPool, BW.com, NiceHash, CKPool and GHash.ioare among a number of bitcoin mining pools and operations that have been hit by distributed denial-of-service (DDOS) attacks in recent days.

The incidents appear to have begun in the first week of March. For example, on 11th March, AntPool ownerBitmain sent an email to customers disclosing the DDOS attacks and advising external pool users to set up failsafe pools in the event of an outage.

According to many of the companies affected by the incidents, those behind the attacks demanded payment in bitcoin in return for stopping the attacks.

BW.com alerted customers via its official blog to possible service disruptions owing to DDOS attacks, but did not say whether or not a ransom notice had been sent. Other pools took to Bitcoin Talk to warn users about the DDOS attacks.

GHash.io operator CEX.io suggested that affected pools are seeing escalating DDOS threats, and said that the source of recent attacks on its pool came with increasing ransom demands.

A spokesperson for CEX.io told CoinDesk:

“The attack has been conducted by a hacker who has already DDOSed CEX.IO in October, 2014. Previously, he demanded 2 BTC for stopping the attack. This time, the payment has been raised to 5 to 10 BTC.”

At least one other mining pool, NiceHash, also reported sustained DDOS attacks last fall.

The alleged source of the DDOS attacks, operating under the name DD4BC, is believed to be behind a number of attacks on digital currency websites and services in the past year.

Incidents tied to DD4BC include an attack last year on the digital currency exchange Bitalo that resulted in the posting of a 100 BTC bounty. Following the recent DDOS threats, Bitmain contributed an additional 10 BTC to the bounty.

Disruptions likely to continue

Affected pools say they have moved to boost in-house defense mechanisms in light of the attacks, but some have warned that future outages may likely occur. Bitmain said that its other services, including the cloud mining platform HashNest, may also be affected in the coming days.

Operators that responded to press queries say they have refused to pay the ransoms and will continue keeping their pools open despite the risk of future DDOS attacks.

Some of the pools have conceded that resolving the situation will be difficult owing to the capabilities believed to be possessed by the source of the attacks.

Bitmain’s Yoshi Goto noted that the attacks appear to be systematic and acknowledged that it remains unclear when the situation will be completely resolved.

“It is a cat and mouse game now but we will do our best,” he said.

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Henr Sapiecha

 

Regulated currencies like the US dollar could soon join Bitcoin in the virtual space.

Regulated currencies like the US dollar could soon join Bitcoin in the virtual space. Photo: AP

IBM is considering adopting the underlying technology behind bitcoin, known as the “blockchain,” to create a digital cash and payment system for major currencies, according to a person familiar with the matter.

The objective is to allow people to transfer cash or make payments instantaneously using this technology without a bank or clearing party involved, saving on transaction costs, the person said. The transactions would be in an open ledger of a specific country’s currency such as the dollar or euro, said the source, who declined to be identified because of a lack of authorisation to discuss the project in public.

The blockchain — a ledger, or list, of all of a digital currency’s transactions — is viewed as bitcoin’s main technological innovation, allowing users to make payments anonymously, instantly, and without government regulation.

Rather than stored on a separate server and controlled by an individual, company, or bank, the ledger is open and accessible to all participants in the bitcoin network.

The proposed digital currency system would work in a similar way.

“When somebody wants to transact in the system, instead of you trying to acquire a bitcoin, you simply say, here are some US dollars,” the source said. “It’s sort of a bitcoin but without the bitcoin.”

IBM is one of a number of tech companies looking to expand the use of the blockchain technology beyond bitcoin, the digital currency launched six years ago that has spurred a following among investors and tech enthusiasts.

The company has been in informal discussions about a blockchain-tied cash system with a number of central banks, including the US Federal Reserve, the source said. If central banks approve the concept, IBM will build the secure and scalable infrastructure for the project.

IBM media relations office did not respond to Reuters emails about this story and the Fed declined to comment.

However, there are signs that central banks are already thinking about the innovations that could arise through digital currency systems. The Bank of England, in a report in September 2014, described the blockchain’s open ledger as a “significant innovation” that could transform the financial system more generally.

Instead of having ledgers maintained by banks that act as a record of an individual’s transactions, this kind of open ledger would be viewable by everyone using the system, and would use an agreed-upon process for entering transactions into the system.

The project is still in the early stages and constantly evolving, the source said. It is also unclear how concerns about money-laundering and criminal activities that have hamstrung bitcoin.

Unlike bitcoin, where the network is decentralised and there is no overseer, the proposed digital currency system would be controlled by central banks, the source said.

“These coins will be part of the money supply,” the source said. “It’s the same money, just not a dollar bill with a serial number on it, but a token that sits on this blockchain.”

According to the plans, the digital currency could be linked to a person’s bank account, possibly using a wallet software that would integrate that account with the proposed digital currency ledger.

“We are at a tipping point right now. It’s making a lot more sense for some type of digital cash in the system, that not only saves our government money, but also is a lot more convenient and secure for individuals to use,” the source said.

Reuters

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Henry Sapiecha

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1. (60 globally) Vladimir Potanin – [Russia] – $15.4 billion ($12.6 billion in 2014)

Potanin has shot up the rankings from last year, being one of the few miners to come out ahead despite the downturn. Last year he was ranked 86th globally, and only at number 7 in regards to mining.

He is now also the richest person in Russia.

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2.(71 globally) Alisher Usmanov – [Russia/Uzbekistan] – $14.4 billion ($18.6 billion in 2014)

Usmanov has been unseated from his top position last year after recording a 22 per cent drop in his wealth year on year. He also slipped significantly in global rankings, after coming in 40th last year.

This also means he is now no longer the richest person in Russia, slipping to third.

Usmanov, like many Russian and former Soviet oligarchs, built his fortune in mining operations.

He runs USM, holding 100% voting rights in the company, and is the co-owner of Metalloinvest, which owns metal and mining businesses such as Lebedinksy GOK and Ural steel mills.

Usmanov also holds a large stake in underwater mining company Nautilus Minerals, which holds exploration tenements off Papua New Guinea.

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3.(77 globally) German Larrea Mota Velasco  – [Mexico] – $13.9 billion ($14.7 billion in 2014)

Velasco has recorded the third consecutive drop in his revenues year on year, although his wealth stating relatively stable compared to the rest of the sector, which contributed to his rising in the rankings from 6th to third for mining, although he did fall from 67th to 77th globally.

German Lerrea Mota-Velasco is the head of Grupo Mexico, the largest mining corporation in Mexico and the third largest copper producer in the world.

Through its subsidiary, Southern Copper, it has the largest copper reserves in the world

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4. (82 globally) Iris Fontbana – [Chile] – $13.5 billion ($15.5 billion in 2014)

In a similar fashion to Velasco, a relatively small drop in wealth has seen Fontbana retreat down the global list from 58th last year, but actually ascend the mining list from 5th position in 2014.

Iris Fontbona is the widow of Antonio Luksic, who is the founder of the Luksic Group.

Similar to GroupoBAL, Luksic holds a number of interests in different areas, but predominantly in mining. The group has major holdings in Antofagasta, the UK listed copper miner.

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5.(82 globally) Lakshmi Mittal – [India] – $13.5 billion ($16.7 billion in 2014)

The only Indian on the list, Mittal’s fortunes have been hit particularly hard, with his wealth more than halving in the last four years.

Mittal came in third for mining, and 52nd globally last year.

Mittal is the chairman and CEO of ArcelorMittal, the largest steel manufacturer in the world.

He opened his first steel mill in Indonesia at the age of 26 and has gone from strength to relative strength since.

Coming off a high of $31.1 billion in 2011, Mittal has seen his fortunes dwindle as the demand for steel shrinks.

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6.(89 globally) Alexei Mordashov – [ Russia] – $13 billion ($10.5 billion in 2014)

Mordashov is another Russian who has fared well over the last year in spite of the spiralling rouble. Last year he snuck into the list in 10th place, and sat at 111th, globally.

Like a number of Russian and East European billionaires, Mordashov made his money during the break-up of the Soviet Union.

Whilst working for Cherepovetsky Metallurgical Plant he bought a major stake in the factory when it was privatised. He later became a general director of the business and went to build the conglomerate Severstal, acquiring coal and mining companies. His wealth grew in spite of the  selling off his North American steel plants to the Renco Group for $1.2 billion, less than half of what he paid for them only three years ago.

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7.(94 globally) Gina Rinehart – [Australia] – $12.5 billion ($17.7 billion in 2014)

The only Australian on this list, Rinehart’s fortunes have slipped significantly, by close to a third, in the wake of the tumbling iron ore price. Last year she came in second for mining, and 46th globally.

Despite this she is still Australia’s richest person.

While many believe Gina inherited much of her wealth from her father’s company and operations through Hancock Prospecting, when she assumed the chair of HPPL the company was actually found to be in serious debt.

According to the company “much of Rinehart’s wealth has been generated since her executive chairmanship commenced in 1992″.

This was done through the development of the Hope Downs iron ore project, the acquisition and development of the Roy Hill project, and its Queensland coal interests,” which all took place under Mrs. Rinehart’s executive chairmanship,”Hancock Prospecting said.

The company owns swathes of extremely prospective iron ore tenements throughout the Pilbara, which is now being transformed into the massive Roy Hill mine.

Rinehart also shares in the profits generated by the Hope Downs mine, and also has major stakes in the Alpha Coal and Kevin’s Corner coal project in the Galilee Basin.

A heavily dramatised version of her life recently appeared on T.V., of which we will say no more.

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8. (107 globally) Vladimir Lisin – [Russia] – $11.6 billion ($16.6 billion in 2014)

Lisin has dropped down the rankings dramatically, falling from fourth in mining, and 53rd globally, last year.

A Russian steel tycoon, Lisin a one of the world’s leading authorities on metallurgy, and holds a number of patents on metallurgical processes.

In a similar vein to Australia’s own Nathan Tinkler, (although much more successful) Lisin started at the bottom, working as a mechanic at a Soviet coal mine, working his way through the ranks to become a deputy chief engineer.

Thanks to tenacious trading, which gained him a large share of the nation’s steel and mining industry following Soviet collapse, eventually becoming the sole owner of Novolipetsk Steel in 22000.

He has been a director of Norilsk Nickel since 2002.

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9.(121 globally) Alberto Bailleros Gonzalez – [Mexico] – $10.4 billion ($12.4 billion in 2014)

Demonstrating the fading fortunes of many mining magnates, while Gonzalez has remained stable at ninth position on the mining billionaires list, he has dropped significantly down the global list, falling from 90th last year.

Gonzalez owns a holding company called GroupoBAL, which amongst other things runs Penoles, which is the world’s largest producer of refined silver and bismuth, as well as Latin America’s largest producer of lead and zinc.

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10.(125 globally) Wang Wenyin – [China] – $9.9 billion

Wenyin is a newcomer to the mining top ten list, and the only Chinese citizen.

He has charged up the global rankings, rising from 354th last year to his new position just outside of the top 100, demonstrating the significant newfound wealth in China.

He is the chair of the Amer International Group. Which produce cable and copper products, and holds interests in a number of copper mines based in China’s Jiangxi Province.

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OOO

Henry Sapiecha

The use of the digital cryptocurrency bitcoin is hindering police investigations.

The use of the digital cryptocurrency bitcoin is hindering police investigations. Photo: Getty Images

It’s not only outlawed motorcycle gangs and other hardened criminals using virtual cryptocurrencies such as bitcoin for illicit purposes. “Mums and dads” are also using them to buy illicit narcotics and synthetic drugs, the Australian Crime Commission has told a senate inquiry examining virtual currencies.

“…You are seeing large volumes of mums and dads purchasing illicit commodities over the internet and we’re seeing organised crime groups such as [outlaw motorcycle gangs] in recent media reporting using bitcoin as a standard way to move value,” Dr John Moss, national manager of intelligence at the Australian Crime Commission, told the senate inquiry on Wednesday.

"Mums and dads" are using digital currencies to buy drugs, according to Dr John Moss of the Australian Crime Commission.

“Mums and dads” are using digital currencies to buy drugs, according to Dr John Moss of the Australian Crime Commission.

Appearing surprised at the revelation, Nationals Senator Matthew Canavan asked Dr Moss to confirm that “mums and dads” were in fact purchasing illicit commodities using digital cryptocurrencies and the types of goods and services they were acquiring.

“The primary detection is around narcotic importation [and] new synthetic drugs,” Dr Moss said.

Responding to a Fairfax Media request for further evidence, Dr Moss said he was talking about “everyday” Australians using bitcoin for illicit purposes.

“Clear evidence of this can be seen by the nature of illicit drug purchases from illicit marketplaces on the dark-net,” Dr Moss told Fairfax Media.

“For example, small scale purchases, low in volume, sent to Australian residential properties or PO Box addresses.”

Although not all related to bitcoin, he said the Australian Crime Commission’s Illicit Drug Data Report for 2012-13 showed a record 86,918 seizures of illicit drugs — a 66 per cent increase on the previous decade.

The senate inquiry into digital currency is examining how to develop an effective regulatory system for virtual currencies in Australia, the potential impact of digital currency technology on the Australian economy and how Australia can take advantage of digital currency technology.

But law-enforcement agencies told the inquiry that digital currencies being used for illicit purposes were making their investigations into criminal matters more difficult.

“The main challenge for the [Australian Federal Police] operationally is the anonymity associated with bitcoins and the lack of regulation,” said Jarred Taggart, team leader of the AFP’s Criminal Asset Confiscation Taskforce, who added that there was a real challenge in determining the true owners of bitcoins and other digital currencies.

“So … while [that] may not be something that is a significant issue for us at the moment, it’s more in the future space where things like this, if there were predictions that say [these currencies] may become more popular and more user friendly, [then] that could become an issue if there wasn’t an ability for us to understand the true ownership behind bitcoins,” Mr Taggart added.

Hamish Hansford, national manager of strategic intelligence and strategy at the Australian Crime Commission, also told the inquiry it wasn’t only cryptocurrencies preventing investigations.

“I think it’s fair to say that across a whole range of different areas it’s becoming more and more difficult to investigate and prosecute crime and this is just another type of encryption … on a whole range of different areas,” he said, noting the use of encrypted ways of communicating and the use of “darknets” on the internet, which make it difficult to identify offenders.

“So the way in which law-enforcement responds to a digital currency issue needs to change over time and … it’s becoming more difficult to investigate with the higher levels of encryption.”

But Daniel Mossop, director of the Attorney-General’s Department’s financial crime section, told the inquiry it was important to try to regulate the currencies in a way that didn’t “stifle their growth”.

“We do realise that there is a range of useful and worthwhile purposes for digital currency,” Mr Mossop said.

“It obviously has … the ability to vastly increase the financial inclusion for people who are currently unbanked [without bank accounts]. It’s [also] a relatively cheap and effective way for people to hold and store value and move it around easily … with relatively limited fees. So it’s something that we would like to see used in a positive way but also in a way where we can try and mitigate those risks [of criminal activity occurring with their use ].”

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Henry Sapiecha