Bitcoin is vulnerable to sabotage from the Chinese government because of its overwhelming exposure to the country, researchers have warned.

Beijing could render the Bitcoin network effectively useless by taking control of the powerful computers used to maintain the digital currency, which are largely based in China, according to a report from security companies Hacken and Gladius.

This is cryptocurrency explained in video

Bitcoin is seen by its supporters as free of government control, a feature that is highlighted as one of its key benefits.

The digital currency is maintained not by any central organisation but by a collection of “miners”, computers that are rewarded in new Bitcoins for updating the ledger of all transactions known as the blockchain.

As Bitcoin has grown, it has required more expensive and powerful computers, and meant mining has migrated to parts of the world where electricity is cheap, in particular China.

Some 77.7 per cent of the “hashpower” – the computing strength behind Bitcoin – is now based in China, according to the report, leaving the network vulnerable. The majority of the specialised hardware used to mine Bitcoin is also made in China.

“It is obvious what this country can do to the network. [It] is over-exposed to China and the government can sabotage it,” said Vladyslav Makarov, an author of the report.

Bitcoin transactions must be confirmed by a consensus of users, which protects the currency from cyber attacks.

However, if one party were to control more than half of its processing power, they would be able to manipulate Bitcoin in a way that renders it useless, the report says. Such a “censorship attack” would cause transactions to grind to a halt, be completed twice, or result in Bitcoins disappearing from wallets. These events could be launched by Beijing if it coerced enough miners in the country.

Beijing has already proven itself to be sceptical of Bitcoin and other cryptocurrencies, prompting fears about financial stability and capital flight. This year China has already banned initial coin offerings, a form of crowdfunding that involves companies issuing cryptocurrency-like tokens, and has shut the online exchanges that allow people to buy and sell cryptocurrencies.

Neither act dampened appetite for Bitcoin, whose price rose to an all-time high near $US20,000 this month, before dropping back last week.

An attack on the network could have potentially devastating effects. Even if it does not completely freeze the network, it could cause a confidence crisis that leads to Bitcoin’s price collapsing.

It is obvious that a huge amount of hashpower concentration in a single jurisdiction is detrimental to the health of the Bitcoin ecosystem.

“It is obvious that a huge amount of hashpower concentration in a single jurisdiction is detrimental to the health of the Bitcoin ecosystem,” said Hacken’s Hennadiy Kornev.

Adam Anderson from Gladius said that the damage from such an attack could be limited by cloning, or “forking”, Bitcoin to create a version less vulnerable to Chinese influence.

“[However], I’m not sure faith in Bitcoin could be restored,” he said.

The Sunday Telegraph, London

Courtesy of bitcoin play

Compliments of  >>>


Henry Sapiecha

Henry Sapiecha

  • Bitcoin’s mysterious creator could be Australian Craig Steven Wright

Police and tax investigators have raided the Sydney home of a man that members of the Australian bitcoin community say might be the mastermind behind the controversial cryptocurrency, just hours after reports emerged in the United States suggesting that he may be its secretive creator.

However, Fairfax Media has been told the raid at the property of Craig Steven Wright relates to an “individual taxation matter” involving Mr Wright, rather than his apparent role in creating the encrypted currency.

The alleged creator of Bitcoin, Australian Craig Steven Wright.


The Australian Federal Police attended Mr Wright’s home in Gordon, on Sydney’s north shore, on Wednesday afternoon to assist the Australian Taxation Office in carrying out a search.

In a report published on Wednesday morning, US tech publication Wired said it had uncovered enough evidence to suggest that bitcoin’s mysterious founder, who operated under the pseudonym Satoshi Nakamoto, was actually 44-year-old Mr Wright.

Wired acknowledged that its report was based on “unverified leaked documents” that it admitted “could be faked in whole or in part”.

Fairfax Media attempted to contact Mr Wright for comment but received no response. The Australian Federal Police referred matters to the ATO. The ATO declined to comment.

Mr Wright is listed by the Australian Securities and Investments Commission as a director of Hotwire and another company, Panopticrypt, which are both registered at a residential address on Sydney’s North Shore. He has been a shareholder and director in a range of other enterprises, the ASIC database shows.

This Sydney property owned by Craig Steven Wright was searched by police on Wednesday.

He is also listed as chief executive on the website of a company called DeMorgan, which describes itself “a pre-IPO Australian listed company focused on alternative currency, next generation banking and reputational and educational products.” Calls to this company went straight to voicemail.

‘He was a bit weird’

At about 4.15pm, the real estate agent managing the Gordon home leased by Mr Wright entered the house after being told by a neighbour, who knew the owners, that it was being searched.

The AFP and tax investigators raid Craig Wright’s home in Gordon.

Photo: Nick Moir

Federal Police and the ATO officers were then later seen leaving the property, at 4.50pm. Asked why the federal police were at the house, they offered “no comment”.

Neighbours, who didn’t wish to named, said Mr Wright was an elusive man who had two children and a partner. He had an expensive taste in cars, they said, having seen him pull up to the house in a Toyota Land Cruiser, a Lexus, and a Jaguar.

Mr Wright, his partner, and children were not seen within the vicinity of the house.

Apart from owning a dog, which one neighbour described as “noisy”, he also owned hens, which could be seen out the back of his house.

“I thought he did something with insurance or was an entrepreneur or something,” said one neighbour, who described Wright as a “daggy dad” often seen exercising in his garage gym. “He was a bit weird.”

Another neighbour said Mr Wright apparently had three-phase, 450-volt power — normally used for industrial applications — installed at the home.

The same neighbour said he recently heard that Wright had packed up the house as he was apparently off to go live in London. None of the neighbours interviewed said that Wright had told them he was the creator of Bitcoin.

Plausible candidate

Chris Guzowski, founder of ABA Technologies and a regular on the Bitcoin conference circuit, said Wired had uncovered enough circumstantial evidence for Mr Wright to be a plausible candidate.

“It certainly makes sense,” said Mr Guzowski. “He’s definitely been in Bitcoin from the very start and has accumulated a really big stash of Bitcoin. He’s also been in this huge stoush with the ATO for a long time.”

Andrew Sommer, a partner at Clayton Utz and who testified at last year’s Senate Inquiry into digital currency, is reputedly Mr White’s lawyer.

But Mr Sommer said he couldn’t comment on any client when contacted by Fairfax.

Zhenya Tsvetnenko, founder of bitcoin remittancy company Digital BTC, has discussed business with Mr Wright previously and was struck by his understanding of Bitcoin and his long history with the protocol.

“It could definitely be him, I remember thinking this guy could be Satoshi at the time,” Mr Tsvetnenko said

“I asked him how many Bitcoin he had and he said enough to buy a pizza. Which is a joke because it’s well known in the Bitcoin community the first thing bought with the very first Bitcoin was a pizza.”

The Wired story was not the first time a media outlet has claimed to reveal the true identity of bitcoin’s founder.

Last year, US magazine Newsweek said it had found the mysterious person behind the cryptocurrency t. However the man it named, Dorien Nakamoto, unconditionally denied Newsweek’s claim, and subsequently sued the publication.

The Wired report cites archived blog posts from as far back as 2008, purportedly written by Mr Wright, which discuss aspects of the distributed ledger that is a key element of bitcoin, as well as leaked emails and a liquidation report by Australian corporate recovery firm McGrath Nicol involving one of Mr Wright’s companies.

McGrath Nicol confirmed the veracity of the liquidation report, which states that the company, called Hotwire Preemptive Intelligence, was backed by $30 million in capital that was “injected via bitcoins”.

Potential hoax

Wired acknowledged that the trail of evidence leading to Mr Wright could be part of an elaborate hoax.

Asher Tan of CoinJar, Australia’s largest bitcoin exchange, said he was skeptical of Wired‘s claim, pointing out the bitcoin community relies on mathematical proof.

Solid technical proof should be given more weight than speculation, he said.

“There are some methods of doing this,” Mr Tan said. These would include “moving bitcoin attributed to Satoshi’s personal stash or utilising his personal encryption key (PGP) to communicate.

“These aren’t foolproof methods of identifying him, but anyone who publicly stakes a claim to being Satoshi would be expected to demonstrate either of these methods.”

The New York Times, which conducted an inconclusive investigation of its own into the matter, has described Mr Nakamoto’s identity as “one of the great mysteries of the digital age”.

But many in the bitcoin community believe that the identity of the person (or people) behind Nakamoto is irrelevant, since the virtual currency is an open source and community driven technology. It sure is a fun story though.

Do you know Satoshi Nakamoto? Email our reporters.

Henry Sapiecha

APOSTLES of blockchain, the technology behind Bitcoin, think of it as the internet of money

with implications stretching far beyond the cryptocurrency


Henry Sapiecha

bitcoin images www.acbocallcentre (1)

Reinventure has taken a stake in Bitcoin company Coinbase, which has 2.3 million users and 3 million digital “wallets”. Photo: Bloomberg

westpac logo image

In a deal that will put Westpac Banking Corp in the box seat as cryptocurrencies develop, the bank’s venture capital fund, Reinventure Group, has invested in Coinbase, one of the world’s pre-eminent Bitcoin companies.

In the first deal involving an Australian bank and a Bitcoin company, it is understood that Reinventure joined a $US75 million raising Coinbase conducted earlier this year, which also won support by some of the world’s largest venture capital firms, the New York Stock Exchange and former Citigroup CEO Vikram Pandit.

Backers of Coinbase are making bets that blockchain technology will radically transform the movement of money around the globe’s financial system. The investment by Reinventure will allow Westpac to monitor a future world where money morphs beyond central bank-regulated currencies into a myriad of forms.

“We plan to work closely with Reinventure and share insights into the use of digital currencies globally,” the San Francisco-based Coinbase said in an announcement on its blog on Tuesday morning. A spokesman for Westpac confirmed the investment. Coinbase’s “mission is to be the most trusted bitcoin company in the world and it is investing heavily in next generation security. Reinventure’s investment will provide key insights into the use of digital currencies and associated technologies,” the Westpac spokesman said

Coinbase provides a range of services to the Bitcoin economy. These include allowing customers to exchange domestic currencies into Bitcoin and transfer payments in Bitcoin, storing Bitcoin in a digital wallet and providing merchant services to process transactions for companies dealing in Bitcoin. It also operates an exchange where speculators can bet on direction of price of bitcoin, and various anti-money laundering and security services.

The company has been seeking to legitimise Bitcoin which has been plagued by volatile moves in its price, the high-profile theft of some Bitcoin from an exchange in Japan, and its use in the blackmarket economy. Coinbase has been working with regulators in the US and the UK to create legal frameworks under which it can operate.

Earlier this month, US regulator Benjamin Lawsky released a final version of Bitcoin regulations known as a BitLicense which will require digital currencies businesses in New York state to operate with a license and report to government. The Reserve Bank of Australia has conducted detailed analysis of Bitcoin and its implications. A Senate Committee is also preparing a report on digital currencies due for release this year.

Reinventure joined in the recent “Series C” fundraising round venture capital powerhouses Draper Fisher Jurvetson, Andreessen Horowitz, Robbot Capital  and Union Square Ventures, all of which had participated in previous Coinbase raisings. As well as the NYSE, the raising was Japan’s largest mobile phone operator NTT DoCoMo, USAA Bank, the venture arm of Spain’s BBVA, Mr Pandit and former Thomson Reuters CEO Tom Glocer.

It is believed the participation of USAA, BBVA and now Westpac represents the first time any global financial institutions or their VC funds have invested in Bitcoin. No amounts were disclosed, however, it is understood that each party put in between $US1 million and $US10 million into the raising, which was completed in January.

Coinbase allows users to buy and sell Bitcoin in 25 countries and is focused on expanding to 30 by the end of the year. “We look forward to working with Reinventure and bringing bitcoin to new markets around the world,” the company said.

Reinventure Group co-founder Simon Cant said: “We’re very excited to be working with such a great management team and look forward to helping them grow their business.”

According to Coinbase’s website, it has 2.3 million users, serves 3 million digital “wallets”, is used by 40,000 merchants and has 7,000 developer applications. Wallet growth grew by 10 times in 2014, the company has said.

The deal comes after Westpac, Australia and New Zealand Banking Group and Commonwealth Bank of Australia begin testing out payment technology from US-based company Ripple Labs, an exchange for messages that is being targeted towards banks. The Ripple network uses similar blockchain-style technology to Bitcoin, which it calls a ledger, but is a distributed network rather than a decentralised one.

Westpac seeded Reinventure – which is managed independently – with $50 million in February last year. It has made four previous investments: marketplace payments provider, PromisePaybig data analytics firm Zetaris Corporation; Australian local community social network Nabo; and the peer-to-peer lender SocietyOne, which is also backed by media moguls James Packer, Lachlan Murdoch and Ryan Stokes.


Henry Sapiecha

bit coins in focus image

AntPool,, 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. 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. operator 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 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.


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.



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 ].”


Henry Sapiecha

bitcoin 400 fred wilson

Motherboard, a blog run through Vice Media LLC, was recently given a tour of a bitcoin mining facility in Dalian, a port city in Liaoning Province, northeast China.

The mine, located on the second floor of a repurposed factory, generates 4,050 bitcoins a month, the equivalent of around $1.5 million, according to Motherboard:

“Despite its dystopian appearance, the group’s six mining farms encompass eight petahashes per second of computing power, whose brute force, as of October, accounted for 3 percent of the entire Bitcoin network.”

Bitcoins – a digital currency that can be transferred instantly between two people anywhere in the world – are generated by “mining” them with custom-built computers. Wikipedia compares the process to “a continuous raffle draw [where] mining nodes on the network are awarded bitcoins each time they find the solution to a certain mathematical problem (and thereby create a new block). Creating a block is a proof of work with a difficulty that varies with the overall strength of the network.”

“To put it simply, we’re racing to find an answer on the Internet,” said Jin Xin, Bitcoin Mine Manager, in a video shot during a site visit. “Whoever does the correct calculation will be rewarded. The rewards are bitcoins, a virtual currency.”

At its peak, the Changcheng factory churned out 100 bitcoins a day at each of its six sites, but the group of entrepreneurs is finding that as the level of difficulty and computing power increase, the ratio is gradually changing. The process uses about 1,250 kilowatt-hours of electricity, and the group’s monthly electricity bill is about $80,000. They are currently mining from 20 to 25 bitcoins a day.

The facility has about 3,000 “miners,” which are computers that connect to the Internet and churn out algorithms whose correct queries are then generated an award in the form of a “bitcoin” – which is really just a number associated with a bitcoin address.


Henry Sapiecha

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