Dollars

December 2013


EXPERT ECONOMIST GIVES THUMBS DOWN FOR BITCOIN + OTHER STUFF

paul-krugman

It’s no secret that famed economist Paul Krugman hates Bitcoin (as a monetary system).

He’s been talking about it since back in 2011 when the cryptocurrency was on very few peoples’ radars.

“What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin,” the economics professor wrote two years ago.

In his most recent column, “Bits and Barbarism,” Krugman has even harsher words for the cryptocurrency whose valued has soared over the past few months, reaching an all-time high of $1,240 per BTC in November.

In Krugman’s piece – a “tale of monetary regress” as he puts it – the economist identifies three “money pits” – Bitcoin being the second on his list.

Bitcoin only has value because people are willing to buy it because they think other people are willing to buy it, Krugman explains.

“It is, by design, a kind of virtual gold. And like gold, it can be mined: you can create new bitcoins, but only by solving very complex mathematical problems that require both a lot of computing power and a lot of electricity to run the computers,” Krugman writes.

“A lot of real resources are being used to create virtual objects with no clear use,” he concludes.

Interestingly, the first “money pit” on Krugman’s list is Barrick Gold’s Porgera open-pit gold mine in Papua New Guinea. The economist criticizes the mine for its reputation of human rights abuses and environmental damage.

Interested in Krugman’s third “money pit”? You should probably read it in his words.

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Henry Sapiecha

EXPERT ECONOMIST GIVES THUMBS DOWN FOR BITCOIN + OTHER STUFF

paul-krugman

It’s no secret that famed economist Paul Krugman hates Bitcoin (as a monetary system).

He’s been talking about it since back in 2011 when the cryptocurrency was on very few peoples’ radars.

“What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin,” the economics professor wrote two years ago.

In his most recent column, “Bits and Barbarism,” Krugman has even harsher words for the cryptocurrency whose valued has soared over the past few months, reaching an all-time high of $1,240 per BTC in November.

In Krugman’s piece – a “tale of monetary regress” as he puts it – the economist identifies three “money pits” – Bitcoin being the second on his list.

Bitcoin only has value because people are willing to buy it because they think other people are willing to buy it, Krugman explains.

“It is, by design, a kind of virtual gold. And like gold, it can be mined: you can create new bitcoins, but only by solving very complex mathematical problems that require both a lot of computing power and a lot of electricity to run the computers,” Krugman writes.

“A lot of real resources are being used to create virtual objects with no clear use,” he concludes.

Interestingly, the first “money pit” on Krugman’s list is Barrick Gold’s Porgera open-pit gold mine in Papua New Guinea. The economist criticizes the mine for its reputation of human rights abuses and environmental damage.

Interested in Krugman’s third “money pit”? You should probably read it in his words.

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Henry Sapiecha

VIDEO ON HOW TO GET BITCOINS

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Henry Sapiecha

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In September, the FBI shut down the Silk Road online drug marketplace, and it started seizing bitcoins belonging to the Dread Pirate Roberts — the operator of the illicit online marketplace, who they say is an American man named Ross Ulbricht.

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The seizure sparked an ongoing public discussion about the future of Bitcoin, the world’s most popular digital currency, but it had an unforeseen side-effect: It made the FBI the holder of the world’s biggest Bitcoin wallet.

The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address that consolidates much of the seized Silk Road bitcoins. Those 144,000 bitcoins are worth close to $100 million (£61 million) at Tuesday’s exchange rates. Another address, containing Silk Road funds seized earlier by the FBI, contains nearly 30,000 bitcoins (£12 million).

That doesn’t make the FBI the world’s largest bitcoin holder. This honour is thought to belong to bitcoin’s shadowy inventor Satoshi Nakamoto, who is estimated to have mined 1 million bitcoins in the currency’s early days. His stash is spread across many wallets. But it does put the federal agency ahead of the Cameron and Tyler Winklevoss, who in July said that they’d cornered about 1 percent of all bitcoins (there are 12 million bitcoins in circulation).

In the fun house world of bitcoin tracking, it’s hard to say anything for certain. But it is safe to say that there are new players in the Bitcoin world — although not as many people are buying bitcoins as one might guess from all of the media attention.

Satoshi stores his wealth in a large number of bitcoin addresses, most of them holding just 50 bitcoins. It’s a bit of a logistical nightmare, but most savvy Bitcoin investors spread out their bitcoins across multiple wallets. That way if they lose the key to one of them or get hacked, all is not lost.

“It’s easier to keep track of one address, but it’s also most risky that way,” says Andrew Rennhack, the operator of the Bitcoin Rich List, a website that tracks the top addresses in the world of bitcoin.

According to Rennhack, the size of the bitcoin universe has expanded over the past year, but the total number of people on the planet who hold at least one bitcoin is actually pretty small — less than a quarter-million people. Today, there are 246,377 bitcoin addresses with at least one bitcoin in them, he says. And many people keep their bitcoins in more than one address. A year ago, that number was 159,916, he says.

Although some assume that the largest Bitcoin addresses are held by bitcoin dinosaurs — miners who got into the game early on, when it was easy to rack up thousands of bitcoins with a single general-purpose computer — almost all of the top 10 bitcoin addresses do not fit that profile, says Sarah Meiklejohn, a University of California, San Diego, graduate student.

She took a look at how many transactions in these wallets seemed to match the profile of early-day miners and found that only one of them really fit the bill.

The rest seem to belong to what Meiklejohn calls Bitcoin’s “nouveau riche”: people who are accumulating bitcoins from non-mining sources. “What you’re seeing is this influx of a different kind of wealth,” she says.

Because most bitcoin addresses haven’t been publicly identified — like the FBI’s — it’s hard to say exactly who makes up the new Bitcoin top 10. Meiklejohn says that they’re likely to include wallets created by up-and-coming Bitcoin exchanges or businesses. One of them is the wallet that’s thought to contain 96,000 bitcoins stolen from the Silk-Road successor, Sheep Marketplace.

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Henry Sapiecha

gold dollar sign line

In September, the FBI shut down the Silk Road online drug marketplace, and it started seizing bitcoins belonging to the Dread Pirate Roberts — the operator of the illicit online marketplace, who they say is an American man named Ross Ulbricht.

bitcoin_13

The seizure sparked an ongoing public discussion about the future of Bitcoin, the world’s most popular digital currency, but it had an unforeseen side-effect: It made the FBI the holder of the world’s biggest Bitcoin wallet.

The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address that consolidates much of the seized Silk Road bitcoins. Those 144,000 bitcoins are worth close to $100 million (£61 million) at Tuesday’s exchange rates. Another address, containing Silk Road funds seized earlier by the FBI, contains nearly 30,000 bitcoins (£12 million).

That doesn’t make the FBI the world’s largest bitcoin holder. This honour is thought to belong to bitcoin’s shadowy inventor Satoshi Nakamoto, who is estimated to have mined 1 million bitcoins in the currency’s early days. His stash is spread across many wallets. But it does put the federal agency ahead of the Cameron and Tyler Winklevoss, who in July said that they’d cornered about 1 percent of all bitcoins (there are 12 million bitcoins in circulation).

In the fun house world of bitcoin tracking, it’s hard to say anything for certain. But it is safe to say that there are new players in the Bitcoin world — although not as many people are buying bitcoins as one might guess from all of the media attention.

Satoshi stores his wealth in a large number of bitcoin addresses, most of them holding just 50 bitcoins. It’s a bit of a logistical nightmare, but most savvy Bitcoin investors spread out their bitcoins across multiple wallets. That way if they lose the key to one of them or get hacked, all is not lost.

“It’s easier to keep track of one address, but it’s also most risky that way,” says Andrew Rennhack, the operator of the Bitcoin Rich List, a website that tracks the top addresses in the world of bitcoin.

According to Rennhack, the size of the bitcoin universe has expanded over the past year, but the total number of people on the planet who hold at least one bitcoin is actually pretty small — less than a quarter-million people. Today, there are 246,377 bitcoin addresses with at least one bitcoin in them, he says. And many people keep their bitcoins in more than one address. A year ago, that number was 159,916, he says.

Although some assume that the largest Bitcoin addresses are held by bitcoin dinosaurs — miners who got into the game early on, when it was easy to rack up thousands of bitcoins with a single general-purpose computer — almost all of the top 10 bitcoin addresses do not fit that profile, says Sarah Meiklejohn, a University of California, San Diego, graduate student.

She took a look at how many transactions in these wallets seemed to match the profile of early-day miners and found that only one of them really fit the bill.

The rest seem to belong to what Meiklejohn calls Bitcoin’s “nouveau riche”: people who are accumulating bitcoins from non-mining sources. “What you’re seeing is this influx of a different kind of wealth,” she says.

Because most bitcoin addresses haven’t been publicly identified — like the FBI’s — it’s hard to say exactly who makes up the new Bitcoin top 10. Meiklejohn says that they’re likely to include wallets created by up-and-coming Bitcoin exchanges or businesses. One of them is the wallet that’s thought to contain 96,000 bitcoins stolen from the Silk-Road successor, Sheep Marketplace.

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Henry Sapiecha

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Henry Sapiecha

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SECURITY FLAW IN BITCOIN SYSTEM  ALLOWS THEFT OF $112M WHEN SHEEP MARKETPLACE CLOSES

BITCOINS IN BULK IMAGE www.profitcentre.net

Another online drug marketplace bit the dust over the weekend and another massive Bitcoin heist shook the deep web.

Sheep Marketplace, one of the two most prominent Silk Road competitors, went down on Saturday in the US. A message posted briefly on the site on Saturday claimed that one of Sheep Marketplace’s vendors exploited a security flaw and stole 5400 Bitcoin (BTC), or $6.3 million at its current value.

The heist could be even larger than that, though; it may have involved up to 96000 BTC ($112.1 million), which would be by far the largest Bitcoin theft given that Bitcoin’s value is currently at an all-time high. It’s the third major Bitcoin robbery in the last month; cybercriminals also stole 4100 BTC from inputs.io, which was run by an Australian, and 1295 BTC from BIPS, both online Bitcoin payment providers.

On Saturday, a Reddit user posted a message from the site’s administrators, which has since been removed. The message claimed vendor EBOOK101 hacked the site and stole 5400 Bitcoin.

“Sheep is down. We are sorry to say, but we were robbed on Saturday 11/21/2013 by vendor EBOOK101,” the message reportedly said. “This vendor found [a] bug in [our] system and stole 5400 BTC – your money, our provisions, all was stolen. We were trying to resolve this problem, but we were not successful. We are sorry for your problems and inconvenience, all of current BTC will be ditributed to users, who have filled correct BTC emergency adress [sic]. I would like to thank to all SheepMarketplace moderators by this, who were helping with this problem. I am very sorry for this situation. Thank you all.”

Details of the incident are still unclear. Angry former users of the drug bazaar are pointing fingers in all directions, mainly on Reddit, and mounting a cyber-manhunt operation to track down the robbers. Many believe the heist was a scam, and the No. 1 suspect among Redditors is the Sheep Marketplace administrator, a Czech citizen named Tomáš Jiřikovský. Rumors of suspicious behavior from Sheep Marketplace’s administrators began in late November, as documented on the website SheepMarketScam.com.

“You run a site partially dedicated to thieves and scammers selling their wares, yet somehow wonder how it ends up getting robbed?” wrote Reddit user twigburst.

Jiřikovský has, in turn, denied the accusation in a Facebook post.

The stolen 5400 BTC were allegedly just the tip of the iceberg. Redditors pointed to a transfer of 39,900 BTC this weekend, claiming it was an indication that the administrators were siphoning money from users’ accounts on the site, as first reported by Forbes.

On Monday, a Redditor nicknamed sheeproadreloaded2 claimed to identify a transfer of 96,000 stolen bitcoins. Along with another Redditor, sheeproadreloaded2 kept track of the money as it moved through Blockchain, the public repository of all bitcoin transactions.

“We’ve been chasing the scoundrel with our stolen bitcoins through the blockchain,” sheeproadreloaded2 wrote. “Around lunchtime (UK), I was chasing him across the roof of a moving train, (metaphorically). I was less than 20 minutes, or 2 blockchain confirmations, behind ‘Tomas.'”

As a side effect of the Sheep Marketplace heist and shutdown, another Silk Road competitor, BlackMarket Reloaded, has closed doors, claiming the site wouldn’t be able to sustain the migration of users and vendors from Sheep Marketplace.

After the abrupt closings of both sites, others launched in the wake of Silk Road’s shutdown in October. They are Silk Road 2.0, which was launched less than a month ago, and the lesser-known Pandora Marketplace, Deep Bay and Budster.

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Henry Sapiecha

gold dollar sign line

SECURITY FLAW IN BITCOIN SYSTEM  ALLOWS THEFT OF $112M WHEN SHEEP MARKETPLACE CLOSES

BITCOINS IN BULK IMAGE www.profitcentre.net

Another online drug marketplace bit the dust over the weekend and another massive Bitcoin heist shook the deep web.

Sheep Marketplace, one of the two most prominent Silk Road competitors, went down on Saturday in the US. A message posted briefly on the site on Saturday claimed that one of Sheep Marketplace’s vendors exploited a security flaw and stole 5400 Bitcoin (BTC), or $6.3 million at its current value.

The heist could be even larger than that, though; it may have involved up to 96000 BTC ($112.1 million), which would be by far the largest Bitcoin theft given that Bitcoin’s value is currently at an all-time high. It’s the third major Bitcoin robbery in the last month; cybercriminals also stole 4100 BTC from inputs.io, which was run by an Australian, and 1295 BTC from BIPS, both online Bitcoin payment providers.

On Saturday, a Reddit user posted a message from the site’s administrators, which has since been removed. The message claimed vendor EBOOK101 hacked the site and stole 5400 Bitcoin.

“Sheep is down. We are sorry to say, but we were robbed on Saturday 11/21/2013 by vendor EBOOK101,” the message reportedly said. “This vendor found [a] bug in [our] system and stole 5400 BTC – your money, our provisions, all was stolen. We were trying to resolve this problem, but we were not successful. We are sorry for your problems and inconvenience, all of current BTC will be ditributed to users, who have filled correct BTC emergency adress [sic]. I would like to thank to all SheepMarketplace moderators by this, who were helping with this problem. I am very sorry for this situation. Thank you all.”

Details of the incident are still unclear. Angry former users of the drug bazaar are pointing fingers in all directions, mainly on Reddit, and mounting a cyber-manhunt operation to track down the robbers. Many believe the heist was a scam, and the No. 1 suspect among Redditors is the Sheep Marketplace administrator, a Czech citizen named Tomáš Jiřikovský. Rumors of suspicious behavior from Sheep Marketplace’s administrators began in late November, as documented on the website SheepMarketScam.com.

“You run a site partially dedicated to thieves and scammers selling their wares, yet somehow wonder how it ends up getting robbed?” wrote Reddit user twigburst.

Jiřikovský has, in turn, denied the accusation in a Facebook post.

The stolen 5400 BTC were allegedly just the tip of the iceberg. Redditors pointed to a transfer of 39,900 BTC this weekend, claiming it was an indication that the administrators were siphoning money from users’ accounts on the site, as first reported by Forbes.

On Monday, a Redditor nicknamed sheeproadreloaded2 claimed to identify a transfer of 96,000 stolen bitcoins. Along with another Redditor, sheeproadreloaded2 kept track of the money as it moved through Blockchain, the public repository of all bitcoin transactions.

“We’ve been chasing the scoundrel with our stolen bitcoins through the blockchain,” sheeproadreloaded2 wrote. “Around lunchtime (UK), I was chasing him across the roof of a moving train, (metaphorically). I was less than 20 minutes, or 2 blockchain confirmations, behind ‘Tomas.'”

As a side effect of the Sheep Marketplace heist and shutdown, another Silk Road competitor, BlackMarket Reloaded, has closed doors, claiming the site wouldn’t be able to sustain the migration of users and vendors from Sheep Marketplace.

After the abrupt closings of both sites, others launched in the wake of Silk Road’s shutdown in October. They are Silk Road 2.0, which was launched less than a month ago, and the lesser-known Pandora Marketplace, Deep Bay and Budster.

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Henry Sapiecha

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Bitcoin’s won’t become popular if you believe investment firm Offit Capital. 

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Bitcoins probably won’t become a popular method of exchange as competing “crypto-currencies” crowd the market, confusing merchants and sending them back to credit cards and cash, investment firm Offit Capital says.

“Why should I pay $US1000 for a Bitcoin when I can acquire a Bbqcoin for $US10 or a Hobonickle for 10 US cents?” Todd Petzel, chief investment officer of the New York-based private wealth-management firm, said in a report today. “They are all costless to produce, and consequently ultimately worth as much.”

Bitcoins, which aren’t regulated by any country or banking authority, jumped 80-fold from a year earlier to about $US1200 last week. They traded at $US104.98 on Tuesday on online exchange BitStamp. The currency, which exists as software in an open online system, gained credibility after law enforcement and securities agencies said at US Senate hearings last month that it could be a legitimate means of exchange.

Bitcoins fall short as a viable currency because there is a finite supply, Petzel said. The software that creates bitcoin dictates there can be only 21 million in circulation.

“A Picasso drawing could sell for one Bitcoin and a Starbucks latte for one one millionth of a Bitcoin,” he said. “An absolute fixed quantity of currency in circulation is a recipe for extreme deflation and all the problems that come with it.”

Bloomberg

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Henry Sapiecha
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BITCOIN MILLIONAIRE ONE DAY, POOR THE NEXT BECAUSE OF DRIVE THROW OUT

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A British IT worker has launched a frantic search of a landfill site after realising he accidentally threw away a computer drive holding $7.9 million in the online currency bitcoin.

James Howells, 28, obtained 7500 bitcoins in 2009 when the currency was virtually worthless. Its value has since soared, with a single bitcoin hitting $US1000 ($1101) for the first time last week.

Howells left the hard drive in a drawer for several years, and threw it away earlier this year without a second thought.

To his horror, he then realised what it had contained – and that he would be a millionaire, if he could only find it.

He now faces the prospect of a painstaking hunt through a massive landfill site in his home city of Newport, Wales, he told BBC television.

“When I went to the tip the manager took me up to the current landfill site and when I saw it — it’s about the size of a football field — my first thought was ‘no chance’,” he said.

James Howells.
James Howells. Photo: ABC TV/BBC

“The manager explained that things that were sent to landfill three or four months ago could be three to five feet (1.5 metres) deep.

“He confirmed my worst fears when he said that.”

Large-scale searches of the landfill site — including those for police evidence — usually involve up to 20 workers with digging equipment and dogs, he added.

“The truth is, I haven’t got the funds or ability to make that happen at the moment without a definite pay cheque at the end of it,” Howells said.

He told the BBC he forgot about the bitcoin stash because he was “distracted by family life and moving house”.

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The hard drive was thrown out between mid-June and August, he believes.

He has checked all of his back-up files without success.

Launched in 2009 as the invention of a mysterious computer guru who goes by the pseudonym Satoshi Nakamoto, bitcoins can be exchanged online for real money or used to buy goods and services on the internet.

The currency is not regulated by any government.

AFP

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