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CONTENTS

The Blockchain is the True Beginning of Recorded History

Care About Your Financial Privacy? HD Wallets are Your Friend

by DAVID A. JOHNSTON

by ARIANNA SIMPSON

Letter from the Editor

Bitcoin Might be Digital, but It’s Still Old Money by NICK MILLS

Crypto Biz Magazine

Page.2 October.2014

Expert Advisory Board . . . . . . . . . . . . . . . . . . . 21 Million for Billions by DOM STEIL .

by DOM STEIL

You Know You Want to Go: You’re Invited to . . . . . . . . . . . . New Zealand’s First Bitcoin Conference by BELINDA TOO

The World Outside the Valley . . . . . . . . . . . . . . . . .

by JEFF HANDLER and DAVE SUTTER

CryptoCoin Social

Looking for the Next CEO for Bitcoin Inc. . . . . . . . . . . . . . 24 by MANIE EAGAR

continued on page.6

Issue.05 October.2014 Published by CRYPTO BIZ MEDIA, a division of CRYPTO BIZ GROUP

I AM SOSHI… The wave of social entrepreneurship that Bitcoin has generated is revolu-

Editor-In-Chief SOSHI

tionary. This new industry has allowed previously unimaginable possibilities

Chief Operations Advisor TRENT NELLIS trent@cryptobizmagazine.com

that are now completely possible.

Chief Financial Advisor BARRY MORGAN Chief Technical & Media Advisor JAY ADDISON Art Director VANESSA KING Technical Editor BELINDA TOO COVER DESIGN Jay Addison CONTRIBUTING WRITERS Blake Anderson, Oleg Andreev, Manie Eagar, Jeff Handler, Tina Hui, David A. Johnston, Nick Mills, Chris Mrozek, Arianna Simpson, Dom Steil, David Sutter, Belinda Too IN THE US: NEW JERSEY Josh Gold Josh@cryptobizmagazine.com IN THE US: SACRAMENTO CA Brandon Johnson Brandon@cryptobizmagazine.com IN NEW ZEALAND: AUCKLAND Belinda Too Belinda@cryptobizmagazine.com

to become fuel; the fuel for outrageous futuristic dreams, and innovations,

This new type of entrepreneur is less focused on the traditional business model, where profits and market share are key performance indicators. Bitcoin entrepreneurs tend to be more socially-minded, and want to solve problems through innovation, combined with passion and networking, to have a wider effect on society—while, of course, operating successful businesses. The risks they take in setting up a completely new style of business are high, but the rewards for such an enterprise are tantalizing. The Bitcoin ecosystem shows how all of the interesting and clever business concepts that people are launching, are not really in competition with each other, but work in collaboration. Each new, successful Bitcoin business adds another layer of credibility to the ecosystem, by introducing or enhancing Bitcoin usage to another section of traditional society. We’re in a transitional stage, where every individual who learns to use Bitcoin will be able to teach others, until acceptance becomes widespread, with the bonus of an endless suite of technology and products to support

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this new economy.

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nity seems too outrageous, or too niche. The beauty of this is that each busi-

www.cryptobizmagazine.com Crypto Biz Magazine assumes no responsibility for unsolicited material. Opinions expressed herein are those of the authors and advertisers and do necessarily reflect those of CRYPTO BIZ GROUP, editors, advisors or staff. Readers are encouraged to thoroughly investigate and consult with a crypto financial advisor before embarking on any investment, speculation or financial opportunities. Crypto Biz Magazine makes no warranties or guarantees and we assume no liability regarding advertisements or editorial content or any claims that may arise from them. The contents of Crypto Biz Magazine are Copyright © 2014, all rights reserved. Crypto Biz Magazine may not be reproduced in whole or in part without the expressed written permission of CRYPTO BIZ GROUP.

of Things,’ function even better. Whether it’s social entrepreneurship, based on sharing the wealth generated by traditional network advertising techniques; the economic explanation to why Bitcoin is needed to support social change, and welfare; providing a social environment to discuss ideas; considering how the blockchain is the next evolution of historical record-keeping; or even rethinking how a global currency could be backed using the resources from the Universe… these entrepreneurs are willing to take risks to collaboratively create value for the cause. Enjoy reading these ideas in this month’s magazine, and consider how we are all part of a collective social shift into a new economic ecosystem, driv-

Receive our monthly editions delivered to you in the digital format of your choice.

en by entrepreneurs who want to improve life for everyone.

Enjoy! —S

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subscriptions@cryptobizmagazine.com for a FREE subscription to Crypto Biz Magazine

ness appeals to someone, and this assists the ecosystem, and the ‘Internet

October.2014 Page.3

E-MAIL contact@cryptobizmagazine.com

The attitudes of Bitcoin entrepreneurs should be commended. No opportu-

Crypto Biz Magazine Page.4 October.2014

CONTENTS

continued from page.2

Bitcoin Service Directory . . . . . . . . . . . . . . . . . . San Francisco Meetup

Orlando Meetup

The New Age and Language of Security .

Crypto Biz Magazine

Page.6 October.2014

by BLAKE ANDERSON

Github Bitcoin Glossary . . . . . . . . . . . . . . . . . . . 46 Inside Bitcoins, Tel Aviv . . . . . . . . . . . . . . . . . . . 57 Bitcoin Merchant Directory

EXPERT ADVISORY BOARD KRISTOV ATLAS KRISTOV ATLAS is a network se-

curity and privacy researcher who studies crypto-currencies. He is the author of Anonymous Bitcoin: How to Keep Your Ƀ All to Yourself, a practical guide to maximizing financial privacy with Bitcoin. Kristov is also a correspondent for the World Crypto Network, appearing regularly on the weekly roundtable show The Bitcoin Group, and host of Dark News, a show about un-censorship technologies.

LISA CHENG LISA CHENG is the co-founder of

BRANDEN PETERSEN is the founding Executive Director a n d C h a i r m a n o f t h e B o a rd of yesbitcoin. Along with this work, he serves on the Financial St a n d a rd s Wo r k i n g G ro u p at Th e B i tco i n Foundation. Elected to the Minnesota House of Representatives in 2010 and the Minnesota State Senate in 2012, Petersen currently represents the people of Senate District 35 in Northwest Anoka County. His legislative accomplishments in education policy reform as well as citizen data privacy protections are among the notable items in his body of work as the youngest member of the State Senate. Along with his work in the public sector, Petersen has also been delivering strategic communications solutions for an array of nonprofit and corporate clients as a Senior Counselor at Ainsley Shea Communications in St. Paul, MN.

PIOTR PIASECKI, BSc MSc PIOTR PIASECKI i s a C h i e f

S c i e n t i s t a t P rova b l e I n c , a Vancouver-based software development startup. Since discovering Bitcoin in 2011, he became a reputable member of the Bitcoin community under the nickname “ThePiachu.” Piotr wrote his Master’s thesis on the subject of Bitcoin security in Technical University of Lodz, in Poland. He is also a moderator of Bitcoin.StackExchange. com, /r/Bitcoin subreddit, runs a number of Bitcoin-focused websites, such as Vanity Pool and TestNet Faucet, as well as writes a blog on various cryptocurrencies.

October.2014 Page.7

Distributed.buzz and the CEO of the Vanbex Group. She is the force behind the popular news aggregation site BitcoinRegime. com and a behind the scenes advocate of Bitcoin 2.0 and blockchain technology. She comes from an accomplished background after having worked at Fortune 500 companies and technology startups involved with Big Data, algorithmic trading, and enterprise systems. Lisa’s time is now focused on consulting and planning for new cryptocurrency projects after having worked for the Mastercoin Foundation in leading the Business Development effort. She is located in Vancouver, British Columbia, Canada and you can reach her via Twitter @lisacheng.

BRANDEN PETERSEN

Crypto Biz Magazine

21 MILLION FOR BILLIONS The price of Bitcoin has slowly declined over the past few months, despite a flurry of development, and consumer and merchant adoption. This past summer it dropped from:  $620 to $520 from July 20th – August 20th,

Crypto Biz Magazine

Page.8 October.2014

 $500 to $420 from August 20th – September 20th,

most recently a drop of $30 US Dollars (13%) on this past Friday, September 19th to under $400. [Editor’s note: at the time of this wrting, this drop was the most recent significant drop.]

by DOM STEIL

In August, the Chinese Yuan represented 70% of all Bitcoin trade volume. It would make sense if, as many are speculating, the most recent drop in Bitcoin prices was caused by international and domestic investors selling Bitcoin to invest in the largest IPO in history. On a side note, people probably sold some Bitcoin to get the new iPhone 6 and iPhone 6 Plus. The price is still sitting in the hundreds, but the recent decline has everyone in the ecosystem wondering what app needs to be developed, or what company needs to adopt it as payment, for Bitcoin to get that comma back. What about all of the projected, end of 2014, price targets of $1,400, or upwards of $1,800? Originally, any Bitcoin news was good news, to get the word out regarding this new developing digital currency. Now, positive sentiment seems not to have as drastic an effect on the price.

There’s speculation in many Bitcoin and financial communities that Alibaba’s recent IPO may have caused the most recent price drop. Alibaba raised $25 billion in its debut, making it the largest IPO in history. It’s a massive company, with many internet subsidiaries such as Taobao Marketplace, Tmall, eTao, AliExpress.com and Alipay.

A recent exception, on September 23, was PayPal’s announcement that it would integrate Bitcoin payments for digital goods, which brought the price back up from $395 to $445. In addition, their subsidiary, Braintree, announced that it would also be integrating Bitcoin payments into its software development kits. With the reach of our various digital mediums and the fact we are inseparable from our mobile devices, any sort of news or event nowadays is instant global news. Any change in sentiment can have an immediate effect on the price of any type of market, commodity or company because people can trade, immediately, from their mobile devices. This is especially true with the Bitcoin market, given its volatility. The price a year ago, September 2013, was $123 USD. It is now sitting at just over $400 and people are actually considering this a low! This is great news, and here is why. Despite the sell and downward market movement over the past few months, Bitcoin is still being heavily invested in, and developed in the form of:  Venture Capital over the past year compared to 2013  Startups over the past year compared to 2013  Bitcoin ATMs: Lamassu, BitOcean

On September 15, 2014, almost 90k transactions took place, the fifth highest daily volume ever, and only a few days before the price dropped. The only other time volumes were this high, or higher, was November, 2013, when Bitcoin was around $1,000 USD. The price across exchanges follows transaction volume, for good or for bad. If there’s enough limit order volume in the book, the order gets filled at the price of the last transaction. If there is not enough order volume, the next best price fills the order.

METCALFE’S LAW AND THE NETWORK EFFECT Metcalfe’s Law is related to the number of unique connections in a network of nodes(n) expressed as n(n-1)/2. More Bitcoin nodes mean more efficient relay of transactions throughout the network. There are currently around 7,000 reachable nodes in the world. The future of Bitcoin has already arrived, the software just takes time to be evenly distributed around the world. As Bitcoin becomes easier to use, and I mean easier than using a piece of plastic and signing your name, the price will follow the value of this network.

MOORE’S LAW The network is exponentially increasing. Miners are being built on chips down to 16nm and 14nm.

 Core Software developments: Multisig, APIs released  Multiple Bitcoin ETFs

 Derivatives Exchanges

 Regulatory recognition from the NYDFS and the ex-

tended comment period to October 21st, 2014

 Corporate adoption in 2014

 Chain  Toshi

 BlockCypher  Plugchain  Gem

FIRST TO MARKET OR BEST IN CLASS The power is in the software, the mathematics that govern the distribution rate of new coins. September, 2014—There are currently 13 of 21 million coins in the market, with 25 new BTC mined every ten minutes

September, 2020—18 of 21 million coins in the market, for five billion people connected to the Internet Machines, “the Internet of Things,” connected can use bitcoins as flow control payment for operations.

It’s just the beginning for this type of international network. The software is open source, and it reaches anyone with an internet connection. It’s a divisible substance in the sense that half of a bitcoin, or even a thousandth of a bitcoin, is still Bitcoin. On the other hand, half of a penny… is not money. 21 million coins for billions of people, all with mobile banks in their pockets. —S DOM STEIL is an entrepreneur from

the Silicon Valley. He is well-versed in a variety of technological fields and has experience as a business analyst at the international enterprise level. For more information, visit his blog at www.dominicsteil.wordpress.com. Dom also accepts Bitcoin tips to:

1FiYresjQP7GV9EUxr9fudWm3Xz7WC2VMC

Crypto Biz Magazine

September, 2016—15 of 21 million coins in the market, releasing 12.5 BTC every ten minutes

There’s a lot going on behind the scenes that price, and the general public sentiment, doesn’t reflect. The fact that the Alibaba IPO only drove the price down $30 USD, shows Bitcoin is here to stay. Bitcoin is extremely responsive in this sense.

October.2014 Page.9

Blockchain APIs

THE BLOCKCHAIN IS THE Crypto Biz Magazine Page.10 October.2014

TRUE BEGINNING OF RECORDED HISTORY by DAVID A. JOHNSTON

THE FRAGILE HISTORICAL RECORD Since the invention of writing systems, around five thousand years ago, humanity has been able to encode and decode messages through reading and writing. The recording and storage of these messages, particularly on paper, provides the insights we have today about the history of the world. However, due to the fragile, combustible, and generally decaying nature of paper, surprisingly few original historical records from before the time of the printing press have survived. In addition to general decay and loss to fires, the medium of paper is difficult to authenticate, in the sense of providing a reliable “time stamp,” indicating when a message was originally created— though carbon dating has helped in this respect. Today, computer-based recording systems, while much better at copying and relaying messages

instantly around the world, still suffer from fraud and persistence issues in maintaining an honest record of history. Databases can be easily altered; records can be fraudulently created; and central record-keeping authorities can be corrupt, or fail to properly back up multiple copies of records.

ENTER THE BLOCKCHAIN And then, on January 3rd, 2009, the Bitcoin blockchain began confirming blocks of transactions (starting with the Genesis Block) on its decentralized network of nodes. That day, for the first time in human history, a truly persistent and immutable ledger of record began operating. The very first transaction contained the following text “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

The text, which was from a headline in that day’s newspaper, was the first extra data, other than the transaction itself, to be stored in the Bitcoin blockchain. Fast forward a few years, and applications are storing all sorts of data in the Bitcoin blockchain, far beyond a few words attached to a transaction.

ENTER THE SAFE NETWORK The final piece in creating our true, recorded history of the world falls into place with the capabilities of a decentralized, immutable storage network for large files. The Safe Network, and other projects, such as Storj, are creating a place for users to permanently store files on a distributed network of nodes, making the original document recoverable for all time.

One of the methods to accomplish this is known as “Proof of Existence,” where the user hashes a long document into a short string of letters and numbers and places that hash into the blockchain.

Now we can maintain an honest accounting of the timing of events in history, thanks to the blockchain.

ENTER FACTOM

Finally, with all the hashes in this process linked to the blockchain record, any user can, at any time in the future, conduct a “Proof of Audit” and confirm the process was following according to the rules set forth.

The clarity and reliability with which we can record, prove, and audit events in our personal lives, as well as our collective history, is about to radically improve. It could even be said that this shift is equal to that of the move from our ancient past of oral history, to the beginning of written history as we know it. —S

DAVID A. JOHNSTON , Investor, Technologist, and 10X

Entrepreneur, Austin, Texas—David has extensive experience with a number of leading tech and cryptocurrency organizations. Currently he’s the managing director for DApps Fund I, where he evaluates investments in Decentralized Applications & Protocols. He’s also a founding board member at the MSC Protocol Foundation, which supports the development of open source tools for the Master Protocol. He’s also a co-founder, and the original Executive Director, of the BitAngels Network, where he built up the group’s membership to one of the largest angel networks in the world.

Crypto Biz Magazine

The next logical extension of this “Proof of Existence” is to allow users to chain together these timestamped documents as a “Proof of Process,” thus leveraging the time-stamping service throughout a defined series of activities, so that an entire process can be proven to have been executed.

CONCLUSION October.2014 Page.11

This effectively places an immutable timestamp on the document, forever onward (provided the user has a copy of the document), it can be proven with cryptographic certainty that the document did indeed exist in that form, and at the time it was added to the blockchain record.

So, now we have the original document, we have the time-stamping from the immutable blockchain, we can bring the two together with a Notary Chain, and further prove a fine-grained series of actions accrued.

U S EE

C BS

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YOU KNOW YOU WANT TO GO: YOU’RE INVITED TO NEW ZEALAND’S FIRST BITCOIN CONFERENCE, BITCOIN SOUTH, NOVEMBER, 2014 PRESS RELEASE—It’s time to add the most exciting Bitcoin networking event and conference destination to your calendar: Bitcoin South in Queenstown, New Zealand, the weekend of November 29 – 30, 2014. Go on an unforgettable adventure, and enjoy the latest the global Bitcoin community has to share. Organized by the founder of bravenewcoin.com, Fran Strajnar, the conference is taking shape as a ‘Journey Around the Blockchain,’ to give a full 360-degree view of cryptocurrencies—designed to educate and drive Bitcoin adoption in New Zealand by bringing together a wide range of innovators and businesses leaders. Anyone from corporate executives to entrepreneurs and developers are encouraged to attend so they can learn how Blockchain Technology can be integrated into their company—it will impact every business over the next few years. Bitcoin is a fundamental change in how we see, count and store value, and track assets, and is rivaling the dot com tech boom in terms of global interest and investment.

And with a full schedule of some of the biggest names in Bitcoin attending, plus a line-up of local New Zealand specialists, there will be something for every level of Bitcoin enthusiast.

Some of New Zealand’s own specialists will appear, including Simon Jensen and Jonathon Ewing. These specialists include a variety of entrepreneurs who have made businesses out of Bitcoin functionality, those who want to share their story of how they suc-

The event will be held at the Millennium Hotel in Queenstown, New Zealand. The adventure capital was chosen as a destination to polarize the innovative and adventurous spirit inherent in Bitcoin. Queenstown’s activities will act as a networking tool, for those who wish to spend an extra day or two cutting deals, or building relationships with other attendees. Queenstown is an incredible luxury location for a Bitcoin Meetup—guests will be able to experience the amazing Lord of the Rings territory, dramatic lakeside scenery, and majestic mountain views, which make up the Southern Hemisphere’s premier four-lake and alpine resort area. Award-winning airline, Air New Zealand, will fly you there in style, maybe even on one of their famous Hobbit planes. International flights arrive in Auckland, and then connect to Queenstown. Make sure you have your camera handy as you fly over the picturesque and breathtaking Southern Alps! Only 500 tickets are available for this conference, don’t miss out on this amazing opportunity! Put a New Zealand stamp in your passport—register now at bitcoinsouth.co. Early bird bookings are available until September 30th.

Crypto Biz Magazine

Speakers include Andreas Antonopoulos, Jeffery Tucker and Jeff Berwick and a large number of other international specialists.

The two-day agenda is designed to give a fascinating and empowering overview on ‘what is Bitcoin’ as well as detailed information around the technology, the regulation, and the various markets it’s already disrupting.

October.2014 Page.13

Educating mainstream industries will go a long way towards making Bitcoin a regular feature of economic enterprise, and this conference is an opportunity for businesses to learn, be inspired, and go away feeling more confident about what Bitcoin has to offer. Whether you’re new to Bitcoin and curious about its potential, or already involved and looking to further your understanding, or share your ideas—this conference is for you.

cessfully integrated Bitcoin into their businesses, legal and accounting experts who can advise on the changing economic landscape, and Bitcoin currency traders who want to share their expertise.

THE WORLD OUTS Crypto Biz Magazine Page.14 October.2014

by JEFF HANDLER and DAVE SUTTER, EXECUTIVE DIRECTORS at The BITCOIN SOCIETY

It’s no secret that organized protests against the established “1%” have moved beyond Wall Street. Over three thousand miles west, dissent amongst middle- and working-class individuals has been steadily brewing, and becoming targeted against businesses, groups, and individuals who they see as responsible for the rampant gentrification—or urban redevelopment, or whatever you choose to call it—that has made San Francisco the nation’s least affordable city. As opposed to the ‘occupiers,’ who target bankers and CEOs, anti-gentrification groups in the Bay Area block buses from Google and Facebook, bashing the rising class of ‘technorati,’ who they believe are laying waste to the culture and grit that made San Francisco, San Francisco. While many in the tech industry view the Bay Area as a Mecca of sorts, and see relocating their startups to Silicon Valley as the key to success on their perilous journeys as ‘futurists,’ or ‘disruptors,’ they may fail to understand what they represent to the people who have called San Francisco home, long before anyone ever heard of MySpace.

These middle-class workers and families don’t see the burgeoning tech industry for the innovations and jobs it has created, but rather as the engine for a rising new elite that has widened the income gap, and driven the price of everything in ‘The City,’ from a studio apartment to a cup of coffee, to record highs. More than just economics, many true ‘locals’ see the workforce driving this industry—we all know the stereotype: young, tech hipster, walking through the Mission District with an iPad and Google Glasses—as smug, overpaid, and out of touch with the real culture of San Francisco. This backlash against the rise of tech and startup culture in San Francisco, is representative of a larger trend that’s not unique to the Bay area. Around the country, there seems to be a growing anxiety amongst middle-class

SIDE THE VALLEY To see this other side of tech, we invite you to visit Lexington, Kentucky—yes, really, Lexington, Kentucky—where two serial entrepreneurs, Lamar Wilson and Lafe Taylor, have created Love Will Inc., a software development company that builds applications for Bitcoin. As recent college graduates and new entrepreneurs, we first visited Lamar and Lafe in Lexington in June, as part of our efforts under The Bitcoin Society. Our two companies have since merged and are carrying out a variety of Bitcoin-related projects under one mantle. Our main reason for merging is that Love Will Inc. embodied the ideals of Bitcoin, and the spirit of American entrepreneurship in its most pure, genuine form. The contrast between Lexington and San Francisco could not be greater, yet both host entrepreneurs laying the groundwork for a new age. Love Will Inc is not your typical startup. Devoid of the fanciful amenities associated with blue chip, Valley-backed ventures, Wilson and Taylor work in a community center on Georgetown Street. This neighborhood, blocks away from where the two grew up, is notorious amongst Lexington residents for its history of street vi-

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However, there’s hope for us yet. While Silicon Va l l ey m ay b e l i t te re d with smug techies, lavish offices, and a baffling abundance of capital, there remains a bastion of entrepreneurs who remember tech is about much, much more than IPOs, returns, and elite status; it’s about spurring innovation and solving problems. In doing so, many tech entrepreneurs are building a more desirable future,

where life for everyone is a bit better, and you and I can prosper a little more.

October.2014 Page.15

workers who are having a difficult time finding meaningful employment opportunities, in an American job market increasingly comprised of positions in the technology and service sectors. This anxiety has led to frustration, and this frustration to anger, now often directed at the Mark Zuckerbergs of the world—a new breed seen as the young aristocrats of a new digi t a l a g e, w h i l e re g u l a r Americans struggle to shake the lingering pain of the Great Recession.

Downtown Lexington olence and drug activity, certainly not serious tech development. But that’s exactly what’s happening there.

Crypto Biz Magazine Page.16 October.2014

Love Will is developing some of the best applications in Bitcoin, the first of which, Pheeva, is a mobile Bitcoin wallet for iOS, Android, and Chrome that has received acclaim from some of the industry’s biggest names. Lamar, known within the Bitcoin community as one of it’s most skilled developers, has turned down several offers from bigger companies to pursue his own passions. They shun the glass and stainless steel of high profile tech offices, in favor of the cracking dry wall and frayed carpeting of their neighborhood community center, where they work side-byside, trying to make this world, and their community, a better place. They began our first trip to Love Will Inc. by taking us on a walk through downtown Lexington. The walk took half the day because we were stopped on every block by someone interested in the various community and commercial projects they’re so heavily involved in. A s ke d w h y t h ey ’ ve c h o o s e t o re m a i n i n Lexington, Lamar replied instantly, “I want my success to be my community’s success. I’m not in this for me. I’m doing this because I see problems in this world that I know I can fix, and I want to fix them for those who need these solutions the most. That’s why I’m in Lexington, and that’s why I’m in Bitcoin.”

Lamar and Lafe have made it their mission to drive the tech industry, and Bitcoin, back into the hands of the people. After just a day talking with them, it was clear their focus was on much more than Bitcoin. To them, and many others, one of the main reasons companies like Google, Twitter, Facebook, and the tech industry at large, are receiving so much backlash is their ad-based monetization strategy. In the digital age, large web-based companies have harnessed the value of the network effect to monetize their companies through advertisements, and earned hundreds of billions of dollars doing so. The true value of these companies to advertisers is not their products, but rather the strength of their network: the number of people that use their service, known as the network effect. These companies sell our information, and buy our attention, but we, the user base, don’t actually receive any of the revenue that we’ve played an integral role in building. The general public is increasingly aware of how this model works, and understand the incongruencies of the situation, when they see sixteen hundred new millionaires created through Twitter’s stock offering. For the average American, this ad-based monetization model is representative of an economic landscape that allows those at the top to increasingly benefit from everyone else, placing these tech companies in the same group as the Wall Street bankers and CEOs. In the words of Thoreau, “Men have become the tools of their tools.” For the past six months, Lamar and Lafe have been hard at work trying to change this uncomfortable status quo in the tech industry, and in the business world at-large. In June, 2014, they released what we believe—and many others in the industry share in our sentiment—to be the best mobile wallet in Bitcoin. The core focus behind the Pheeva wallet is to ensure that Bitcoin can be used by everyone, regardless of age, lo-

cation, or knowledge of Bitcoin, so that the benefits of the technology are made available to all. They’ve recently finished the development and beta roll-out of the COG Cooperative, a new type of social network that strikes at the heart of the aforementioned tension, between the tech industry and mainstream America. COG, which stands for Cycle of Goodness, is structured as a cooperative—an autonomous association of people, who voluntarily cooperate for their mutual social, economic, and cultural benefit. Cooperatives have existed for decades, but have fallen out of fashion in today’s ROIinfatuated business environment. Lamar and Lafe, as they usually do, are driving change. COG’s name, Cycle of Goodness, describes the way its business model works. Google, Facebook, Twitter, and their counterparts make hundred of billions of dollars annually from advertising revenue. Ad money floods the coffers of these tech giants for one reason, they have enormous networks.

We’re not talking about handouts. It’s true, everyone in COG is entitled to a piece of the revenue, but how big a piece members get is entirely dependent on their actions. The amount of bitcoin each member receives from COG is based on the number of Patronage Points he or she earns.

As the network grows, it becomes increasingly attractive to advertisers. As more advertisers join and the ad revenue increases, more of this

COG’s incentivized sharing model is also aimed at becoming an engine for the mass adoption of Bitcoin. Users, sharing what they’ve learned about Bitcoin, are finally rewarded for carrying out work that’s essential to the strength and prosperity of Bitcoin, and its nascent industry. “COG is a chance for the many ‘Bitcoin evangelists’ to finally earn some bitcoin for their important work,” said Lafe. Lamar and Lafe are certainly unique in the tech industry, but not alone. These working-class tech innovators have something one cannot get in the Valley, a true understanding of the realities of life, and the problems average Americans face each day. They’re living proof that, amidst a backdrop of GDP-sized IPOs, flashy offices, and seven figure salaries, there are still a select few who remember that technology is supposed to make this world a better place, not just a wealthier one. Whatever wealth may come from one’s ventures should be used to continue to solve problems, and improve the quality of life for America and its neighbors, and countries around the world. Lamar understands, like many other entrepreneurs outside the Valley, that the road to success is a tough one, but if anything, he seems excited by this fact. “That’s why we’re doing what we’re doing. That’s why we’re in Bitcoin… Not to fatten our pockets, but to be a part of something extraordinary, something that will stand the test of time. We know this won’t be easy, but nothing worth doing ever was. We want to be the change so many seek and need.” —S

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These Patronage Points are awarded for actions that bring value to the network, like sharing the app and getting others to sign up, making in-app purchases, and hosting educational events. “This is the essence of a cycle,” said Lamar, “the value that you bring will always come back to you.”

On their inspiration behind COG, Lafe said “In a time where so much wealth is being accumulated under of a fortunate few, we thought it was time to emulate Bitcoin and shift power back to the users. We hope that by extending a hand rather than reaching into a pocket, we can shift the paradigm in the tech industry and within it, the Bitcoin community.”

October.2014 Page.17

Astronomical sums are paid for access to millions, and now billions, of views and clicks from every corner of the globe. COG Cooperative is tapping into the power of this network effect, but passing on the benefits to its members—the very people who make these networks valuable in the first place. COG members are part owners in the cooperative and earn a portion of the revenue from a growing digital ad network. The revenue is distributed periodically in bitcoin, directly into a member’s Pheeva wallet.

revenue is given back to COG members in the form of Bitcoin patronage refunds. The more value a member adds to the network by sharing the app with others, the higher the share of bitcoin they will receive. As the network continues to grow, it becomes more attractive to advertisers, and the cycle continues.

CARE ABOUT YOUR FINANCIAL PRIVACY? HD WALLETS ARE YOUR FRIEND

Crypto Biz Magazine Page.18 October.2014

by ARIANNA SIMPSON

Maintaining privacy of transactions is a key tenet in building a robust financial network. Despite all the media hype around Silk Road and others, this is true even if you’re engaging only in perfectly licit behavior. The beauty of the blockchain lies in its decentralized, open nature, but due to those very characteristics, specific actions need to be taken to protect bitcoin transactions and balances from being exposed in undesirable ways. Users can inadvertently reveal information about themselves and their past transactions if they use a single address for all of their Bitcoin activity, which is the default behavior of many wallets today. When Bitcoin addresses are used multiple times, transactions can be linked to one another, and if it becomes known who the participants are in any one such transaction, a large amount of the transaction history of that address can be exposed. For instance, let’s say you work at a company that pays its employees in bitcoin. You would, of course, know the address that is generating the transaction that pays you, and because the blockchain is public, you could also see the other transactions that were broadcast to the network by that same address. This would allow you, or anyone else who knows the source address, to glean sensitive information about a colleague’s compensation, or your company’s ledgers, etc.

Bitcoin Improvement Proposal 32 (BIP 32), a specification for how to use cryptographic key derivation to manage multiple keypairs with a single secret key, helps reconcile privacy and security concerns. Hierarchical deterministic wallets, also known as HD wallets (not to be confused with high definition!), offer increased privacy without adding to the burden of managing a large number of keys.

Standard deterministic wallets only include one chain of keypairs, which means that a user would effectively be sharing the entire wallet with someone if she or he wanted to share any of the keys. With an HD wallet, the user would instead have the ability to share some, but not all, of the public keys. Multi-sig and hierarchical deterministic wallets are critical foundational technologies, which BitGo has invested a great deal of time and resources into implementing, but wide adoption of these standards by major players in the space can only benefit the ecosystem as a whole. BIP16 and BIP32 bring together the security offered by multiple keys, and the privacy offered by transaction confidentiality—and that’s a marriage we can all get behind. —S

As a Bitcoin enthusiast and in vestor, ARIANNA SIMPSON is particularly passionate about helping women get involved in the Bitcoin community. She is now at Facebook, working out of the New York office, where she organizes the Bitcoin meetup group. In her previous lives, Arianna did ecology research for the National Science Foundation in South Africa, co-founded Tigervine, lead sales & boutique operations at Shoptiques.com, and spent several months backpacking through Southern Africa. Her Bitcoin address is: 1DLBeB2NxcGNsCAFyLa6ateQqtBc1o1LJh.

Crypto Biz Magazine

In addition to using multi-signature (BIP 16) addresses, BitGo has implemented HD on all its wallets, which means that every time a transaction is made with a BitGo address, it is rotated so it appears to the outside world as a new account. However, you don’t need new private keys for this account, because the new keys are derived from your HD keychain.

In HD wallets, a seed is used to generate a tree of keypairs. Hierarchical deterministic wallets enable selective sharing, because an entire tree of keypairs is created, rather than a single chain.

October.2014 Page.19

Both individuals, and organizations holding sizable amounts of bitcoin, have good reason to avoid linking their addresses and transactions to their identity in a way that is visible to the general public, which could result in targeted theft attempts—or worse.

HD wallets are one of several types of deterministic wallets. More broadly speaking, deterministic wallets allow keys to be derived from a single seed. Using the seed alone, users can back up and restore their wallet, but unlike traditional wallets, deterministic wallets must only be backed up once and then remain backed up forever, because all future addresses are determined in advance. This also allows for more efficient key management, as they can be trimmed down to a very small size that can easily be stored in a paper format, such as on a QR code. Non-deterministic wallets become larger, more cumbersome, and harder to back up over time.

Crypto Biz Magazine Page.20 October.2014

CRYPTOCOIN SOCIAL

@Bitcoin_Rush

@HTMLCoin

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October.2014 Page.21

@TarenTrout56

Crypto Biz Magazine

CRYPTOCOIN SOCIAL

Crypto Biz Magazine Page.22 October.2014

@MrChrisEllis

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October.2014 Page.23

@DevNullius

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Crypto Biz Magazine Page.24 October.2014

LOOKING FOR THE NEXT CEO FOR BITCOIN INC. INVESTING IN THE DIGITAL FINANCE ECOSYSTEM by MANIE EAGAR, FOUNDER AND CHAIRMAN, DIGITAL FINANCE INSTITUTE First, you would need to address the issue of bitcoin as a currency, a unit of account or a store of wealth. It is all three, and more. In short, the Bitcoin protocol allows one to designate it any way you choose. There is, increasingly, talk of the ‘internet of money,’ converging with the ‘internet of value’ (exchange), and the ‘internet of things,’ and greater understanding of the opportunity in digital finance services, and infrastructure development. The digital finance landscape is evolving to fill all the spaces, creating huge convergence and integration opportunities, and niche plays alike. At the end of the day, the users/consumers of all these offerings will decide

which variations suit them best based on ease of use, access, stability, store of value, security, friction, exchangeability, transferability, etc.—ultimately, the best UX for the money. Delivery platforms from every sector of the industry will vie for a stake in this lucrative and necessary business, from the so-called ‘over-’ to ‘underbanked’ parts of the world. There is no question that the world financial system needs an overhaul, or at the very least, sound and viable alternatives to the current legacy system driven offerings, and the latest innovations emerging through branchless banking and mobile transactions/payments. There is a great chance that

Bitcoin itself could become disintermediated if it doesn’t ‘step up its game’ as cryptocurrency technologies, business processes and alternative currencies and protocols emerge, or become adopted by existing players in the financial and mobile payment sectors.

* with reference to the success of M-PESA in Kenya that

New players, from a Bitcoin perspective, will compete with the vast resources of the incumbent players in the financial sector, to win the regulators over (or at least build a common understanding) and to provide room for the evolution of this disruptive innovation, and last but not least, convince the consumers that this can work for them. Ultimately, these are the drivers for the Bitcoin business models and ROIs to make ‘enterprise Bitcoin’ sustainable.

As there are many loyalty schemes, token systems, voucher offerings, etc., there will be many similar and unique altcurrencies. Service providers such as gyft already have relationships with a number of large retailers, whose consumers participate in ‘gyfting’ each other via a blockchain protocol-backed platform, as part of their loyalty and reward programs.

HYBRID DIGITAL FINANCE What this implies is a ‘hybridization’ of technologies, and meshing of centralized, decentralized and centralized platforms and delivery channels. There are a number of reasons why this dual economy is likely to emerge, including the ease with which Bitcoin can unite global consumers and merchants, the low cost of Bitcoin payments, and the openness of consumers to new innovations; as well as the growing influence of technology companies, according to Gareth Murphy, director of markets for the Central Bank of Ireland, speaking at the recent BitFin 2014: Digital Money and the Future of Finance Conference, in Dublin. He envisions a hybrid Bitcoin-Fiat future, where “The existence of a ‘euro-denominated economy,’ and a ‘virtual currency economy,’ raises the prospect of an internal balance of payments between two sub-economies, where suppliers may prefer one currency over another as a means of payment (for different goods and services).”

“However, unlike these examples, rapid advances in information and mobile technology suggest that such a virtual currency could evolve. The factors behind this might include: the ease with which transactions can occur between counter-parties located anywhere in the world;



the relatively low cost of effecting payment and transmitting funds;



the fact that many large technology companies are household names that are recognizable and trusted;



and the possibility of engaging a large market with a broad demographic span, particularly in terms of age, which is open to new innovations.*”

Ripple, Ethereum, Open Transactions and Stellar are examples of current and emerging cryptocurrency platforms offering hybrid digital value exchange solutions, embracing the principles of the decentralization and distribution of credit, debit or assets. Ripple, specifically, is making significant traction as a Bitcoininspired payment network, allowing institutions to conduct low-cost international money transfers without the intermediation of banks. It has created a network of gateways for the LATAM region, and recently signed up two banks in the US, and Fidor in Europe, which should allow them to offer significantly cheaper foreign exchange and bank wire services to their customers. I predict there will be many more ventures in this strategically critical space in the near future, including integration with legacy banking offerings. The foot race for consumer adoption and inclusion has just begun, with PayPal—which has partnered with BitPay, Coinbase, and GoCoin to provide Bitcoin support to its millions of users; and Apple Pay positioning itself in the lucrative market for mobile payments, and customer loyalty apps, indicating fresh approaches to new and existing markets. There are many lessons here, for Bitcoin and cryptocurrencies specifically, and digital finance solution builders in general. There are already many reports of future potential ‘plays’ by leading financial institutions in Canada and the US—either to adopt cryptocurrency-like protocols, or to reinvent or enhance their current platform offerings. Many advanced partnership discussions are taking place behind the scenes, between cryptocurrency ventures, and established financial institutions, and mobile transaction players to scale offerings into their existing and new markets. In the end, there could be thousands of currencies/ coins (think of enabling platforms for colored coin, mastercoin, zerocoin, etc.) that are offered by individuals, groups, countries, and retailers—to provide an exchange of value or to provide rewards to an underlying base of users/customers/citizens, not to mention denominating coins/tokens to represent other stores of value such as contracts, physical goods, digital services, shares, gold bullion, etc. Then there is crowdfunding, gifting, brand promotions (remember the old soda bottle top competitions?),

Crypto Biz Magazine



ALTERNATIVE CRYPTOCURRENCY OPTIONS—GOOD OR BAD?

October.2014 Page.25

He continues, “Multi-currency economies are not unusual. For example, the US dollar is accepted in many economies alongside the local legal tender. Also, there are a number of regional currencies in existence in parts of France and Switzerland that aim to encourage transactions in local goods and services.”

shows the potential for this technology to reach a large market

etc., promising huge growth opportunities, reaching ‘second markets’ globally.

THE EMERGING DIGITAL FINANCE INVESTMENT LANDSCAPE The cornerstones for the new digital finance world are emerging, from decentralized applications to trusted computing, to currency exchanges, and to telecom, capital and banking partners. Venturescanner, in its latest analysis of the Bitcoin startup landscape, has identified 541 active companies representing 330 million USD in capital raised.

Crypto Biz Magazine Page.26 October.2014

A shortlist of current Bitcoin ecosystem investment opportunities from Venturescanner include: BITCOIN EXCHANGES: Platforms where consumers can buy or sell bitcoins, in currencies of their choice. Some play matchmaker (tracking bid/ask prices and linking up a seller with a buyer with the spreads close) while others are broker/dealers (doing matchmaking with their own inventory of bitcoins). Leading examples include Coinbase, Circle, Bitstamp and OKcoin. BITCOIN WALLETS offer consumers a place to securely store their bitcoins through public/private key encryption. Many offer enhanced security features such as cold storage, multi-step/sig authentication, and deposit insurance. Leading examples are Xapo, Coinbase, Circle and BitGo. BITCOIN PAYMENTS: Merchants and consumers pay for real-world goods/services using Bitcoin as the medium of exchange. Leading examples are Bitpay, Coinbase, Circle and vogogo. BITCOIN MINING: Includes those who either “sell the pickaxe” or “swing the pickaxe.” Typically, hardware companies selling the latest ASICs specifically designed for Bitcoin mining. Mostly conglomerates of rig operators, that have come to dominate so much of the mining activity. Active fund-seekers include BitFury, 21E6, Avalon Clones and KnCMiner. BITCOIN FINANCIAL SERVICES: Players offering typical banking services, but with a focus on bitcoins. Firms offer financial investment advice on how to manage portfolios of crypto-currencies, focusing on providing remittance payments, and providing loans

denominated in Bitcoin. Lead players include Xapo, Kraken, Vaurum and Elliptic. BITCOIN INFRASTRUCTURE: Includes those who are “building a backbone” into the Bitcoin enterprise. This cluster includes the people responsible for maintaining the open source Bitcoin code itself, offering white-label solutions (such as those for building your own exchange or wallet services), and the physical Bitcoin Automated Teller Machines (ATMs). Leading investments include Chain, Vaurum, HKCEx and Buttercoin. BITCOIN APPLICATIONS: A very broad category attempting to capture all the players that use bitcoins for a specific purpose. Includes online casinos that only gamble in bitcoins, online review sites that rate Bitcoin-related services, and aggregated lists of all the places you can spend bitcoin for physical goods. Some of the active ventures are BitcoinShop.us, UpDown, CrowdCurity and Gem. BITCOIN TRUST AND VERIFICATION SERVICES: While a lot of bitcoin transactions can be completed pseudonymously, some use cases are governed by regulations, where the identity of a person needs to be verified (anti-fraud, anti-terror financing, etc.). If a company offers these regulated services in other currencies, but also wants to accept customers who use bitcoins, they would turn to players in this cluster to provide third-party identity verification. Ventures include BlockScore, Blacklisted Bitcoins, BitGo and VerifyBTC. BITCOIN NEWS AND DATA: Organizations that offer up-to-date pricing information, original content, analytics and aggregated sources of Bitcoin-related news. Ventures include TradeBlock, BlockTrail BV, BitScan and CoinDesk. BITCOIN INVESTMENT FUNDS: Organizations that have built dedicated funds, or investment vehicles, to move large amounts of money into bitcoins themselves or into the startups building the Bitcoin ecosystem. Funds include CoinSeed, Koinify, Bitcoin Embassy and Boost Bitcoin Fund. BITCOIN SERVICES include those companies which offer business operation consulting, but with a Bitcoin focus. Includes recruiting, regulatory compliance, and technical implementation. Examples include Moneero, HoneyBadgr, CoinComply and BitRecruiter. BITCOIN BIG DATA: A core feature of Bitcoin is the public ledger (known as the blockchain), which maintains a transparent and complete record of all Bitcoin transactions. Companies in this space parse and analyze that blockchain to allow their customers to gain useful insights. Lead players include Chain, QuantaBytes, Coinalytics and Bits of Proof. Venturescanner’s estimate for the larger financial technology industry is 990 active companies, with 12.4 billion USD raised, and the Internet of Things sector, with 566 companies seeking funding, with 2.72 billion USD raised so far.

ity and control, leading to larger investments in client servicing systems. Corporate banks, on the other hand, are putting money into IT as a means of gaining greater insight into lending decisions, which should reduce risk and increase responsibility.

DIGITAL FINANCE 2.0—EMERGING BUSINESS OPPORTUNITIES

If we consider the 2.5 billion unbanked, in the next stage of global financial inclusion, these markets cannot be reached economically and feasibly/efficiently by conventional and legacy banking solutions. This is where the new hybridized delivery models will come into their own, converging digital banking, cryptocurrency offerings, and mobile transactions, via the internet of value exchange. This will involve a meshwork of centralized, decentralized and distributed financial networks and delivery platforms, with substantial integration and compliance requirements.

This is a quick checklist of upcoming opportunities for startups and investors, in the next phase of development and deployment: Tax declaration, blockchain ledgers, triple entry accounting, and auditing and financial reporting

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Compliance—regulatory, verification and ‘Bitlicensing’

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Governance and risk management

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Merchant and agent solutions at POS

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Customer facing—UX, KYC, CRM, AML, fraud prevention, privacy (identity management)

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Legal and investment advisory services; mergers and acquisitions

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VC and crowdfunding advisory services

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Security, at all levels—from customer to financial services providers to securitization

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Storage—multi-key versus cold storage versus secured devices

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Integration—Banking; Mobile transactions; DAZ protocols

Gareth Murphy, director of markets for the Central Bank of Ireland, summed up the future challenges for service providers and regulators from a Eurocentric perspective as follows:



Build Operate Deploy (BOD), e.g., inter-exchanges, Build Operate Manage (BOM), e.g., Ripple gateways

 “Who



Business Process Management, e.g., ITIL, ISO4217

Interestingly, according to the Ovum report, there is a desire for established financial institutions to move toward more centralized banking functions, which is further driving up IT spending in this sector. By using technology to consolidate functions, firms hope to improve their efficiency. Account holders demand visibil-



How safe is the payments infrastructure?

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How much economic activity is denominated in virtual currencies?



To what extent is the ‘virtual currency economy’ connected with the ‘euro-denominated economy’?



How do we distinguish between transactional activity and speculative/investment activity?



and, from a monetary policy perspective, there is also the fundamental question of understanding the supply of the virtual currency, and its impact as a form of money.”

In conclusion, there is a lot of work ahead, for many players, at many levels, to address and deliver the promise of Digital Finance 2.0. —S

Crypto Biz Magazine

Considering the currently addressable market opportunities in e-commerce and digital banking, the IT investment into this sector is substantial. In the bigger picture, Ovum projects a compound annual growth rate (CAGR) of 6.4 percent, from 2014 to 2018. By the end of this period, global IT spending in financial markets is predicted to surpass $100 billion (Increase in financial markets IT spending points to end of credit crunch, Ovum, March 19, 2014).

is transacting (to address AML concerns)?

October.2014 Page.27

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David Johnston—Founder, DApps

Josh Garza—CEO, GAW Miners

Ragnar Lifthrasir—CEO, Meson

Kirill Gourov—Founder, CSquared

Steven Michaels—Digital Currency Institute, and Founding Member, San Diego Bitcoin Meetup

Alan Meckler—Chairman and CEO, Meckler Media, and Inside Bitcoins Organizer

Steve Beauregard (center)—Founder and CEO, GoCoin, with Trent (left) and Jay (right)

While attending InsideBitcoin’s latest conference, October 5 – 7, in Las Vegas NV, Chief Technical Advisor Jay Addison and Chief Operations Advisor Trent Nellis conducted over 30 interviews with the CEOs, Founders, and Principals of numerous crypto companies participating in the event. In the coming weeks, look for these interviews on our website at cryptobizmagazine.com/podcasts

Lisa Cheng—Founder, Vanbex Group

VeriCoin

50% of the Multi-pool fees will go to the VeriFund, services for VeriCoin will be paid from the VeriFund.

Proof-of-Stake Verified. Proof-of-Work Distributed. Network-Stake-Dependent Interest. www.vericoin.info/verifund.html

Donate:

VRC: VTHZfUg11wEJmSgBLUcmCKGYekuqFcGHQq

BTC: 1LRWAyE3WKwTzXszEmtqKXzikQvoq7NJBa

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BITCOIN MIGHT BE DIGITAL, CRYPTOCURRENCY HAS become a very competitive space. It appears that some Bitcoin purists still refuse to acknowledge altcoins (other cryptocurrencies) and some altcoin enthusiasts, who have little to invest, refuse to accept bitcoins as the m ost va l u a b l e cu r re n cy, or the way forward.

Special Advertising Feature

One major problem is that both are fighting over the same thing, in a push-pull mechanism, with existing money invested in bitcoins.

Crypto Biz Magazine Page.32 October.2014

Notice I said “existing money.” This is an important point. Anyone looking at cryptocurrencies as they exist today, thinking they’ve cured poverty, must think again—all cryptocurrencies are doing is absorbing today’s existing money. Why is that an economic problem? Firstly, only people with money can buy or mine cryptocurrencies, they have not been freely distributed; secondly, the way banks “create new wealth” is by borrowing money from the national treasury, and loaning it to people, and adding commission. The more they lend, the more they create. If banks don’t have access to that wealth, they can’t make new money. People aren’t banks, so it’s not helpful for society to own bitcoins—the banks need them to loan to people, to make money; or they need to stop the investment into digital currencies such as Bitcoin. I’m sure they’re not too fond of the public ledger, either, which enables the public to monitor transactions. This is the kind of accountability the financial industry will certainly not warm to.

CRYPTO CURRENCY CONSORTIUM I believe cryptocurrencies should be part of a consortium, which works together to represent the cryptocurrency community—together as a huge movement. Together it would be a very powerful organization, and possibly create a whole new banking infrastructure, using established Proof of Stake technology to grow wealth in a controlled way.

Working together, and accepting that everyone has a place in the digital finance industry, would help everyone who struggles individually. Governments and treasuries manage national wealth, but there’s still a huge global space for a new economy to develop, adapt and increase global wealth.

NAVIGATING THE PROBLEM WITH NEW WEALTH The real question is how to stop cryptocurrencies from absorbing existing wealth, and to inject them with new wealth? The answer is simply to create a second, global, parallel economy. Historically—in the US until the early 1970s—economies ran on the gold standard. Money was distributed against stored gold, which ensured that it retained a high trade value; because there was not enough gold in the world, treasuries had no choice but to print money to make up for this shortfall, devaluing currency, and completely removing the element of trust from society. Now though, we have a real solution to this problem, and that is virtual commodities. At present, the world has acknowledged that Bitcoin technology provides two units. The first is a storage of wealth, a commodity. The second is a medium of transaction, digital cash. To create new wealth with cryptocurrency, you must have a unit of tan-

BUT IT’S STILL OLD MONEY

by NICK MILLS

gible goods, e.g., gold; a storage of unit for its value, virtual gold, goldbars (GBS); and a medium of transacting that wealth, any crypto coin.

VIRTUAL GOLD CREATES INFINITELY REGULATED WEALTH The basic fact is this, by 2090 the world’s population, at the current rate, will have quadrupled from seven billion to twenty-eight billion. If there’s not enough wealth available now, what’s it going to be like in fifty years? Given that Bitcoin and cryptocurrencies circulate old money, it’s just not going to help, so how do we create new money?

Crypto Biz Magazine Page.34 October.2014

Throughout the universe, it’s estimated that there are 151 trillion trillion metric tons of gold, locked in planets and stars. Given that, so far, there’s been no admission of other intelligent life forms (cus-

todians of commodities), it’s acceptable for us to assume, for now, that we’re the only intelligent life forms, thus the universe is our larder, and at some time in the distant future, we will have access to millions of tons of commodities, creating economies for new colonizations on planets throughout the universe. The only way we’re going to fund space activity, and colonize other worlds, is to create an abundant supply of new wealth. Without conventional means, it’s a chicken and egg problem—we’ll solve it by creating new chickens to hatch new eggs, but we’ve got to use off-world gold before we can actually get our hands on it to benefit humanity. This is why I invented GoldBars (GBS), the world’s first “transit state virtual commodity,” which acts as a temporary storage unit of wealth, I call it

Virtual Gold or vGold. Until such time as the tangible unit has been retrieved, as long as wealth is regulated globally, it is a way of creating new wealth without affecting existing markets (see the Interplanetary Loan To Value Scheme available on Cryptocointalk.com).

HOW MUCH WOULD CRYPTO CURRENCIES BE WORTH?

GoldBars (GBS) is the world’s first “Crypto Ore,” based on real world commodities, and designed to act identically to real world gold in forming a virtual commodities market. There are 240 million GoldBars (GBS), initially created to transit wealth in the region of $127 trillion, but this has no upper limit. We also have SilverBars (SBS), and PlatinumBars (PBS), and a range of elemen-

Of course, all of the wealth wouldn’t be used just for cryptocurrencies, it would also be used to provide direct funding streams for humanitarian aid, conservation, space exploration and colonization, and more. The fact is, world debt could be eradicated in an instant, or over a set period, and give the world a chance to start over, with some cryptocurrencies worth a lot of new money, see table at right for examples.

tary commodities to launch, once we have enough support globally.

BITCOIN SERVICE DIRECTORY WALLETS BLOCKCHAIN

blockchain.info

COINKITE

coinkite.com

MULTIBIT

multibit.org

COINBASE

coinbase.com

HIVEWALLET hivewallet.com

XAPO

xapo.com

EXCHANGES BTC-E

btc-e.com

CRYPTSY

cryptsy.com

MINTPAL mintpal.com

QUADRIGA CX

quadrigacx.com

SWISSCEX

VAULT OF SATOSHI

swisscex.com

vaultofsatoshi.com

INDEXES BITCOIN AVERAGE

BITCOIN CHARTS

bitcoincharts.com

BITSTAMP

BRAVENEWCOIN

bravenewcoin.com

COINDESK

COINMARKETCAP

coinmarketcap.com

bitcoinaverage.com

bitstamp.com

coindesk.com

CoinMarketCAP

This is a list of merchants, and their websites, that accept bitcoins for their services. If you know companies that are now accepting bitcoins and who youâ&#x20AC;&#x2122;d like to see added to this list, please contact us at directories@cryptobizmagazine.com. Additionally, let us know if you find that any of these companies has stopped accepting bitcoins, or if you have any difficulty using bitcoins with them.

TOKENIZED PAYMENTS

Crypto Biz Magazine Page.36 October.2014

For countries which have a poor history of wealth management and need humanitarian aid, money can be issued in the form of redeemable crypto-tokens for food, water, and items to help them increase their UN humanitarian level, and create new industry. Digital cash doesn’t just have to be cash!

If we reserved one trillion dollars of GoldBars (GBS) into each of the following cryptocurrencies, each would be worth: CURRENCY

INVESTMENT

TOTAL COINS

PER COIN VALUE

Bitcoin

$1 trillion

21 million

$47,619

Worldcoin

$1 trillion

265 million

$3,700 (est)

1 million

$1 million

2,419 million

$416 (est)

Cryptogenic Bullion $1 trillion Mazacoin

$1 trillion

This would be all NEW wealth, if banks were to own crypto currencies they too would profit.

REGULATING WEALTH

DISCLAIMER

The great thing about this new wealth is that if stakeholders of cryptocurrencies do not act in a way which is beneficial and positive for humanity, the investments can be reduced to lower currency values, as well as the direct opposite, independent of a national government.

All of the information provided is speculative and has not been endorsed in any legal capacity, or by any government or financial services organization. The author has submitted in-depth information to the UK Government, and HM Treasury, requesting approval for a legal framework to operate as designed. This has been acknowledged, and put forward to the team responsible for future regulatory framework on virtual currencies, and virtual commodities, and is currently pending.

That, ladies and gentleman, is how we can use Bitcoin technology to create new money, and raise the standard of living for everyone around the world, provide jobs for everyone, create new cities, reduce climate change, invest in conservation, increase humanitarian aid and colonize new worlds. It shouldn’t be a giveaway, and everyone should contribute positively for reward, but it’s a start in the right direction.

The author acknowledges any approval and use of “Virtual Gold” to create new wealth, must be done to benefit the international community, empower communities, and forward the positive and peaceful development of fairness, and equality, for all humanity.

NICK MILLS (@mazillionaire) unfortunately discovered Bitcoin too late at the end of 2013. He is the founder of GoldBars (GBS), the world’s first Crypto Ore using the SHA256 Bitcoin Core. He also founded Hashasaurus (hashasaurus.com) created Virtual Ores, The Virtual Commodities Concept, Infinite Wealth (The Book Available On Amazon) and more recently has formed Aerarium Universitas (Latin translation Treasury Of The Universe) ,the world’s first Global Treasury designed to develop and manage transient commodities and create new wealth to suit global demand. Nick accepts donations [BTC at right]: DOGE:

DDNaXdovccMCbuqmUCJPTbZCJEhEfKGX5r and Mazacoin: MUTKLMmA3ASvfb4WHeXSopcrkDT2vRzAXb

BTC:

17bvZywsf5UE9esMiYvKkZdgMLeMsfQP1B

SAN FRANCISCO MEETUP Crypto Biz Magazine Page.38 October.2014

by TINA HUI

FOLLOW THE COIN hosts numerous community events throughout the year, in support of folks interested in connecting with, and learning more about, Bitcoin, FinTech and technology, from Dogecon SF, to intimate educational fireside chats, and casual monthly drink-ups. Follow The Coin currently has the homepage of digital currency online, with the leading video coverage of news and information on Bitcoin, Dogecoin, digital currencies, e-commerce and FinTech. Follow The Coin are huge fans of bringing information, community, fun and people together. Most events are open to people of all ages… and even canines! In their first event, in downtown San Mateo, the Follow The Coin team was present, along with many members of Boost VC’s current tribe of Bitcoin and tech startups, Adam McKenna—the founder of MultiPool, and more. It was, as most Follow The Coin events go, a great event where people learned and discussed great ideas, and had fun getting to know others in the tech and digital currency community. So, what’s on the upcoming calendar of events? There’s a great fireside chat, coming together with the creator

Baby Bitcoiners! of Dogecoin, Jackson Palmer as a featured guest, and a Winter Ball! So please stay connected and in the know, follow us at www.followthecoin.com for more details, news and events! Great events wouldn’t be the same without you!

DECENTRALIZED CROWDFUNDING www.swarmcorp.com

Yes,

itâ&#x20AC;&#x2122;s that easy.

coinkite.com

ORLANDO MEETUP

Crypto Biz Magazine Page.42 October.2014

by CHRIS MROZEK

The Orlando Bitcoin Meetup just celebrated its third anniversary on August 21, 2014. It was originally founded by Tony Gallippi—yes, THAT Tony Gallippi, the founder of BitPay. After Tony moved his company to Atlanta, in January, 2013, the group lay dormant for thirteen months.

al meetings, we are evolving to a format based on both. We’ve gotten a good response using an “open mic” approach and having as many as six presenters, giving talks about any Bitcoin-related topic they want. Such a format, it is hoped, could turn the Meetup into a regular Bitcoin conference.

In March, 2014, it started up again, continuing with all of its 83 registered members—it has since grown to 135 registered members.

We’ve asked members and visitors to notify us on the meetup site if they want to give a talk. We’re modeling the discussions on the BarCamp model. A maximum of 30 minutes is allocated.

We used to meet at Whiskey Dick’s, a trendy little bar in downtown Orlando. Sitting on bar stools, having dollar burgers and beers, Tony would always demonstrate paying both his tab, and our waitress Crystal’s tip, in bitcoin. I watched, amazed, as he transferred her tip from his phone to hers in a matter of seconds, and showed us the e-mail he received as confirmation, almost instantaneously. That was so impressive! Now BitPay is a $160 million company. Robert LeFebure took up the challenge to re-institute the Meetup. Our growth has been slow but steady. Robert arranged a new meeting place at a special needs school, but we now meet at EnvyLab, an innovative coding school in the GAI Building, downtown Orlando. The beautiful, well-appointed meeting space is very useful for anything we need, technology-wise. Special thanks to EnvyLab for allowing us to use their space on a monthly basis. We have set a goal to structure a meetup that has something for everyone, from the beginner to the programmer and developer, which is a challenge. Trying to find the balance between an open type of discussion or tightly structured, instruction-

One of our main goals has been to develop education for the public. Damon Smith took on the challenge, and produced an educational tool to transition the public from traditional banking to BTC as a way of life. He uses an interactive, fun, game-type format, with tangible visuals that explain how to philosophically look at what it is! Our meetings are the venues for testing his material. He will test it at the upcoming Orlando BarCamp. Techies and Newbies alike get so much from his methodology. We also allow time for any and all emerging new businesses to pass out their cards and, time permitting, show how they’re incorporating Bitcoin. By the way, where ARE the women? You can’t tell me that women are not interested in financial matters. We need to work on bringing them in. We are also looking to help establish satellite groups around central Florida. We want to facilitate this process with them. You can find us at Bitcoin Orlando, and check out photos.

THE NEW AGE AND LANGUAGE OF SECURITY by BLAKE ANDERSON

BITCOIN IS MORE SECURE THAN ANY CURRENCY ON THE MARKET BUT MANY STRUGGLE TO UNDERSTAND IT

Crypto Biz Magazine Page.44 October.2014

rypto is short for cryptographic, which is now the back bone of IT security. Encryption is used to obfuscate sensitive data. In the age of information, data is extremely valuable and some people are starting to theorize that data is central to future concepts of value itself. In this new age of non-physical security we need to obscure data to retain our privacy and or value, and to avoid law battles stemming from ideas and information not being properly secured. Today, advances in math-based security have transcended limitations on financial friction and are an elemental part of nearly all business. When new forms of value quantification and transfer arise and reach ubiquity, the impact on markets is so remarkable that it will be more or less inexplicable relative to old paradigms. Gone are the days when security could be an afterthought relative to information technology and business development. In our times, it is becoming clear that secure processes and protocols must be an elemental part of data exchange and storage. The most important role at any large company is quickly becoming that of the chief technical officer (CTO). Without competent technical security leadership, risk management becomes all but impossible as prima facie indicators of vulnerability are missed. A CEO can badly manage a company into worthlessness but a bad CTO can ruin a company financially along with the lives of those affected by data breaches or systemic vulnerability. A new language of value called Bitcoin was modeled after a nine page P2P-ECS white paper published in 2008 referencing only eight sources. This document

has transcended virtually all previous fault tolerance limitations in computer science. Using this new ultra robust language of value, a currency called Bitcoin was created which has a strongly deflationary rate of production and is default free. Currently a very small group of people globally have a true understanding of the implications that math based security brings to decentralization and risk management. Fewer people still understand the paradigm shattering effect that new forms of language and communication will have on the future. Platitude or not, we live in the most exciting times in history.

Technology changes, as will currency The first iterations of communication technology were image based and painted on cave walls. Gestures and referencing drawings created a situation where ideas could be communicated like never before. Many people hold the turn of phrase â&#x20AC;&#x153;a picture is worth a thousand wordsâ&#x20AC;? to be self evident. The ability to exchange ideas in this way was central in bringing about the next iteration, which was formal language and the writing thereof. Everything that came before we could record proper language is designated as prehistoric. Eventually through the use of language and ubiquitous communication of our ideas, we were able to create data transmission technologies. These technologies were able to send and receive organized data in layers, including interrogating for missing portions of data which had issues. New forms of communication create a situation where fault tolerance is orders of magnitude higher than it had been with all previous forms of communication.

The newest iteration of communication is one of value and security described by the 2008 white paper. A block chain was created in 2009 which hashes data into obscurity and then hashes previous hashes into new ones in a “linking” fashion. The hardware network that creates these hashes and checks them is widely distributed by the market to ensure that natural disasters or state actions cannot effect more than a portion of this system. The application specific integrated circuits that currently support the Bitcoin system are created in such a way that attempts to damage the network with non ASIC computer power are all but entirely fruitless.

The need for security Systems which reduce friction, along with having builtin security, operating as a new language sophisticated in that it was built by the fruits of TCP/IP, using the largest conversation and gathering of information

stance coming from the IRS will instill confidence and drive growth. In addition to having a nod from the state, client ledgers are extremely easy to submit to a CPA or tax attorney to figure out how to be square with the state. Bitcoin currently has a sub 10 billion USD market cap and the impact on currencies and commodities is in a developing stage, but more than 300 billion has been reported to be waiting to flow into Bitcoin as soon as a western Bitcoin exchange opens which is compliant with Hedge fund investment risk management strategies. —S BLAKE ANDERSON is an MIT educated cryptographic economist and computer scientist. Having worked in Fortune 25 finance as a math based security project manager he now works with Bitcoin derivatives, contracts and financial products. Working full time with BTC behind the scenes for years prior to IRS direction Blake is now happiest when speaking publicly about technology empowering the individual. More about Blake at: cointelegraph.com/post/ blake_anderson

Crypto Biz Magazine

Many economists who examine Bitcoin purely as a commodity and come to bearish conclusions have illustrated that they cannot understand the implications of a complete transcension of fault tolerance limitations in computer science. Without an understanding of the protocol and the relationship to Bitcoin, along with geopolitical pressure, pretensive speculation is quite hol-

Currently the United States government, through the Internal Revenue Service, has classified Bitcoin as property relative to purposes of taxation. Some people, including Cameron and Tyler Winklevoss, predicted that the IRS would behave in this way. However many people feel strongly that classifying an entry on a decentralized ledger as “property” is the height of absurdity. With new tax implications being the biggest hurdle to US small business adoption many people feel that having a firm

October.2014 Page.45

in all of history, is mind shatteringly remarkable. Few economists understand the implications of transcending elemental road blocks in computer science. Many computer scientists don’t understand the true nature of economics and the economic benefits of decentralized autonomy. It seems that only a small group of tech savvy entrepreneurs and economists currently have the near polymathic understanding required to comprehend everything this new system of value touches and may change. Computer science and economics are and have been interacting in ways beyond NYSE and NASDAQ high speed trading operations and breakthroughs in global digital arbitrage will carry that trend into unknown territory leading to market benefits the past never would’ve imagined.

low and conclusions about Bitcoin data are starkly ill informed. Attempting to quantify the value of Bitcoin without understanding the protocol is akin to attempting to quantify the value of the internet without understanding networking and physical infrastructure. Make no mistake about the fact that the economics of Bitcoin are an absolute niche science and those not familiar with public key security are severely compromised in their ability to criticize Bitcoin in a meaningful way.

GITHUB BITCOIN GLOSSARY Some unusual terms are used in Bitcoin documentation and discussions about tx or coinbase, or words like scriptPubKey fly around, without reference or context. Help is here! This glossary will help you understand the exact meaning of all Bitcoin-related terminology—both words and phrases.

0-CONFIRMATION (ZEROCONFIRMATION)

See Unconfirmed Transaction and Confirmation Number.

51% ATTACK

Crypto Biz Magazine Page.46 October.2014

Also known as >50% attack or a double spend attack. An attacker can make a payment, wait till the merchant accepts some number of confirmations and provides the service, then starts mining a parallel chain of blocks starting with a block before the transaction. This parallel blockchain then includes another transaction that spends the same outputs on some other address. When the parallel chain becomes more difficult, it is considered a main chain by all nodes and the original transaction becomes invalid. Having more than a half of total hashrate guarantees possibility to overtake chain of any length, hence the name of an attack (strictly speaking, it is “more than 50%,” not 51%). Also, even 40% of hashrate allows making a double spend, but the chances are less than 100% and diminish exponentially with the number of confirmations that the merchant requires.

This attack is considered theoretical as owning more than 50% of hashrate might be much more expensive than any gain from a double spend. Another variant of an attack is to disrupt the network by mining empty blocks, censoring all transactions. An attack can be mitigated by blacklisting blocks that most “honest” miners consider abnormal. Under normal conditions, miners and mining pools do not censor blocks and transactions as it may diminish trust in Bitcoin and thus their own investments. 51% attack is also mitigated by using checkpoints that prevent reorganization past the certain block.

ADDRESS

Bitcoin address is a Base58Check representation of a Hash160 of a public key with a version byte 0x00 which maps to a prefix “1.” Typically represented as text (ex. 1CBtcGivXmHQ8ZqdPgeMfcpQNJrqTrSAcG) or as a QR code. A more recent variant of an address is a P2SH address: a hash of a spending script with a version byte 0x05 which maps to a prefix “3” (ex. 3NukJ6fYZJ5Kk8bPjycAnruZkE5Q7UW7i8). Another variant of an address is not a hash, but a raw private key representation (e.g.5KQntKuhYWSRXNqp2yhdXzjekYAR7US3MT1715Mbv5CyUKV6hVe). It is rarely used, only for importing/exporting private keys or printing them on paper wallets.

ALTCOIN

A clone of the protocol with some modifications. Altcoins usually have rules incompatible with Bitcoin and have their own genesis blocks. Most notable altcoins are Litecoin (uses faster block confirmation time and scrypt as a proof-of-work) and Namecoin (has a special key-value storage). In theory, an

altcoin can be started from an existing Bitcoin blockchain if someone wants to support a different set of rules (although, there was no such example to date). See also Fork.

ASIC

Stands for “application-specific integrated circuit.” In other words, a chip designed to perform a narrow set of tasks (compared to CPU or GPU that perform a wide range of functions). ASIC typically refers to specialized mining chips or the whole machines built on these chips. Some ASIC manufacturers: Avalon, ASICMiner, Butterfly Labs (BFL) and Cointerra.

ASICMINER

A Chinese manufacturer that makes custom mining hardware, sells shares for bitcoins, pays dividends from on-site mining and also ships actual hardware to customers.

BASE58

A compact human-readable encoding for binary data invented by Satoshi Nakamoto to make more user-friendly addresses. It consists of alphanumeric characters, but does not allow “0,” “O,” “I,” “l” characters that look the same in some fonts and could be used to create visually identical looking addresses. Lowercase “o” and “1” are allowed.

BASE58CHECK

A variant of Base58 encoding that appends first 4 bytes of Hash256 of the encoded data to that data before converting to Base58. It is used in addresses to detect typing errors.

BIP

Bitcoin Improvement Proposals. RFC-like documents modeled after PEPs (Python Enhancement Proposals) discussing different aspects of the protocol and software. Most interesting BIPs describe hard fork changes in the core protocol that require a super-majority of Bitcoin users (or, in some cases, only miners) to agree on the change and accept it in an organized manner.

BITCOIN

Refers to a protocol, network or a unit of currency. As a protocol, Bitcoin is a set of rules that every client must follow to accept transactions and have its own transactions accepted by other clients. Also includes a message protocol that allows nodes to connect to each other and exchange transactions and blocks. As a network, Bitcoin is all the computers that follow the same rules and exchange transactions and blocks between each other. As a unit, one Bitcoin (BTC, XBT) is defined as 100 million satoshis, the smallest units available in the current transaction format. Bitcoin is not capitalized when speaking about the amount: “I received 0.4 bitcoins.”

GITHUB BITCOIN GLOSSARY BITCOIN CORE

New name of BitcoinQT since release of version 0.9 on March 19, 2014. Not to confuse with CoreBitcoin, an Objective-C implementation published in August 2013. See also Bitcore, a JavaScript implementation for Node.js by Bitpay.

BITCOINJ

A Java implementation of a full Bitcoin node by Mike Hearn. Also includes SPV implementation among other features.

BITCOINJS

A JavaScript toolkit. Allows signing transactions and performing several elliptic curve operations. Used on brainwallet.org.

BITCOINQT

Bitcoin implementation based on original code by Satoshi Nakamoto. Includes a graphical interface for Windows, OS X and Linux (using QT) and a command-line executable bitcoind that is typically used on servers. It is considered a reference implementation as it’s the most used full node implementation, especially among miners. Other implementations must be bug-for-bug compatible with it to avoid being forked. BitcoinQT uses OpenSSL for its ECDSA operations which has its own quirks that became a part of the standard (e.g. non-canonically encoded public keys are accepted by OpenSSL without an error, so other implementations must do the same).

BITCOIND

Original implementation of Bitcoin with a command line interface. Currently a part of BitcoinQT project. “D” stands for “daemon” per UNIX tradition to name processes running in background. See also BitcoinQT.

A Bitcoin utilities library in Ruby by Julian Langschaedel. Used in production on Coinbase.com.

BLOCKCHAIN

A public ledger of all confirmed transactions in a form of a tree of all valid blocks (including orphans). Most of the time, “blockchain” means the main chain, a single most difficult chain of blocks. Blockchain is updated by mining blocks with new transactions. Unconfirmed transactions are not part of the blockchain. If some clients disagree on which chain is main or which blocks are valid, a fork happens.

BLOCKCHAIN.INFO

A web service running a Bitcoin node and displaying statistics and raw data of all the transactions and blocks. It also provides a web wallet functionality with lightweight clients for Android, iOS and OS X.

BRAIN WALLET

Brain wallet is the concept of storing private keys as a memorable phrase without any digital or paper trace. Either a single key is used for a single address, or a deterministic wallet derived from a single key. If done properly, a brain wallet greatly reduces the risk of theft because it is completely deniable: no one could say which or how much bitcoins you own as there are no actual wallet files to be found anywhere. However, it is the most error-prone method as one can simply forget the secret phrase, or make it so simple that someone is able to brute force and steal all the funds. Additional risks are added by a complex wallet software. E.g. BitcoinQT always sends change amount to a new address. If a private key is imported temporarily to spend 1% of the funds and then the wallet is deleted, the remaining 99% is lost forever as they are moved as a change to a completely new address. This has already happened to a number of people.

BRAINWALLET.ORG

U t i l i t y b a s e d o n b i tco i n j s to c ra f t t ra n s a c t i o n s by hand, convert private keys to addresses and work with a brain wallet.

BITCORE

BTC

A Bitcoin toolkit by BitPay written in JavaScript. More complete than Bitcoinjs.

The most popular informal currency code for 1 Bitcoin (defined as 100,000,000 Satoshis). See also XBT.

BLOCK

CASASCIUS COINS

A data structure that consists of a block header and a merkle tree of transactions. Each block (except for genesis block) references one previous block thus forming a tree called the blockchain. Block can be thought of as a group of transactions with a timestamp and a proof-of-work attached.

BLOCK HEADER

BLOCK HEIGHT

A sequence number of a block in the blockchain. Height 0 refers to the genesis block. Several blocks may share the same height (see Orphan), but only one of them belongs to the main chain. Block height is used in Lock time.

CHANGE

Informal name for a portion of a transaction output that is returned to a sender as a “change” after spending that output. Since transaction outputs cannot be partially spent, one can spend 1 BTC out of 3 BTC output only by creating two new outputs: a “payment” output with 1 BTC sent to a payee address, and a “change” output with remaining 2 BTC (minus transaction fees) sent to the payer’s addresses. BitcoinQT always uses a new address from a key pool for better privacy. Blockchain.info sends to a default address in the wallet.

Crypto Biz Magazine

A data structure containing a previous block hash, a hash of a merkle tree of transactions, a timestamp, a difficulty and a nonce.

Physical collectible coins produced by Mike Caldwell. Each coin contains a private key under a tamper-evident hologram. The name “Casascius” is formed from a phrase “call a spade a spade,” as a response to the name of Bitcoin itself.

October.2014 Page.47

BITCOIN-RUBY

CONTINUED

GITHUB BITCOIN GLOSSARY A common mistake when working with a paper wallet or a brain wallet is to make a change transaction to a different address and then accidentally delete it. E.g. when importing a private key in a temporary BitcoinQT wallet, making a transaction and then deleting the temporary wallet.

CHECKPOINT

A hash of a block before which the BitcoinQT client downloads blocks without verifying digital signatures for performance reasons. A checkpoint usually refers to a very deep block (at least several days old) when it’s clear to everyone that the block is accepted by the overwhelming majority of users and reorganization will not happen past that point. It also helps to protect most of the history from a 51% attack. Since checkpoints affect how the main chain is determined, they are part of the protocol and must be recognized by alternative clients (although, the risk of reorganization past the checkpoint would be incredibly low).

CLIENT See Node.

COIN

An informal term that means either 1 bitcoin, or an unspent transaction output that can be spent.

Crypto Biz Magazine Page.48 October.2014

COINBASE

An input script of a transaction that generates new bitcoins, or the name of that transaction itself (“coinbase transaction”). Coinbase transaction doesn’t spend any existing transactions, but contains exactly one input which may contain any data in its script. Genesis block transactions contain a reference to The Times article from January 3rd, 2009 to prove that more blocks were not created before that date. Some mining pools put their names in the coinbase transactions (so everyone can estimate how much hashrate each pool produces). Coinbase is also used to vote on a protocol change (e.g. P2SH). Miners vote by putting some agreed-upon marker in the coinbase to see how many support the change. If a majority of miners support it and expect non-mining users to accept it, then they simply start enforcing the new rule. The minority should either continue with a forked blockchain (thus producing an altcoin) or accept the new rule.

COINBASE.COM

US-based Bitcoin/USD exchange and web wallet service.

COLORED COIN

A concept of adding a special meaning to certain transaction outputs. This could be used to create a tradable commodity on top of Bitcoin protocol. For instance, a company may create 1 million shares and declare a single transaction output containing 10 BTC (1B satoshis) as a source of these shares. Then some or all of these bitcoins can be moved to other addresses, sold, or exchanged. During a voting process or a dividend distribution, share owners can prove ownership by simply signing a particular message by the private keys associated with addresses holding bitcoins derived from the initial source.

CONTINUED

COLD STORAGE

A collective term for various security measures to reduce the risk of remote access to the private keys. It could be a normal computer disconnected from the Internet, or a dedicated hardware wallet, or a USB stick with a wallet file, or a paper wallet.

COMPACTSIZE

Original name of a variable-length integer format used in transaction and block serialization. Also known as “Satoshi’s encoding.” It uses 1, 3, 5 or 9 bytes to represent any 64bit unsigned integer. Values lower than 253 are represented with 1 byte. Bytes 253, 254 and 255 indicate 16-, 32- or 64-bit integers that follow. Smaller numbers can be presented differently. In bitcoin-ruby it is called “var_int,” in Bitcoinj it is VarInt. BitcoinQT also has even more compact representation called VarInt, which are not compatible with CompactSize and used in block storage.

CONFIRMED TRANSACTION

Transaction that has been included in the blockchain. Probability of transaction being rejected is measured in a number of confirmations. See Confirmation Number.

CONFIRMATION NUMBER

Confirmation number is a measure of probability that transaction could be rejected from the main chain. “Zero confirmations” means that transaction is unconfirmed (not in any block yet). One confirmation means that the transaction is included in the latest block in the main chain. Two confirmations means the transaction is included in the block right before the latest one. And so on. Probability of transaction being reversed (“double spent”) diminishes exponentially with more blocks added “on top” of it.

DIFFICULTY

Difficulty is a measure of how difficult it is to find a new block compared to the easiest it can ever be. By definition, it is a maximum target divided by the current target. Difficulty is used in two Bitcoin rules: 1) every block must meet difficulty target to ensure 10 minute interval between blocks and 2) transactions are considered confirmed only when belonging to a main chain, which is the one with the biggest cumulative difficulty of all blocks. As of September 5, 2013, the difficulty is 86,933,018 and grows by 20 – 30% every two weeks. See also Target.

DENIAL OF SERVICE

A form of attack on the network. Bitcoin nodes punish certain behavior of other nodes by banning their IP addresses for 24 hours to avoid DoS. Also, some theoretical attacks like 51% attack may be used for network-wide DoS.

DEPTH

Depth refers to a place in the blockchain. A transaction with 6 confirmations can also be called “6 blocks deep.”

DETERMINISTIC WALLET

A collective term for different ways to generate a sequence of private keys and/or public keys. Deterministic wallet does not need a Key Pool. The simplest form of a deterministic wallet is

GITHUB BITCOIN GLOSSARY based on hashing a secret string concatenated with a key number. For each number the resulting hash is used as a private key (public key is derived from it). More complex schemes uses elliptic curve arithmetic to derive sequences of public and private keys separately, which allows the generation of new addresses for every payment request without storing private keys on a web server. More information on Bitcoin Wiki. See also Wallet.

DOS

See Denial of Service.

DOUBLE SPEND

A fraudulent attempt to spend the same transaction output twice. There are two major ways to perform a double spend: reverting an unconfirmed transaction by making another one which has a higher chance of being included in a block (only works with merchants accepting zero-confirmation transactions) or by mining a parallel blockchain with a second transaction, to overtake the chain where the first transaction was included. The Bitcoin proof-of-work scheme makes it incredibly difficult to double spend transactions included in the blockchain. The deeper transaction is recorded in the blockchain, the more expensive it is to “reverse” it. See also 51% attack.

DUST

A transaction output that is smaller than the typical fee required to spend it. This is not a strict part of the protocol, as any amount more than zero is valid. BitcoinQT refuses to mine or relay “dust” transactions to avoid uselessly increasing the size of unspent transaction outputs (UTXO) index. See also UTXO.

CONTINUED

FEE

See Transaction Fee.

FORK

Refers either to a fork of a source code (see Altcoin) or, more often, to a split of the blockchain when two different parts of the network see different main chains. In a sense, fork occurs every time two blocks of the same height are created at the same time. Both blocks always have the different hashes (and therefore different difficulty), so when a node sees both of them, it will always choose the most difficult one. However, before both blocks arrive at a majority of nodes, two parts of the network will see different blocks as tips of the main chain. Fork or hard fork also refer to a change of the protocol that may lead to a split of the network (by design or because of a bug). On March 11, 2013, a smaller half of the network running version 0.7 of bitcoind, could not include a large (>900 Kb) block at height 225430, created by a miner running version 0.8 or newer. The block could not be included because of the bug in v0.7 which was fixed in v0.8. Since the majority of computing power did not have a problem, it continued to build a chain on top of a problematic block. When the issue was noticed, majority of 0.8 miners agreed to abandon 24 blocks incompatible with 0.7 miners and mine on top of 0.7 chain. Except for one double spend experiment against OKPay, all transactions during the fork were properly included in both sides of the blockchain.

FULL NODE

ELLIPTIC CURVE ARITHMETIC

GENESIS BLOCK

ECDSA

EXTRA NONCE

A number placed in coinbase script and incremented by a miner each time the nonce 32-bit integer overflows. It is not necessary to continue mining when nonce overflows, one can also change the merkle tree of transactions or change a public key used for collecting a block reward. See also nonce.

The very first block in the blockchain with hard-coded contents and an all-zero reference to a previous block. Genesis block was released on 3rd of January, 2009 with a newspaper quote in its coinbase: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” as a proof that there are no secretly pre-mined blocks to overtake the blockchain in the future. The message ironically refers to a reason for Bitcoin existence: a constant inflation of money supply by governments and banks.

HALVING

Refers to reducing reward every 210,000 blocks (approximately every 4 years). Since the genesis block to a block 209,999 in December 2012 the reward was 50 BTC. By 2016 it will be 25 BTC, then 12.5 BTC and so on, until it’s only 1 satoshi around 2140, after which point no more bitcoins will ever be created. Due to reward halving, the total supply of bitcoins is limited: only about 2100 trillion satoshis will ever be created.

HARD FORK

Some people use the term hard fork to stress that changing Bitcoin protocol requires overwhelming majority to agree

Crypto Biz Magazine

A set of mathematical operations defined as a group of points on a 2D elliptic curve. Bitcoin protocol uses predefined curve secp256k1. Here’s the simplest possible explanation of the operations: you can add and subtract points and multiply them by an integer. Dividing by an integer is computationally infeasible (otherwise cryptographic signatures won’t work). The private key is a 256-bit integer and the public key is a product of a predefined point G (“generator”) by that integer: A = G * a. Associativity law allows implementing interesting cryptographic schemes like Diffie-Hellman key exchange (ECDH): two parties with private keys a and b may exchange their public keys A and B to compute a shared secret point C: C = A * b = B * a because (G * a) * b == (G * b) * a. Then this point C can be used as an AES encryption key to protect their communication channel.

October.2014 Page.49

Stands for Elliptic Curve Digital Signature Algorithm. Used to verify transaction ownership when making a transfer of bitcoins. See Signature.

A node which implements all of Bitcoin protocol and does not require trusting any external service to validate transactions. It is able to download and validate the entire blockchain. All full nodes implement the same peer-to-peer messaging protocol to exchange transactions and blocks, but that is not a requirement. A full node may receive and validate data using any protocol and from any source. However, the highest security is achieved by being able to communicate as fast as possible with as many nodes as possible.

GITHUB BITCOIN GLOSSARY with it, or some noticeable part of the economy will continue with original blockchain following the old rules. See Fork and Soft Fork.

INPUT

See Transaction Input.

HASH FUNCTION

KEY

Bitcoin protocol mostly uses two cryptographic hash functions: SHA-256 and RIPEMD-160. First one is almost exclusively used in the two round hashing (Hash256), while the latter one is only used in computing an address (see also Hash160). In addition to Hash256 and Hash160, scripts may also use SHA1, SHA-256 and RIPEMD-160.

Could mean an ECDSA public or private key, or AES symmetric encryption key. AES is not used in the protocol itself (only to encrypt the ECDSA keys and other sensitive data), so usually the word key means an ECDSA key. When talking about keys, people usually mean private keys as public key can always be derived from a private one. See also Private Key and Public Key.

HASH, HASH256

KEY POOL

When not speaking about arbitrary hash functions, Hash refers to two rounds of SHA-256. That is, you would compute an SHA-256 hash of your data and then an SHA-256 hash of that hash. It is used in block header hashing, transaction hashing, making a merkle tree of transactions, or computing a checksum of an address. Known as BTCHash256() in CoreBitcoin, Hash() in BitcoinQT. It is also available in scripts as OP_HASH256.

HASH160

SHA-256 hashed with RIPEMD-160. It is used to produce an address because it makes a smaller hash (20 bytes vs 32 bytes) than SHA-256, but still uses SHA-256 internally for security. BTCHash160() in CoreBitcoin, Hash160() in BitcoinQT. It is also available in scripts as OP_HASH160.

TO HASH

To compute a hash function of some data. If hash function is not mentioned explicitly, it is the one defined by the context. For instance, â&#x20AC;&#x153;to hash a transactionâ&#x20AC;? means to compute Hash256 of binary representation of a transaction.

Crypto Biz Magazine Page.50 October.2014

CONTINUED

HASHRATE

A measure of mining hardware performance expressed in hashes per second. As of September 5, the hash rate of all Bitcoin mining nodes combined is around 647,000 Gh/s. For comparison, AMD Radeon graphics cards produce from 200 to 800 Mh/s depending on model.

HASH TYPE (HASHTYPE)

A single byte, appended to a transaction signature in the transaction input, which describes how the transaction should be hashed in order to verify that signature. There are three types affecting outputs: ALL (default), SINGLE, NONE and one optional modifier ANYONECANPAY affecting the inputs (can be combined with either of the first three). ALL requires all outputs to be hashed (thus, all outputs are signed). SINGLE clears all output scripts but the one with the same index as the input in question. NONE clears all outputs thus allowing changing them at will. ANYONECANPAY removes all inputs except the current one (allows anyone to contribute independently). The actual behavior is more subtle than this overview, you should check the actual source code for more comments.

HEIGHT

See Block Height.

Some wallet applications that create new private keys randomly keep a pool of unused pre-generated keys (BitcoinQT keeps 100 keys by default). When a new key is needed for change address or a new payment request, the application provides the oldest key from the pool and replaces it with a fresh one. The purpose of the pool is to ensure that recently used keys are always backed up on external storage. Without a key pool you could create a new key, receive a payment on its address and then have your hard disk die before backing up this key. A key pool guarantees that this key was already backed up several days before being used. Deterministic wallets do not use a key pool because they only need to back up a single secret key.

LIGHTWEIGHT CLIENT

Comparing to a full node, lightweight node does not store the whole blockchain and thus cannot fully verify any transaction. There are two kinds of lightweight nodes: those fully trusting an external service to determine wallet balance and validity of transactions (e.g. blockchain.info) and the apps implementing Simplified Payment Verification (SPV). SPV clients do not need to trust any particular service, but are more vulnerable to a 51% attack than full nodes. See Simplified Payment Verification.

LOCK TIME (LOCKTIME)

A 32-bit field in a transaction that means either a block height at which the transaction becomes valid, or a UNIX timestamp. Zero means transaction is valid in any block. A number less than 500,000,000 is interpreted as a block number (the limit will be hit after year 11,000), otherwise a timestamp.

MAINNET

Main Bitcoin network and its blockchain. The term is mostly used in comparison to testnet.

MAIN CHAIN

A part of the blockchain which a node considers the most difficult (see difficulty). All nodes store all valid blocks, including orphans, and recompute the total difficulty when receiving another block. If the newly arrived block or blocks do not extend existing main chain, but create another one from some previous block, it is called reorganization.

MERKLE TREE

Merkle tree is an abstract data structure that organizes a list of data items in a tree of their hashes (like in Git, Mercurial or ZFS). In Bitcoin, the merkle tree is used only to organize

GITHUB BITCOIN GLOSSARY transactions within a block (the block header contains only one hash of a tree) so that full nodes may prune fully spent transactions to save disk space. SPV clients store only block headers and validate transactions if they are provided with a list of all intermediate hashes.

MEMPOOL

A technical term for a collection of unconfirmed transactions stored by a node until they either expire or get included in the main chain. When reorganization happens, transactions from orphaned blocks either become invalid (if already included in the main chain) or moved to a pool of unconfirmed transactions. By default, bitcoind nodes throw away unconfirmed transactions after 24 hours.

MINING

A process of finding valid hashes of a block header by iterating millions of variants of block headers (using nonce and extra nonce) in order to find a hash lower than the target (see also difficulty). The process needs to determine a single global history of all transactions (grouped in blocks). Mining consumes time and electricity and nowadays the difficulty is so big, that energy-wise it’s not even profitable to mine using video graphics cards. Mining is paid for by transaction fees and by block rewards (newly generated coins, hence the term “mining”).

MINING POOL

MINER

A person, a software or a hardware that performs mining.

MIXING

A process of exchanging coins with other persons in order to increase privacy of one’s history. Sometimes it is associated with money laundering, but strictly speaking it is orthogonal to laundering. In traditional banking, a bank protects customer’s privacy by hiding transactions from all third parties. In Bitcoin any merchant may do a statistical analysis of one’s entire payment history and determine, for instance, how many bitcoins one owns. While it’s still possible to implement KYC (Know Your Customer) rules on a level of every merchant, mixing allows you to separate information about one’s history between the merchants.

M-OF-N MULTI-SIGNATURE TRANSACTION

A transaction that can be spent using M signatures when N public keys are required (M is less or equal to N). Multi-signature transactions that only contain one OP_CHECKMULTISIG opcode and N is 3, 2 or 1 are considered standard.

NODE

Node, or client, is a computer on the network that speaks Bitcoin message protocol (exchanging transactions and blocks). There are full nodes that are capable of validating the entire blockchain and lightweight nodes, with reduced functionality. Wallet applications that speak to a server are not considered nodes.

NONCE

Stands for “number used once.” A 32-bit number in a block header which is iterated during a search for proof-of-work. Each time the nonce is changed, the hash of the block header is recalculated. If nonce overflows before valid proof-of-work is found, an extra nonce is incremented and placed in the coinbase script. Alternatively, one may change a merkle tree of transactions or a timestamp.

NON-STANDARD TRANSACTION

Any valid transaction that is not standard. Non-standard transactions are not relayed or mined by default BitcoinQT nodes, but are relayed and mined on testnet. However, if anyone puts such transaction in a block, it will be accepted by all nodes. In practice it means that unusual transactions will take more time to get included in the blockchain. If some kind of non-standard transaction becomes useful and popular, it may get named standard and adopted by users (like it). See also Standard Transaction.

OPCODE

8-bit code of a script operation. Codes from 0x01 to 0x4B (decimal 75) are interpreted as a length of data to be pushed on the stack of the interpreter (data bytes follow the opcode). Other codes either do something interesting, are disabled and cause transaction verification to fail, or do nothing (reserved for future use). See also Script.

ORPHAN, ORPHANED BLOCK

A valid block that is no longer a part of a main chain. Usually happens when two or more blocks of the same height are produced at the same time. When one of them becomes a part of the main chain, others are considered “orphaned.” Orphans also may happen when the blockchain is forked due to an attack (see 51% attack) or a bug. Then a chain of several blocks may become abandoned. Usually a transaction is included in all blocks of the same height, so its confirmation is not delayed and there is no double spend. See also Fork.

OUTPUT

See Transaction Output.

Crypto Biz Magazine

Most important reasons for mixing are: 1) receiving a salary as a single big monthly payment and then spending it in small transactions (“café sees thousands of dollars when you pay just $4”); and 2) making a single payment and revealing connection of many small private spendings (“car dealer sees how much you are addicted to coffee”). In both cases your employer, a café and a car dealer may comply with KYC/AML laws and report your identity and transferred

amounts, but neither of them need to know about each other. Mixing bitcoins after receiving a salary and mixing them before making a big payment solves this privacy problem.

October.2014 Page.51

A service that allows separate owners of mining hardware to split the reward proportionally to submitted work. Since probability of finding a valid block hash is proportional to miner’s hashrate, small individual miners may work for months before finding a big per-block reward. Mining pools allow more steady stream of smaller income. Pool owner determines the block contents and distributes ranges of nonce values between its workers. Normally, mining pools are centralized. P2Pool is a fully decentralized pool.

CONTINUED

GITHUB BITCOIN GLOSSARY P2SH

contain public keys or addresses in the output scripts and signatures in the input scripts.

PAY-TO-SCRIPT HASH

REFERENCE IMPLEMENTATION

See Pay-to-Script Hash.

A type of script and address that allows sending bitcoins to arbitrary complex scripts using a compact hash of that script. This allows payer to pay much smaller transaction fees and not wait long for a non-standard transaction to get included in the blockchain. Then the actual script matching the hash must be provided by the payee when redeeming the funds. P2SH addresses are encoded in Base58Check just like regular public keys and start with number “3.”

BitcoinQT (or bitcoind) is the most used full node implementation, so it is considered a reference for other implementations. If an alternative implementation is not compatible with BitcoinQT it may be forked, that is, it will not see the same main chain as the rest of the network running BitcoinQT.

RELAYING TRANSACTIONS

A form of cold storage where a private key for Bitcoin address is printed on a piece of paper (with or without encryption) and then all traces of the key are removed from the computer where it was generated. To redeem bitcoins, a key must be imported in the wallet application so it can sign a transaction. See also Casascius Coins.

Connected Bitcoin nodes relay new transactions between each other on best-effort basis in order to send them to the mining nodes. Some transactions may not be relayed by all nodes. E.g. non-standard transactions, or transactions without a minimum fee. Bitcoin message protocol is not the only way to send the transaction. One may also send it directly to a miner, or mine it yourself, or send it directly to the payee and make them relay it or mine it.

PROOF-OF-WORK (POW)

REORG, REORGANIZATION

PAPER WALLET

A number that is provably hard to compute. That is, it takes measurable amount of time and/or computational power (energy) to produce. In Bitcoin it is a hash of a block header. A block is considered valid only if its hash is lower than the current target (roughly, starts with a certain amount of zero bits). Each block refers to a previous block thus accumulating previous proof-of-work and forming a blockchain.

Crypto Biz Magazine Page.52 October.2014

CONTINUED

Proof-of-work is not the only requirement, but it’s an important one to make sure that it is economically infeasible to produce an alternative history of transactions with the same accumulated work. Each client can independently consider the most difficult chain of valid blocks as the “true” history of transactions, without need to trust any source that provides the blocks. Note that owning a very large amount of computational power does not override other rules enforced by every client. Illformed blocks or blocks containing invalid transactions are rejected no matter how difficult they were to produce.

PRIVATE KEY (PRIVKEY)

A 256-bit number used in ECDSA algorithm to create transaction signatures in order to prove ownership of a certain quantity of bitcoins. Can also be used in arbitrary elliptic curve arithmetic operations. Private keys are stored within wallet applications and are usually encrypted with a pass phrase. Private keys may be completely random (see Key Pool) or generated from a single secret number (“seed”). See also Deterministic Wallet.

PUBLIC KEY (PUBKEY)

A 2D point on an elliptic curve secp256k1 that is produced by multiplying a predefined “generator” point by a private key. Usually it is represented by a pair of 256-bit numbers (“uncompressed public key”), but can also be compressed to just one 256-bit number (at the slight expense of CPU time to decode an uncompressed number). A special hash of a public key is called address. Typical Bitcoin transactions

An event in the node when one or more blocks in the main chain become orphaned. Usually, newly received blocks extend the existing main chain. Sometimes (4 – 6 times a week) a couple of blocks of the same height are produced almost simultaneously, and for a short period of time, some nodes may see one block as a tip of the main chain which will be eventually replaced by a more difficult block(s). Each transaction in the orphaned blocks either become invalid (if already included in the main chain block) or become unconfirmed and moved to the mempool. In case of a major bug or a 51% attack, reorganization may involve reorganizing more than one block.

REWARD

Amount of newly generated bitcoins that a miner may claim in a new block. The first transaction in the block allows miner to claim currently allowed reward as well as all transaction fees from all transactions in the block. Reward is halved every 210,000 blocks, approximately every 4 years. As of September 5, 2013, the reward is 25 BTC (the first halving occurred in December 2012). For security reasons, rewards cannot be spent before 100 blocks are built on top of the current block.

SATOSHI

The first name of Bitcoin’s creator Satoshi Nakamoto and also the name of the smallest unit used in transactions. 1 bitcoin (BTC) is equal to 100 million satoshis.

SATOSHI NAKAMOTO

The pseudonym of the author of the initial Bitcoin imple mentation. There are many speculations on who and how many people worked on Bitcoin, of which nationality or age, but no one has any evidence to say anything definitive on the matter.

SCRIPT

A compact turing-incomplete programming language used in transaction inputs and outputs. Scripts are interpreted by a Forth-like stack machine: each operation manipulates data on the stack. Most scripts follow the standard pattern

GITHUB BITCOIN GLOSSARY and verify the digital signature provided in the transaction input against a public key provided in the previous transaction’s output. Both signatures and public keys are provided using scripts. Scripts may contain complex conditions, but can never change the amount being transferred. Amount is stored in a separate field in a transaction output.

SCRIPTSIG

Original name in bitcoind for a transaction input script. Typically, input scripts contain signatures to prove ownership of bitcoins sent by a previous transaction.

SCRIPTPUBKEY

Original name in bitcoind for a transaction output script. Typically, output scripts contain public keys (or their hashes; see Address) that allow only owner of a corresponding private key to redeem the bitcoins in the output.

SEQUENCE

A 32-bit unsigned integer in a transaction input used to replace older version of a transaction by a newer one. Only used when locktime is not zero. Transaction is not considered valid until the sequence number is 0xFFFFFFFF. By default, the sequence is 0xFFFFFFFF.

SIGNATURE

A sequence of bytes that proves that a piece of data is acknowledged by a person holding a certain public key. Bitcoin uses ECDSA for signing transactions. Amounts of bitcoins are sent through a chain of transactions: from one to another. Every transaction must provide a signature matching a public key defined in the previous transaction. This way, only the proper owner of a secret private key, associated with a given public key, can spend bitcoins further.

A scheme to validate transactions without storing the whole blockchain (only block headers) and without trusting any external service. Every transaction must be present with all its parent and sibling hashes in a merkle tree up to the root. SPV client trusts the most difficult chain of block headers and can validate if the transaction indeed belongs to a certain block header. Since SPV does not validate all transactions, a 51% attack may not only cause a double spend (like with full nodes), but also make a completely invalid payment with bitcoins created from nowhere. However, this kind of attack is very costly and probably more expensive than a product in question. Bitcoinj library implements SPV functionality.

SECRET KEY

SOFT FORK

Sometimes the soft fork refers to an important change of software behavior that is not a hard fork (e.g. changing mining fee policy). See also Hard Fork and Fork.

Incorrect peer-to-peer messages (like sending invalid transactions) may be considered a denial of service attack (see DoS). Valid transactions sending very tiny amounts and/or having low mining fees are called Dust by some people. The protocol itself does not define which transactions are not worth relaying or mining, it’s a decision of every individual node. Any valid transaction in the blockchain must be accepted by the node if it wishes to accept the remaining blocks, so transaction censorship only means increased confirmation delays. Individual payees may also blacklist certain addresses (refuse to accept payments from some addresses), but that’s too easy to work around using mixing.

SPENT OUTPUT

A transaction output can be spent only once: when another valid transaction makes a reference to this output from its own input. When another transaction attempts to spend the same output, it will be rejected by the nodes already seeing the first transaction. Blockchain as a proof-of-work scheme allows every node to agree on which transaction was indeed the first one. The whole transaction is considered spent when all its outputs are spent.

SPLIT

A split of a blockchain. See Fork.

SPV

See Simplified Payment Verification.

STANDARD TRANSACTION

Some transactions are considered standard, meaning they are relayed and mined by most nodes. More complex transactions could be buggy or cause DoS attacks on the network, so they are considered non-standard and not relayed or mined by most nodes. Both standard and non-standard transactions are valid and once included in the blockchain, will be recognized by all nodes. Standard transactions are: 1) sending to a public key; 2) sending to an address; 3) sending to a P2SH address; 4) sending to M-of-N multi-signature transaction where N is 3 or less.

TARGET

A 256-bit number that puts an upper limit for a block header hash to be valid. The lower the target is, the higher the difficulty to find a valid hash. The maximum (easiest) target is 0x00000000FFFF0000000000000000000000000000000000000000000000000000. The difficulty and the target are adjusted every 2016 blocks (approx. 2 weeks) to keep interval between the blocks close to 10 minutes.

TESTNET

A set of parameters used for testing a Bitcoin network. Testnet is like mainnet, but has a different genesis block (it was reset several times, the latest testnet is testnet3). Testnet uses a slightly different address format to avoid confusion with main Bitcoin addresses and all nodes relaying and mining non-standard transactions.

TESTNET3

The latest version of testnet with another genesis block.

Crypto Biz Magazine

Either the Private Key or an encryption key used in encrypted wallets. Bitcoin protocol does not use encryption anywhere, so secret key typically means a private key used for signing transactions.

SPAM

October.2014 Page.53

SIMPLIFIED PAYMENT VERIFICATION (SPV)

CONTINUED

GITHUB BITCOIN GLOSSARY TIMESTAMP

UNIX timestamp is a standard representation of time as a number of seconds since January 1st, 1970, GMT. Usually stored in a 32-bit signed integer.

TRANSACTION

A chunk of binary data that describes how bitcoins are moved from one owner to another. Transactions are stored in the blockchain. Every transaction (except for coinbase transactions) has a reference to one or more previous transactions (inputs) and one or more rules on how to spend these bitcoins further (outputs). See Transaction Input and Transaction Output.

TRANSACTION FEE

Also known as “miners’ fee,” an amount that an author of transaction pays to a miner who will include the transaction in a block. The fee is expressed as the difference between the sum of all input amounts and a sum of all output amounts. Unlike traditional payment systems, miners do not explicitly require fees and most miners allow free transactions. All miners are competing between each other for the fees and all transactions are competing for a place in a block. There are soft rules encoded in most clients that define minimum fees per kilobyte to relay or mine a transaction (mostly to prevent DoS and spam). Typically, the fee affects the priority of a transaction. As of September 5, 2013 average fees are below 1 BTC per block. See also Reward.

Crypto Biz Magazine Page.54 October.2014

TRANSACTION INPUT

A part of a transaction that contains a reference to a previous transaction’s output and a script that can prove ownership of that output. The script usually contains a signature and is called scriptSig. Inputs spend previous outputs completely. So if one needs to pay only a portion of some previous output, the transaction should include extra change output that sends the remaining portion back to its owner (on the same or different address). Coinbase transactions contain only one input with a zeroed reference to a previous transaction and arbitrary data in place of script.

TRANSACTION OUTPUT

An output contains an amount to be sent and a script that allows further spending. The script typically contains a public key (or an address, a hash of a public key) and a signature verification opcode. Only an owner of a corresponding private key is able to create another transaction that sends that amount on to someone else. In every transaction, the sum of output amounts must be equal or less than the sum of all input amounts. See also Change.

See Transaction.

TXIN

away, find it in the blockchain, or include it in the blockchain itself (if it’s a miner). See also Confirmation Number.

UTXO SET

A collection of Unspent Transaction Outputs. Typically used in discussions on optimizing an ever-growing index of transaction outputs that are not yet spent. The index is important to efficiently validate newly created transactions. Even if the rate of the new transactions remains constant, the time required to locate and verify unspent outputs grows. Possible technical solutions include more efficient indexing algorithms and more performant hardware. BitcoinQT, for example, keeps only an index of outputs matching user’s keys and scans the entire blockchain when validating other transactions. A developer of one web wallet service mentioned that they maintain the entire index of UTXO and its size was around 100GB when the blockchain itself was only 8GB. Some people seek social methods to solve the problem. For instance, by refusing to relay or mine transactions that are considered dust (containing outputs smaller than a transaction fee required to mine/relay them).

VARINT

This term may cause confusion as it means different things in different Bitcoin implementations. See CompactSize.

WALLET

An application or a service that keeps private keys for signing transactions. Wallet does not keep bitcoins themselves (they are recorded in blockchain). “Storing bitcoins” usually means storing the keys.

WEB WALLET

A web service providing wallet functionality: ability to store, send and receive bitcoins. User has to trust counter-party to keep their bitcoins securely and ready to redeem at any time. It is very easy to build your own web wallet, so most of them were prone to hacks or outright fraud. The most secure and respected web wallet is Blockchain.info. Online exchanges also provide wallet functionality, so they can also be considered web wallets. It is not recommended to store large amounts of bitcoins in a web wallet.

XBT

Informal currency code for 1 Bitcoin (defined as 100,000,000 Satoshis). Some people proposed using it for 0.01 Bitcoin to avoid confusion with BTC. There were rumors that Bloomberg tests XBT as a ticker for 1 Bitcoin, but currently there is only ticker XBTFUND for SecondMarket’s Bitcoin Investment Trust. See also BTC. —S

See Transaction Input.

TXOUT

See Transaction Output.

UNCONFIRMED TRANSACTION

Transaction that is not included in any block. Also known as “0-confirmation” transaction. Unconfirmed transactions are relayed by the nodes and stay in their mempools. An unconfirmed transaction stays in the pool until the node decides to throw it

CONTINUED

GITHUB bitcoin Glossary by OLEG ANDREEV (oleganza@gmail.com). Twitter: @oleganza. Send your Bitcoin tips to:

1CBtcGivXmHQ8ZqdPgeMfcpQNJrqTrSAcG.

COINOUTLET ATMS Bill Bing, President of Locant Services, says he is excited to partner with Coin Outlet, “based on their best-in-class hardware, and regulatory acumen. We look forward to assisting with the deployment of Bitcoin Kiosk machines by leveraging our portfolio of approximately 100,000 prime locations nationwide.” Initially, Coin Outlet Kiosks will be located in Los Angeles, Chicago, Dallas, Boston, San Diego, and Berkeley, before spreading across an expansive nationwide network. The first 30 kiosks are anticipated to be installed in the US by the end of this year.

PRESS RELEASE—Coin Outlet, with the assistance of Bitcoin Shop, signs partnership with Locant to launch world’s largest Bitcoin ‘ATM’ network

Locant’s exclusive nationwide network of over 100,000 prime locations provides the ideal infrastructure for this partnership and launch. With such widespread coverage and visibility, the companies believe Bitcoin and the digital economy will become truly accessible to anyone. They believe it will not only move Bitcoin further into the mainstream of commerce, but also educate the general public on the advantages of digital currency.

Eric further commented “I want to thank Charles Allen, the CEO of Bitcoin Shop for his advice, guidance and support in consummating this partnership.”

Coin Outlet is a rapidly-growing startup that manufactures AML/KYC-compliant Bitcoin Kiosks (similar to an ATM), with two-way transactions via a recycler, and secure fulfillment services with bank-grade security. It provides a convenient means for the general public to safely buy and sell bitcoins with cash. More information about Coin Outlet can be found at the company’s website: www.coinoutletatm.com.

ABOUT LOCANT SERVICES: Locant Services holds exclusive rights to locate wireless equipment, and offer wireless services, at over 100,000 high traffic, plug-and-play locations across the United States. More information about Locant Services can be found at the company’s website: www.locant.com

ABOUT BITCOIN SHOP: Bitcoin Shop serves as a medium between consumers wishing to spend Bitcoin, Litecoin or Dogecoin, and sellers wishing to receive sales. Their goal is to be a leading virtual currency marketplace. More information can be found at: www.bitcoinshop.us Coin Outlet Inc. Belinda Too, Branding & Communications Director, belinda@coinoutlet.io

Crypto Biz Magazine

Coin Outlet CEO Eric Grill explains “The partnership with Locant allows us to drive Bitcoin and digital currency adoption through a systematic roll-out of ATMs across key cities, from coast to coast. Our partnership encompasses the perfect collaboration of resources, technology, and prime locations.”

ABOUT COIN OUTLET:

October.2014 Page.55

Burlington, NC, September 29, 2014—Coin Outlet Inc., a rapidly-growing startup, who manufactures and plans to operate AML/KYC-compliant digital-currency ATMs, announced today that it has partnered with Locant Services to establish and operate what may be the largest Bitcoin ‘ATM’ kiosk network in the world. Coin Outlet is striving to generate a series of unique partnerships that will lay the foundation for the Bitcoin ecosystem to gain mainstream integration.

Charles Allen, CEO of Bitcoin Shop Inc. (OTCBB: BTCS), stated, “I’m thrilled I could provide strategic guidance and assistance to Coin Outlet with this paramount transaction, and believe the Locant and Coin Outlet partnership will allow Coin Outlet Kiosks to be installed at popular public locations, creating an extensive Bitcoin Kiosk network.”

ABOUT COINFEST… CoinFest is the world’s FIRST decentralized currency convention! Not the first convention about decentralized currency, but rather the first currency convention to itself be decentralized in concept, organization and form. We book venues all across the globe for a simultaneous extravaganza of cryptocurrency, hosted in a non-profit fashion by various partners. CoinFest is not owned by any person or company, and all domain names and other assets will eventually be turned over to a decentralized autonomous organization. Anybody can start a CoinFest of their own, so long as they uphold the spirit of CoinFest. One may not charge admission for a CoinFest event, as it is intended for public outreach. CoinFest is also intended to incentivize cryptocurrency adoption, and thus one may not host a CoinFest at a venue or business that does not support alternative currency, barring extreme circumstances. All currencies are allowed, but use of state-backed currency (within the state backing said currency) is discouraged, except for the purpose of purchasing alternative currency.

CONFIRMED LOCATIONS FOR COINFEST 2015

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Vancouver, Canada, the birthplace of CoinFest. It will once again be organized by CoinFest founder Andrew Wagner Winnipeg, Canada, brought to us by returning organizer Josh Nekrep. Check out his website Montreal, Canada, home of Canada’s Bitcoin Embassy. Now joining us thanks to Francis Pouliot, chief executive of the Canadian chapter of the Bitcoin Foundation

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Renaca Beach in Vina Del Mar, Chile. Major thanks to our anarchist friend Gabriel Scheare from Galt’s Gulch

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Mexico City, Mexico, spearheaded by Bitso co-founder and Bitcoin Co-Op member Pablo Gonzalez

Donate to CoinFest CoinFest is entirely funded by donations and sponsorships, and charges no fees to event venues or guests. If you like what we’re doing to spread currency innovation and freedom, you can support the movement by donating to one of the following addresses, or by using CoinOS!

BITCOIN ADDRESS:

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FEATHERCOIN ADDRESS:

DOGECOIN ADDRESS:

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Donate with CoinOS! February 20 – 22—CoinFest is now an annual event. Save the date! www.coinfest.org Contact

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Whether you’re a venture capitalist, lawyer, technologist, or entrepreneur, the conference agenda offers a diverse and exciting array of topics that shed light on the implications of bitcoin, along with predictions on the opportunities and challenges that lie ahead.

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October.2014 Page.57

Inside Bitcoins Conference & Expo, the leading trade show for the fast-growing bitcoin and related cryptocurrency, will be launching in Israel later this month after successful events earlier this year in Berlin, New York, Hong Kong, Melbourne, and London. From October 19-20, thought leaders, virtual currency experts and business visionaries will converge at Kfar Maccabiah Convention Center to lead a discussion on the first digital, decentralized, peer-to-peer based global currency.

And many more! View the full speaker list here. Inside Bitcoins, Tel Aviv will also feature a bi-directional Bitcoin ATM, which will be placed at your service. Crypto Biz Magazine

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THE EVOLUTION OF TRANSACTION SOLUTIONS

Bitcoin offers merchants transaction fees that are much lower than other payment solutions

Crypto Biz Magazine Page.58 October.2014

With the excitement of all the various cryptocurrencies currently in the space, what in in thethe future of what sometimes sometimesisisunder-discussed under-discussedisistheir theirrole role future transactions. As merchants learnlearn aboutabout the benefits of accepting cryptoof transactions. As merchants the benefits of accepting currencies like Bitcoin, skepticism will be will met be by met the numerous advancryptocurrencies like Bitcoin, skepticism by the numerous tages of using type protocol for payment. advantages of this using thisoftype of protocol for payment. At BitPay we currently have 30,000 merchants, including higher profile clients like Gyft, TigerDirect and the NBA’s Sacramento Kings. While these forward thinking companies immediately saw the benefit of Bitcoin and were quick to jump aboard, the mainstream acceptance of Bitcoin also requires our smaller merchants that sell specialized items or services. Once skepticism and misinformation is quelled, the facts of Bitcoin as a payment method become crystal clear to many merchants. Through or or less of their transaction amount (deThrough BitPay BitPaymerchants merchantspay pay1%1% less of their transaction amount pending on volume) as aasprocessing fee which is significantly less than (depending on volume) a processing fee which is significantly less payment processing options. It’sP2P the nature P2P nature the Bitcoin other payment processing options. It’s the of theofBitcoin netthan other network enables extremely payment processing option. It’s work thatthat enables this this extremely low low payment processing option. It’s also also important to realize Bitcoin is still infancyand andother otherpayment payment important to realize thatthat Bitcoin is still in initsitsinfancy options have had 50 plus years to build their network and infrastructure. Bitcoin has hasbeen beenaround aroundsince since2009 2009and and those years Bitcoin in in those fivefive years thethe useruser exexperience merchants customers become drastically easier. perience forfor merchants andand customers has has become drastically easier. This Thiscontinue will continue to improve asopen the open source platform develops. will to improve as the source platform develops.

SPECIAL ADVERTISING FEATURE

An analogy I quite often make is to the music industry in the early 2000s. Napster forced record labels to change their business model to one that Napster forced record labels to change their business model to one that is more in line with what the consumers wanted. Some advantages that is more has in line withwhat whathappened the consumers wanted. include Some advantages that Bitcoin over with Napster the existence continued of a global marketplace, venture capital investments and Bitcoin has over what happened with Napster include the existence of a development of the protocol. The switch to digital was something that was global marketplace, continuedresistance developconfusing and scary venture for manycapital musicinvestments fans and theand immediate slowlyoffaded away andThe business as iTunes and Google ment the protocol. switchopportunities to digital wassuch something that was conMusic came to make buying digital music easier and the preferred way fusing and scary for many music fans and thenow immediate slowly to purchase a song. Bitcoin is controversial becauseresistance it’s challenging something been the same for a very time. It’s important faded awaythat andhas business opportunities suchlong as iTunes andmore Google Music to realize that, like any other technology, it becomes more mature and came to make buying digital music easier and the preferred way to pureasier to use over time. chase a song. Bitcoin is controversial now because it’s challenging someSome of the smartest and most successful entrepreneurs in the world thing that has been the same for a very long time. It’s more important to are embracing Bitcoin. realize that, like any technology, it becomes more maturedrastically and easThese individuals seeother the long term potential in how it could reduce payment costs as well as the global reach it has. BitPay has ier to use over time. continued to bring credibility, excellent support and development of the platform to the community and successful that has resulted in beinginthe Some of the smartest and most entrepreneurs themarket world leader for Bitcoin Payment Processing. We also hope to continue to grow are embracing Bitcoin. and Amsterdam as well as a new location for our continuously growing These individuals see the long term potential in how it could drastical-

What’s important is for other Bitcoin companies in the space to contribute development time to ensure the protocol can grow properly. At BitPay, Bitcoin Core Coredeveloper developerJeff JeffGarzik Garzik a member of our andconwe Bitcoin is aismember of our teamteam and we continue to contribute to platform the platform through projects as Bitcore. tinue to contribute to the through projects suchsuch as Bitcore. One startups grow able One our biggest hopes as other of ourofbiggest hopes is asisother startups grow thatthat theythey willwill be be able to to expand their development teams to contribute to Bitcoin. expand their development teams to contribute to Bitcoin.

ly reduce payment costs as well as the global reach it has. BitPay has

Bitcoinusers userscurrently currently have various reasons useprotocol; the protocol; Bitcoin have various reasons to usetothe includincluding technological, political, financial and economic. As merchant ing technological, political, financial and economic. As merchant acacceptance grows education subject grows, ceptance grows andand education on on thethe subject grows, the the useruser basebase will will diversify platform become easier to use. aren’t close diversify andand the the platform will will become easier to use. WeWe aren’t close to to widespread acceptability in same the same vein as a credit card, it is widespread acceptability in the vein as a credit card, but it isbut somesomething thatBitcoin the Bitcoin community is currently developing. thing that the community is currently developing.

ue to grow globally with new offices in San Francisco, New York City,

continued to bring credibility, excellent support and development of the platform to the community and that has resulted in being the market leader for Bitcoin Payment Processing. We also hope to contin-

Argentina and Amsterdam as well as aACCEPT new location for our continuously BITCOIN growing Atlanta office.

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newegg.com

overstock.com

This is a list of merchants, and their websites, that accept bitcoins for their products. Please contact us at directories@cryptobizmagazine.com if you know merchants who are now accepting bitcoins and who youâ&#x20AC;&#x2122;d like to see added to this list. Additionally, please let us know if you find that any of these merchants has stopped accepting bitcoins, or if you have any difficulty using bitcoins with them.

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