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What is Bitcoin?

Bitcoin is a digital crypto-currency with no single point of failure due to its decentralized peer-to-peer architecture. The source code is publicly available and changes to the reference Bitcoin client are made via concensus within the community. Advantages of Bitcoin include irreversible transactions (i.e. no possibility of chargebacks as with credit cards), pseudo-anonymous, limited and fixed inflation, near instant transactions, multi-platform, no double-spend and little to no barriers to entry and more. It was created by an anonymous person known as Satoshi Nakamoto. Find out more at

Bitcoin Latest News

Major Magazine Publisher to Accept Bitcoin Payments

Posted on 18 December 2014 | 12:43 pm

Microsoft accepts Bitcoin

Posted on 11 December 2014 | 5:06 am

Mozilla accepting Bitcoin

Posted on 20 November 2014 | 1:55 pm

PayPal and Virtual Currency

Posted on 23 September 2014 | 9:52 pm

Wikimedia Foundation Now Accepts Bitcoin

Posted on 30 July 2014 | 3:14 pm

airBaltic - World’s First Airline To Accept Bitcoin

Posted on 22 July 2014 | 11:03 am

Bitcoin Core version 0.9.1 released

Posted on 8 April 2014 | 4:27 pm

Bitcoin taxfree in Denmark

Posted on 25 March 2014 | 5:46 pm

Bitcoin-Qt v0.9.0rc3 released

Posted on 13 March 2014 | 3:21 am

Bitcoincharts and SSL

Posted on 4 March 2014 | 2:21 pm

Bitcoin Price Technical Analysis for 6/10/2015 – Approaching Target - newsBTC


Bitcoin Price Technical Analysis for 6/10/2015 – Approaching Target
After facing a surprising number of ups and downs, Bitcoin is finally approaching its target of $245. But, what after it reaches its target? Will it extend the gains or will it succumb to profit booking? Let's conduct technical analysis on the daily ...

and more »

Posted on 5 October 2015 | 9:40 pm

Bitcoin Can Be A Gamechanger During The Holiday Shopping Season - Inside Bitcoins

Inside Bitcoins

Bitcoin Can Be A Gamechanger During The Holiday Shopping Season
Inside Bitcoins
Buying something for friends, family, or loved ones, has become part of the holiday seasons, but that doesn't mean deals and discounts become less important; More importantly, can Bitcoin play any major role in the “bargain” holiday shopping this year?

Posted on 5 October 2015 | 9:28 pm

Bitcoin flounders in Australia as regulatory worries bite - Business Insider

Business Insider

Bitcoin flounders in Australia as regulatory worries bite
Business Insider
SYDNEY (Reuters) - Australian businesses are turning their backs on bitcoin, as signs grow that the cryptocurrency's mainstream appeal is fading. Concerns about bitcoin's potential crime links mean many businesses have stopped accepting it, a trend ...
Bitcoin Staggers in Australia as Banking Cartel Conspires Against ExchangesCoinTelegraph
Bitcoin Busts In
Australian Businesses Ditch Bitcoin After Banks Act Against Bitcoin ExchangesCryptoCoinsNews

all 58 news articles »

Posted on 5 October 2015 | 8:34 pm

Bitcoin Price Analysis: Wash Trading & Rising Volume - CoinTelegraph


Bitcoin Price Analysis: Wash Trading & Rising Volume
After speaking with self proclaimed “degenerate gambler” and one of the most respected bitcoin traders of the space, BTCVIX, most of this volume appears to be wash trading. “And now we are even seeing some of this interest wane as I believe the ramping ...

Posted on 5 October 2015 | 4:10 pm

With Winklevoss Bitcoin Exchange, Digital Currency Grows Up - WIRED


With Winklevoss Bitcoin Exchange, Digital Currency Grows Up
Cameron and Tyler Winklevoss were among a group of investors who put $1.5 million into BitInstant, a bitcoin exchange founded by a guy named Charlie Shrem. Shrem was also a founding member of The Bitcoin Foundation, the not-for-profit created to ...
With Gemini, Winklevoss brothers seek respect in bitcoinFortune
Bitcoin Exchange Gemini Approved for Launch in New YorkCoinDesk
Winklevoss Twins Win Approval to Open Bitcoin ExchangeNew York Times
New York Post -TechCrunch -Financial Times
all 87 news articles »

Posted on 5 October 2015 | 1:44 pm

Bitcoin Price Turns On a Dime, Again. - CryptoCoinsNews


Bitcoin Price Turns On a Dime, Again.
Bitcoin price has been churned into a washing machine lately and today was no exception. On the aniversary of the start of history's largest asset price rally on 5 October 2013, the bitcoin chart, once again, looked primed for a sharp decline. However ...

Posted on 5 October 2015 | 12:08 pm

Transparent Bitcoin Applications like OKLink Are a Huge Market in China, Says ... - Bitcoin Magazine

Transparent Bitcoin Applications like OKLink Are a Huge Market in China, Says ...
Bitcoin Magazine
OKCoin's new superwallet allows bitcoin as a background method of money transfers not only across borders, but across currencies as well. Jack Liu, head of international at OKCoin, recently discussed bitcoin in China and as an alternative payment ...

Posted on 5 October 2015 | 11:07 am

Santander InnoVentures Adds $4 Million to Ripple’s Series A Round

Ripple has received an additional $4m in funding from Santander InnoVentures, bringing the total amount raised during its Series A round to $32m.

Posted on 6 October 2015 | 3:43 am

Fed Chair: Bitcoin's Popularity Unrelated to Central Bank Policy

US Federal Reserve chairwoman Janet Yellen said the popularity of bitcoin doesn't relate to the public's perception of its monetary policy.

Posted on 5 October 2015 | 10:15 am

US Government to Sell 44,000 BTC in Final Silk Road Auction

The US Marshals Service (USMS) has announced it will sell 44,341 BTC (worth approximately $10.6m at press time) in an online auction due to take place on 5th November. To be held from 12:00 UTC to 18:00 UTC, the six-hour auction, open only to pre-registered bidders, represents the final sale of bitcoins in connection with […]

Posted on 5 October 2015 | 9:38 am

Ukraine's National Bank Issues Bitcoin Warning

Ukraine's National Bank has warned against the associated risks that come with digital currencies such as bitcoin.

Posted on 5 October 2015 | 6:50 am

Survey: 3% of Consumers Would Switch Retailers for Bitcoin

A survey of US consumers suggests that at least some may be willing to start shopping with a specific retailer if they started accepting bitcoin.

Posted on 5 October 2015 | 3:26 am

Quiz: This Week's Bitcoin News

Are you up to date with the latest bitcoin and blockchain news? Test your knowledge with our quiz for the week of 28th September – 4th October.

Posted on 4 October 2015 | 7:49 am

The CFTC’s Not-So-Hidden Message: Traders Beware

Bitcoin law experts Brian Klein and Geoffrey Aronow explore recent rulings by the US CFTC and how they affect bitcoin traders across the world.

Posted on 3 October 2015 | 2:50 am

Dutch Central Bank Research Head 'Not Opposed' to Bitcoin

De Nederlandsche Bank (DNB) head of research Jakob de Haan has issued new responses to pointed questions about the role of bitcoin in global finance.

Posted on 2 October 2015 | 3:25 pm

Anti-Virus Tycoon John McAfee Accepts Bitcoin for Presidential Run

Anti-virus software pioneer John McAfee is now accepting bitcoin in his 2016 presidential campaign.

Posted on 2 October 2015 | 5:17 am

Bitcoin Company Coinplug Raises $5 Million in Funding

South Korean bitcoin services company Coinplug has closed a $5m Series B funding round.

Posted on 2 October 2015 | 4:49 am

Study: Google Searches Can Predict Bitcoin Trading Volume

Google search data can predict the price of bitcoin, new research has found.

Posted on 2 October 2015 | 3:15 am

Gemini Exchange Moves Toward Launch With Twin NYDFS Approvals

Bitcoin exchange Gemini has received two key approvals from the NYDFS that move it closer to launching services in the US.

Posted on 1 October 2015 | 3:10 pm

SEC Seizes Assets from Alleged Altcoin Pyramid Scheme

A California company promoting a digital currency called GemCoin has had its assets seized by the US government amid allegations of fraud.

Posted on 1 October 2015 | 12:52 pm

Transparent Bitcoin Applications like OKLink Are a Huge Market in China, Says OKCoin's Jack Liu

OKCoin's new superwallet allows bitcoin as a background method of money transfers not only across borders, but across currencies as well.

Jack Liu, head of international at OKCoin, recently discussed bitcoin in China and as an alternative payment system in an interview with Bloomberg Business.

Liu referred to the dramatic price crash of bitcoin in 2013 as a good thing, because it forced developers and entrepreneurs to think of creative applications of bitcoin and its underlying blockchain technology instead of focusing uniquely on the price of bitcoin. As a result, there are now large venture capital investments and lots of startups building infrastructure.

“The people behind the industry used to be very libertarian, very political in nature, and wanted to push an alternative currency and an alternative lifestyle,” said Liu. “You are now seeing the bitcoin players receive venture capital and work with banks closely, trying to create a more harmonious financial system integrating the traditional financial system with the Bitcoin network, and that’s going to be much more powerful.” and , two separate companies owned by the same investors and focused respectively on Chinese and worldwide digital currency trading, were founded in 2013 with a $1 million angel investment from Ventures Lab and Silicon Valley venture capitalist Tim Draper, and received a $10 million series A funding round in March 2014. OKCoin is perhaps the largest exchange in the world with 20 percent of daily trading volume, said Liu.

“As a native speaker of both English and Chinese, and as someone who has worked in traditional finance and at a U.S.-based bitcoin exchange, I hope to bring both international and institutional perspective to OKCoin and to shed more light on the Chinese market with the global Bitcoin community,” said Liu when he joined OKCoin as Director of institutional strategy and sales in November 2014. “I view OKCoin now as an international company, not as a Chinese one.”

According to Liu, the most interesting applications use bitcoin and the blockchain as a transparent intermediate step for fund transfers in fiat currencies, making sending and receiving money as easy as sending and receiving email.

“We can hide bitcoin technology in the background, and that’s what we have launched with a product called OKLink, in the spring, that was the first ‘superwallet’ in the world,” said Liu. “A superwallet is really a mobile wallet that allows you to hold a more comfortable type of value, like the USD or the CNY, but transact over the Bitcoin network.” Liu added that OKLink transactions aren’t affected by the volatility of bitcoin. “Because you are doing instant buy of bitcoin and sell of bitcoin, you are not affected by the bitcoin price,” he said.

OKCoin launched the OKLink “superwallet” in April. OKLink is an open digital wallet, which allows national and digital currencies to transact cross company, cross border, and cross currency in an instantaneous and free manner. OKCoin gives an example of consumer-to-consumer transaction in fiat currencies channeled transparently through the blockchain:

“Paul, an American, and Tom, a Canadian, are good friends. Paul is a Circle user while Tom uses OKLink. Tom would like to borrow from Paul $100 USD worth of Canadian dollars (CAD). Tom opens his OKLink Superwallet and shows his QR Code to Paul. Paul through scanning the QR code with his Circle Superwallet, sends Tom $100 USD. The Circle Superwallet buys exactly $100 USD worth of bitcoins from a U.S. dollar Bitcoin exchange and then via the Bitcoin network sends the bitcoins to Tom’s OKLink account. Tom has instructed as default that incoming funds should be received as CAD. OKLink Superwallet takes the received bitcoins and sells it on a CAD Bitcoin exchange for CAD. In the end, Paul sent $100 USD to Tom, and Tom received it as CAD to use.”

Besides consumer-to-consumer transactions, OKLink can be used for business-to-business, consumer-to-business, and business-to consumer transactions.

“This is a huge market, especially in China,” continued Liu. China already owns around 50 percent of bitcoin mining hashpower and 60 percent of exchange volume, and Chinese people – especially students – are frequently abroad and need efficient cross-border payments. Chinese consumers are already used to “a beautiful payment experience” with WeChat and Alipay for domestic payments, and they expect the same for cross border payments.

Interestingly, the Bank of America (BoA) recently filed a patent application titled “System and Method for Wire Transfers Using Cryptocurrency” for an alternative to traditional wire transfers, where the funds are first transferred to a cryptocurrency exchange, then converted to a cryptocurrency such as bitcoin, then sent to another exchange, and finally converted into another currency for the recipient.

In other words, BoA wants to patent the concept of using a cryptocurrency as a transparent intermediate step for fiat currency transfers, but it seems that OKCoin got there first.

The post Transparent Bitcoin Applications like OKLink Are a Huge Market in China, Says OKCoin's Jack Liu appeared first on Bitcoin Magazine.

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Winklevoss Twins Announce the Launch of Gemini Bitcoin Exchange

Investors have been watching and waiting for the launch of Gemini, the bitcoin exchange launched by Cameron and Tyler Winklevoss, since it was first announced on January 23. The wait is over.

Customers have been begun receiving instructions for onboarding and will be able to officially begin trading on the Gemini exchange starting Thursday, October 8 at 9:30 a.m. EST.

The nine months it took for Gemini to go from announcement to launch is due to a belief in the need to “ask for permission, not forgiveness.” However, on September 23, Gemini Trust Company received approval for its Articles of Organization and was further granted an exemption from the deposit insurance requirements of Section 32 of the Banking Law.

Due to its corporate structure as a limited liability trustcompany (LLTC), it is able to service both individual and institutional customers, which is important because many believe that banks are curious about trading bitcoin.

“The reality is that institutions will bring the most amount of capital to the exchange,” Cameron Winklevoss, president of Gemini Trust Company, told Bitcoin Magazine in an interview and demo. “Every major bank in the world has people looking at bitcoin.”

The downside of being an LLTC is that the company itself cannot provide FDIC insurance for its accounts. That being said, Gemini revealed at launch that Signature Bank, based in New York, was one of its primary partner banks that would hold all fiat currency transferred to Gemini. Through Signature, the fiat currency is eligible for FDIC insurance.

Four Silos of Success

In an interview with Cameron Winklevoss, he revealed that the company operates on four silos that they drive toward for success.

The fastest way for a user to lose trust in a company is for security to be insufficient. Because of that, security is the company’s primary objective. They hired Cem Paya, the former security lead at AirBnB, to be the chief security officer at Gemini. Further, all bitcoin is held by Gemini in a cold, geographically dispersed network of servers. When the Winklevoss Bitcoin ETF, COIN, launches, all of its bitcoin will be held by Gemini.

Taking it a step further, though, the company has put in place a rule that prohibits any links in emails. For example, in its “Gemini is open for business!” launch email, there is no link to Gemini. To prevent phishing attempts whereby a hacker gains access to a user’s account, the individual has to manually type in to register.

Following security came compliance. Since the company is based in New York, that meant working with the New York State Department of Financial Services (NYFDS). According to Winklevoss, NYSDFS seemed open to working with Gemini. Compliance was also required for the remainder of the country.

At launch, users in California, Colorado, Delaware, Florida, Idaho, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota,Mississippi, Missouri, Montana, New Hampshire, New Mexico, New York, North Carolina, Ohio, Rhode Island, South Carolina, Tennessee, Utah, Vermont,Washington, D.C., and Wyoming can use Gemini starting on Thursday.

The third component of the Winklevoss’ four silos is banking. There have been too many instances where a bank won’t cover a bitcoin company because of the concern about auditing. “It didn’t take a lot of selling to convince the bank to work with us,” Winklevoss said. “They liked the team and the product.”

Only after security, compliance and banking were handled did the product become a priority. And if any of the four silos had to suffer, it would be product.

“You have to have all four right to succeed, but if you’re missing a little bit on product, it’s not going to be catastrophic,” he explained. “Rather than building a rocket shop in the air, we built it in the hanger, tested it, and tested it again, and then we have liftoff.”

In his interview with Bitcoin Magazine, Winklevoss talked at length about the risk tolerance of banks and the simple fact that they hate risk.

“It’s better to have the regulatory framework figured out because the risk appetite of banks is conservative. People don’t recognize how important regulation is these institutions. Banks care,” he explained.

And because it is the big institutions that are bringing the majority of the capital, it was important to the team to have that regulatory framework squared away. “There is a lot of dark pool trading, because it is easier, that will go on exchange when they are regulated.”

Gemini wasn’t the first to market, but Winklevoss said that wasn’t important to him.

“Market centers [like Gemini] will build up reputation and credibility with participants over time. A month does not make or break your business,” he explained, referring to other exchanges that had already launched in New York City.

Trading on the Exchange

The exchange opens for trading on Thursday 9:30 a.m. EST, but users can begin the process of signing up today.

Part of the registration process is a knowledge-based authorization. The system will attempt to verify a user’s identity through a Social Security number and then questions about that user’s credit. For example, it will ask if they have ever owned a house on a particular street if that appears on the credit report. This is meant to speed up the authorization process for that user.

In our demo, Winklevoss stressed the importance that he wanted Gemini to become the favorite of both institutions and individuals.

“Early community is certainly very important because they are the most vocal and they are the ones who will touch the product more,” he explained.

The team went with a very clean look, using as much white space as possible. Further, the system was built with visualization engines that enable the user to identify what impact their particular trade will have on the order book.

For example, in the image above, if a user decided topurchase 0.631 BTC at a limit of $237.71, the blue portion of the order book would fill in darker where that purchase takes place. This is meant to show what the average price would be for the user.

At launch, it will be free to deposit and withdraw fundsfrom Gemini. However, the company will charge a 25 basis points fee for both buyers and sellers who trade on the exchange. There will also be APIs for individuals who are more interested in programmatically trading to participate.

Photo TechCrunch / Flickr

The post Winklevoss Twins Announce the Launch of Gemini Bitcoin Exchange appeared first on Bitcoin Magazine.

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Dutch National Police Set Sights on Blockchain-Based Cloud Services

The Dutch National Police have taken an interest in Blockchain-based cloud services. A presentation given over the summer reveals a new focus on Storj and Filecoin.

Members of the Dutch National Police and UNIJURIS gave a presentation in July titled “Technical and Legal Challenges of Criminal Law Enforcement in the Digital Age .” This is an update of a presentation given in 2013 titled “The merits & challenges of distributed least authority data storage .”

The presentations explain how cloud storage and file hosting "Data is cut up in a hundred pieces. Pieces are spread over a hundred servers, in dozens of countries, over a multitude of hosters.”

Both presentations explain how Mega (Mega Limited) replaced the controversial Megaupload cloud storage service. Megaupload was seized and shut down by the United States Department of Justice in January 2012 over copyright infringement claims.

Extradition hearings are currently underway for Megaupload founder Kim DotCom in New Zealand. When the original Megaupload site was seized, federal prosecutors stated, “This action is among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime.” However, Kim DotCom, founder of Megaupload and Mega, recently distanced himself from Mega, stating over the summer that he would not trust Mega with user data and that he intends to create a third version of the site.

How would you like a new Internet that can't be controlled, censored or destroyed by Governments or Corporations? I'm working on it #MegaNet

— Kim Dotcom (@KimDotcom) February 16, 2015

As the Dutch presentation explains, next-generation technologies such as Mega make it more difficult for law enforcement to seize: “Never mind reading it. Data cannot even be located without the key.”

The presentation from this year was updated to include both Filecoin and Storj (pronounced “storage.”).Filecoin, according to its website, is a “data storage network and electronic currency based on Bitcoin. Users can “Earn Filecoin by renting disk space.” Filecoin was named by both Business Insider and Coindesk as Bitcoin projects to watch in 2015.

Storj, according to its website, is “based on blockchain technology and peer-to-peer protocols to provide the most secure, private, and encrypted cloud storage.” It will allow users to rent out extra hard-drive space and bandwidth using MetaDisk . It is built on top of Bitcoin with the Storjcoin X “SJCX” Counterparty token. According to CoinMarketCap , SJCX has a market capitalization of approximately $735,000 at time of publication.

Bitcoin Magazine spoke with Storj founder Shawn Wilkinson, who said that the presentation did a good job on half the picture:

“Traditionally, law enforcement could knock on the door of a third-party provider for access to information. As this is abused and data becomes more and more abstract and distributed (for economic and reliability) this will become almost impossible. This should lead to a decrease in cybercrimes as well. If governments can't get access to it, neither can attackers.”

Further, he noted that it missed some of the benefits to law enforcement:

“[It] Misses the possible use cases with this type of system in law enforcement. For example, handling of digital evidence in a public and verifiable way. “[This was] Not possible before.”

For example, in a popular dashcam video of a phone theft on Youtube, the detective assigned to the case was eventually provided with a signed (with an indelible ink pen) DVD by the person who captured the video. This seems like an antiquated way to prove authorship.

The presentation offered the following “solutions”:

Regarding Jurisdiction: “Legal duty (based on a warrant, of course) for third parties (companies) to hand over data locally in countries they offer their services in.”

Regarding Enforcement: “Seizure and acquisition moves back to the [end user or] client (not the hoster [or company].) [This creates a] New legal paradigm regarding the ‘location’ of data.”

Wilkinson said that the “P ossible solutions portion won't work at all as these solutions become more and more distributed.” While he disagrees with solutions, he thought the presentation was very forward-thinking and they are “asking the right questions.”

The distributed platform such as that which Storj will provide is a paradigm shift away from traditional centralized services. The past year saw very high-profile hacks of SONY , the Office of Personnel Management and even Ashley Madison . The breadth and scale of these kinds of data breaches are made possible though centrally stored data. While decentralized solutions may make law enforcement’s job more difficult, there must be thoughtful regulation because it might be a service such as Storj’s that will prevent a “cyber Pearl Harbor ” from happening.

Indeed, the authors note that:

“When these technologies, and others like them, converge in the … not so distance future, cloud based security will take a large step forward towards the multi granular least authority approach required for true in-depth cloud security….When looking at the public-order and security aspects of law enforcement, these developments can only be seen as a blessing.”

They also note: “When looking at the same developments from the prosecution and forensics viewpoint however, we see major technological and legal obstacles and challenges arising …”

The Dutch Police have had their hands full lately with a Supermarket Bomber making ransom demands in bitcoin. Earlier this year, The National High Tech Crime Unit of the Netherlands’ police and Kaspersky Lab announced that they would help victims recover from CoinVault ransomware. Earlier this month they arrested two young adults believed to be involved in the CoinVault campaign. They have been playing whack-a-mole with several Silk Road copycats . The Dutch National Police Agency also created a fork on GitHub of John Ratcliff's blockchain: A minimal parser for the bitcoin blockchain .

UNIJURIS, also located in the Netherlands, is a research group on unilateralism and the protection of global interests and has a section on its website called “Extraterritorial jurisdiction on the Internet .” This includes a research paper “The end of territory. The re-emergence of community as a principle of jurisdictional order.”

The post Dutch National Police Set Sights on Blockchain-Based Cloud Services appeared first on Bitcoin Magazine.

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WEF Survey Predicts Bitcoin 'Tipping Point' Happening By 2027

A survey by the World Economic Forum says the tipping point for bitcoin and blockchain adoption will happen by the year 2025.

The majority of 800 executives and experts surveyed by the World Economic Forum (WEF) put the 6-year-old currency bitcoin, as well as the underlying blockchain technology, 10 percent of the world’s Gross Domestic Product (GDP) running through the two technologies by 2025. The WEF was a bit more cautious with its own prediction and put 2027 as year they would reach the “tipping point.”

The WEF described the use of apps such as, a website that allows people to issue programmable contracts that pay out sums of bitcoin when certain factors (set by the creator of the contract) are reached and verified, without the involvement of any middleman, as a “Shift In Action” in society. “These contracts are secured in the blockchain as “self-executing contractual states,” which eliminate the risk of relying on others to follow through on their commitments.”

“[By 2025] 58% of respondents expected this tipping point to have occurred. Bitcoin and digital currencies are based on the idea of a distributed trust mechanism called the 'blockchain,' a way of keeping track of trusted transactions in a distributed fashion. Currently, the total worth of bitcoin in the blockchain is around $20 billion, or about 0.025% of global GDP of around $80 trillion,” read the report.

Positive impacts of bitcoin and blockchain technology reaching a critical tipping point listed by the WEF included: more direct financial transactions with less and less middleman; brand new assets that can be traded; better property records, and more financial inclusion in emerging markets; blockchain-based contacts and legal services used as unbreakable escrow or programmatically designed smart contracts; and increased transparency.

Technological Shifts that Will Change the Future

World Economic Forum’s Global Agenda Council on the Future of Software and Society gathered to identify 21 changes in society caused by software that would shape the future. They then survey business and technological leaders about when the “tipping point” for these technologies would happen and what the possible positive and negative effects of them would be, and published the results in a report titled Deep Shift: Technology Tipping Points and Societal Impact .

The committee featured 18 thought leaders and executives in the technology industry, which included several familiar, or involved, in the bitcoin/blockchain industry. Ron Cao, managing director of Lightspeed Venture Partners, a venture firm that invested in American bitcoin exchange CirclePay and Chinese exchange BTCC (formly BTC China); Primavera De Filippi, research fellow at Berkman Center for Internet & Society, France, and early explorer of bitcoin’s and blockchain’s effect on modern law, among others.

The report also included the “sharing economy,” 3D printing, smart cities, wearable devices, the Internet of Things (IoT), among the list of future-shaping technologies.

“Now comes the second machine age. Computers and other digital advances are doing for mental power – the ability to use our brains to understand and shape our environments – what the steam engine and its descendants did for muscle power,” wrote Council Vice-Chair and Director at MIT Initiative on the Digital Economy at Massachusetts Institute of Technology Erik Brynjolfsson in the report.

Blockchain use by governments was another trend that was included in the list. Possible uses by governments included recording land registries, tax collecting schemes, and other improvements in governmental processes. The tipping point decided by the WEF was the first time that tax is collected through a blockchain application and expected it to happen by 2023.

“[By 2025] 73% of respondents expected this tipping point to have occurred. The blockchain creates both opportunities and challenges for countries. On the one hand, it is unregulated and not overseen by any central bank, meaning less control over monetary policy. On the other hand, it creates the ability for new taxing mechanisms to be built into the blockchain itself (e.g. a small transaction tax).”

The WEF remained neutral on whether this would be a net positive or negative, citing corruption, real-time taxation, and unclear role for government in the process, including a state’s central bank, were reasons it could “cut both ways.”

An example given by the report as already underway was a 2016 mayoral candidate of London who has suggested implementing blockchain technology to upgrade the city’s’ ledger for land, as well as for its finances and budget. (Similar experiments are going on in Honduras and the Isle of Man.) “Because these records are kept permanently, there is a strong possibility (without the blockchain) for them to be altered or faulted.”

“The Internet is driving a shift towards networks and platform-based social and economic models. Assets can be shared, creating not just new efficiencies but also whole new business models and opportunities for social self-organization. The blockchain, an emerging technology, replaces the need for third-party institutions to provide trust for financial, contract and voting activities,” concluded the report.

Photo World Economic Forum

The post WEF Survey Predicts Bitcoin 'Tipping Point' Happening By 2027 appeared first on Bitcoin Magazine.

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How the Hunt for Satoshi Turned Dorian Nakamoto’s Life Upside Down: the Inside Story

Once More for Posterity: Dorian Nakamoto Explains Why He Is Not the Mastermind Behind the World's Most Popular Digital Currency

Approaching the home that Dorian Nakamoto shares with his 93-year-old mother in the small Los Angeles County suburb of Temple City, one beholds a posted note under the doorbell declaring, “Private property: No solicitors or reporters.” Though I have come as an invited guest, the note stands as a stark reminder of the peculiar form of hell Nakamoto endured just a year and a half ago, when he was hounded to distraction by hordes of media and various curiosity-seekers after Newsweek magazine published a purported exposé that dubbed him the “Father of Bitcoin.”

The claim fell like a bomb on those who follow Bitcoin, and given Newsweek ’s longtime status as a paragon of mass magazine journalism, it engendered widespread discussion. The article, by Leah McGrath Goodman, served as the magazine’s cover story on March 6, 2014. It claimed to have uncovered the true identity of Bitcoin creator Satoshi Nakamoto, following a two-month investigation that included “interviews with those closest to (Dorian) Nakamoto and the developers who worked most frequently with him (“Satoshi”).

Citing Dorian’s past contracting work on top-secret engineering projects, an ingrained disdain for government intrusion, and using quotes from various family members which paint him as a humble, privacy-obsessed engineering mastermind, Goodman made a compelling though surface-level argument for Dorian Nakamoto as the creator of Bitcoin.

But following the article’s publication, most involved with Bitcoin were quick to question the validity of Goodman’s claims, seeing the evidence presented as largely circumstantial. A commonly held belief among those who are skeptical of Newsweek ’s claims is that “Satoshi Nakamoto” is actually an alias for a group of cryptographers/software engineers, rather than an individual. Others who corresponded with “Satoshi,” including core developer Gavin Andresen, believe he is in fact an individual.

Furthermore, a recent piece by Nathaniel Popper in The New York Times makes the case that if the creator was indeed an individual, he was probably BitGold inventor and noted cryptocurrency expert Nick Szabo, not Dorian Nakamoto (although Szabo, too, refutes these claims).

Still others have asked the logical question of why a humble and essentially private person such as Dorian Nakamoto would create Bitcoin, seek anonymity for that feat, and then choose an alias that includes his given last name, in light of all of the other measures he took to remain anonymous.

Mike Hearn, a developer who communicated with Satoshi prior to his departure from Bitcoin, even posted a blog entry that charted logical inconsistencies within Goodman’s claim that Dorian Nakamoto and Satoshi Nakamoto are one and the same.

Trial By Media Fire

The Newsweek story revealed sensitive details about Dorian Nakamoto in an effort to highlight personality traits and motivations that fall in line with what little there is to infer about Bitcoin’s creator. It ended up turning his world upside down.

In the midst of an unwanted media blitz that included what he describes as being unable to grab milk from the store without being barraged by reporters, Nakamoto gained support from lawyers and individuals in the Bitcoin community. One group even created the short-lived website “” that was intended to clear his name and raise funds for a lawsuit against the publication giant.

In a statement formally submitted to Newsweek by Nakamoto and his lawyer, he states that he “did not create, invent or otherwise work on Bitcoin,” and that, “Newsweek ’s false report has been the source of a great deal of confusion and stress for myself, my 93-year-old mother, my siblings, and their families.” He then ends the letter: “This will be our last public statement on this matter. I ask that you now respect our privacy.”

Given the definitive nature of that statement, I ask Dorian why he now desires to speak to the press. His simple answer: “Closure.”

Cookies and Courtliness

As we enter Nakamoto’s home, he leads me into the kitchen, where the table is neatly set with woven placemats, a Japanese style tea set and a box of chocolate chip cookies. It is immediately apparent that Nakamoto, 65, a bachelor with a past marriage and grown children on his family resume, may not regularly entertain new guests in such a quasi-formal setting, but he has his own sense of how to go about doing so. He exudes a kind of courtliness, reverence and respect for the occasion that young people today would likely describe as “old-fashioned.”

As I take my seat, he is quick to offer and pour me green tea, then proceeds to make sure that I am content and comfortable in a way that feels refreshingly sincere. Not drinking any tea himself, he settles into his seat and begins to form circles around the empty cup with his fingers. Far from the shrewd, eccentric man portrayed in the Newsweek piece, he appears much more as a kind and good-humored person, with an almost canonical approach to respect and hospitality. After an exchange of additional basic pleasantries, he chuckles to himself and says in his slow, deep voice, “OK. Ask me anything.”

At the crux of Newsweek ’s claim that Nakamoto is in fact the creator of Bitcoin is a brief exchange between Goodman and him, in which Goodman states that he “tacitly" acknowledged his role in the Bitcoin project by declaring to her: “I am no longer involved in that and I cannot discuss it. It’s been turned over to other people. They are in charge of it now. I no longer have any connection.”

The words “no longer involved” and “turned over” would seem to lend credence to the belief that Nakamoto was in fact involved in some capacity with the “Bitcoin project.” I ask him about this exchange specifically, seeking to gain some clarity on his response. He replies: “I was thinking about work I had done at Citibank that was security things, security exchange. Even if I was involved I can’t tell you, because every engineering firm makes you sign a nondisclosure contract for during and post. I thought maybe that [her question] was something to do with Citibank work that I did.”

This response provides potential clarity surrounding this pivotal exchange between Goodman and Nakamoto. He insists he was not even familiar with the term “Bitcoin” at the time of the Newsweek interview, and thought Goodman was referring to a project that he had worked on at Citibank. Why, at the time, he drew this conclusion about the connection between “Bitcoin” and his previous, confidential work for Citi is still not entirely clear.

The Case for and Against

The Newsweek piece emphasizes: “Perhaps the most compelling parallel between the two Nakamotos are their professional skill sets and career timeframes.”

While portrayals of work on classified military projects are commonly projected with an almost clichéd, sinister tone, Nakamoto’s’s reasons for the life of secrecy described by his family are far more practical than they are mysterious. In addition to the nondisclosure agreements he signs with each classified project, and his firm belief in abiding by what he describes as the “engineer’s code,” he also emphasizes that it is extremely advantageous for people in his line of work to be as private as possible in order to best preserve their job security.

In this and his other responses, it is clear that Nakamoto has the mind of an engineer, articulating each of his carefully constructed thoughts piece by piece, and attending to even the most seemingly minute details. Noting the measures that his employers take to ensure that contractors will not be motivated to exchange classified information for rewards, he explains how anything from debt to a troubled relative or an affair (remember David Petraeus’s exit from the CIA?) would be grounds for immediate removal, and likely result in permanent exclusion from classified projects.

He notes that since publication of the Newsweek article, which exposed many personal details including sensitive information about his health and finances, he has been effectively “blacklisted” from the types of engineering jobs that he has worked on throughout his professional career.

Respect for the “Bitcoin Creator”

While the unwanted association with Bitcoin has brought significant hardship and stress to Nakamoto’s life, he brightens and is eager to thank the Bitcoin community for their “support.” He then expresses appreciation toward the “creator” for bringing Bitcoin’s blockchain technology to the world.

“The more I study about it, I think it’s a fantastic idea. I really appreciate what he [Satoshi Nakamoto] did, and all the people who contributed, including [Bitcoin core developer Gavin] Andresen and Andreas [M. Antonopoulos, Bitcoin entrepreneur and security expert].”

Warming to his topic, he continues: “And then the free software, freeware--that is a brilliant idea on the part of this creator or group of creators. But you also need very talented people to implement and carry it out; also marketing, sales. I just feel when I looked at it, I said ‘Wow! This is a beautiful thing.’ Especially if you are anti-authority or anti-establishment, which would be banks and governments and things like that. And they [Bitcoin] have a hold of young people now, including Jeffrey right here!

“I’d like to see how Bitcoin evolves into the next stage. How it encounters this problem, I won’t say problem, but government is always trying to encroach. Same thing with banks. And we will have to withstand the storm of what’s going to happen to our dollars as the international standard exchange currency….The biggest thing is we can’t possibly pay,” he says, in reference to the American debt. “My hope is that the top level designers, the creators, think about that.”

I am astonished to hear that Nakamoto has such high praise for the technology, and moreover, that he has clearly thought about how it should evolve, drawing on the nuances of the economic implications surrounding a decentralized currency/monetary system, and in light of the current geopolitical environment.

Riding Toward a Powerful Future

Nakamoto’s car, a faded beige Toyota Corolla, which “still runs great” after having logged almost 200,000 miles on the odometer, is not his preferred method of transportation. Driving to grab some Chinese food in Temple City, he points out the flawed street design and cracked sidewalks that obstruct his frequent bike rides around town.

Chuckling as he explains what he sees as simple solutions to basic infrastructure problems, he notes the pleasure and peace he finds in his regular bicycle rides, smiling as he recounts past excursions through the San Gabriel foothills and on the banks of the Los Angeles River. (Yes, there is such a thing, but it is mostly a wide concrete channel traversing the L.A. basin.)

In his New York Times piece, Popper states, “At this point, the creator’s identity is no longer important to Bitcoin’s future.” While most Bitcoin observers would likely believe this to be true, it is also clear that the unique mindset, convictions and motivations that governed “Satoshi’s” approach have had a meaningful, lasting effect on the enterprise, and they warrant examination. In this regard, Satoshi Nakamoto becomes more than the "genius” (or geniuses) who created Bitcoin—he also created Bitcoin, took no credit, and left the fortune amassed by his own creation completely untouched, all in order to best preserve the purity of a powerful idea. And that is a world-changing thing, quite likely unique in human history.

It is almost impossible for most of us to imagine a person or group who would have both the technical skill set to create Bitcoin and the ability to faithfully execute on such selfless principles. This draws us to figures like Nick Szabo and Dorian Nakamoto. Both men’s personalities and beliefs align with the characteristics that make Satoshi Nakamoto such a uniquely compelling figure. While such investigations are, for these reasons, entertaining and thought-provoking, they do clearly affect—in Dorian’s case, severely affect—the individuals under examination.

Moreover, such attempts to unveil the creator’s identity go against (what appears to be) Satoshi’s desire for Bitcoin to evolve as a truly inclusive open source project, in which the actual identity of its creator is ultimately unimportant.

With all that said, I am glad I was able to spend a day with Dorian Nakamoto in Temple City. I hope that this account will shed some light on Newsweek ’s so-called “Father of Bitcoin,” and perhaps help provide him with the closure that he seeks. If so, it couldn’t happen to a humbler guy.


Postscript: After learning of Dorian’s financial complications, his friend cryptograffiti created a piece of artwork that will be auctioned off with 100% of the proceeds going to Dorian. The artwork is also signed by Dorian, who will be conducting an AMA on Reddit later this week. The auction will be accepting bitcoin exclusively and will run until October 15th, 2015 at 7pm PST. Please submit sealed bids to .

The post How the Hunt for Satoshi Turned Dorian Nakamoto’s Life Upside Down: the Inside Story appeared first on Bitcoin Magazine.

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Beyond Bitcoin: How the Blockchain Can Power a New Generation of Enterprise Software

This is a guest post by Jesus Rodriguez.

Bitcoin has become one of the most intriguing and revolutionary technologies created in the last few years. From a functional standpoint, the cryptocurrency has challenged the most fundamental principles of the world’s financial systems by providing a decentralized, secured and trusted model to process financial transactions. To enable its magic, Bitcoin relies on an architecture powered by a groundbreaking technology known as the blockchain.

While bitcoin has clearly become the most important implementation, it is just one of many practical applications that can be powered by the blockchain. From the conceptual standpoint, the blockchain provides a series of capabilities that can change some of the well-established architectures in the enterprise digital world.

How can the blockchain redefine enterprise?

The decentralized, autonomous, trusted and secured capabilities of the blockchain can redefine the foundational patterns of enterprise applications. While the principles of the blockchain are well-understood patterns in enterprise solutions, until now we have lacked practical implementations that validate its functionality at an enterprise scale. The blockchain opens a new set of opportunities to enterprise scenarios that weren’t possible before. However, in order for blockchain solutions to be embraced in enterprise, they will have to develop a series of key capabilities to get past traditional IT compliance and regulatory practices.

What’s needed to adopt the blockchain in enterprise?

Despite its unique value, the process of adopting blockchain solutions in enterprise is far from trivial. Like many other technology trends, blockchain solutions will have to develop a series of enterprise-ready capabilities to be adopted in mainstream business scenarios. Those enterprise-ready capabilities are called to address many requirements in areas such as management, operational readiness, or compliance, which are essential to adopt solutions on different industries. The following list includes some of the key capabilities required to adopt the blockchain in mainstream enterprise scenarios.

  • Development Platform: The blockchain is a very complex architecture modeled in terms of transactional exchanges. To mitigate that complexity, we need programming frameworks and languages that allow average developers to build general-purpose applications against the blockchain.
  • Monitoring Tools: To be adopted in enterprise settings, the blockchain community should produce solutions that can actively monitor the health of a blockchain network and recover from unexpected failures. These capabilities will allow organizations to monitor the runtime behavior of blockchain solutions.
  • Private Cloud Deployments: Facilitating the deployment of the blockchain in private cloud topologies using mainstream enterprise infrastructures is a key element to facilitate the wide adoption of blockchain solutions in the enterprise. In that sense, the blockchain should work seamlessly with technologies such as Docker, VMWare vCloud, Open Stack among other mainstream enterprise infrastructure platforms.
  • Standards: As organizations start adopting blockchain solutions, the need to have standards will become increasingly relevant. Standards will facilitate the interoperability between different blockchain platforms while also enabling important security and compliance requirements of enterprise solutions.
  • Interoperability with Well-Established Enterprise Platforms: Like any other enterprise software trend, blockchain solutions will be required to integrate with established enterprise platforms like databases, line of business systems, etc. Enabling that interoperability will be essential to power the adoption of blockchain solutions in the enterprise.

10 Enterprise Scenarios that can be Redefined by the Blockchain

Decentralized IoT

The Internet of Things (IoT) is becoming one of the most important trends in modern enterprise software. While many IoT platforms are based on a centralized model in which a broker or hub control the interaction between devices, this model has proved to be impractical for many scenarios in which devices need to exchange data between themselves autonomously. That specific requirement has been the fundamental principle behind decentralized IoT platforms. Those decentralized models are fundamentally powered by a trusted ledger of exchanges between smart devices fundamental to power real-world IoT solutions.

The blockchain provides foundational capabilities of decentralized IoT platforms such as secured and trusted data exchange as well as record-keeping. In this type of IoT architecture, the blockchain will serve as the general ledger, keeping a trusted record of all the messages exchanged between smart devices in an IoT topology.

Keyless Signature

Public Key Infrastructure (PKI) has been one of the fundamental technologies powering data signatures. PKI models rely on a central authority to stamp and validate signatures on a data payload. While PKI models have been incredibly successful, the dependency on a central authority presents serious limitations for large-scale scenarios and is also vulnerable to attacks involving quantum computation.

The characteristics of the blockchain can help to overcome some of the limitations of PKI models with a keyless security infrastructure (KSI). A KSI model uses only hash-function cryptography, allowing verification to rely only on the security of hash functions and the availability of a public ledger commonly referred to as a blockchain.

Data Archiving

Archiving historical data in a secure and trusted manner has been a permanent challenge of enterprise IT. Companies like EMC have become one of the most iconic enterprise software companies in history by providing robust storage and archiving solutions. More recently, cloud platform vendors such as Amazon have provided alternative data archiving solutions. However, in both cases, data archiving solutions rely on a centralized storage model, which has well-known limitations in enterprise scenarios in areas such as security and privacy.

Decentralized and autonomous data archives models, such as the ones provided by the blockchain, can be an interesting alternative to centralized data storage solutions. This model will eliminate the dependency on a centralized authority and will allow distributed and trusted storage across nodes in a blockchain network. More importantly, using the blockchain as a data archive will allow any nodes to validate the authenticity of the archived data without relying on central hub.

Decentralized B2B Auditing

Business-to-business (B2B) exchange models are one of the foundations of modern commerce. In those scenarios, transaction tracking, auditing and reconciliation processes are essential capabilities of B2B processes. Traditional B2B platforms enable these capabilities by providing centralized transaction tracking models that will be used by the different B2B endpoints to log relevant events of a specific transaction. These centralized tracking models have proved to be impractical to address many of the typical challenges of B2B transaction tracking processes in areas such as auditing and reconciliation.

Leveraging the blockchain as a decentralized, secured and trusted transaction ledger could be a more effective model to address the challenges of B2B transaction tracking solutions. Using the blockchain, each party in a B2B process could autonomously track the events related to a B2B transaction without the need to rely on a centralized authority. Additionally, the security capabilities of the blockchain will facilitate the implementation of more sophisticated reconciliation and auditing processes.

Legal Proof of Existence or Proof of Possession

Validating the existence or the possession of signed documents is an incredibly relevant element of legal solutions. The challenge of traditional document validation models is that they relied on central authorities for storing and validating the documents, which presents some obvious security challenges, but also becomes more difficult as the documents become older.

The blockchain provides an alternative model to proof-of-existence and possession of legal documents. By leveraging the blockchain, a user can simply store the signature and timestamp associated with a document in the blockchain and validate it at any point using the native blockchain mechanisms.

Distributed File Storage

Cloud file storage solutions such as Box, Dropbox or One Drive are becoming regular citizens of modern enterprise environments. Despite its popularity, cloud file storage solutions typically face challenges in areas such as security, compliance and privacy in order to be adopted in enterprise environments. Those concerns are all rooted behind the fact that enterprises need to trust a third-party cloud system with their confidential documents.

Security Trade Settlement

Central Security Depositaries (CSDs) have been an essential element of modern equity and bond trading. In the U.S. equity market, following frequent bottlenecks during the late 1960s in the settlement of securities trades, CSDs smoothed the post-trade process for transferring share ownership by eliminating the exchange of paper certificates and recording transactions in central, computerized book-entry systems. The international CSDs Euroclear and Cedel (now Clearstream) played a similar role in the Eurobond market from the 1970s onward.

The centralized nature of CSDs is essential to successful bond and equity trades. However, the settlement process via CSDs is incredibly expensive and slow, averaging two or three days per trade settlement.

The blockchain offers an interesting alternative to traditional CSDs as a decentralized ledger that can keep records of transactions without relying on a central authority. The query capabilities of the blockchain will allow the settlement of trades in minutes or even seconds and at a fraction of the cost of the current CSD solutions.


Counterfeiting remains as one of the biggest challenges in modern commerce. Segments like luxury goods, pharmaceutical or electronics are constantly affected by counterfeiting. As a result, the demand for anti-counterfeiting remains one of the hottest topics in the digital commerce world. Unfortunately, most solutions in the market require a trust in the third-party authority, which introduces a logical friction between merchants and consumers.

The decentralized and security capabilities of the blockchain can enable an interesting alternative to traditional anti-counterfeiting platforms. In that sense, we can envision a model in which brands, merchants and marketplaces are part of a blockchain network with nodes storing information to validate the authenticity of specific products. In this model, brands don’t have to trust a central authority with their product authenticity information and can rely on the security and decentralized trust models of the blockchain.


Governments all over the world are investing deep resources to digitize many of their existing processes. Many of these processes deal with sensitive information that require sophisticated levels of traceability, privacy and security. Inevitably, the digital collaboration process relies on trust on centralized authorities.

The blockchain capabilities provide a robust option to enable the digital collaboration between government agencies and citizens. In this model, different government agencies can store records in blockchain nodes so that it can be accessed and verified by other government parties and citizens in a secure and trusted way.

P2P Commerce

Traditional ecommerce business models are based on the presence of a centralized entity that control activities such as order processing, inventory management, catalog access, etc. In order to buy and sell goods, ecommerce marketplaces need access to sensitive user information such as credit card information, user profile data etc. This information often becomes the target of cybersecurity attacks and many other security and regulatory challenges.

The architecture of the blockchain can enable the first effective peer-to-peer (P2P) ecommerce network in which buyers and sellers can interact directly without the need of a central authority. The absence of a central marketplace eliminates many of the restrictions of ecommerce models such as fees, regulated transactions, etc.


The blockchain represents one of the most important advancements in computer science of the last few years. The ability to enable decentralized, secure, trusted and highly scalable architectures opens the door to a new group of enterprise software solutions on a large number of industries. Blockchain-powered solutions have the opportunity to challenge some of the fundamental architecture principles of enterprise solutions in areas such as security, data storage, trust, etc. Similar to Bitcoin, we should expect to see spectacular platforms in the enterprise software space powered by the blockchain.

The post Beyond Bitcoin: How the Blockchain Can Power a New Generation of Enterprise Software appeared first on Bitcoin Magazine.

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Building a Risk Market for the Digital Age Using Bitcoin

This is a guest post by Michael Folkson.

The Internet was originally developed as a network for information exchange. Now, a multitude of entrepreneurs and software developers are building the Internet for value exchange. The next logical progression is to build the Internet for risk exchange.

Just as units of currency can be transferred to a third party, insurance contracts transfer risk exposures to a third party. Blockchain technology has the potential to radically transform how the insurance industry operates and how risk exposures are shared and distributed.

While Bitcoin offers a protocol for peer-to-peer value transmission bypassing the traditional banking system, an insurance industry leveraging a public blockchain presents an opportunity for individuals and entities to retain, share or transfer risk exposures without the requirement for risk exposures to sit on an insurance company’s balance sheet.

Science fiction frequently offers inspiration for what an industry could look like in the future. The short speculative fiction titled "Know When to Hold ’Em" by K.G. Jewell is a somewhat dystopian vision of futuristic insurance, but it does explain how the user interface of a peer-to-peer insurance market could operate.

In the story, the lead character, Jonas, acts as an insurer on the platform MicroRisk. Among the microrisks he chooses to provide insurance coverage for are vacation sickness, exam results, fashion (two individuals wearing the same outfit at an event) and being stood up on a first date. He is required to post collateral into his MicroRisk account before insuring a risk and is able to audit claims before paying out on them. The policyholder’s premium and the insurer’s collateral are frozen in escrow until the contract closed.

Some of these risks may be difficult to price due to limited data and increased moral hazard. However, the story does stir the imagination when envisaging what personal risks could be insured if the requirement to go through a conventional insurance company was lifted.

The transfer and distribution of risk dates back to at least to the second millennium B.C. In approximately 1750 B.C. Mediterranean sailing merchants paid their lender an additional sum to agree to terminate their liability conditional on the shipment being stolen or lost at sea.

There are a number of participants in today’s insurance industry. Brokers act as intermediaries to connect insurance buyers and sellers. Underwriters determine the premiums that should be charged in conjunction with the actuaries who also estimate the reserves required to meet future claims on an ongoing basis. Claims adjusters verify the legitimacy of insurance claims and assess the size of the payout.

There are many parallels between the banking and insurance industries with both sectors rewarded for accepting risk exposures. Rather than lending out funds and (hopefully) receiving them back at a future point in time, insurance companies receive funds in advance and return them contingent on future events.

The peer-to-peer lending model has thrived in recent years with companies such as Lending Club, Prosper and Zopa facilitating more than $1 billion of loans between individuals.

Its success is at least partly explained by re-establishing a direct link between investors and specific credit risk exposures at a time of economic uncertainty, sovereign debt crises and complex too-big-to-fail banking institutions. These direct credit risk exposures allow an investor to diversify her overall portfolio, and there are minimal infrastructure costs in comparison to traditional retail banks.

Similarly, a peer-to-peer insurance platform re-establishes a direct link between investors and specific insurance risk exposures. Today’s insurance companies are so large, complex and heavily regulated that the direct link between an investor and specific insurance risks has eroded. If an investor wants exposure to insurance risk to diversify her portfolio, she has little option but to invest in the shares of an insurance group and be exposed to multiple insurance risks in addition to asset risks such as sovereign bonds.

It is extremely difficult to match an investor’s risk appetite with specific insurance risks such as personal or commercial, home, car, health or travel. Moreover, it is impossible for an investor to opt out of specific risk exposures. The only insurance risks investors can get direct exposure to are credit and catastrophe risk through the issue of catastrophe bonds.

The peer-to-peer insurance model offers investors an opportunity to generate higher investment returns, transparency with regards to risk exposures and the satisfaction of directly insuring individuals or businesses rather than investing in a faceless insurance company. It offers policyholders access to cheaper premiums, faster claim payments and insurance coverage that might not be available through traditional channels.

Satoshi Nakamoto’s primary achievement of preventing users spending the same bitcoin on multiple occasions ("double spending") without a reliance on a trusted third party is a historic feat. However, it is worth emphasizing the obvious that the protocol does not wholly eradicate reliance on trusted third parties for all financial contracts.

For example, escrow mechanisms that are easily built using the Bitcoin protocol may still require dispute resolution if there is a disagreement over whether the goods or services delivered are of sufficient quality.

Nevertheless an escrow transaction built on a Bitcoin-like blockchain could be a template for how future insurance contracts are constructed. The insurance buyer and the insurance seller could transfer the premium and the collateral respectively into a multi-signature (2-of-3) Bitcoin wallet. The third signatory to the wallet would be the arbiter. Funds would be released from the wallet conditional on two parties signing the transaction, preventing the buyer, seller or arbiter from fraudulently seizing the funds.

Just as the execution of a standard escrow contract will rely on an arbiter to resolve disputes between the buyer and the seller, the execution of an insurance contract relies on claims adjusters to verify that incoming claims are valid and if necessary estimate the monetary value of the claim.

This service will vary from reviewing evidence submitted by the claimant to physically inspecting the scene of the insured event depending on the magnitude of the claim. It is currently difficult to automate this function, and artificial intelligence is not yet advanced enough to rebuff all human attempts of fraudulent submissions.

Decentralized platforms heavily rely on the efficacy and dependability of reputation systems. The upside of bypassing centralized services such as eBay, Kickstarter or Uber is that no third party can charge excessive fees, impose restrictive policies, prohibit bitcoin payments or present a single point of failure in the storing of users’ personal data.

However, the downside is that no organization is responsible for maintaining the integrity of the system. Instead a mixture of user feedback, reputation scoring and financial incentives must be combined to construct robust reputation systems. The alternative is to build quasi-decentralized systems that may be an improvement on centralized systems but don’t accrue all the benefits of purely decentralized systems.

For example, the various activities of an insurance company could be unbundled so that some activities are automated while others are outsourced to external providers. It may be the case that quasi-decentralized systems will need to be built as an intermediate step or that optimal systems will never be purely decentralized. However, it makes sense to fully explore all the options and capabilities of this technology before falling back on how current systems already operate.

Although private blockchains (or ‘permissioned distributed ledger systems’) are useful for keeping databases in sync in a more trusted environment, they are an incremental innovation when compared to the potential of public blockchains. Just as Bitcoin opens the floodgates for peer-to-peer transactions and permissionless innovation, peer-to-peer insurance leveraging a smart contracts protocol could provide a platform for matching insurance buyers and insurance sellers for any risk they agree to exchange.

This marketplace would be a radical paradigm shift from today’s centralized and spatially anchored insurance industry. The blockchain provides the opportunity to build a more innovative, expansive and transparent industry that evolves to the needs and requirements of its users.

Photo Pictures of Money / Flickr (CC)

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October 6, 2015 -
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