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A technology is called “disruptive” if it creates a new market that first disturbs and then displaces an earlier technology. Bitcoin is potentially such a technology and much more. The fact that it can disrupt the largest and most interconnected marketplace in the world—money, banking, and finance—makes it perhaps the most promising investment opportunity of our age. Unlike our current increasingly unstable and unpredictable financial system, Bitcoin has 21st century technologies at its very core. The digital currency and clearing network is open source, mobile, peer-to-peer, cryptographically protected, privacy oriented and native to the Internet. The fusion of these technologies allows for a level of security and efficiency unprecedented in the world of finance. These are some of the areas […]

The post Bitcoin: Perhaps the Most Promising Investment Opportunity of Our Age appeared first on Bitcoin Magazine.

Robocoin CEO Jordan Kelley has addressed rumors about the company's future, suggesting the company may be shifting away from hardware.

CoinDesk speaks to Bitcoin Foundation board member and VC Micky Malka to learn his predictions for the year ahead.

Polish bitcoin exchange BitMarket.pl had its bank accounts suspended earlier this week due to a legal issue.

The trial against Russ Ulbricht — the alleged mastermind of illegal online marketplace Silk Road — doesn't look awesome for the defense.

He's charged with money laundering, computer hacking, and conspiracy to commit narcotics trafficking while running Silk Road under the pseudonym Dread Pirate Roberts — a reference to the cult movie "The Princess Bride." Ulbricht is on trial in Manhattan.

Since the trial began on Jan.13, prosecutors have called four witnesses to testify against 30-year-old Ulbricht and even presented his alleged diary entries that detail what he referred to as a "criminal enterprise."

His defense, led by attorney Joshua Dratel, conceded in opening statements that Ulbricht had indeed founded Silk Road. But, the defense says, Ulbricht left the site for quite some time and only rejoined right before his arrest.

Dratel has been trying to convince the jury that Ulbricht is not the "real DPR." Somebody else took over the site he started and expanded it into the massive narcotics emporium it became, Dratel's argument goes. But Dratel has struggled to come up with alternative "DPRs" — especially as the journal entries and chat logs found on Ulbricht's laptop continue to incriminate him.

Ulbricht's lawyers have also filed paperwork suggesting he wouldn't be breaking the law even if he were the real Dread Pirate Roberts. Here are his main arguments.

Silk Road's operator is just a 'landlord'

In the defense's pre-trial motions, Dratel argues that his client should not be held responsible for the illegal conduct of Silk Road users since they're not alleging he bought drugs sold on the site or managed any of the users. The motion referred to Ulbricht as the alleged "landlord" of Silk Road.

"A landlord is not a co-conspirator of, and/or liable for, the criminal conduct of his tenants, regardless whether the landlord knows that the premises are being used for illegal purposes," the motion states. 

The motion continued: "Analogously, no landlord has been prosecuted under the federal controlled substances statutes for renting an apartment to a know drug seller. Nor has any internet service provider been prosecuted because users of the service engage in illegal transactions using the provider’s internet service."

The Communications Decency Act protects Silk Road's operator

The motion goes on to invoke the Section 230 of the Communications Decency Act of 1996, in which Congress "manifested a support for a free-wheeling internet" where web hosts can operate without fear of civil liability for the content posted by others, according to Ulbricht's lawyer.

While Ulbricht's is a criminal case, and not a civil one, his lawyer's motion said that the law still "provides firm and indisputable support for limiting the application of criminal statutes in the internet context when the alleged illegal conduct itself is performed not by the defendant, but by others using his web site."

The act has been invoked in other cases, particularly in legal disputes involving revenge porn — sexually explicit media of an individual shared online without their consent, often as punishment for a breakup. Hunter Moore, the notorious operator of now-defunct revenge porn websites, has said Section 230 protected his work because he simply operated the websites and doesn't post pictures.

Bitcoin can't be 'laundered' like money

Dratel also argued that the money laundering charge must be dismissed because Silk Road's financial transactions did not involve real money. Bitcoins — the only form of payment accepted on Silk Road — do not qualify as monetary instruments and therefore can't be the focus of the monetary investigation, Dratel argued. 

Judge Katherine Forrest didn't buy it, however, deciding in July of last year that "Bitcoins carry value — that is their purpose and function — and act as a medium of exchange."

This is not the first time a judge has ruled that bitcoin is or acts as a proxy for money. In 2013, Magistrate Judge Amos Maazant of the Eastern District of Texas federal court ruled that bitcoins were enough like money to be treated as such. That same year, Canada became one of the first countries to treat bitcoins as money and regulate their usage. Germany has also passed legislation equating bitcoins with real currency. 

Ulbricht was arrested at the Glen Park Branch Library in San Francisco on Oct. 1, 2013, where he was allegedly logged into Silk Road's servers and working under the username Dread Pirate Roberts. The pseudonym refers to a plotline in the movie "The Princess Bride," in which multiple characters assume the intimidating Dread Pirate Roberts persona.

In a development that was true to "The Princess Bride," a new Dread Pirate Roberts relaunched Silk Road 2.0 on Nov. 6, 2013. The new operator promised a "new and improved" version of the site, according to Forbes. When at least three of these employees were later arrested, the new DPR abruptly gave up control of the site and froze its activity, including its escrow system. 

Subsequently, a user calling himself "Defcon" took over Silk Road 2.0. He was later identified as Blake Benthall, a 26-year-old San Francisco programmer who was arrested in November 2014. 

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NOW WATCH: 13 Things You Didn't Know Your iPhone 6 Could Do

 There’s a lot of rhetoric about bitcoin and its impact on the $430 billion international remittance industry. One of the cryptocurrency’s most obvious uses is, after all, sending money across the planet with roughly the same effort as sending an email. The potential effect on emerging markets — savings in aggregate that are larger than most countries’ education… Read More

The team behind an FCA-regulated e-money issuer has launched a bitcoin and litecoin exchange aimed at the UK market.

The team behind an FCA-regulated e-money issuer has launched a bitcoin and litecoin exchange aimed at the UK market.

So on Thursday I published an article about why the Clinton-era budget surpluses helped fuel the credit boom that (ultimately) led to the crunch and the recession that followed. It's fair to say not everyone agreed. In fact, some people really didn't agree at all.

Here's Bloomberg columnist and CIO of Ritholtz Wealth Management Barry Ritholtz's take:

WRONG The Germans Are Making The Same Huge Mistake Bill Clinton Made http://t.co/DxnsJk6qWS via @bi_politics

— Barry Ritholtz (@ritholtz) January 29, 2015

In the (good natured) discussion that followed, it emerged that Ritholtz and I have a fundamentally different take in our narratives of the crisis. We both agree that mortgage originators were not forced to provide loans to people with no credit history, nor were financial firms forced to package those loans up, have ratings agencies stamp the resulting securities with an 'A' rating and flog them to credulous institutions around the world.

However, he followed that up by saying "had the bad loans not been made, there never would have been a problem".

I couldn't disagree more. Indeed I think the most important lessons of the last few years is that the emergence of the subprime crisis was a symptom, not cause, of the global financial crisis.

To understand why, you first need to think about the role that housing plays in the economy. When a bank issues a mortgage it simultaneously creates an asset — the mortgage contract — and a liability — the capital that is then used to complete the transaction. In effect, it brings forward the future earnings of the buyer in order to provide a lump sum to the seller.

The buyer then takes possession of the house with the mortgage obligation, while the seller takes the capital and deposits it in the bank (for the sake of this example). The seller can then use that money to fund current purchases — for example, buying a TV or a car etc. In other words, the housing market can be viewed as the main transmission mechanism for bank-created money into the real economy (your and my pockets in other words).

How does this apply to the Clinton surpluses?

Well, the authors of the new paper that spurred my previous post claim that "following the Asian crisis in the late 1990s, a “glut” of global savings flowed towards US safe assets, finding its way into the mortgage market through the purchase of MBS [mortgage-backed securities]". This is based on the work done by former Federal Reserve chair Ben Bernanke in his seminal 2011 paper on the savings glut, in which his asserts that "international capital flows likely played a significant role in helping to finance the housing bubble and thus set the stage for its subsequent bust".

The theory, in essence, is that following the shock of the Asian crisis, emerging markets started to channel their savings into the US. In particular this money flowed into perceived "safe assets" such as US Treasury securities (Treasuries) and Agency debt (Agencies). This capital inflow showed up as a substantial US current account deficit which increased from $120.2 billion in 1996 to $530.7 billion by 2003.

Simultaneously, the US government of the day under President Bill Clinton elected to begin running budget surpluses. This had the effect of reducing the stock of US government-issued "safe assets" as the state began to pay down its debt. This created an incentive — though not the obligation — for the private sector to meet this demand for "safe assets" by creating some of its own. Thus we come back to mortgage securities.

The authors' of the latest paper write that "the boom in securitisation contributed to channel into mortgages a large pool of savings that had previously been directed towards other safe assets, such as government bonds". As Frances Coppola points out, this misstates what was actually going on. The inflow of capital was not "channelled" into the US mortgage market but, rather, it created the demand that gave banks a reason to continue extending mortgage loans into the system.

And here's where the story gets really interesting. The more credit the banks provided through the mortgage market, the more money consumers had available to pay for goods and services (including, for example, clothes and toys produced in China). This spending then fed the current account surpluses in emerging markets, which flooded back into the US in search of safe assets that would provide a steady stream of income.

So the credit market created what looked like a self-fulfilling cycle where banks issued mortgages, that money was spent on goods and services in the US, which provided the cash for emerging economies to buy the mortgage-backed securities that were then created. Glad that's clear.

And this is what happened — real home prices increasing by roughly 40% to 70% between 2000 and 2006:

Critically, this system concentrated risk in the US housing market but because demand for the resulting securities was so high nobody foresaw any problems. But there was a big problem. There is a limit to the amount of future earnings that can be brought forward because people actually have to be able to pay off the debt that they take on.

This poses two related risks — first, once you have a society where as many people who can afford to are already indebted you run out of your source of new assets to sell and; second, if people's expected income in the future fails to materialise then they may fail to be able to service their debt which could wipe out the value of their mortgages.

The key point that Ritholtz misses is that these risks exist even with non-subprime mortgage lending.

So what happened?

Here we have to hypothesise a little. But the majority of subprime mortgages were issued well after the housing market boom was underway at a time when, as the paper puts it, the Great Moderation had led "financial intermediaries to an (ex-post) overoptimistic assessment of the risks faced by their portfolios".

One theory is that when mortgage originators started running out of high-quality borrowers to lend to, they went in search of a new market — subprime. There was nothing necessary about this, it was greed pure and simple. But the fact that the subprime market became an ever larger share of total lending towards the end of the housing boom suggests that the lack of high-quality borrowers was a genuine constraint.

The foolish decision to chase the last pennies of the boom, however, was ultimately to prove the trigger for the collapse. In that way it was a sufficient cause of the crash. But there have been plenty of house price crashes before, not all of which can be simply attributed to the quality of the borrowers at the time the lending took place.

My contention is that the scale of the housing boom had already increased the system's vulnerabilities, and had been exacerbated by the Clinton administration's decision to run budget surplus. In the end as borrowers were maxing themselves out, a hit to future incomes was almost inevitable and with it a correction in the housing market.

And due to the packaging up and re-sale of those mortgage assets to "safe asset" seekers across the world the crash was almost guaranteed to send ripples through global financial markets.

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Bitcoin Price is in search of a value floor as it gears up for the descent to $200. The chart technicals are clear about the drop but leave us wondering if it will be the final low for this market cycle. This analysis is provided by xbt.social with a 3 hour delay. Read the full […]

The post The Bitcoin Price Battle appeared first on CryptoCoinsNews.

DigitalBTC has dissolved a bitcoin mining agreement with CloudHashing. In other news, CloudHashing has being buying back cloud mining contracts.

Ryan X Charles has been let go from his post as cryptocurrency engineer on social platform Reddit. The developer, who only this week demonstrated his proof of concept for peer-to-peer bitcoin payments on the site, announced the news in a Reddit post, saying: "I have complete confidence in the new leadership, but cryptocurrency is no longer in […]

Marco Streng, the CEO of cloud mining operator Genesis Mining, has reaffirmed his company’s long-term commitment to the industry in an interview with CryptoCoinsNews. Striking a positive note on the future of an industry which has been in turmoil over recent months, Streng claims that his company is currently in a “favourable position”. They could […]

The post Cloud Mining Will Profit From Bitcoin Price Rise, Says Genesis CEO appeared first on CryptoCoinsNews.

First they came for SHA256, and before you knew it, you couldn’t mine any amount of Bitcoin with your PC anymore. Soon, you couldn’t even make money with a GPU rig. Then they came for SCRYPT, changing the game for Litecoin, Dogecoin, and similar currencies. In response, in hopes of keeping the network truly decentralized […]

The post ASIC Coming For X-Algorithms: Darkcoin Watch Out appeared first on CryptoCoinsNews.

First they came for SHA256, and before you knew it, you couldn’t mine any amount of Bitcoin with your PC anymore. Soon, you couldn’t even make money with a GPU rig. Then they came for SCRYPT, changing the game for Litecoin, Dogecoin, and similar currencies. In response, in hopes of keeping the network truly decentralized […]

The post ASIC Coming For X-Algorithms: Darkcoin Watch Out appeared first on CryptoCoinsNews.

First they came for SHA256, and before you knew it, you couldn’t mine any amount of Bitcoin with your PC anymore. Soon, you couldn’t even make money with a GPU rig. Then they came for SCRYPT, changing the game for Litecoin, Dogecoin, and similar currencies. In response, in hopes of keeping the network truly decentralized […]

The post ASIC Coming For X-Algorithms: Darkcoin Watch Out appeared first on CryptoCoinsNews.

In under five minutes, any store using WooCommerce for their customer’s shopping experience can enable bitcoin payments. ChainPay posted a video tutorial of their new WordPress plugin yesterday, and the results are fairly quick. In the four minute video, including a 30-second proof of the Wadsworth Constant, James Carter, founder of AltXE, installs the plugin, […]

The post ChainPay Asks, “Why Should Just Multinationals Accept Bitcoin?” After Bringing Bitcoin to WooCommerce appeared first on CryptoCoinsNews.

USAA's Vic Pascucci speaks to CoinDesk about the financial services company's recent investment in bitcoin services company Coinbase.