After spending a year in prison, Bitcoin pioneer Charlie Shrem has a new job and a new mission: Strengthening the ecosystem of blockchain assetsand, just maybe, helping build the future of the Internet.

My word is gold, says Charlie Shrem, glass of absinthe in hand, light winking off a pinkie ring he wears that is embossed with a Bitcoin symbol. And I make sure everyone gets paid.

Bitcoins first felon is in his favorite mode: full-on bluster. Were in Sarasota, where he lives, perched on stools at Pangea Alchemy Lab, a faux-speakeasy tucked behind a curtain in the back of a sandwich shop. The bartender is a bearded anarchist who, after making our drinkshe drips water from a sort of four-armed decanter onto sugar cubes suspended on slotted spoons above glasses of French absintheasks if Ive read Debt: The First 5,000 Years , by the anthropologist David Graeber. Shrem has been offering plenty for the bartender to eavesdrop on, a discourse that features words like Bitcoin, blockchain, digital currency.

Before his fall from grace, Shrem was living the high life as a Bitcoin millionaire . Now, at 27, he once again has something to prove. Ten months after his release from federal custody, he has a new job, and hes looking to mount a comeback.

Its happening just as digital currencies are in the midst of an epic explosion. Bitcoin and its ilk are now worth $107 billion, six times their value at the beginning of the year. Its either the beginning of a global financial realignmentor a bubble of historic proportions. These days as much as $6.6 billion in digital tokens changes hands every day, and even mainstream players such as Goldman Sachs ( gs ) , Visa ( v ) , Capital One, Nasdaq, and the New York Stock Exchange have invested in the underlying technology.

Shrem saw value back when Bitcoins were worth only a few dollars eachthey now trade above $2,600and there was hardly anything to spend them on. In 2011 he cofounded a startup, BitInstant, that became one of the biggest early cryptocurrency companies. At one point, it was processing about a third of all Bitcoin transactions, before flaming out in 2013. You talk to 10 people, says Shrem, I guarantee you at least seven of them will say they got their first bitcoin from BitInstant.

Shrem is a natural-born impresario, a promoters promoter, and he was one of the first public faces of the cryptocurrency phenomenon. In 2013, when GQ needed a spirit guide to the shadow realm of digital currency, it relied on Charlie Shrem. He was featured in the documentary The Rise and Rise of Bitcoin. He was a speaker and proselytizer at industry conferences. And he cofounded the Bitcoin Foundation, the first nonprofit advocacy group for digital currency.

But Shrem crashed as fast as he rose. In March 2015 he went to federal prison after pleading guilty to helping a customer acquire Bitcoins to resell on the underground marketplace Silk Road, where Bitcoin was used to buy drugs.

Today Shrem is a free man again, and his world has dramatically changed. Bitcoin was the only digital currency when he was first in the game. Now its less importantnot because it has imploded, as critics long predicted it would, but because it has given rise to hundreds of new digital assets.

He is embracing the transformation. There wont be one supreme digital currency, he and others agree. A kind of crypto-pluralism is taking hold. In early March, when I first catch up with Shrem, Bitcoins share of the total market cap of all cryptocurrencies is about 85%. By June 12 it is 41%, an all-time low. To be clear, Bitcoins price hasnt fallen; in fact, it has soared (see chart below). But many leading rivals have soared even faster.

Shrem is a connector, not a coder, and hes positioning himself to play a key role in this newly diverse ecosystem. He has already stumbled once in his comeback, with one venture crashing almost instantly, before landing a job at Jaxx, a startup that allows users to hold separate balances of different virtual coins in digital wallets.

Shrem embodied the chaotic, legally questionable early days of cryptocurrency. But he says hes different now. He claims hes no longer operating mainly for himself and instead wants to use his talents to strengthen the crypto-community.

Charlie Shrem is nobodys image of a traditional financier, but thats precisely the point with alternative currencies: Their early leaders were the sorts of people who would never pass muster at, say, Morgan Stanley . That may just make Shrem the perfect messenger, as digital currencies transition from an off-the-grid form of exchange favored by people who reviled any established system into something that is fast becoming an established system of its own.

The promise of bitcoin, when it came into the world in 2009, was to be a universal currency, electronic cash that could be sent around the globe in minutes and that would work as well in New Delhi as it did in New York. Its scarcity is predetermined by the code: New bitcoins are introduced into the system at regular intervals through a process called mining. The word is misleading, since this form of mining consists of solving the complex math problems necessary to confirm transactions on the network. Successfully solving the problems triggers the creation of more digital currency.

Bitcoins pseudonymous creator, Satoshi Nakamoto, built a decentralized system that no one would own but anyone could participate in. A constantly updated copy of the ledger recording all Bitcoin transactionsthe blockchainwould be stored on the computer of anyone running the software. Although the ledger was open to all, Bitcoin transactions were meant to be anonymous.

Blockchain technology is groundbreaking because it allows transactions to be processed without recourse to a central authority, such as a payments company, government, or bank. Businesses and services can be decentralized, cutting out costly middlemen and removing single points of failure.

But only eight years after its launch, Bitcoin is showing strain. A civil war has been raging over its future. Due to limitations in its code, the Bitcoin network can process only seven transactions a seconda trifling quantity for any system that aspires to serve the masses. (Visa handles thousands of transactions per second.) As the load has increased, the time it takes to confirm transactions has risen sharply, and users have been at odds over how to solve the problem. The bickering threatens to divide the currency into two competing versions of Bitcoinor condemn it to obsolescence.

Not only is Bitcoin slower than some of its younger rivals, its also more limited. Yes, Bitcoin allows the transfer of value. But many of the new systems can be used for much more. Ethereums creators , for instance, have built a potentially more versatile network by incorporating a scripting language that allows developers to create smart contractsagreements written into the software that can dispense funds and perform other functions automatically in response to preset triggers.

All of which means Bitcoin faces a threat from younger, more nimble rivals. Their names are legion: Litecoin. Zcash. Monero. Dash.

Dasha portmanteau of digital cashis one of the biggest. It got its start in January 2014, one of many cryptocurrencies that emerged following Bitcoins then-immense rise in price. Many of these, known as altcoins, were used exclusively as vehicles for pump-and-dump schemes. Somebodyoften an altcoins creatorwould pick a coin to pour funds into, and hype would build. Novices would pile in, the price would spike, and the major investors would dump it, sending the price plunging downward.

The old Charlie Shrem was not above taking advantage. He claims he turned $50 into $15,000 on one altcoin (but also got badly burned on an altcoin intended to be a national cryptocurrency for Iceland, which shed half of its value in a single day).

Dash was one of the most popular altcoins. Originally known as Darkcoin because it promised untraceable transactions, it saw plenty of pumping and dumping. But its creator continued to refine the software and add new features. In March 2015 it rebranded as Dash, so people wouldnt mistake it for a single-feature coin, says Ryan Taylor, who leads its core team. Gradually Dash gained legitimacy. The total value of its currency has grown at triple-digit rates every year. Part of that is due to Bitcoins flaws. To attract customers, Taylor says, a new payment method needs to be faster, easier to use, and more secure than the alternatives. Bitcoin and most other digital currencies fail on all three metrics, he argues. Theyre certainly not faster or easier to use than credit cards, says Taylor, a former financial services consultant at McKinsey.

Dash has functions to address those weaknesses. It offers an instant send feature that Taylor says is as fast as using a credit card. To protect against fraud or theft, Dashs next versiondue out this yearwill include features such as moderated transactions, in which funds are released only upon the receipt of goods or services, and vault accounts, which give their owner 24 hours to stop an impending withdrawal of funds. The goal is to create a medium of exchange that can be used for everyday commerce.

Dashs clearest innovation, though, may be its governance system. All prospective projects must be submitted for a vote by people who hold at least 1,000 coins. The advantage of such a system, according to Olaf Carlson-Wee, the CEO of Polychain Capital, a hedge fund that invests exclusively in blockchain assets, is that it allows a decentralized network to make decisions rapidly, avoiding the sort of conflict now engulfing Bitcoin, which has little structure and no way to compel anybody to, say, adopt a new version of its software.

As Dash took off this spring, Shrem decided to get involved. He proposed creating a prepaid debit card. Youd load in, say, three Dash coins, which would then be converted into dollars (or euros or whatever). The cardholder could then use the card at any business that accepts a debit card. This could open the floodgates for hundreds of millions of dollars in digital currency to enter the mainstream economy. People only want to hold Dash if they can easily convert it to something of use, Taylor agrees.

There are several Dash-funded debit cards available, but Shrems would be the first that could be used in the U.S. His plan garnered overwhelming support within the Dash universe. Reputation plays an important role on the network, Taylor says. When someone like Charlie comes along, people take it seriously.

Charlie Shrem grew up in Sheepshead Bay, a predominantly Russian and Jewish neighborhood in deep Brooklyn. His parents are Orthodox Jews, and his father worked for a jewelry retailer, while his mother cared for Shrem and his two sisters.

Shy and awkward, Shrem blossomed upon discovering a knack for computers. He taught himself to code and became a presence in online hacker forums. In 2009, while attending Brooklyn College, he cofounded a daily deals site for electronics called Daily Checkout. He found he loved sales.

Shrem has claimed, with characteristic hyperbole, that he was one of the first 10 people in the world to know what Bitcoin was. That is likely exaggerated. By the fall of 2011, however, he was sufficiently established in the Bitcoin community to be credible as the CEO of a startup (albeit one he launched from his parents basement).

That startup, BitInstant, helped people acquire digital currency and move it between Bitcoin exchanges. Eventually it allowed customers to convert cash into bitcoins at banks such as Wells Fargo ( wfc ) and Bank of America ( bac ) , and (via partners including MoneyGram) at 700,000 locations across the U.S., Russia, and Brazil, including Walmart , 7-Eleven, and CVS stores.

Shrem, who was partnering with a 23-year-old Welsh coder named Gareth Nelson, handled the business end. He raised $10,000 from his mom and $120,000 from an angel investor named Roger Ver. But one person who declined to invest warned him that BitInstant had no safeguards to prevent money laundering.

That was fine with Shrem. It was fine, too, with a substantial portion of BitInstants clientele, users of Silk Road, who needed to exchange dollars for Bitcoins in order to buy drugs on the underground market. There was even a middleman, Robert Faiella, a plumber in Florida who had a sideline obtaining Bitcoins for Silk Road users.

Shrem soon figured out what Faiella was up to. But rather than shut him down, Shrem helped Faiella source money for drug transactions. BitInstants cash-processing company and Shrems partner wanted to put a stop to it. But Shrem simply encouraged Faiella to disguise his identity with a new username and email address.

The flow of money went on unimpeded. By the time Shrem finally cut him off, in late 2012, Faiellawho later pleaded guilty to operating an unlicensed money-transmitting business and was sentenced to four years in prisonhad laundered nearly a million dollars through BitInstant.

The libertarian defense for Shrems conductwhich he himself has advanced at timeshas two parts: first, that individuals have the right to do what they want with their money and their bodies as long as they arent harming anyone else; second, that at the time he began helping Faiella, the U.S. government hadnt determined how to classify or regulate Bitcoin. If the government hadnt even decided whether it viewed Bitcoin as money, the argument goes, how could one be laundering it?

The Bitcoin community in those days was united in its sense of righteous mission. Because the digital currency abjured central banks and other authorities, many of its first devotees were libertarians, anarchists, and black marketeers who wanted to do business away from the governments watchful eye. They were gleeful at any sign of Bitcoins impending triumph over the financial system, enraged by any show of incompetence or malice by the government or big banks. The free flow of capital, community members believed, is a human right.

Shrem embraced the outlaw stance. When a payment processor, under pressure from partner banks and Mastercard , cut all ties with Bitcoin companies, leaving customer funds stranded, it was BitInstant that hacked together a solution to let them withdraw their money.

By August 2012, when I first met him, Shrem was a 22-year-old CEO, a cocky, motormouthed capitalist and proud pothead. I interviewed him and his lieutenants in an office they dubbed the Bakery because of all the marijuana-fueled bull sessions that took place there after hours. One former employee, Rachel Yankelevitz, told me, Charlies main qualification for coworkers was if they could smoke weed or drink with him and chill together.

Shrem had swaggering ambitions. His company would soon be processing 30% of all Bitcoin transactions, and he wanted BitInstant to become the Apple of Bitcoin, as he told me at the time.

That fall, BitInstant raised $1.5 million in funding, most of it from Cameron and Tyler Winklevoss, who had started a venture capital firm. They had become interested in digital currency, and BitInstant helped them buy their first bitcoins. The twinswho later disavowed Shrem upon learning of his arrestwould go on to scoop up a reported 1% of all the bitcoins in existence.

After raising funds, BitInstants future looked bright. Because so much of the crypto-economy depended on fast money transfers in and out of the system, Shrems company became a barometer of the industry. During the Cypriot financial crisis in early 2013, when it appeared that the bank accounts of regular citizens would be taxed at 6.75% as a condition of a European bailout deal, Bitcoin suddenly looked like a safe haven, and its price shot up from $50 to $266a previously unimaginable high. Shrem became a millionaire almost overnight.

Then the wheels came off. First a dispute with the investors led to the ouster of Shrems two best friends at BitInstant. Something went out of him with their departures. He was often distracted. Hed spend the night partying, then sleep in and show up late.

The site, meanwhile, was straining under the surge in users, leading to waves of customer complaints. An upgrade to the platform became mired in technical problems and legal concerns. It became clear BitInstant had been operating without state money transmitter licenses (which, it became clear, some states would require to serve their residents), and the cost of obtaining them would be prohibitive.

It was all too much. BitInstant shut down in July 2013. Alex Waters, the companys chief information officer, says Shrem squandered the opportunity to make BitInstant a world-beating company and screwed over a lot of people. Customers were irate.

Shrem himself appeared at first to have gotten away unscathed. He was living on his own and enjoying his freedom. He and his girlfriend (now fiance), Courtney Warner, took a vacation to Morocco, where he says he tried opium. He flew to Argentina on a mission for the Bitcoin Foundation. His life was a whirlwind of partying and dealmaking. I have to take a lot of people out to clubs, buying bottles, buying dinners, he told a reporter in late 2013. His business now was not BitInstant but himself. He began to earn speaking feesand all the while he kept talking like BitInstant was going to be rebuilt better than ever. He was very arrogant, Warner says of her fianc during that time.

In January 2014 it all caught up with him. On his way back from a speech in Amsterdam, he was arrested. He eventually pleaded guilty to aiding and abetting an unlicensed money transmitter, and was sentenced to two years. I screwed up, he told the judge at his sentencing. Shrem had wanted to raise the issue of whether the law he had broken was just. But his lawyers discouraged it.

Other Bitcoiners had run afoul of the law, but Shrem was the first to serve time. This fact makes him, depending on your view, either a criminal who got his just deserts or a martyr. A lot of people say that I took the first shot for Bitcoin, Shrem says. The first person to walk through the door always gets shot, and then everyone else can come through.

Shrem entered prison in March 2015. He had put weight on his slight 5-foot-4 frame, medicating himself with vodka in the nervous months before he was incarcerated. Now, in the minimum-security federal prison camp in Lewisburg, Pa., he detoxed and began frequenting the prison library. He found himself pondering the question of value. What made currenciesof any formworth anything? As luck would have it, the prison economy provided the answer.

The prison had its own currency, one based on proteinmainly packets of mackerel in soybean oil. Good-quality protein is very hard to come by in prison, Shrem says. Tuna is good, but tuna doesnt have texture. Mackerel is meaty.

Inmates serving long sentences, he says, would stockpile mackerel, using it as a store of value, like a savings account. But those pouches of mackerel expire in three years. People started transacting these mackerels that were expired, Shrem explains. They called them money macks. The money mack had a value of about a dollar, whereas eating macks had a value of about $1.50. And they had exchangers. The money macks had no valueexcept that everyone said they had value.

Gradually he came to believe, as some monetary theorists do, that the acceptance of certain forms of moneyshells, colored beads, pieces of paperis largely a social convention, dependent upon what technologists would call their network effect.

But it was clear that certain features could make one type of currency more suitable than another. Money macks were an ideal form of money for inmates. They were scarce, Shrem says. The only way you could get money mackerels was from edible mackerels that expired. And the inflation rate of edible mackerels was set. You had 500 inmatesevery inmate could only buy 14 mackerels every week in the commissaryThats how many mackerels at any time, at maximum, could come into the system. Theres no arbitrary printing of mackerels; theres no flooding of the market with this food. Its like Bitcoin. There was no Federal Reserve of mackerel that was printing whenever they wanted.

Bitcoin, he knew, has qualities that make it a powerful currency, store of value, and payments network. But expecting it to do more than that was asking too much, he decided. Thats when its going to fail, he says. Trying to do smart contracts, and social media, and a distributed file-storage system, and all these different things on top of the Bitcoin blockchainits like trying to have your browser do everything for you. Better to let a thousand crypto-flowers bloom, each one focusing on what it does best.

Many of the hottest blockchain assets today are not digital currencies like Bitcoin or Dash, but so-called tokens, distinguished from true cryptocurrencies by their lack of a blockchain. They run instead on existing blockchains, primarily Ethereums, and tend to be built for specific applications, such as a peer-to-peer marketplace for computation (Golem), a crowdsourced prediction market (Augur), or a blockchain-based advertising platform (Brave).

Where digital currencies are generally mined, tokens are usually distributed in crowd sales known as initial coin offerings (ICOs). (After that, they trade on public exchanges.) These crowd sales serve both to raise funds and to give potential investors their first chance to grab a piece of whatever service is being built. Dozens of ICOs have already been launched, raising more than $230 million last year, followed by more than $450million just in the first half of 2017. (For more on investing in tokens, and their uncertain legal status, see Why Tech Investors Love ICOsand Lawyers Don't .)

The tokenization craze constitutes nothing less than the second business model of the Internet, contends Carlson-Wee, whose hedge fund is backed by Andreessen Horowitz. Imagine if Facebook had issued a token to its users, with its value deriving from the content and connections generated on the social network. Early users might have scooped up large quantities of the token at rock-bottom prices, while those who joined later, as the networks value became widely apparent, might find themselves able to afford only a few. But all of them, by holding this digital asset, would be able to participate in Facebooks growing success.

This, of course, is not the case. The $435 billion value of Facebook is shared only among Mark Zuckerberg and other stockholders. Most other Internet platforms operate on the same principle. Their owners extract massive value from interactions between users.

With blockchain-based systems, by contrast, theres no longer a division between users and owners, Carlson-Wee says. The tokens are a wealth-sharing mechanism, a way that everyone from hedge funders to consumers can take positions inand place bets onthe future of the Internet.

Shrems reentry into civilian life was a two-step process. He was transferred to a halfway house in Harrisburg, Pa., in March 2016. Shrem says living not merely with embezzlers, fraudsters, and drug dealers, as he had in Lewisburg, but also with murderers, bank robbers, child molesters was worse than prison. He cried his first night there. During this time, Shrem worked as a dishwasher at a restaurant for $8 an hour. Gainful employment was a condition of residency at the halfway house. Playing around with magical Internet money didnt qualify. They were very specific, Shrem says.

If being a dishwasher humbled him, it was still more humbling to realize how much the Bitcoin community had changed in his absence. Familiar landmarks were gone. When he tried to visit one of his old haunts, an online exchange where hed once speculated in altcoins, he found the site no longer existed. Even the lingo had changed.

Shrem set about catching up on what hed missed. In prison the library had been his sanctuary: He would stay in there for hours. He says he read 137 books while incarcerated. Now he took the same approach with the blockchain industry. Marco Santori, a cryptocurrency attorney at the law firm Cooley, likens Shrems reeducation to that scene in Austin Powers where hes unfrozen after 40 years or whatever it is, and he just watches 40 years of history straight through to try to get his bearings.

That didnt stop Shrem from stumbling out of the gate. Having seen that token sales were the new frontier, he became the chief technology officer of a startup called Intellisys Capital, which he predicted was going to revolutionize the investment world. The idea was to raise funds for a portfolio of middle-market companiesand, later, blockchain startupsby issuing $25 million worth of tokens in an ICO. It seemed like a really cool idea, Shrem says.

The problem was that their token would almost certainly be classified as a security under U.S. law. To avoid legal trouble, Intellisys decided to bar American and British citizens from participating in the sale. But the plan had drawbacks: They would have to rely on partners to vet prospective investors for them.

Shrem became the face of the venture. He was back in pitch mode, touting Intellisys to the press and the public. He described the funds planned first investment, a 20-year-old waste-management company in Michigan, as a proof of concept.

But as the date of the token sale was pushed back, from mid-January to the end of February, Shrem began to get cold feet. Selling a security could bring all kinds of scrutiny to a man already convicted of a financial crime. I still get these nightmares Im in prison sometimes, he tells me in March. He was becoming increasingly nervous.

Fortunately for him, fate intervened. The ICO, held at the end of February, was a bomb. We had a bunch of technical problems, says Shrem. We raised a few hundred thousand dollars, and then we refunded everyones money. Shrem decided to walk away. It was easier to take the hit to his reputation than live in fear.

Thats one of the paradoxes of cryptocurrency: Each new development seems to bring both great promise and great peril. ICOs are the next big chapter, after crowdfunding, in the democratization and decentralization of finance, says Brock Pierce, a managing partner at a San Francisco venture capital firm, Blockchain Capital, that invests in cryptocurrency startups. His firm recently raised $10 million by issuing its own blockchain token, becoming the first venture capital firm in the world to do so. (The token sold out in six hours.)

But many of the ICOs conducted so far have played fast and loose with regulations, he says, operating in a gray area. I dont like the way that people are going about doing it, says Pierce. That the SEC hasnt yet cracked down means nothing, he says. Good entrepreneurs with the best of intentions, who want to innovate and change the world, are going to end up in jailor with fines.

Shrem agrees. I try to explain to people that in any other industry its okay to try new things and break shit, but in fintech, because youre talking about peoples money, its a lot more difficult, he says. Especially in the Bitcoin and blockchain space. The government is always watching.

For now, though, the ICO market is surgingdespite fears of a bubble and scamsand mainstream investors are entering. In May, billionaire venture capitalist Tim Draper, long bullish on Bitcoin, announced that he would take part in an ICO for the first time. The crowd sale, planned for July, is for the token powering Tezos, a smart-contracts platform that Draper says will be more secure and more democratic than Ethereum.

Draper says he expects in the future to see tokens for everything from health care to insurance to commodities. Tokens, he says, are both a brave new frontier and a Wild West.

The failure of Intellisys cost Shrem. I expended social capital on it, he says. And Ill have to get that back. In March he tells me that he wants to make a comeback, but it has to be the right sort of comeback. I need to show that I didnt just get lucky one time with BitInstant, he says, but that I know what Im doing.

He had moved to Sarasota with his fiance and was living with her and his future mother-in-law in a rented pink townhouse. He was spending his abundant off-hours relaxing on the beach, eating in nice restaurants, boating, Jet Skiing. He was mellower and more patient than in the past. He decided that if an opportunity came to get in on the ground floor of something amazing, he would seize it. That turned out to be a full-time job as Jaxxs head of business and community development. The companys values appealed to him: Jaxx users are in control of their own funds. It goes toward my vision of you being in control of your own money, you being in control of your own freedom, he says.

March was the first profitable month for Jaxx, which lets users (now more than 100,000) exchange one virtual coin for another. Now its founder, Anthony Di Iorio, who cofounded Ethereum, wants to expand to other countries, such as China, and Shrem will be a key part of that process. He is in charge of turning relationships into revenue, working with developers to add their cryptocoins to Jaxxs stable. Dozens of new partnerships are in the works.

But they have to be the right coins. Having helped Bitcoin grow from a stripling to a giant, Shrem is confident he can tell which crypto-projects have real promiseand which dont. He thinks if he can help build Jaxx, hell be a major industry player again.

His timing may be good. According to Carlson-Wee, the real Cambrian explosion of tokenized assets is still a couple of years away. Thats when he expects to see technology that would let Bitcoin, Ethereum, Dash, and other blockchain networks communicate. As it stands, theyre isolated from one another. (The concept has spawned another name in the argot: parachains, a reference to the idea of bringing parallel blockchains together.)

Parachains would allow applications and smart contracts built on one system to interact with another systems assets. An Ethereum smart contract could be triggered by the balance in a Bitcoin wallet address, for instance. This would help overcome the network effect of the oldest cryptocurrency. Just as Bitcoin faces an uphill battle against currencies like the U.S. dollar, so new cryptocurrencies are at a disadvantage to Bitcoin, which has the broadest name recognition and biggest user base.

Forging bonds between blockchains would allow users to flow easily from Bitcoin to Dash to Ethereum to Zcash, strengthening the entire ecosystem and making all of it more valuable. As long as youre keyed into any cryptocurrency, youll have access to every cryptocurrency, Carlson-Wee says.

Bitcoin was created to be the money of the Internet. Its successors may build a new kind of Internet, a Web 3.0 of interconnected blockchains running countless applications. Charlie Shrem is determined to be in the middle of it all.

Brian Patrick Eha is the author of How Money Got Free: Bitcoin and the Fight for the Future of Finance .

A version of this article appears in the July 1, 2017 issue of Fortune. Weve included affiliate links in this article. Click here to learn what those are.

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Can Bitcoin's First Felon Help Make Cryptocurrency a Trillion-Dollar Market? - Fortune

This article aims to explain the chain of events that happened and going to happen in bitcoin space. Let me start with few basics so that for the benefit of non tech savvy long term investors. Though some of the terms mentioned below are technical, it is highly desirable for long term investors to understand to make their conviction about bitcoin more stronger.

Bitcoin transaction basics A bitcoin transaction tells the bitcoin blockchain network that the owner of the bitcoin has authorized the transfer of bitcoin to another owner. The new owner can now spend these bitcoins by creating another transaction that authorizes transfer to another owner, and so on, in a chain of ownership. So in nutshell bitcoin transactions are nothing but creating a chain of ownership as the value of bitcoin is moved from address to address.

Exponential growth of bitcoin transactions If we look at the 2 year graph on the number of transactions on bitcoin we would get a better understanding. In 2010, the number of transactions per block was below 50. In 2015, the number of transactions registered in a block was in a range of 650 to 800 transactions. Till then it has grown exponentially and in May 21, 2017, the number of transactions in a block reached an all time high of 2218.

SegWit-An Idea by Dr. Pieter Wuille Every transaction in bitcoin network contains an input address from where the value is coming, an output address to where the value is going and a digital signature to verify the authenticity of the transaction. This digital signature associated with each transaction is taking 65% of the space in a given transaction. Another problem by associating digital signature with transaction data is that the signature can be tampered to change the transaction id and later claim for refund. Dr. Pieter Wuille suggested solution to this problem by segregating the digital signature from the transactions data.

What segwit does? Segregated Witness is the process by which the space in each block is "indirectly" increased by removing signature data from Bitcoin transactions. When blocks are made smaller, this frees up the capacity to add more transactions to the chain. SegWit enabled code ignores the data attached to a signature by striping off the signature from within the input and moving it to a structure towards the end of a transaction. This would increase the 1 MB limit for block sizes to nearly 4 MB, in which 3MB data is exclusively for signature part. Once the solution is implemented every block can accommodate more than 3 times of transactions compared to existing blocks

Alternative for segwit When the segwit idea of segregating signature from transaction data floated around another theory came into picture. The idea as to increase the standard block size from 1MB to 2MB or more without segregating the witness or signature.

Segwit2Mb- The combined solution Segwit2Mb is the project that aims to resolve the above conflict between different political positions among miners and developers regarding segwit activation vs an increase of the on-chain blockchain space through a standard block size increase. Segwit2Mb combines segwit as it is today in Bitcoin version 0.14 with a 2MB block size hard-fork activated ONLY if segwit activates (95% of miners has to agree with the proposal). The hard-fork will happen at a future date once the segwit is activated.

NewYork Agreement In May 2017, developers and miners together joined and reached an agreement at Bitcoin Scaling Agreement at Consensus 2017, there after called as NewYork Agreement. As an outcome, they unanimously agreed to immediately support below two parallel upgrades to the bitcoin protocol, which will be deployed simultaneously and based on the original Segwit2Mb proposal:

Activate Segregated Witness at an 80% threshold, signalling at bit 4 Activate a 2 MB hard fork within six months

As mentioned above, the consensus percentage required for Segwit was reduced from 95% to 80% in the New York agreement. This mandatory activation of segwit deployment comes under Bitcoin Improvement Proposal 148 (BIP 148)

What can happen to Bitcoin during this process When segwit happens, it does nothing to Bitcoin as a coin. It will remain as it is because it is bacically a user activated soft fork or UASF, without any split. When standard block size increase, the coin will split into two, one running with existing 1MB block size and the new one forked out with 2MB block size. This is planned to happen after 6 months of segwit activation.

Sounds great right? But the trick lies in the first part. To understand this, we should understand what happens during segwit activation. miners have to signal that they are ready of segwit. If the total hash rate of miners who agree to segwit reaches majority, then the nodes following the original chain will reorganize and begin to follow the segwit activated UASF chain.

The newly segwit activated BIP148 nodes will begin to orphan Bitcoin blocks not signaling Bit 1 (1 means agreeing with segwit) at its UASF forking point. In such an event, there is a chance that a significant number of financial transaction records will disappear from nodes that rejected segwit activation. Mining community calls this as "wipe out"

A contingency plan against UASF (BIP148)- A hard fork by prominent mining community Bitmain as front runner, majority of the mining community have the opinion as the UASF chain presents a risk of the original chain (the chain which rejects segwit) being wiped out. If there is no contingency plan, all transactions that occurs on the original chain after the UASF forking point will face the risk of being wiped out. According to them this has disastrous consequences for the entire Bitcoin ecosystem. They maintain the stand that UASF is an attack against users and enterprises who disagree with activating SegWit right now without a block size increase.

UASF is an attack against users and enterprises who disagree with activating SegWit right now without a block size increase, which is a very important clause in the Hong Kong agreement made by the global Bitcoin community in February, 2016.-bitmain

To protect their interest, they plan for a User Activated Hard Fork, or UAHF. They will do the hard fork at 12 hours and 20 mins later than UASF to maintain the original segwit not active chain. This hard forked block will accept block of which the size is less than 8MB and miners will soft-limit the block size to less than 2MB.There will be a soft fork rule added into the protocol to limit the sigops (signature part) per transaction within 20K.

BTC 148 & BTC Legacy If this two events happens, here would be two types of Bitcoin tokens, "BTC 148" for coins on the soft forked chain, and "BTC Legacy" for coins on the chain that did not activate segwit. As an investor we don't need to worry as each bitcoin would effectively be copied to both chains. If you hold bitcoin right now, you will hold both "148 BTC" and "Legacy BTC" after the split.

"In the event of a hard fork of the Bitcoin protocol, it is likely that Coinbase will temporarily suspend the deposit and withdrawal of bitcoin from the platform pending our assessment of the technical risks posed by any fork, such as the possibility of replay attacks, network instability, or other factors. Customers should take note that they will not be able to withdraw bitcoin from or deposit bitcoin to Coinbase for a period of up to 24 hours or more following the fork. In the event of a hard fork of the Bitcoin protocol, Coinbase may suspend the ability to buy or sell on our platform during this time."

- Coinbase

Advise for long term investors 2 year wait for such an event is going to end by August 1st. Better keep calm and don't trade from July 31st till August 3rd.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Make Or Break August 1st Event Is Coming For Bitcoin Investors - Seeking Alpha

Terrorists are beginning to appreciate how useful bitcoin can be for quick, cheap and near-anonymous money transfers across the world. The cryptocurrency has been used by the Islamic State and jihadists in the Gaza Strip, according to a recent report by the Center for New American Security (CNAS).

To fight this threat along with drug trafficking, money laundering and other illicit uses of cryptocurrencies Senator Chuck Grassley introduced the "Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017" in May. According to a statement, he hopes the bill will "update our money laundering laws for the 21st century." The bill could allow for civil asset forfeitures of bitcoin and other cryptocurrencies, and require users to declare cryptocurrency assets exceeding $10,000 whenever they cross a U.S. border.

The Iowa Republican has been joined by California Democrat Dianne Feinstein, Texas Republican John Cornyn and Rhode Island Democrat Sheldon Whitehouse. Welcome as such bipartisan cooperation is, however, questions remain about whether Senate Bill 1241 is necessary or even productive.

According to the CNAS report, "there is no more than anecdotal evidence that terrorist groups have used virtual currencies to support themselves." For the time being, established systems of money transfer such as hawala networks suffice. In order to curtail a potential threat, experts argue, the government risks stifling innovation that is actually underway.

Testifying before the House Financial Services Committee on June 8, Coin Center executive director Jerry Brito said that blockchain technology the cryptographic innovation that underpins bitcoin and other cryptocurrencies is "perhaps as important as the web," while acknowledging that "like the web, illicit actors are attracted to it." For Brito, however, the way to combat those actors is to reduce not add to the regulatory burden on cryptocurrency companies. Quoting the CNAS report, he told lawmakers:

"One particular challenge in this area is the requirement for a virtual currency firm to obtain licenses in all states in which it operates and maintain compliance consistent with both federal and applicable state standards where they are licensed to operate. With only a single federal registration for virtual currency firms, compliance costs would be more manageable for smaller firms, and regulators would be better able to oversee firms."

Kathryn Haun, a lecturer at Stanford Law School, also told the committee that a federal compliance standard would help. She said that digital currency companies in the U.S. are some of the most cooperative financial services firms around, producing better Suspicious Activity Reports than big banks despite having much less in the way of compliance resources. In her decade working as a federal prosecutor, the best turnaround she ever saw on a subpoena was from a digital currency company. Jonathan Levin, co-founder of Chainalysis, pointed out that cryptocurrency intermediaries already register with FinCEN, the Treasury Department's Financial Crimes Enforcement Network.

When digital currencies become a problem, the culprits almost always use unregistered, overseas exchanges, where Haun said "nearly 100% of ransomware and hacking campaigns take place." She argued that law enforcement needs "more statutory authority to go after uncooperative entities overseas." (See also, Bitcoin Price Drops After "WannaCry" Ransomware Taint.)

Grassley's bill would not do what those experts suggest. S. 1241 would include digital currencies under the legal definition of monetary instruments and the companies that deal with them under the definition of financial institutions, which could result in anti-money laundering reporting requirements for those transporting more than $10,000 in digital currency across the U.S. border.

The problem, as Blockchain Alliance counsel Alan Cohn points out, is that it's difficult to distinguish between owning and transporting digital currency. "In theory, a person always carries their digital currencyor the ability to transact their digital currencywith them, including as they cross a border," he wrote recently, adding that this is also the case with mobile banking and credit cards. (See also, How to Buy Bitcoin.)

The bill may also open cryptocurrencies up to civil asset forefeiture, meaning that law enforcement could seize funds suspected of being tied to criminal activity.

Cryptocurrency enthusiasts are not, by and large, pleased. A Reddit post accusing Congress of "GOING FULL 1984 ON BITCOIN" and calling the bill's sponsors "certifiably insane" garnered 5,427 points in 11 days, with 90% upvotes. Cohn, in a more measured assessment, wrote, "Congress should consider the impacts of singling out virtual currency users, the majority of whom are not using virtual currency for illicit purposes. A better and more risk-based approach should strike a balance between discouraging illicit use while still encouraging innovation."

According to Brito, the Senate's bill is being misinterpreted. It would not in fact require cryptocurrency users to declare assets at the border, Brito wrote recently; rather it would require Homeland Security and Customs and Border Protection to submit a report to Congress "detailing a strategy to interdict and detect prepaid access devices, digital currencies, or other similar instruments, at border crossings and other ports of entry for the United States." Depending on the contents of that report, the ultimate result could be the same, but commissioning a report may fall short of "full 1984." Brito does not address the potential for civil asset forfeitures.

That's not to say he loves the bill. Rather, he sees it as a potential headache for those seeking a stable regulatory environment. The bill is not in fact new, but was introduced in "essentially identical form" in 2011. Two years after that, FinCEN's regulations made clear what cryptocurrency businesses qualify as money service businesses. Much of the vocabulary around cryptocurrency regulation has also been established since 2011: "virtual currency," "convertible virtual currency," "centralized virtual currency" and "decentralized virtual currency" are well understood. "Digital currency," the term S. 1241 uses, is not. If the bill were to become law, in other words, it might not change much just confuse people.

Continue reading here:

Senate Anti-Terror Bill a Threat to Bitcoin - Investopedia

Mt. Gox was one of the earliest and most public downfalls of the Bitcoin era. In early 2014, Mt. Gox stood atop the field of Bitcoin exchanges as the largest, until it declared bankruptcy following a devastating theft or disappearance. The exchange lost 850,000 Bitcoins with a value of about $450 million in February of 2014, alongside an additional $27 million in cash. 200,000 of those Bitcoins were eventually found, but that leaves 650,000 Bitcoins which have mysteriously disappeared. In the time since, many analysts, former Mt. Gox investors, and others have speculated as to where the missing currency is. This is particularly important as Bitcoin's price has soared in recent months: the missing Bitcoins could be worth as much as $2 billion at this point.

According to reporting by Cyberscoop, the investigator working on behalf of Mt. Gox's creditors, Chainalysis, "definitely" knows the location of the missing coins. This comes via congressional testimony made by the company's co-founder. This information emerged in the midst of a June 8 hearing by the House Financial Services Subcommittee on Terrorism and Illicit finance. The hearing centered on the national security implications involved in cryptocurrencies. Witnesses in the hearing were drawn from Chainalysis and Elliptic, both firms that have run investigations into cryptocurrency security. When Rep. Warren Davidson, R-Ohio, inquired about the reason the missing Bitcoins couldn't be traced considering that the transactions were tied to the Blockchain. "I was particularly struck by your opening remarks that we can detect the activity," he said. "It seems that if we have this ability...then we should be able to find the missing Mt. Gox coins. Why can't we?"

According to Jonathan Levin, co-founder of Chainalysis, "we actually did find those...the destination of those coins is definitely known." Davidson did not follow up on the location of the coins and Levin did not share that or other information about where the coins currently are, who has them, and how that will impact the ongoing cases involving Mt. Gox.

According to Jerry Brito, the executive director of Coin Center, "just because you know where they are may not mean you can get them back." Mark Karpeles, the CEO of Mt. Gox who was briefly jailed in 2015, has stated that "many popular rumors about Mt. Gox about the stolen Bitcoins not actually existing or being stolen by me are absolutely false."

It's possible that the hearing involved a miscommunication. Investigators have long known many of the specific transactions in which the coins were stolen. That does not necessarily mean that the location of the coins is currently available or that they are recoverable, however.

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Where's the Missing Mt. Gox Bitcoin, Now Worth $2 Billion? - Investopedia

Rich Ross, technical analyst at Evercore ISI, is getting bearish on the whole market, but not too bearish, predicting a pullback of 3 percent on the S&P 500 and 5 percent on the NASDAQ-100.

The call is based partly on complacency, partly on the time of year, and partly on what he sees are disturbing trends in other asset classes:

"While global equity trends remain strong and prices near record highs; volatility is at the lows; the put/call hit its lowest level of the year; and crude, the dollar, yields and inflation expectations continue to collapse as we enter a period of thinner trade, heightened volatility and typically weaker equity returns," wrote the analyst.

What's most shocking in his new report is the analysis about the sector Ross believes will lead the downturn.

The analyst notes an eerie similarity between trading on the main Philadelphia Semiconductor Sector index (known as "the SOX") and Bitcoin, and indeed the charts do show a remarkable similarity this year, rising modestly from mid-January to mid-March, and taking off in mid-April.

"I reiterate my sell call on Semi's and continue to see a test of 1,000 on the SOX (-8 percent) as the group continues to display the textbook signs of a reversal in trend and a technical symmetry with Bitcoin, which is down -9% overnight and poised for another -17% to 2,044," Ross wrote.

SOX index (black line) vs. Bitcoin (bar chart)

Source: Evercore ISI

He's not completely negative on the whole market. He has an aggressive call to buy biotech and sell semiconductors against them.

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Chart analyst sees a troubling similarity between the rise of chip stocks and bitcoin - CNBC

It has become evident that miners are not opposed to the Bitcoin Core development teams transaction malleability fix Segregated Witness (Segwit) given the overwhelming support towards Segwit2x, a proposal made by Barry Silbert-led Digital Currency group and 57 other companies that include major mining pool operators such as Bitmain.

The hashrate signaling the activation of Segwit2x is currently over 90 percent at the time of writing. The proposal entails the activation of Segwit at an 80 percent activation threshold by September and the execution of a 2MB block size increase hard fork six months thereafter. The key component of the proposal is the activation of Segwit and given the 90 percent support from miners, it is quite clear that miners are in favor of activating Segwit.

One condition requested by the miners is the execution of a 2MB block size increase hard fork which derived from the Hong Kong scaling agreement that was established in February of 2016. The majority of miners believe that the expected 75 percent optimization of block size through the activation of Segwit and additional scaling via second layer payment channels such as Lightning are not sufficient to address the explosive growth of the bitcoin industry and user base.

Yet, the rapidly increasing support towards Segwit2x has proven to the industry and community that miners are not opposed to Segwit for technical reasons. In fact, a major mining pool operator ViaBTC, recently stated:

The main reason to refuse Segwit is because the roadmap of bitcoin core, not the technical detail.

The development team behind ViaBTC revealed that the company along with many China-based mining companies such as Bitmains Antpool have been opposed to Segwit due to their rejection of the Bitcoin Core development teams roadmap. In particular, ViaBTC wrote in a blog post earlier this year that it does not approve Bitcoin Cores roadmap of utilizing Segwit as a scaling solution.

Segwit, which is a soft fork solution for malleability, cannot solve the capacity problem. From Core members public statements, they didnt attach necessary importance on this issue. Even if Segwit after activation can slightly scale up block size with new transaction formats, its still far behind the demand for the development of Bitcoin network, wrote the ViaBTC development team.

However, one of the solutions offered by Segwit is the infrastructure for two layer solutions such as Lightning which are expected to open doors for a wide range of services and applications that can operate on top of bitcoin and most importantly, significantly lower transaction fees through the usage of payment channels.

Similar to the viewpoint of Bitmain, ViaBTC claimed that the implementation of Lightning and payment channels will lead to centralization of transactions by deviating from direct on-chain peer to peer transactions to payment channel-based transactions.

To this date, Bitcoin Core, the industry and community have been straightforward with the scaling roadmap. Activate Segwit to strengthen security measures by eliminating transaction malleability and providing better infrastructure for hardware wallets and establish a working platform for two layer solutions for long-term scalability.

The scaling debate has started to see some progress as miners agreed to activate Segwit given a condition to increase the block size by 2MB. Given that the mining community is opposed to the sole activation of Segwit due to non-technical reasons, over the next few weeks, the bitcoin industry is likely to see major progress with scaling.

Read more from the original source:

Bitcoin Miners are Rejecting Segwit For Non-Technical Reasons - The Merkle

When bitcoin was created in 2009, it was supposed to act as a peer-to-peer cash system, but it has taken on a different form. To earn bitcoin, a person has to act as a miner, which involves them using their computers energy to maintain the blockchain. Bitcoin would therefore act as the reward for this computing power. As more people started to be interested in bitcoins operation, they started to trade it like a financial asset, for example, a stock.

This is when bitcoin really became a phenomenon, and it is now among the top google searches worldwide. For more information on how the bitcoin has emerged, we advise you to take a look at how Investoo explains the history of bitcoin in their infographic. The authorities are also divided on their perception of bitcoin, with some embracing its applications, many still sceptical and a small portion who want nothing to do about it. In fact, these may be the ideal classifications through which to study bitcoins legal status.

A few countries have accepted bitcoin and have decided to actually create laws that govern bitcoin transactions. The first country to completely accept bitcoin was Japan. Starting on the 1st of April, bitcoin was considered a legal form of payment in Japan, with several public institutions accepting it as currency. The laws governing banking have yet to change, but these are also being considered in order to make bitcoin even more usable.

India seems to be next in line to legalizing bitcoin, now that the government has agreed to regulate bitcoin. The Indian government has agreed that regulating bitcoin could be beneficial and is currently creating the laws to do so. The Reserve Bank of India is also considering using the blockchain technology in banking.

These are those countries with set laws regarding bitcoin, although they dont take it as an actual currency as Japan does. Most countries around the world fall into these category. In the US, for example, the CFTC has classified bitcoin as a commodity while the US Treasury Department sees it as a money service business (MSB). None of these financial regulators considers it as a currency, but it should still be reported under tax returns.

In Europe, nearly all of the countries have bitcoin regulations, which are mainly supposed to minimize financial crimes like money laundering, but not to legalize its use as currency. The same trend can be observed in the Americas from Canada and Greenland all the way down to Argentina.

To the east, Asia and countries in Oceania also have some form of regulation regarding bitcoin and other cryptocurrencies, again, just to prevent financial crimes. Bitcoin regulation has always been contentious in Russia, but the countrys central bank has finally put in place regulations that consider the cryptocurrency as an asset.

Only a few countries, six to be exact, have completely banned bitcoin, claiming it is very close to being a currency. One notable example is Iceland, which has the largest bitcoin mines worldwide but residents are not allowed to buy bitcoins. Surprisingly, one can own bitcoins by mining, but not buy bitcoins from a foreign exchange. This is an attempt to prevent capital flight out of Iceland. The other five countries in this category are Bolivia, Ecuador, Bangladesh, Kyrgyzstan and Vietnam.

It is unlikely that bitcoin becomes widely accepted as a currency any time soon. Its decentralized nature makes it difficult to regulate, taking away the central banks authority. In Satoshi Nakamotos 2008 paper that created blockchain and subsequently bitcoin, this was the main advantage of cryptocurrency, but they wont relinquish their control over money supply. There are lots of arguments for either side of legalizing bitcoin, but we cannot tell what will happen in the future, merely wait and watch as the events unfold.

If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.

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Bitcoin's Legal Status Around the World - The Merkle

Few things in life are as appealing as free money. For that reason, few things set off as many alarm bells as the promise of free money! After all, if something sounds too good to be true, it probably is Right?

We usually dont post these type of posts but in this case, the offer of free money has been tested by our team to begenuine and safe! The amounts on offer are alsoworth your time, assuming you hold a fair amount of bitcoins.

Note: the sums mentioned in this article depend on the current market value of Byteball ($800), so your precise reward will vary over time you can either keep your free altcoins or instantly convert them to Bitcoin, another altcoin, or fiat.

Does this still sound too good to be true? Well, there are a couple of minor strings attached:

1) Some manageable privacy risk, which well show you how to mitigate, and

2) Performing a couple of moderately-advanced wallet functions, which well guide you through in detail.

As bootstrapping is the hardest part of launching any new cryptocurrency, the successful distribution of coins to new users is critical. If nobodys using a new coin, then it doesnt matter if it has amazingly innovative technology, skilled developers, or a passionate core community.

Metcalfes law states that the value of a (telecommunications) network is proportional to the square of its users, and this law is equally applicable to cryptocurrency.

2 users = 1 connection, 5 users = 10 connections, 12 users = 66 connections, etc.

Its clear from the above diagram that the busiest network is the most useful, therefore the most valuable and most likely to attract ever more users in a positive feedback loop. As the altcoin market is beyond saturated 756 and counting competition for users is incredibly fierce

Hopefully its starting to make sense why certain coins are just given away and your too good to be true alarm is fading!

As a distribution method, giving away quantities of a new coin to Bitcoin holders individuals with a proven interest in cryptocurrency is perhaps the surest way to build an initial base of receptive users. If the new coin also delivers (in terms of technology, economy, interest and so on), it stands a great chance of gaining the initial traction necessary to rise above its competitors.

Byteball (GBYTE) was released in September of 2016 and is notable for not using a blockchain to order transactions, but rather a Directed Acyclic Graph (DAG). If youve ever mined Ethereum you may be familiar with this term. Indeed, Byteball is sometimes touted as the Ethereum-killer, as it offers lightweight peer-to-peer smart contracts. These contracts enable conditional payments, prediction markets, insurance, betting and various bot-operated markets from within the standard client. Byteball also provides a stealth-coin asset, known as Blackbytes.

DAG-chain example from the Byteball white paper, G being the genesis unit.

Every full moon, youll get free byteballs and blackbytes for every full bitcoin over which you can prove ownership fractions dont count. The next drop will occur at around 4:07 AM (UTC) on July 9th 2017. Each bitcoin will earn you 0.0625 byteballs (currently worth around $50) and 0.132 blackbytes (currently worth around $2.50). These Byteball drops will continue through 2017 and perhaps into 2018, until all GBYTE is awarded. Roughly 25% has been distributed thus far, so this is a medium-term, repeating opportunity!

Download and install the correct Byteball wallet for your system. All major platforms, including mobile, are supported. Opt for the light / quick wallet if prompted. If running on a 32-bit version of Windows, you can try this 32-bit test version of the Byteball client software.

After installation, open the wallet and click this link on the Byteball wallet page:

This will add the Transition bot to your Byteball wallet. This bot handles the assignment of new byteballs and blackbytes to your wallet, based on your bitcoin holdings (as well as any existing byteball or blackbyte holdings well cover this aspect later).

An initial address will be automatically created by your wallet. Now its time to talk with the bot!

If the bots window isnt already open, click the Chat tab at the bottom right corner of the wallet interface.

Then select the Transition Bot as your new conversation partner (dont expect scintillating repartee but you can look forward to some free coins!)

An interaction with the bot is now initiated. The first step, as the bot explains, is to give the bot your Byteball address. This address was automatically generated and named by your wallet previously. Click the ellipsis bubble next to the text input bar and then select Insert my address

32 character wallet addresses is blurred for privacy reasons.

The bot then requests a small Bitcoin payment to a Bitcoin address controlled by the Byteball team. While this is a viable method to prove ownership, theres another method which is both faster and free message signing.

At this point, familiarity with the functions and features of your Bitcoin wallet will be extremely helpful. As there are so many Bitcoin wallets available, its impossible for this guide to cover all of them. We will demonstrate how to sign for an address using the Bitcoin Core full wallet and the Electrum light wallet. If using a different Bitcoin wallet, please consult its documentation for help on the following 3 steps

In order to know which addresses to give the bot and sign for, its necessary to examine all the addresses contained within your Bitcoin wallet addresses. Note that so-called change addresses may not be displayed by default within your wallet.

Unless all your Bitcoin payments were received by a single address (which is not recommended for privacy reasons), your wallets balance will be composed of amounts held within various addresses under your wallets control.

Its necessary to inform the Transition bot of every address containing a significant amount of Bitcoin. These amounts will be totalled by the bot to determine how many byteballs and blackbytes youre eligible to receive.

You may display all your Core addresses which hold value by opening the Console and entering the listunspent command:

Click Help then select the Debug window.

Select the Console tab then enter the listunspent command.

Core will then list non-empty addresses and their values. Note down which addresses contain funds (copy-pasting the info into a text file is the easiest way). This list is especially useful for finding change addresses not automatically listed by the Core wallet in Step 8.

If the Addresses tab isnt visible, click the Wallet menu and then click Addresses.

Ensure that the Receiving and Change lists are expanded.

Now you can view all the addresses which hold your bitcoins, not just the receiving addresses which your wallet regularly displays. Were getting under the hood of your Bitcoin wallet here; understanding how change addresses work will help you to improve your privacy in future.

Combining multiple addresses into a single address can save a lot of time, depending on the number of addresses you intend to sign for. It takes about one minute to complete the signature process for each address, so decide accordingly.

To consolidate your addresses, simply send all your bitcoins to an address under your control. This should be a new or existing receiving address within a wallet you own.

Caution: perform this step well in advance of the next Byteball drop at least a week in advance to be on the safe side. If your consolidating transaction isnt confirmed by the time the drop occurs, youll miss out on the opportunity. Wait for a lull in Bitcoin network activity these usually occur over weekends and consult our guide for info on setting an appropriate fee.

The same private key used to authorise payments from a Bitcoin address may also be used to create an un-forgeable cryptographic proof which links that text with that particular address. This process is known as signing and its entirely secure see the below section, A Note on Signing Security Concerns.

Unfortunately, some personal wallets and most exchange wallets dont feature signing functionality. If your wallet doesnt support signing, youll either have to send the suggested micropayment to the Transition bots Bitcoin wallet or transfer your bitcoins to a wallet which does support signing.

This BitcoinTalk forum post, although slightly out-dated, provides a lot of helpful information on which wallets support signing, as well as how to sign with them. Heres how the process works, in 3 simple steps:

1) This first step requires a little copying-and-pasting of addresses between your Byteball and Bitcoin wallets.

The Byteball bot asks for a Bitcoin address. Give it one which contains BTC. The bot will then ask you to sign your auto-generated Byteball address, using the provided Bitcoin address.

2) Heres how to sign your Byteball address using your Bitcoin address(es):

Select File menu then the Sign message tool.

For Part 1, click the left button to select from a list of receiving addresses (listunspent reveals which contain funds).

Clicking the right button will paste any change address you copied from thelistunspent command run in the wallets Console (Step 6).

Select the Tools menu then the Sign / verify message option.

Paste the relevant addresses and click Sign. Now copy the output.

Signing is a useful operation, in the event you ever wish to prove ownership of a Bitcoin address. However, as the Core wallet advises, you should always name and date any statements you sign, particularly those with legal implications.

In this case, your signature can only be used to associate your Bitcoin addresses with a Byteball address. This is unlikely to cause you any problems in future, although do see the cautionary note contained in the below section, A Note on Privacy Concerns.

Get the signed message and paste it to the Byteball Transition Bot. If all goes well, the bot will let you know:

The Bot now knows you own the particular Bitcoin address you signed for!

If you were using a consolidated Bitcoin address, the process is now complete! If not, repeat Steps to 6 9 until youve signed your Byteball address with all your value-containing Bitcoin addresses.

Visit this website and paste your Byteball address into the field provided. Within a few minutes of completing the signing procedure, itll display the total amount of byteballs and blackbytes you can expect to receive in your Byteball wallet when the drop occurs.

Multiply your number of complete bitcoins by the expected byteball reward and compare the result by the total displayed by the website. If the website displays less than expected, it can only mean that youve forgotten to sign for one or more addresses. Note that theres no benefit for including address amount which wont bring your total above (integer) BTC.

Once you have your free GBYE, you must decide whether to hold it or sell it! Below are some points which may help you to decide!

Daily prices of Byteball on Bittrex, its biggest market. Note the run-up to June 9th (crosshaired) and the subsequent dip and recovery.

Its up to the individual to weigh the above points and come to a decision. Good luck!

It occurred to this author that, if the Byteball wallet were a particularly crafty piece of malware, it might trick users into providing signatures which could be used to authorise a transactions from users Bitcoin wallets and drain them! However, this concern may be safely dismissed, for the following reasons:

1) Six Byteballs distributions have been completed thus far, with no reports of any such malicious activity.

2) The Byteball wallet generates the text to be signed (specifically, your Byteball address) before requesting any signatures from your Bitcoin wallet. It would have to a remarkably sophisticated malware to know which of your

3) The following conversation with Bitcoin Core developer, Gregory Maxwell, in which he confirms that preventions against such a signature attack have been implemented in Bitcoin:

HeySteve: is it possible to construct a message to be signed by a bitcoin address, such that the signed message could also be a signature used to authorise a transaction?

gmaxwell: If by signed by a bitcoin address you mean the standard signmessage functionality, then the answer is No because we very carefully constructed signmessage so this could never be possible.

What transactions are signing is sha2(sha2(masked transaction)) and what signmessage signs is sha2(Bitcoin signed message: || message)

(I might be slightly wrong about the exact string.)

I think the very early draft of that functionality didnt do that e.g. sha2(message), and someone (probably me or Peter Todd) pointed out that you could be tricked into signing something that was actually a transaction hash.

HeySteve: yes, that was my worry. I signed a series of 32 character altcoin addresses using my Bitcoin addresses

gmaxwell: Yea, were looking out for you. 🙂

If you follow the above procedure, the Byteball developer and anyone he shares the information (willingly or otherwise) will be able to associate your IP address with all Bitcoin addresses for which you signed. Further, it would be possible for other addresses you own to become associated with your linked addresses.

You may mitigate these issues immediately after the drop occurs by anonymizing your bitcoins.

The Fairness of a Bitcoiner Drop Distribution

Effectiveness isnt the only criteria for judging a coins distribution. Allegations of an unfair or selfish distribution can harm a coins reputation over the long term. Distributing new coins to holders of existing coins is arguably the fairest way to distribute a new coin, assuming the initially held coins were fairly distributed. Compare this method to the alternatives:

1) Mining

Proof of Work mining, performed on a CPU, was Satoshis original design for Bitcoins distribution. This method was perfectly fair in that any interested party with a computer could participate and earn their share of coin for contributing to the security of Bitcoins blockchain.

However, the advent of ASIC technology changed the game; only those with major investment into mining facilities in areas with cheap power are able to profitably mine nowadays.

In response to ASICs, many altcoins implemented ASIC-resistant mining algorithms. These restrict mining to those with powerful graphic cards generally accessible and relatively affordable tech, with numerous applications. This ensures a fairly healthy distribution of coins over time, except in the case of pre-mined coins. Such coins reserve some percentage of their total issuance for developers up to 100% in the case of Ripple.

2) ICOs

Initial Coin Offerings are essentially the pre-sale of coins / tokens for a project in development; like a crypto Kickstarter. This is currently a common if questionable distribution strategy for new projects. ICO developers tend to hype their project to the max to attract as much initial funding as possible. When (or if) the project launches, buyers get their coins which then usually crash in price immediately. In rare cases, price recovers to trade above its ICO level.

The ICO Special lots of froth, not much else!

Many ICOs are based on Ethereum, which was itself partly distributed as an ICO as well as pre-mined. The spectacular failure of the DAO, which led to the loss of over $60 million and the bifurcation of the Ethereum network, doesnt seem to have dampened enthusiasm for ICOs. Currently the Bancor project has raised a record $153 million and ICOs have become something of a mania Be wary of investing in such projects; many will turn out to be catastrophic money burners!

If youve tried this method yourself please let me know your experience in the comment section below!

Good luck!

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How to Use Your Bitcoin Wallet to Get Free Coins - 99 Bitcoins (blog)

The love-hate relationship of Chinas central bank with digital money shows no signs of resolving soon, as investors continue to back the industry leading bitcoin while Beijing lays the foundation for its own sovereign cryptocurrency.

The technological underpinnings of an electronic currency hold a strong allure for a government struggling to keep a tight grip on capital outflows, but that same technology makes digital money resistant to centralised control, industry experts say.

The Peoples Bank of China (PBOC) is struggling to maintain some rhetorical consistency. Bank governor Zhou Xiaochuan said in February last year that a digital currency must be issued by the central bank and the PBOC had been pouring money into the study of blockchain technology. Following two years of research, the bank had devised a test of its own digital currency and by the end of last year had set up an in-house research institute headed by a former deputy director at the banks payment department.

Bitcoin price triples since start of year to break through US$3,000 amid rising global demand

In a recent speech, Yao Qian, a PBOC official who heads the research institute, called for prudent tolerance towards regulating the virtual currency industry while speeding up the issuance of its sovereign digital currency.

Ten years ago, the value of 10,000 bitcoins could buy a piece of pizza. Now the price of one bitcoin is more than one unit of gold, Yao said. But the mainland also needed to provide an investment opportunity for companies that sought to rely on cryptocurrency market to make initial public offerings, where they offer digital tokens to raise capital. At least its better than buying some trash stocks, Yao said.

This perspective is in stark contrast to the banks hostility toward bitcoin in December 2013 when it issued a notice prohibiting all banks and payment service providers from accepting it as a way of payment. Bitcoins price immediately crashed and didnt bounce back until late last year.

It remains deeply volatile, with rampant speculation on the mainland, which produces most of the worlds bitcoins and counts the largest number of its investors, fuelling much of that fluctuation.

In January, prices plunged by about 40 per cent within a few hours. The PBOC subsequently raided three mainland bitcoin exchanges to check for foreign exchange violations and money-laundering.

It has since maintained a tight grip on bitcoin trading by requiring the exchanges to charge transaction fees, stop lending to investors for trading, and stop coin withdrawals, a ban that was only lifted in June. The exchanges were also required to adopt additional rules to strengthen verification of the personal information of clients seeking to make withdrawals.

Chinas bitcoin market: another ticking time bomb?

As a result, the Chinese mainlands share of global bitcoin trading fell to 16 per cent from 80 per cent, according to Huobi, a major bitcoin exchange on the mainland. Despite the central banks heavy-handed control over trading, the price of bitcoin continued to rise, thanks to investors from Japan and South Korea, and hovered around 19,000 yuan (US$2,780 or HK$21,690) this week more than triple its level earlier this year.

In 2017, essentially, the PBOC made bitcoin trading in China less desirable, compared to what happened in 2013, Arthur Hayes, chief executive of Hong Kong-based Bitcoin exchange BitMEX, said. It shows that regulators can only slow down the on-ramp [leading to] cryptocurrency, but the demand is still there for money that is not affiliated with any particular government.

The PBOCs zeal for its own digital currency is so pronounced that a few companies have started to sell digital currency in the name of the bank, leading the central bank to issue a statement alerting the public to misleading claims. The yuan remains the only legitimate currency on the Chinese mainland.

Hong Kong Bitcoin exchange hacked, US$66m stolen: thieves may have exploited market closure during typhoon

The central banks fondness for going digital has raised scepticism in the bitcoin community. Susanne Tarkowski Tempelhof, founder of Bitnation, an advocacy group, said that if the central bank tried to invent a currency with embedded centralised control and inflation rather than deflation, then it would have a hard time competing with bitcoin and similar more well-designed currencies over time.

Previous attempts to create geography-centric crypto currencies such as Aurora Coin, MintChip and Scotcoin have so far been failures, Tempelhof said.

And the PBOC continued to face a challenge in producing an alternative to bitcoin, she added, which was decentralised, untrusting and resistant of traditional central banking.

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Can China's central bank mint an answer to bitcoin? - South China Morning Post

You've seen all the headlines about bitcoin and other cryptocurrencies rising in value. Maybe you want to get in on the game. But how do you even start? We'll show you.

Before you do this, though, you should note that bitcoin isn't universally accepted like regular currency. My colleague Seema Mody published a great video recently where she tried to live a week on the currency, and it wasn't easy. You can use bitcoin online and at some retailers, but for the most part you're still better off just paying with cash or a credit/debit card.

You should also be aware that bitcoin is more like a speculative investment than a regular currency, and can fluctuate wildly in value. Although the overall trend has been up in recent months, but crashes of 20 percent or more in a few days are historically not uncommon.

Still interested? Here's how to get started:

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How to buy Bitcoin in seconds from your smartphone - CNBC

The teenagers story has captivated America, delighting people with its mix of childhood ambition, entrepreneurial skills and hard work. Mr Finman has been celebrated on news channels, and lauded in the tech community.For his story is little short of remarkable.

The tale began in 2011, when he was 12, and his grandmother gave him $1,000.

Mr Finman, whose parents Paul and Lorna met at Stanford University in the 1980s, when Paul was getting his PhD in electrical engineering and Lorna was getting hers in physics, took the cash and invested it in Bitcoin, following a tip from his brother Scott.

The Finman siblings, three brothers, admit to being fiendishly competitive. Erik describes his family as being the "Elon Musk version of the Kardashians" both his older brothers work in tech and engineering,and the youngest Finman was frustrated by school.

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Idaho teenager becomes millionaire by investing $1000 gift in Bitcoin - and wins bet with his parents - Telegraph.co.uk

Younger, tech-savvy people are also more likely to play the digital currency markets and the high risk involved, Sunnarborg said. He estimates that about two-thirds of investors in cryptocurrencies are under age 40.

That same age category is less likely to invest in the stock market. Just one-third of millennials, or adults currently aged 21 to 35, said they owned a stock in a Bankrate study last July. In contrast, 51 percent of Gen Xers, or those age 36 to 51, said they owned a stock, and 48 percent of baby boomers, ages 52 to 70, according to the survey of 1,000 American adults conducted for Bankrate by Princeton Survey Research Associates International.

"The next generation is suffering from the same thing that the Gen Xers suffered in the dot-com bust," Winer said. "They're playing all kind of markets that they know nothing about."

He was referring to the speculative trading that ended in the stock market's plunge in 2000.

Traders and market strategists also worry that a "fear of missing out trade" has helped send U.S. stocks deep into record territory the S&P 500 has posted 24 record closes this year and is up 9 percent over that time.

The difference is this time, typical measures of overexuberance may not apply to stocks.

Bank of America Merrill Lynch's June global fund manager survey found that while a record 44 percent of managers say stocks are overvalued, their cash holdings have actually moved up to 5 percent, higher than the 10-year average of 4.5 percent. There's "no irrational exuberance" in contrast with the 1999 bubble, the note said.

However, sluggish global growth and easy central bank policy could limit investment returns, while people remain wary about stock markets after the financial crisis.

"I do believe that in a market with few attractive alternatives, speculation tends to become rampant," said Daniel Alpert, a founding managing partner at Westwood Capital. "And it almost doesn't matter what people choose to speculate in, as long as they believe there is a fool greater than they out there somewhere."

See the rest here:

Bitcoin speculators are the new day traders - CNBC

After years of debate, the Segwit2x scaling proposallooks like it could play a role in finally taking bitcoin a step forward.

But the codersand companies involved have been doing at least someof thedevelopment behind closed doors, a way of workingthat some argue runs counter to bitcoin's value proposition as a decentralized money that no one person, or group, controls.

The project, which follows in a long line of proposals for increasing bitcoin's transaction capacity, is now supported by an all-time-high of nearly 90% of the bitcoin mining hashrate.

Since the current method of triggering majorcode changes relies on the support of mining pools, it seems likely that the first portionof the agreement, SegWit, will activate on the network by the end of July. (Although, it's hard to say what will happen with the rest of the proposal.)

But, while Segwit2x is perhaps the most widely-supported scaling agreement among companies and mining pools followingyears of debate, some have argued that key decisions are being made by an insular group of companies.

These companies, some argue, have continued pushing the proposal through even though many of the developers that are perhaps the most familiar with bitcoin's codefind fault with thetechnical implementation and disagree with thestated goals.

And those same companies have been elusive when it comes to details about the status of the proposal itself.

Segwit2xwas kick-started at an invite-only meetingcomprised of big companies and large mining pools in the space.

From the beginning, one of the main criticisms levied against Segwit2x is thatits development process isn'topen to everyone. And many argue this process doesn't jibewith bitcoin's history of open-source development.

There is certainly evidence to the contrary. Btc1, as the Segwit2x software implementation is called, is hosted on GitHub where any developer is welcome to point out bugs and suggest improvements. This open processhas indeed already led tomajor changesin the project's direction. Similarly, the mailing list is open for anyone in the community to at least peruse if not post to.

In other ways, the effort isstaying true to its secretive origin story.

There's an invite-only Slack group, where companies that originallypledged to contribute are represented, includingAbra, Bitfury, BitGo, BitPay, Blockchain, Bloq, BTCC, Ledger, RSK Labs and Xapo.

Others included in the Slack group are OB1, Purse and developers from the alternative bitcoin implementation Bitcoin XT, which aimed to increase bitcoin's block size parameter to 8MB in 2015.

Most of these companies and individuals who have committed developer resources, though, declined to provide specific information in response to CoinDesk requests to understandtheir involvement. Some companies did not respond at all.

Others confirmedthat they'reinvolved in development, but declined to be more specificabout which developers are involved and what they're working on.

"We are also contributing technical expertise to the Segwit2x code, which is in its test phase right now on a separate testnet," saidValery Vavilov, CEO of The BitFury Group.

Many company responses were similarly vague.

Yet Vavilov continued:

"We are also in the working group that is researching, building, reviewing and testing the upgrade, and will help businesses adopt the upgrade as well."

Companiesare currentlytestingthe code on the newly-deployed testnet. On Thursday, the group released a public testnet faucet, which producesfake bitcoins that developers can use.

A number of developers are tuned into the effort, as seen on the GitHub and the Segwit2x project mailing list. Those two resources make it easy to see a few of the people involved in development, including posted contributions fromBloq CEO Jeff Garzik and Purse.io CTO Christopher Jeffrey.

While Digital Currency Group (DCG) CEO Barry Silbert is often viewedas the public face and linchpin of the effort (its often calledthe "Silbert Agreement"), he noted he's "not involved on the development side at all", and so can't comment on the process any more than what's already been published.

Despite knowledge of the process, there are gaps inthe community's understanding ofwhat's being developed, such as who specifically is contributing to the effort and what they are contributing.

Those who are not contributing, according to Lightening Labs CEO Elizabeth Stark, are those who have disagreed with the proposal in some way.

Stark said her companyprovided technical feedback to Segwit2xbecause they didn't agree with the proposal for "various technical reasons". And according to Stark, they were not invited to participate further.

"This proposal has like zero developer consensus," she said, referring to Bitcoin Core developers, most of whom have outright rejectedthe project.

She added:

"Unfortunately, the [mailing] list is only for people that agree with Segwit2x."

Again, opponents said, thisphilosophy contrasts with bitcoin's open development process so far, which invites all developers to contribute their ideas. Aloose group of volunteer developers work on Bitcoin Core, for example, where development, for the most part, is done out in the open.

On the other hand, Segwit2x's closed approach to development"allows people to self-vindicate, and shields you from peer review and public commentary," wrote Blockstream CEO Adam Back inan email to the working group.

He continued:

"The forming of distinct and closed communication channels is not inviting review. Why would this project be special in needing to work in closed/controlled environments and not participate openly like the six or so other implementations and hundreds of developers across dozens of companies, institutions and individuals[?]"

Disclosure:CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Abra, BitGo, BitPay, Blockstream, Bloq, BTCC, Ledger, OB1, Purse.io, RSK Labs and Xapo.

Hands behind a blue doorimage via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [emailprotected].

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Top Secret? Bitcoin Scaling Plan Segwit2x Leaves More Questions Than Answers - CoinDesk

Financial markets are frothier than a millennial's 3-D latte. Investors are scrambling to throw money at Argentina, Vice Media and George Clooney's tequila. Only the crypto-currency craze seems to give us comfort there are worse bubbles out there.

One bitcoin is now worth

$2,677

The latest warning against digital currencies comes from Aberdeen Asset Management's top venture capitalist, Peter Denious. He blames a feeding frenzy of speculation for the explosion in prices and new coins.

"A lot of lessons will be learned and a lot of money will be lost, before a lot of money can be made," he told Bloomberg News. "It's a gold-rush mentality."

Bitcoin Boom

Crypto-currency craze is unsettling people but shows little sign of going into reverse

Source: Bloomberg data for Bitcoin Tracker, an open-end Exchange Traded Note incorporated in Sweden.

Denious is right to say that the market is speculative and unsustainable. Despite recent price wobbles, Bitcoin has almost tripled year-to-date, to $2,677. Its closest rival, Ether, is now worth more than 40 times its end-2016 level of $8.

This isn't because people are using crypto-currencies to buy homes or cars, or because regulators suddenly like them. It's seen as a way to make money.

Another Bubble?

BofA sees S&P 500's market cap relative to nominal GDP hitting all-time highs

Source: Bloomberg

It's hard, though, to separate the crypto craze from worries about regulated public markets and the real economy after a decade of ultra-cheap central-bank cash.

Everything's Fine

Volatility keeps getting crushed

Source: Bloomberg

Talk of a bubble permeates every aspect of today's financial markets. Bank of America research offered up several signs of "Wall Street excess" on Friday:

Bitcoin wasn't mentioned once. That makes it harder for the mud thrown at crypto-currencies to stick. Even Fidelity's CEO and John McAfee are mining bitcoins in this market.

The mind-boggling returns of crypto-currencies also reflect a desire to escape public market bubbles rather than just emulate them.

If bonds are the old world's safe haven, Bitcoin is the millennial generation's apocalypse insurance. Crypto-currencies are marketed as a direct expression of opposition to central-bank and government policy, far more so than gold.

Just as low yields push wealthy investors to take bigger risks -- like buying Argentinian debt -- some people see Bitcoin as an escape from financial repression and instability.

That's why Venezuela, where demand for digital coins is soaring amid triple-digit inflation, currency devaluation and political crisis, has one of the highest potentials for bitcoin adoption in the world, according to the London School of Economics. The other top country is -- you guessed it -- Argentina. Monetary experiments beget technological ones.

This doesn't mean that there are purely rational explanations for the actual price of crypto-currencies today, tomorrow or yesterday. If the bubble bursts, investors will have to lower their expectations as to what Bitcoin and its ilk can actually achieve without rampant speculation and illicit activity.

But the more worrying scenario is that political unease about central bankers and wealth inequality will help to funnel more money into crypto-currencies.

Societe Generale's Albert Edwards reckons citizens are close to turning on "unelected and virtually unaccountable central bankers" after years of economic crisis and stagnation.

Bitcoin's computer scientists don't deserve to be seen as a better alternative. But if the path out of the financial crisis takes a sudden turn for the worse, it may well be too late.

Both bubbles seem too closely connected for comfort.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story: Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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When the Bitcoin Bubble Bursts - Bloomberg

When you hand someone a dollar bill, gold coin, or bushel of wheat, the transaction doesnt require much effort to execute. The seller holds a physical object, and apart from counterfeiting, knows that he or she has been paid. When you pay someone by credit card, money must be digitally transferred between accounts, but this is all done by a centralized company and requires only a trivial amount of computing power. But when you pay someone with a cryptocurrency such as Bitcoin, computers in a decentralized network around the world must verify the transfer from one Bitcoin wallet to another. Executing the transaction therefore requires significant real resourcesenergy needed to run computers. Those who spend the time, energy and computing power to execute payments need to be compensated.

This compensation comes in two forms. The more well-known form of compensation is newly created bitcoinsthis is the reason we call those running the software miners. Miners currently earn 12.5 bitcoins for each block of transactions (about 1MB in size) verified, over $30,000 at todays prices. But the code behind Bitcoin is designed so that this reward is cut in half when the all-time number of transactions hit certain milestones (the reward was originally 50 bitcoins). This causes the number of new coins to slow down as they reach the predetermined limit of 21 million bitcoins. The limit isnt projected to be reached for 100 years, but this form of compensation for running the system will inevitably decline in importance.

Miners are also compensated by transaction fees in the form of small fractions of a bitcoin every time you or I make a transaction. Many people dont know about these feeswidely used wallet services like Coinbase have an algorithm to determine how much you pay. Like most things about Bitcoin, the transaction fee system is decentralized, market based, and a little hard for the beginner to understand. You choose the size of the transaction fee you will pay (or no fee at all), and miners decide based on that amount whether or not to include you in a verified block. Transactions with lower fees therefore risk taking a longer time for the system to verify.

Average transaction fees have increased at a staggering pace this year, from 35 cents on January 1 to almost $4.50 today. That works out to a little more than $10,000 on average per verified block. Much of this increase is due to competition as the system becomes more crowded with transactions. But over a longer time frame, this incentive will become more important as fewer new coins are mined. Predicting the future level of these fees is difficult and depends on variables such as future computing speed, energy costs, and the value of a bitcoin. But they will be essential to provide incentives to keep the system running.

Could high transaction fees provide an open door for a competitor to disrupt Bitcoin? Bitcoin makes the verification process even more difficult and energy consuming than it needs to be in order to get the economic incentives right and keep a lid on the number of new Bitcoins. If someone designed a digital currency that solved those problems while making verification more efficient, it could presumably save consumers millions in transaction fees. Such a scenario is yet another reason why hard and fast predictions about the future of Bitcoin are a fools errand.

Read more:

Who Pays to Keep Bitcoin Running? - American Institute for Economic Research (blog)

I continually get news feeds streaming across my computer telling me how other countries are jumping on board with Bitcoin. But, I read in American financial sites that say to stay away from Bitcoin. The fact is, as a medium of exchange, Bitcoin has tremendous value and ability. As an investment class, Bitcoin continues to move higher, latest pauses on the road to $3k. Bitcoin, as an asset class is heading much higher based upon supply and demand. Articles are being printed showing that Bitcoin could eventually print $1 million dollars. While I can see Bitcoin $1 million dollars, I am going to focus on the crypto-currency's move into from four to five digits for now; that is far more easily accessible.

It is very easy for Americans to dismiss Bitcoin. By, and large, Americans think in only one type of currency; The U.S. Dollar. So, when I read articles on major financial website trashing Bitcoin, I have no problem trashing the articles; the disconnect with Bitcoin is more because of a lack of understanding. A perfect example of a country that is not only embracing Bitcoin is Japan. Japanese are embracing Bitcoin at a very rapid pace. Because of this, demand is pushing higher and higher, and so is price. I see this as being continuous. I see Bitcoin pushing past $3k and, in fact, eventually hitting $10,000.00 per coin with an eventual price target of $1 million for Bitcoin. This is the framework of why that is going to happen.

Whenever I sit down with anyone who asks me about Bitcoin, I always show anyone the daily chart from just the past year alone - below. I then tell them they should consider Bitcoin as an alternative and explain the reasons why. I go into the details about limited supply and no central bank as well as what is happening in the economies around the world. Again, Americans have a tough time with this simply because they cannot think outside of the U.S. Dollar box. Most Americans have never even traveled outside of the country; only 8% of Americans traveled outside of the United States in 2016.

Bitcoin is being embraced in Japan at an incredible pace. I have read several articles over the past two weeks alone where Japanese hotels, cash systems and other purveyors are adding Bitcoin into their economy. And, yet, in America, financial websites are warning to stay away from Bitcoin. I took this as a lack of education, if anything.

In Japan, the government has legalized Bitcoin - along with other countries. At the same time, the Bank of Japan is in the process of desperately trying to dilute their currency to create any kind of inflation possible. It is largely not working.

Here is a look at the central bank's "printing press" in action: As stated, their goal is to stimulate the Japanese economy and keep inflation at target, normal levels. They are not succeeding so far. Inflation at 0.4% on a year-over-year basis is not even worth bringing up; It is negligible. My bigger fear is that mountain of printing that the Bank has done.

In the meantime, savvy Japanese investors are scooping up Bitcoin at a rapid pace. Whereas Japanese Bitcoin exchanges were not even really a factor, since the first week of April when the government legalized Bitcoin, the Japanese exchanges are now neck-and-neck with America exchanges. This is just one of many countries where Bitcoin is not just a curiosity but is becoming a way of life and is being integrated into the economy at a rapid pace with 100s of thousands of pay stations and ATMs appearing.

Americans simply do not get Bitcoin and they may very well regret that later. There is a great deal of potential with Bitcoin as an alternative to banking; some 56 million Americans do not even have a bank account. Bitcoin, just like cash, does not have the extensive paperwork criteria like a bank account has. With some 56 million Americans not even having a bank account this is a significant opportunity.

Unlike the charts above showing the Japanese central bank attempting to dilute its currency, Bitcoin has not central bank. Instead, Bitcoin will only ever have 21,000,000 million coins. Because of that, the price of Bitcoin is going to continue to be pushed higher. In fact, unlike fiat currency, Bitcoin appreciates in value. The purchasing power of any fiat currency is always being eroded by a central bank, whereas Bitcoin's potential to continue to move higher. And, although this cartoon is a bit tongue-in-cheek, it is also very accurate: Compared to today, if you had invested $100 in Bitcoin in 2009, you would be worth about $75 million today. And, yet, there are people who trash the idea of Bitcoin simply because they do not understand the currency and what it does.

At the beginning of April, Bitcoin was trading at $900.00. It is now just above $2,650.00 and looks set to test the $3,000.00 level for the third time. That is a simple multiple of 3.5x in two months. If that happens again, even if it takes another 6 months to happen, or even 6 years, Bitcoin will rise to nearly $10,000. That is an impressive gain unmatched by other "stores of value" or asset classes. Whether the currency crosses the $3k level this time, I am not certain. But, I am certain it will push past eventually. It is a matter of when, and not if, given the limited supply and the potential widespread demand.

Bitcoin's limited quantity of coins is set. But, there are 7 billion potential users of the currency. The fundamentals continue to support Bitcoin moving higher and higher as more and more access is available. And, since this currency's track record is that it moves higher and higher, its appeal over fiat currency is gar greater.

I can very easily see a day when Bitcoin pushes past $10,000.00 per coin. And, I can see a day when there is another order of magnitude to the coin's value. Some savvy investors even see $500,000.00 per coin.

Bitcoin works because of the agreement that there is a price for it and its exchangeability for goods and services, or conversion into fiat currency. And, as more and more countries ensure Bitcoin is able to work unhinged, the demands for the currency will continue to move higher. That will push up price. It is an added value to the coin's appeal.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in COIN over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Read more here:

Embracing Bitcoin - Seeking Alpha

Here's a little history on the founder: Buterin was born in Moscow, according to a feature by Wired's Backchannel last year. At 6 years old, he moved with his family to Canada. He was considered a math genius from an early age and was placed in a gifted program in the third grade, the publication reports.

Buterin reportedly first grew interested in bitcoin when his father introduced him to the concept, and he soon became an expert in the emerging field. In 2011, he launched the cryptocurrency's eponymous magazine.

In May 2013, the 19-year-old programmer traveled to California to a cryptocurrency conference led by the Winklevoss twins. According to Backchannel:

Veterans of the dotcom era drew comparisons between cryptocurrencies and the dawn of the Internet. Booths showed off new hardware wallets, merchant payment platforms, and Bitcoin ATMs. And Buterin witnessed it all as a representative of Bitcoin Magazine. The San Jose event was Buterin's first glimpse at the living, breathing community cropping up around the cryptocurrency economy.

"That moment really crystallized it for me," he tells the publication about the experience. "It really convinced me that, 'Hey, this thing's real and it's worth taking a risk and jumping into.' So I did."

Buterin dropped out of the University of Waterloo and spent the rest of the year traveling around the world visiting with individuals working on bitcoin, according to Backchannel.

See more here:

Meet Vitalik Buterin, the 23-year-old founder of bitcoin rival ethereum - CNBC

There are many reasons for investors to buy chipmakers Nvidia and Advanced Micro Devices, but the recent rush for an indirect way to play skyrocketing cryptocurrencies bitcoin and ethereum should not be one of them, CNBC's Jim Cramer said Friday.

"One of the reasons why AMD and Nvidia have been going up is their chips are used for mining, for cryptocurrency mining," Cramer told "Squawk on the Street." But he warned, "Do not play it for this is what I'm saying. But it is being played for that."

Bitcoin and ethereum miners use powerful graphics processing units or the computer chips on graphics cards to generate new cryptocurrency units, which can then be sold or held for future appreciation.

Cramer cited a recent note from RBC Capital Markets, which said the growing cryptocurrency mining market has contributed $100 million worth of GPU sales for Nvidia in the past 11 days alone. "AMD chips are the best ones for the ethereum platform," he added.

"Of course there are so many other uses for their chips, but a lot of retail people love bitcoin and are looking for a way to play it," Cramer said.

In the past 12 months, bitcoin has soared about 325 percent to around $2,703 per unit as of midmorning trading on Friday. Ethereum, the smaller bitcoin rival, has skyrocketed about 2,240 percent to around $328.

In the past month, as the cryptocurrency surges have been more widely reported, AMD shares have soared 33 percent and Nvidia stock has gained about 15 percent.

"You play Nvidia for artificial intelligence, for GPUs, for autonomous cars, and for gaming," he said. "You play AMD for gaming and they have a faster chip than Intel."

Buying the stocks for those reasons, not because of cryptocurrency mining, makes sense, Cramer concluded.

More:

Cramer: Bitcoin-ethereum craze boosts Nvidia and AMD, but it shouldn't - CNBC

Blockchain, the London-based bitcoin currency service provider, has raised $40 million of fresh funding, representing one of the largest investment rounds in the financial technology sector since Britains vote to leave the European Union.

New investors in the company, which provides technology such as virtual bitcoin wallets and analytical tools for the digital currencys underlying system, include Googles GV, which led the funding with Lakestar. Existing investors, including Lightspeed Venture Partners and Sir Richard Branson, provided new financing.

The pace of innovation in the digital currency space is unmatched, said Tom Hulme, a partner at GV. We were impressed by Blockchains consistent market traction and dedication to building secure financial products for an increasing number of users.

Bitcoin, and the blockchain system that powers it, is one of several virtual currencies and the value of one bitcoin skyrocketed more than 300 percent in the last year.A competing currency, Ether, based on the ethereum blockchain, reached a record $402 earlier this month.

Blockchain Chief Executive Officer and co-Founder Peter Smith said his companys new funding was raised before bitcoin and ethers recent run up. "We did it a few months ago," he told Caroline Hyde in an interview on Bloomberg Television Thursday.

While it has been accepted for legitimate transactions by companies such as Microsoft Corp., Expedia Inc. and social media platform Reddit, it is also a favorite tool for criminals seeking ways of anonymously sending and receiving money, such as during the May WannaCry ransomware attack that affected countless businesses and hospitals worldwide.

In a press release, Blockchain said its new investment will support a wider global expansion and related localization efforts, as well as further research and development for its product.

The 14 trillion dollar financial services industry hasnt meaningfully changed in over a century, said Smith in the release. Blockchain is on a mission to create a financial system that is faster, more inclusive, and radically different than the status quo.

Blockchain had previously raised $30.5 million in 2014.

Excerpt from:

Bitcoin Startup Blockchain Taps $40 Million in New Funding - Bloomberg

Summertime and the living isnt so easy, if youre a stock investor looking over your shoulder at oil.

The hesitation we saw yesterday, as we adjust to the oil-in-a-bear-market world, looks set to continue today. So you just might just like to escape to another investing world where there is no Fed, OPEC or FANG stocks throwing curveballs.

Fatigue for traditional investors may be one reason why the excitement is booming in the wild west of the cybercurrencies right now. Over on Reddit, one forum dweller said they were ready to drop $20,000 into bitcoin after doing some research and concluding the only way was up for the crypto cash. It beats $20k sitting in a safe-deposit box, the poster said.

Only invest what you are willing to lose, was one response.

And that leads us to our call of the day, which says theres some big money being made on cybercurrencies but the risk is on the same scale. And where theres an opportunity, there are hedge funds.

Blogging for ValueWalk, Rupert Hargreaves took a deep dive into the Crypto-Currency Fund Index from Eurekahedge. The data firm uses the index to track the performance of five actively managed hedge funds with holdings in bitcoin, ethereum and other digital cash.

The findings? The Eurekahedge index not only beat traditional hedge funds, it even blew bitcoin itself out of the water.

Between June 2013 and April this year, the index shows eye-popping cumulative returns of 2,152.32%, versus 1,408.11% for the Bitcoin Price Index. Looked at annually, thats a return of 125.35%, compared with 102.96%.

The funds on the index seem to offer a less volatile way to bet on cryptocurrencies over just buying bitcoin or ethereum, even though the level of volatility for the index itself is off the chart, Hargreaves notes in his blog post.

In its report on performance, Eurekahedge said that over a period of 14 months between December 2013 and January 2015, the Eurekahedge Crypto-Currency Fund Index lost almost 73% of its value from its 2013 high. In contrast, the Bitcoin Price Index lost almost 81% of its value, according to Hargreaves

Whether were on the edge of a South Sea Bubble or greatness for the cybercurrency faithful, bitcoin and its pals have been bringing the drama meanwhile.

Popular rival ethereum suffered a flash crash yesterday, which CoinDesk blamed on an influx of new users, pumped on media hype. ZeroHedge said it was caused by one seller trying to dump $30 million of ETH in one go.

Just a day in the life of a brave new world.

Check out: How big is bitcoin, really? This chart puts it all in perspective

The Dow DJIA, +0.13% S&P SPX, +0.17% and Nasdaq COMP, +0.25% are trading into the black a bit. Europe SXXP, +0.01% is looking at its third-straight loss on weak energy names.

Crude CLU7, +0.51% is bouncing back. Some metals are on the rise, and that has lifted parts of Asia ADOW, +0.52% MSCIs inclusion of China stocks continued to boost the Shanghai Composite SHCOMP, -0.28% .

Risk off? Gold GCU7, +0.00% is up.

Read the latest in Market Snapshot

Its not just oil thats hurting these days. Check out whats happening with some soft commodities, via these charts from The Wall Street Journals Daily Shot.

Heres sugar futures:

And cocoa:

I love all people, rich or poor. But in those particular positions, I just dont want a poor person. Does that make sense? That was President Donald Trump at a rally in Iowa Wednesday evening, in reference to Commerce Secretary Wilbur Ross, also present.

Trump said he needs people great, brilliant business minds, so that the world doesnt take advantage of the U.S. anymore, said POTUS. Watch that clip here:

More than 600 Thats how many buildings in England are estimated to have been fitted with the cladding that is suspected to have led to the deadly Grenfell Tower fire:

Oracle ORCL, +8.84% is up as it looks like its cloud transition has hit a turning point.

Staples SPLS, +7.04% has been lifted by a Reuters reported that Sycamore Partners is in advanced talks to buy the office supplies retailer.

Steelcase SCS, -13.96% dived late Wednesday after a miss from the office-furnishing companys earnings.

Nike NKE, -0.17% plans to sell some its products directly to Amazon AMZN, +0.07% , according to a source. Check out a preview of Nikes earnings, due June 29.

Read: Amazon Wardrobe is another blow to department stores

Twenty-five companies, including GE GE, -0.49% and Microsoft MSFT, +0.11% will attend the White Houses tech summer event later today. Theyll talk about emerging technologies and the effect on U.S. industry jobs, says CNBC.

Residents remain trapped in Isis-occupied Philippines city

Meanwhile, another piece of cultural heritage has been lost in Syria

The Richest Person in Every State? Most of them are self-made

With the help of a giant squirrel, John Oliver is now getting sued by a coal magnate

Millionaire may call off treasure hunt after a deadly turn

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This play beats bitcoin with 100%-plus returns and it's less risky - MarketWatch