The Satoshi Nakamoto Mystery

The Satoshi Nakamoto Mystery

bitcoinSince the creation of Bitcoin, many have wondered who Satoshi Nakamoto, the pseudonymous creator, actually was. The mystery was deepened recently when on March 6, 2014, Newsweek published an article which identified a man named Dorian Prentice Satoshi Nakamoto as the Satoshi Nakamoto who created Bitcoin. Dorian Nakamoto is a 64 year old Japanese American male who lives a modest lifestyle in Temple City, California and also likes to collect model trains. It appears as though if he is the creator of Bitcoin, he has not spent any of his riches.

The article was written by Leah McGrath Goodman, and gives several pieces of evidence to suggest that Dorian is the real creator of Bitcoin. Apparently, Dorian Nakamoto was very good at math and also had a background in engineering and knew how to program. Much of his career, which includes work for the U.S government, is shrouded in secrecy. The greatest piece of evidence is the statement given by Dorian Nakamoto at the time of the interview: “I am no longer involved in that and I cannot discuss it. It’s been turned over to other people. They are in charge of it now. I no longer have any connection.”

This statement was later confirmed by police. However, in a later interview, Dorian denied being the creator and said that his quote was taken out of context. He apparently though that the interviewer was talking about his classified work for the U.S military. He would also deny having anything to do with Bitcoin, saying he had just recently heard of it. The mystery was deepened even further when on March 7th Satoshi Nakamoto’s profile on the P2P Foundation posted: “I am not Dorian Nakamoto.”

Other issues remain with the Newsweek story, such as why the writing style and skill of Dorian Nakamoto is so much different than the Bitcoin creator’s writing skills. Satoshi Nakamoto wrote in a very technical tone and with very good English skills. As evidenced by earlier emails and letters written by Dorian, his writing is nowhere near as good. Because of these issues, many in the Bitcoin community met the article with skepticism. Many were also concerned with Dorian Nakamoto’s lack of privacy and exposure which, regardless of whether he really created Bitcoin, may put him in danger.

While many may still be inclined to believe that Dorian Nakamoto is the creator of Bitcoin, it seems as though he is serious about denying it. A law firm hired by Dorian Nakamoto released a statement that said: “I did not create, invent or otherwise work on Bitcoin. I unconditionally deny the Newsweek report.” The fact that Dorian hired a law firm may mean that he is contemplating action against Newsweek. Regardless of what happens, the mystery of Bitcoin’s anonymous creator will continue on.

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Bitcoin as a Solution to E-Commerce Pain

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Bitcoin as a Solution to E-Commerce Pain

Written By: Ashok Misra of Alina Consultants

Introduction

Bitcoin as a Solution to E-Commerce Pain

Bitcoin is a decentralized virtual currency whose valuation and use has grown dramatically since its inception in January 2009.

Some thinkers view bitcoin as a viable alternative to sovereign currencies; however, e-commerce was the original use case for bitcoin in Satoshi Nakamoto’s epic paper in 2009 on the proposed “Peer to Peer” cash system.

Unfortunately, a lack of authoritative articles exist on the precise benefits of bitcoin vis-a-vis payment methods involving credit cards for purchase of goods and services on the Internet.

In this paper, we address in practical terms the precise advantages of using bitcoin as a payment method for Customer Not Present (CNP) transactions made over the Internet.

E-commerce Payments (“e-payments”)

E-payments are digital payments for goods and services that are made over the Internet on online merchant websites. E-commerce serves multiple vertical lines of business for physical and digital goods. Dominant verticals in shipped physical goods purchased over e-commerce channels by retailers are books, apparel, and electronics. Examples of digital goods purchased over the Internet are music, streaming media, and e-books.

Some key drivers for e-commerce are: residential broadband penetration; access to consumer payment instruments suitable for online commerce; and distribution and delivery channels for physical goods.

The worldwide e-commerce market has grown by 20 percent year after year for the last several years. Global B2C Ecommerce Sales are projected to hit USD1.5 Trillion in 2014, driven by growth in emerging markets.

The more mature e-commerce markets such as the United States, the UK, and Germany, where citizens enjoy a strong purchasing power and widespread access to broadband Internet, see about 10 to 15 percent of online share to total retail trade, whereas less mature e-commerce markets such as Poland see only about 3.8 percent of online retail volume to total volume. However, many regions such as Poland are witnessing a tremendous rate of growth in e-commerce. Poland, for example, has a population of 38.5 million, out of which 26.2 million are Internet users and 12.6 million are online shoppers.

Payment Methods

Payment methods used by consumers for online purchases vary considerably by region, depending upon their availability and consumer attitudes. They expose a unique set of advantages and risks for online commerce. They can be broken down as follows:

Credit and Debit Cards

Credit and debit cards were originally intended for “card present” merchants. The cards were designed for physical use at the point of sale, where the magnetic stripe card is “swiped” and read by a terminal. The cardholder is authenticated by methods such as a wet ink signature on a printed receipt, a signature captured on a touch sensitive POS screen, a secret PIN number, etc.

Such cards have been adapted since the birth of e-commerce by merchants and processors for use on the Internet. The number on the card is entered by the consumer on a web form during the order process. Authentication is carried out using information such as billing zip code, expiration date, etc.

Fraud with credit cards is a serious concern on account of the weak authentication and inherently insecure mechanics. However, it must be noted that consumers are typically protected against fraudulent purchases on their credit cards. For transactions made in a “Card Present” manner, the consumer’s bank bears the fraud loss, whereas in the e-commerce CNP use mode, the online merchant bears the fraud loss.

Security for credit cards in a “Card Present” environment has improved progressively. That notwithstanding, there have been recent cases of large breaches involving retail stores. The United States lost 5.33 billion USD to fraud in 2013. This was up 14.5% from the previous year. Of the 5.33 Billion, issuing banks in the United States lost 3.41 billion USD. The United States accounted for 47.3 % of global card fraud losses on only 23.5% of total volume.

All industrialized countries outside of the United States have migrated magnetic stripe credit cards to EMV1 technology. EMV cards have a microprocessor chip embedded in the plastic that communicates with the POS device. It is possible to embed the EMV chips form factor on mobile phones to communicate with proximity readers. EMV cards are virtually invulnerable to tampering, duplication, etc. Banks and card brands in the United States have announced their intent to move to EMV technology, and rollout is currently underway in a phased manner. It is expected that fraud on e-commerce channels will increase after the EMV rollout in the United States as fraudsters typically attempt to exploit the weakest attack surfaces.

It must be noted that EMV technology does not impact the mechanics of the e-commerce use case. Credit card numbers will still have to be entered on websites in the same manner as they are for magnetic stripe transactions.

Alternative Payment Methods

Credit card penetration in some regions (like the European Union, for example) has been limited due to negative sentiments on the part of consumers with the use of credit payment instruments.

That notwithstanding, e-commerce growth in several of these regions has progressed, as non-card payment tenders have been adopted. Examples of alternative payment methods are

Direct Debit (Germany), Ideal (Netherlands), and Boleto (Brazil). Alternate payment systems generally have more friction in purchase paths than credit cards. This friction usually stems from more robust authentication.

Main Players in Credit Card E-commerce Payments

Consumers are issued payment instruments by their card issuers. These instruments are credit or debit cards.

Issuers are banks that provide credit or debit instruments to consumers.

Merchants are businesses that sell goods or services to consumers.

Acquirers are banks that underwrite merchants.

Brands are the associations, such as Visa, MasterCard and Discover, that maintain the network of Issuers and Acquirers. Visa and MasterCard are now public companies.

Payment Service Providers (PSPs) are entities who provide transaction and settlement services for merchants.

Costs of E-commerce Payments with Credit Cards

The costs of e-commerce payments are borne primarily by merchants. Whereas there has been regulation that precludes merchants from directly passing on credit card processing costs to consumers, one can conjecture that costs for payment processing are reflected in SKU prices.

Costs for credit card processing are broadly divided into two categories:

  • Non-negotiable costs
  • Negotiable costs

Non-negotiable costs are pass-through costs levied by the brands and collected by acquirers. These costs make up more that 85 percent of total payment acceptance costs. The largest component of the non-negotiable cost is credit card interchange. Credit card interchange varies depending upon the type of card product. For example, an airline mileage card may attract 50 basis points of additional interchange fees over a non-rewards card. Other non-negotiable fees are assessments, cross-border fees, etc.

Negotiable fees are service fees paid by merchants to gateway service providers. Merchants with smaller processing volumes may be set up by their processor to pay a single-blended fee that includes interchange and gateway service fees.

Typical Process Flow for CNP Commerce

Screen Shot 2014-11-13 at 8.45.04 AM

  1. Consumer visits merchant website and loads a shopping basket.
  2. Checkout flow captures payment information and shipping address.
  3. Merchant sends authorisation to credit card gateway for final amount with shipping and handling.
  4. Credit card gateway routes transaction to consumer’s credit card issuer and obtains authorisation.
  5. Merchant indicates to consumer that the process is completed, and goods will be shipped or available for download.
  6. Merchant sends a settlement instruction to credit card gateway, which, in turn, routes it to the issuing bank.
  7. Merchant gets paid by acquirer.
  8. Transaction shows up on customer’s billing statement.

Bitcoin Basics

Bitcoin is a software-based online payment system described by Satoshi Nakamoto in 2008 and introduced as open-source software in 2009. Bitcoin payments are recorded in a public ledger using its own unit of account which is also called bitcoin. Payments work in a peer-to-peer manner without a central repository or single administrator, which has led the US Treasury to call bitcoin a decentralized virtual currency. Although its status as a currency is disputed, media reports often refer to bitcoin as a cryptocurrency or digital currency.

Bitcoin is created as a reward for payment processing work in which users offer their computing power to verify and record payments into the public ledger. Called mining, individuals or companies engage in this activity in exchange for transaction fees and newly created bitcoin. Besides mining, bitcoin can be obtained in exchange for fiat money, products, and services. Users can send and receive bitcoin electronically for an optional transaction fee using wallet software on a personal computer, mobile device, or a web application.

E-commerce Purchase Paths Using Bitcoin

E-commerce purchase paths using bitcoin as a payment method can be developed using two basic methodologies, namely:

  1. Purchase paths using a Bitcoin processor
  2. Purchase paths made without the use of a Bitcoin processor

Bitcoin Processors

Bitcoin processors such as Coinbase and BitPay offer an abstraction layer into Bitcoin. A merchant desirous of accepting bitcoin from consumers, but at the same time desirous of being paid in fiat currency, could integrate with a service like BitPay. From the consumer’s point of view, the order flow would be exactly similar to a purchase with a credit card until the point of payment. Upon reaching the point where the payment is to be made, the website generates and displays a Bitcoin public address for the merchant. This Bitcoin address may be rendered in a QR code. Also, the order amount is converted to BTC and displayed to the consumer. The processor determines the price point to BTC conversion rate based upon industry real-time analytics. The consumer pays for the order amount using his or her Bitcoin wallet. BitPay provides the technical implementation to notify the merchant’s website when the payment has been completed as a signal to initiate delivery of the purchased goods to the consumer.

Merchants who choose to accept and hold bitcoin2 do not technically need a payment processor. In the direct integration method, the merchant creates a unique Bitcoin address for the customer’s shopping cart. The customer pays for the order total using his or her own wallet.

The merchant polls the Bitcoin network periodically to determine if the payment is completed, after which goods can be delivered.

Pain Points Solved by Bitcoin

Receipt of Funds by Merchants.

Credit Cards

With credit card payments, consumers see the funds withdrawn from their account (or credit floor reduced) immediately after the e-commerce payment has been completed. As described in the flow diagram, the merchant is paid through a settlement process that takes from one to several days. During the time that the funds are in transit, the merchant is technically forced to extend credit to her acquirer. It is likely that merchants do not enjoy the same credit on their account payable vendors.

Bitcoin

As we have seen, bitcoin payments are instantaneous3 for both parties, and there are no settlement delays involved. Thus, the funds disbursed by consumers are available immediately to the merchant.

Credit Card Chargebacks

A consumer may dispute a merchant charge within a certain window after a transaction is

completed. A dispute may arise due to non-receipt of goods or services, fraud, an incorrect amount billed, etc. The consumer’s transaction is temporarily reversed at the initiation of the dispute process. During this time, the acquiring bank “funds” the disputed amount to the consumer. Thereafter, there is a resolution process wherein the consumer and merchant present documentation to resolve the dispute. If the transaction is resolved in the consumer’s favor, the charge is reversed permanently. If resolved in the merchant’s favor, the temporary adjustment made to the consumer at the start of the dispute process is reversed.

Bitcoin

With bitcoin, there is no guarantor for transactions. No party can reverse a completed payment. From a merchant’s point of view, there is no exposure to disputes that will reverse payments.

Merchant Credit Card Acceptance Underwriting

As described earlier, a merchant desirous of accepting credit cards needs to secure a relationship with an acquiring bank. This could involve an “underwriting procedure,” as the acquiring bank guarantees payments for the merchant. Should the merchant become insolvent, it is the acquiring bank who protects the payment in the event of consumer disputes. Merchants who do not have a processing history, such as startup businesses, usually face difficulties during the underwriting process for obvious reasons.

Bitcoin

With Bitcoin there is no centralized banking institution involved. The underwriting process is eliminated completely. Also, merchants who do not have a business history can begin payment acceptance immediately.

Credit Card Security

Security with payment cards relies upon protecting the credit card payment data (16-digit credit card number) and authentication data (billing address, expiration date, cardholder verification codes, etc.).

The Payment Card Industry Data Security Standard (“PCI DSS”) was developed to encourage and enhance cardholder data security and facilitate the broad adoption of consistent data security measures globally. PCI DSS provides a baseline of technical and operational requirements designed to protect cardholder data. PCI DSS applies to all entities involved in payment card processing—including merchants, processors, acquirers, issuers, and service providers, as well as all other entities that store, process, or transmit cardholder data.

Bitcoin Security

Attack surfaces for Bitcoin are primarily at the endpoints. There is no useful information for a hacker that can obtained by observing transactions in flight. The Bitcoin protocol, in fact, relies on transaction information being public.

Since the consumer does not “deposit” symmetric payment and authentication information to the merchant, there is no way for a maleficent agent who is privy to the communication channel or to the merchant’s infrastructure to use that information to exploit the consumer at some later time.

At the merchant end, there is no need to maintain any sensitive information on front-end webservers. The infrastructure to handle the merchant’s bitcoin obtained from consumer payments can be completely delinked from the commerce website.

There have, in fact, been recent incidents where bitcoin have been stolen. It is worth emphasizing that these cases without exception involved theft at end-point infrastructure. Thus, they were not attacks on the protocol. There are various technologies (out of the scope of this article) to secure bitcoin on hardware appliances.

Caveats

Volatility

Screen Shot 2014-11-13 at 9.07.10 AM

As seen in the chart above, price fluctuations in the bitcoin to USD rate on bitcoin exchanges vary considerably over even short periods in time. We have seen bitcoin highs and lows in the range of $1,200 to $100 in the last twelve-month period. The volatility is likely due to the fact that currently bitcoin purchase is driven largely by speculation and there is no robust way of evaluating an appropriate USD to BTC rate. Also the perceived value of the cryptocurrency fluctuates with news and announcements from financial regulators on the manner in which they intend to regulate bitcoin. This volatility is not conducive to e-commerce and some stability needs to set in for mass adoption.

Consumer Protection – There are several cautionary advisories from government agencies about the risks associated with virtual currencies. It is certainly true that Bitcoin offers no protection for consumers, and it is unlikely that governmental consumer agencies will protect consumers for bitcoin purchases in the same manner as they do for regular bank instruments. That notwithstanding, from the consumer risk management point of view it brings up the question if the higher reflected sku costs associated with credit card transactions are proportional to the protection offered. If the costs of protection were offered using free principles, the costs would likely be lowered. For low value transactions over the internet, consumers may choose to embrace the risks associated with bitcoin for lower SKU price points, particularly for repeat purchases from the same merchant.

It is conceivable that trusted third parties could broker bitcoin transactions and offer consumer insurance. The Bitcoin protocol supports the contract to enforce financial agreements; Bitcoin supports contracts using the same decentralized and distributed architecture used for financial transactions. These constructs can be used to reduce the risks of dealing with unknown entities in commerce.

Legal Issues – Needless to say there are serious risks on further growth of bitcoin on account of the uncertain legal status of bitcoin as a financial tender type. Some jurisdictions have deemed bitcoin to be a commodity whereas others treat it as currency. Some countries have outlawed bitcoin altogether and treat the possession of bitcoin as a criminal activity.

At the time of writing the United States treats bitcoin as a commodity. Any agency involved in the transfer of bitcoin with fiat currencies comes under the purview of banking and money laundering laws and requires licensing in every state, thus there is a high entry bar for exchange activities. For consumers, the act of purchasing a commodity in bitcoin is a taxable event. This treatment certainly hinders wider adoption.

Regulators clearly see the bitcoin features of anonymity, decentralization and lack of a central control as detrimental to control. However, it is fair to assume that a complete ban on bitcoin would continue to take place only in totalitarian jurisdictions. In western countries, it is unlikely for governments to impose a categorical ban on bitcoin. It is more likely that tax reporting, VAT, etc. would be based on some kind of honor system. There are some successful examples of parallel currencies that are recognized as legal tenders. An example is the WIR franc developed in Switzerland in 1934 and still in use at this time.

Conclusion

Bitcoin offers a unique and powerful payment mechanism for all participants in e-commerce payments. It eliminates many of the inefficiencies present in traditional web payments. Bitcoin is not purely an academic subject anymore. Some mainstream web properties such as Expedia, Overstock.com, Dell, and WordPress have been accepting bitcoin as a form of payment. Bitcoin has an extremely low entry bar and should expect its usage to grow rapidly

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What Is Digital (Crypto) Currency-How Does It Work

Just what is electronic money? It is defined as: money saved as well as transferred in digital type. Sounds straightforward enough, but how does it all job?

This sort of currency is thought to excel to make use of for making purchases on the web considering that if it works the way it was implied to, deals ought to be instead anonymous and untraceable back to the payer or individual.

This means that hackers would certainly no more have the ability to acquire individual details from people which utilize their credit cards to make online investments. This would obviously reduce the variety of swiped identities that take place every day.

To help you realise more of, “exactly what is digital money?” I have done a fair bit of research on the subject as well as have actually discovered that there are a number of various kinds available, each with it’s very own special high qualities.

Right here are simply a couple of with their descriptions adhering to:

Digital Gold Currency– This kind is supported by gold stored in safes. The gold provides an extra action of security and if you hold this type of money, you might possibly directly exchange it for solid gold bullion.
Central Currency Equipments– these are like PayPal as well as these business enable you to send money across the globe as long as you have cash in the account. For some solutions supplied by these types of business, you obtain charged a fee on the receivers end of the purchase.

Decentralized Currency Systems– Like Bitcoin are all based upon cryptography and/or count on networks. Likewise called Hard Electronic Money, it is planned to be much more like making use of cash to make your deal however your transaction is non-refundable once made. This sort of system simply operates in one direction.

The E-cash idea has actually evolved along with the development of the Net. Folks simply do not feel comfortable with offering their individual bank card information over the Net when buying.

A lot of bad things could occur like identification theft. Nobody wants their identification taken.

So, numerous business have tried to develop this kind of repayment or financial system to lessen the threats of purchasing online.

Numerous countries have effectively created systems for “internal” usage such as Hong Kong’s Octopus card. This card works similar to a kind of debit card where the customer loads money onto the card and afterwards all the cash is transferred into a financial institution. They could then utilize the card for anything they need to use it for.

Some countries are working with or have systems that permit the customer to move money with cell phones. I believe this is rather like just what Chase lets their consumers do. Their consumers could take a picture of their check, front and also back, with their phone and make their down payment digitally.

I do wish that this offers you some concept of what is digital money and also how it is attempting to take it’s area worldwide of e-commerce. There may be a bit even more to it compared to I can explain in simply one small short article however I think you could obtain a great idea.

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Halsey Minor’s Bitreserve

Halsey Minor

Halsey Minor’s Bitreserve Is Designed To Fix Bitcoin Volatility, But It Is Doing Much More

by Ian DeMartino @ 2014-11-21 09:40 PM

When I started writing for CoinTelegraph, Bitcoin was around $800. With my modest lifestyle and three roommates, that was enough for roughly six weeks worth of rent. Today, one Bitcoin wouldn’t cover one month’s rent. Luckily for me, CoinTelegraph pays in Bitcoin but bases the amount on its current USD value, but still, if it wasn’t already obviously apparent to me, I would have quickly learned that Bitcoin was not a safe place to hold money that might be needed for rent or bills.

Writing, contrary to what some may believe, is not a lucrative career. Sure, some people get wealth and accolades from it, but most aspiring writers fail to make ends meet either because they burn out or due to a lack of motivation, discipline or talent, and end up delivering pancakes at IHOP. While the former possibility would be nice, it is rare enough that success is usually measured by simply not falling into the later.

I mention all this not to evoke the writing faux pas of starting this article talking about myself, but to simply point out that I am Halsey Minor’s target audience with Bitreserve. If I kept the majority of my savings in Bitcoin, I would be at risk of losing half of my earnings and could easily find myself in the real life hell that is “Kids Eat Free” Tuesdays at IHOP.

Bitcoin evangelicals can scream all day that “one bitcoin equals one bitcoin” and that is how we should think of it, but when one bitcoin also equals either six weeks or less than three weeks of rent, the reality stands in stark contrast to the platitude.

Halsey Minor’s Bitreserve is meant to fix that. While I think most everyone would agree that Bitcoin is a betterinvestment than the dollar, a usable currency isn’t the same thing as an investment. Any sane Bitcoin advocate will tell people not to invest what they cannot afford to lose, but that ignores the huge number of people who aren’t in a position to invest anything. If the Bitcoin community wants the masses to get on board, it has to be financially viable for them to do so.

Bitreserve has many functions. Most of them are by design, but a few of the use cases companies coming up with using the open API surprised even the Bitreserve team. The main function though, the pillar that Minor is clearly most proud of, is the ability to let people use the Bitcoin network and all the advantages that entails, without having to deal with volatility.

When you sign up for Bitreserve, you are presented with six cards, five representing one of the major currencies Bitreserve supports and one representing Bitcoin. Users can deposit Bitcoin into any of the cards and Bitreserve will hold that amount of money in their system and its connecting, transparent “ReserveChain.” Every Dollar, Euro, Yen, Yuan or Pound held by users in the Bitreserve system is backed by real fiat held by Bitreserve. If they say you have $50, they actually have $50 set aside for you, and it can be tracked on the Bitreserve system. It isn’t loaned out to another user or invested in some risky derivative like it would be at a bank.

What this means is, someone like myself can hold dollars (or euros or whatever currency I want) on the Bitcoin network. I can send that amount of dollars, regardless of fluctuations in Bitcoin’s price, at any time through the Bitcoin network. Bitreserve simply sends the Bitcoin from their own reserves, then buys it back 20-30 seconds later with the money I spent. I tested it out on a merchant that uses Coinbase as its payment processor and noticed no major difference between Bitreserve’s transaction times and my normal wallets.

Ultimately, it is about the convenience of being able to use the Bitcoin network without having to make a currency conversion every time you do it, or having to worry about Bitcoin volatility when you have a significant amount of your disposable income in it.

“When I [go] to England, I do what just about everyone does, for the vast majority of purchases, I pull out a credit card and I don’t think ‘oh gosh, I’m going to swipe this and do a foreign currency exchange’ my bank just handles it for me. I keep money in the form I want, I keep it in my home currency and everybody has a home currency.”

If the majority of people are going to start using Bitcoin, they need a way to put a significant amount of money into it without worrying about it disappearing the next day. That is the advantage of holding money in the Bitreserve system.

“[I]f I hold a thousand dollars, and my rent is a thousand dollars, I don’t have to worry about being evicted because I held a thousand dollars.”

One could say that people should only put what they can afford to lose into the Bitcoin system, but that kind of barrier to entry does not lend itself to commerce for the vast majority of the population.

“There is a certain amount of elitism [in the Bitcoin community] that I’m not sure people are even aware of, that people around the world can afford to have money in a currency that goes down in value [quickly]. I mean, if you are a working mother of three and you are trying to raise your kids and you live on a budget [you can’t afford that]. Most people actually spend more than they make, and there is a sort of thing in Bitcoin that [people feel] like ‘well, that’s your problem, who cares if it goes up and down? You should use it anyway’ and it’s not practical. People do need the money they make.”

Bitreserve was born out of Minor’s own struggles with finances and financial institutions. His financial past is well documented and there is no reason to re-hash it at length here. But the short of it is he founded C|Net, one of the first profitable publicly traded businesses on the internet. He then was an early investor in SalesForce in 1999 and soon was worth billions. Some bad investments, and two bank failures later he was bankrupt in one of the tech world’s fastest and most public richest to rags stories.

While I do not know what Minor’s day-to-day life was at the time, I don’t know how comparable his struggles were to the struggles of “normal” people trying to make ends meet, it is clear to me, even in our relatively brief hour long conversation, that his fall from grace has a lot to do with what he is trying to accomplish with Bitreserve. Undoubtedly, Bitreserve is his comeback company, but it also seems like a personal crusade for him. While there are salacious stories about art addictions and other contributing factors, it is clear that he blames at least part of his financial issues on the banks, having one fail while they are building a hotel for you will do that and so it isn’t surprising to see him use Bitcoin as the rocket ship meant to return him to grace. He made millions by capitalizing when the Internet opened up media to the world, how much can he make as Bitcoin opens up the financial world in a similar way?

More than that though, it seems that his personal struggles made him realize how important a stable financial nest egg is. How the vast majority of people out there cannot afford to have their currency drop drastically in value, even if a rebound or massive spike is promised right around the corner. That is something he may have had trouble seeing, if he still had the kind of finances that make rumors of a fine art “addiction” possible. This is something that he is acutely aware of.

“I wouldn’t wish [my financial issues] on anybody and I wouldn’t wish it on myself. But in the end, that doesn’t mean it wasn’t extraordinarily valuable to me in some way. This company and many of its innovations are both a collection of things I learned along the way and stuff that I, being ‘billionaire Halsey Minor’  would have never been able to appreciate.”

But as it turns out, Bitreserve has more functions than just letting people use the Bitcoin network without worrying about volatility. Minor clearly has no love for the banks and doesn’t want Bitreserve to become one. To that end, they created the ReserveChain and BitLedger. This allows for complete transparency for users who have their money in the Bitreserve system. Essentially, they are extensions to the Bitcoin blockchain, letting users see how much money they hold, what currencies they hold it in, when they bought it and what exchange rate they got at the time. Eventually, as the reserve outpaces the liabilities, some of it will be invested in low-risk investments like government bonds. But again, users will be able to see exactly what security was bought, how much was paid for it, when it was bought and where it is presently.

This was designed to give Bitreserve users a way to know, unlike the customers of the banks that lost untold billions, what is going on with their money and not just build trust through transparency, but make trust an obsolete construct in the financial world.

It accomplishes that. But what it also has ended up doing is open up a whole slew of tools for companies using the API to make their companies transparent as well.

“We actually have some next generation exchanges. We provide transparency for them, they are able to show that they are holding either dollars or bitcoin inside of us [. . .] [F]or the first time [we] engineered a company whose business processes can be written out in real-time.”

Which could have implications beyond just Bitreserve and Bitcoin. Minor told me that over 100 fiat currencies are coming to Bitreserve over the next year, with the first of those set to roll out “very soon” according to Bitreserve’s press representative. This would enable companies, not just cryptocurrency companies, around the world to prove their reserve in an open and transparent way to their customers and investors.

“[O]ne company [that approached Bitreserve,] their business partners wanted to know (A) the money they are putting in is safe and (B) they want transparency [. . .] Investors are using sort of the albatross of the non-bitcoin system, everyone wants to see what is going on, and we actually provide that. No bank does that. There is no bank system for transparency. As it turns out, there are all kinds of businesses that actually want to have transparency as part of their business model.”

Ultimately, Minor hopes that this transparency will be adopted by more companies and will eventually “allow different kinds of financial systems to exist” based on the technology Bitreserve provides.

“This verifiable transparency will enable different kinds of business models than [exist] today.”

In regards to its use case in the real world, as I mentioned, I am pretty much the archetype of the market Bitreserve wants to hit: The person who is interested in Bitcoin and is tech savvy enough to understand it, but lacks the financial stability to go all-in on the currency while being able to sleep at night. I have already begun using Bitreserve, and I am able to keep more money right on the periphery of the Bitcoin market by storing it in fiat in the Bitreserve site. There I can keep my “maybe for savings, maybe for spending” money in dollars where I can feel safe about it, but can easily also use it to buy things with Bitcoin (and all the advantages that brings) or quickly invest it back into Bitcoin when I am feeling more bullish on the market. If an unexpected expense comes up, I can still quickly turn it back into Bitcoin and then sell it through Coinbase and Circle and pay rent or bills with it, but in the meantime, I don’t have to worry about it losing value and losing my meager savings.

I am pretty certain that in ten years $100 will be worth less than it is today, but I am more certain that money I save for rent now will still be enough for rent at the end of the month, that can’t be said for Bitcoin. Minor wants to make Bitcoin usable for people other than speculative investors and people willing to gamble on the price. These tools do make it possible, the only question is, will the advantages of Bitcoin, other than the speculative ones, be enough to tempt customers away from traditional financial institutions? Minor thinks so.

Halsey Minor is more than just an savvy investor who hit it big in the technology world. He was a pioneer in the internet space and was one of the first people to prove it could be profitable. Entering into the Bitcoin space, he says the similarities to the early internet days are impossible to ignore. I don’t normally quote at length but his comparison is worth reading in full.

“I have to tell you, this whole bitcoin thing is deja vu all over again. Everyone said ‘oh the internet is for porn’ and ‘oh credit cards are going to get stolen.’ It was just one bad [story after another]. Even in  ’98, the stories about eBay were ‘somebody is selling their kidney on eBay.’ It was one salacious thing after another.

The eBay thing was interesting because when that went nationwide, it was the best thing that happened to them because what it says is: no matter what you want to buy, even if it is a kidney, it is available on eBay.

So this has all the same kind of unsettling beginnings where  people are drawn to [certain things]. The reality was that the first business model on the internet was porn, but that doesn’t mean the internet was designed for porn, obviously. And while people may have used Bitcoin for illegal purposes, it isn’t designed for illegal purposes anymore so than the dollar, maybe less so.

It has the same trepidation and same kind of early negativity that the internet itself had, and it shares with the internet that same sort of notion of being indestructible. [With] the internet, no one can shut it down and no one can stop you from getting on it. With Bitcoin, basically no one can shut it down and no one can stop you from getting on it. And it is that same sort of indestructible nature that means it is something that is going to stick around and is something that is worth paying attention to.”

Minor was able to navigate the treacherous waters of the early internet market and its proceeding bubble and came out on top. As this market matures, regardless of the future success or failure of Bitreserve, it is worth paying attention to what he has to say. He left me with one final thought on the Internet and what it can teach us about Bitcoin.

“Cool stuff happens and you generally want to adopt it when it does”

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What Is Digital (Crypto) Currency-How Does It Work

What is electronic currency? It is specified as: money stored as well as transferred in electronic kind. May sound simple sufficient, but how does it all work?

This kind of currency is believed to be good to utilize for making acquisitions online considering that if it functions the way it was implied to, purchases must be instead confidential as well as untraceable back to the payer or individual.

This means that hackers would certainly no longer have the ability to gather individual info from folks which utilize their bank card to make on-line purchases. This would undoubtedly reduce the variety of taken identifications that happen daily.

That can help you realise even more of, “what is electronic money?” I have actually done quite a bit of study on the subject and have found that there are several different kinds out there, each with it’s very own unique qualities.

Right here are merely a few with their descriptions complying with:

Digital Gold Money– This kind is supported by gold saved in vaults. The gold supplies an extra procedure of safety and security as well as if you hold this sort of currency, you might perhaps directly exchange it for strong gold bullion.
Central Money Units– these resemble PayPal as well as these business allow you to send out money all over the world as long as you have money in the account. For some services supplied by these types of firms, you get charged a cost on the receivers end of the purchase.

Decentralized Currency Systems– Like Bitcoin are all based on cryptography and/or trust networks. Also called Hard Electronic Money, it is meant to be a lot more like making use of cash money to make your deal however your deal is non-refundable once made. This type of system just operates in one direction.

The E-cash suggestion has developed along with the development of the Web. Individuals merely do not feel comfy with offering their personal bank card information over the Web when buying.

Too many bad points can take place like identity theft. No person wishes their identification stolen.

So, several companies have actually tried to produce this kind of settlement or financial system to lessen the risks of buying online.

Many countries have actually successfully created systems for “internal” usage such as Hong Kong’s Octopus card. This card works much like a form of debit card where the individual loads money onto the card then all the cash is deposited into a financial institution. They can then use the card for anything they have to utilize it for.

Some nations are working on or have systems that enable the customer to transfer money via cell phones. I think this is rather like exactly what Chase lets their customers do. Their clients can take a picture of their check, front as well as back, with their phone as well as make their down payment electronically.

I do hope that this gives you some concept of exactly what is digital money and exactly how it is attempting to take it’s area on the planet of e-commerce. There may be a bit additional to it compared to I could describe in merely one tiny short article yet I believe you could acquire a great idea.

    Bitcoin Hub

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What Is Digital (Crypto) Currency-How Does It Work

Just what is digital money? It is specified as: money saved as well as transferred in electronic type. Seems basic sufficient, yet just how does it all work?

This kind of currency is thought to be good to use for making acquisitions on the web because if it works the method it was suggested to, purchases should be instead confidential as well as untraceable back to the payer or customer.

This implies that cyberpunks would no longer have the ability to gather individual details from individuals that utilize their charge card to make online investments. This would obviously minimize the number of taken identifications that take place on a daily basis.

To assist you understand even more of, “exactly what is electronic money?” I have done quite a bit of study on the subject and have actually discovered that there are a number of different kinds available, each with it’s very own one-of-a-kind qualities.

Right here are simply a couple of with their descriptions adhering to:

Digital Gold Currency– This kind is backed by gold saved in vaults. The gold supplies an additional measure of security and also if you hold this kind of money, you could possibly straight trade it for strong gold bullion.
Centralized Currency Systems– these are like PayPal and these companies permit you to send money all over the globe as long as you have cash in the account. For some solutions offered by these sorts of business, you obtain billed a cost on the receivers end of the transaction.

Decentralized Currency Units– Like Bitcoin are all based on cryptography and/or depend on networks. Likewise called Hard Electronic Money, it is planned to be a lot more like making use of money to make your deal yet your deal is non-refundable as soon as made. This type of system simply works in one direction.

The E-cash idea has evolved in addition to the progression of the Net. Folks merely do not feel comfortable with providing their personal charge card info over the Internet when purchasing.

Way too many bad points can take place like identity theft. No one wishes their identity swiped.

So, several companies have actually tried to create this sort of payment or monetary system to reduce the threats of shopping online.

Numerous nations have actually efficiently created systems for “internal” use such as Hong Kong’s Octopus card. This card functions just like a form of debit card where the individual lots money onto the card and then all the money is deposited right into a financial institution. They could then make use of the card for anything they have to utilize it for.

Some nations are working with or have systems that allow the customer to transfer cash via mobile devices. I think this is rather like just what Chase permits their consumers do. Their consumers can take a photo of their check, front as well as back, with their phone as well as make their down payment online.

I do hope that this offers you some suggestion of exactly what is digital money as well as how it is attempting to take it’s location around the world of e-commerce. There may be a bit more to it than I could possibly explain in just one small write-up yet I think you could acquire a great idea.

    Bitcoin Hub

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What Is Digital (Crypto) Currency-How Does It Work

Exactly what is digital currency? It is defined as: money stored as well as moved in electronic kind. May sound simple sufficient, however how does it all job?

This type of money is thought to be good to utilize for making investments on the web because if it works the means it was implied to, transactions ought to be instead confidential as well as untraceable back to the payer or user.

This implies that hackers would certainly no more manage to compile personal info from people that use their bank card to make on-line acquisitions. This would obviously lower the variety of taken identities that take place each day.

To assist you realise even more of, “just what is digital currency?” I have actually done quite a bit of research on the subject as well as have actually found that there are a number of different kinds out there, each with it’s very own special qualities.

Right here are merely a few with their descriptions following:

Digital Gold Currency– This type is supported by gold stored in safes. The gold offers an extra procedure of safety and if you hold this sort of currency, you could possibly directly exchange it for solid gold bullion.
Central Currency Systems– these are like PayPal and also these companies enable you to send cash throughout the globe as long as you have cash in the account. For some solutions provided by these types of firms, you get charged a charge on the receivers end of the deal.

Decentralized Currency Equipments– Like Bitcoin are all based on cryptography and/or count on networks. Likewise called Hard Electronic Money, it is meant to be a lot more like making use of cash money to make your purchase however your transaction is non-refundable once made. This type of system simply works in one instructions.

The E-cash idea has evolved along with the progression of the Net. People just do not really feel comfortable with providing their individual charge card info over the Web when buying.

Way too many bad things can occur like identification theft. Nobody wishes their identification taken.

So, several firms have attempted to create this kind of repayment or monetary system to lessen the dangers of shopping online.

Lots of nations have actually efficiently developed systems for “internal” usage such as Hong Kong’s Octopus card. This card functions much like a kind of debit card where the individual tons cash into the card then all the cash is transferred into a bank. They could then utilize the card for anything they should use it for.

Some nations are working on or have systems that enable the individual to move money via cell phones. I assume this is rather like just what Chase permits their clients do. Their clients can take a picture of their check, front and back, with their phone and also make their down payment online.

I do hope that this offers you some idea of just what is digital money as well as just how it is attempting to take it’s area in the world of e-commerce. There could be a little additional to it than I could possibly explain in just one tiny post yet I believe you can obtain a good idea.

    Bitcoin Hub

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What Is Digital (Crypto) Currency-How Does It Work

Just what is digital money? It is specified as: cash kept as well as moved in digital type. Sounds straightforward enough, however exactly how does it all work?

This type of money is believed to be good to make use of for making acquisitions on the internet considering that if it works the way it was suggested to, deals need to be instead confidential as well as untraceable back to the payer or individual.

This implies that cyberpunks would certainly no longer have the ability to collect personal details from individuals who use their bank card to make on-line purchases. This would obviously reduce the variety of taken identities that happen everyday.

To help you recognize even more of, “just what is digital money?” I have actually done a fair bit of research on the subject and have found that there are numerous different kinds out there, each with it’s very own distinct high qualities.

Below are simply a few with their descriptions adhering to:

Digital Gold Money– This type is backed by gold saved in safes. The gold provides an added procedure of security and also if you hold this sort of currency, you can potentially straight trade it for strong gold bullion.
Central Money Units– these are like PayPal and these companies enable you to send out cash all over the globe as long as you have money in the account. For some services supplied by these types of firms, you obtain asked for a cost on the receivers end of the purchase.

Decentralized Money Systems– Like Bitcoin are all based upon cryptography and/or count on networks. Additionally called Hard Electronic Currency, it is intended to be much more like making use of cash money to make your transaction however your purchase is non-refundable as soon as made. This type of system simply works in one instructions.

The E-cash suggestion has actually progressed in addition to the evolution of the Internet. Individuals just do not feel comfortable with giving their individual bank card details over the Internet when buying.

Too many bad things could happen like identity burglary. No one desires their identity swiped.

So, lots of business have actually tried to create this kind of repayment or financial system to reduce the threats of purchasing online.

Several countries have actually successfully created systems for “internal” use such as Hong Kong’s Octopus card. This card functions just like a form of debit card where the user loads cash onto the card then all the cash is transferred into a banking. They can then make use of the card for anything they need to utilize it for.

Some countries are working on or have systems that enable the user to move cash via cell phones. I assume this is rather like just what Chase permits their customers do. Their consumers could take an image of their check, front as well as back, with their phone as well as make their deposit online.

I do wish that this provides you some concept of what is electronic currency as well as just how it is attempting to take it’s place worldwide of e-commerce. There might be a little more to it compared to I might explain in simply one small post however I think you could obtain a great idea.

    Bitcoin Hub

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What’s Next for Bitcoin Wallet Security?

What’s Next for Bitcoin Wallet Security?

 (@dannybradbury) |

bitcoin wallet security

Times have been busy in the bitcoin wallet world lately. Two hardware wallets – Trezor and BTChip – have finally shipped, and wallet security continues to mature.

In spite of all this, though, people who should know better are still being robbed because they fail to add more protection to their bitcoin holdings.

To tackle the issue of bitcoin wallet vulnerabilities, it’s important to look at the security protections that are currently available for wallets, and to explore what work still needs to be done in the future.

Multisig

2014 was to be the year of multiple signatures (multisig), according to Gavin Andresen in his 2014 State of Bitcoin speech, and there has been a lot of activity on this front. Multisig allows wallet owners increased security by requiring that a third party sign off on transactions before they’re finalized.

This paves the way for third party risk services, said Gary Rowe, CEO of popular bitcoin walletMultibit:

“If you are buying a £10,000 car or something like that with bitcoin, people might send a text to confirm that transaction.”

Multibit is based on Bitcoinj, a Java-based implementation of bitcoin. Bitcoinj now has multisig support built-in, along with pluggable transaction signers. But neither Multibit nor Hive, both of which are based on Bitcoinj, currently support multisig at the time of writing.

Other wallets, such as BitGo and Armory, which are focused more on enterprise users, have built in multisig support.

But we shouldn’t pin all of our security hopes on multisig wallets.

“Not everyone will buy into them as being part of the decentralised ethos of bitcoin, so they can’t be relied upon as being the only solution to the problem,” said Rowe, who added that multisig wallets are also more complex to use than deterministic wallets.

Deterministic wallets

Early bitcoin wallets generated addresses randomly. Bitcoin addresses aren’t supposed to be reused, which means that when used properly, there should be many addresses in a single wallet. This makes it difficult to recover those addresses if they are lost.

Deterministic wallets create addresses using a simple multi-word phrase, randomly created by the user. The phrase will also create the same set of addresses.

All of this makes it easier to solve the backup problem, said Aaron Vosine, creator of iOS-basedBreadwallet:

“If a wallet is deterministic then your wallet seed is all you need. This seed should be recorded offline as with a long password, or on a secure hardware device locked with an easy to remember pin code.”

Now, hierarchical deterministic (HD) wallets are adding another dimension. They create ‘trees’ of addresses using a seed phrase. Any branch of the tree can be shared with another user, without giving away the whole tree. That makes HD wallets easily exchangeable with others without compromising privacy, and easily replicable.

These are all great developments, but perhaps one of the biggest evolutions this year has been the rise of the hardware wallet. Bitcoinj project leader Mike Hearn lauded the shipment of Trezor:

“It’s worth repeating this – there is no more sophisticated financial authenticator device in the world, as far as I’m aware. The standard used by banks in the EU and elsewhere (CAP) isn’t as easy to use, and once Trezor integrates support for the payment protocol, it will be more secure than CAP too. US banks don’t even get close.”

Other wallets are rapidly rolling out support for hardware wallets. Multibit’s Trezor integration should be live in a couple of weeks, said Rowe.

Video thumbnail for vimeo video Trezor now taking pre-orders for its hardware Bitcoin wallet
Trezor hardware wallet

Room for improvement

In spite of the strides made this year, there are still significant challenges for wallets.

One of the biggest concerns is malware, said Breadwallet’s Vosine. The threat from malware is only likely to increase, and Android has been a hotbed of malware activity.

Vosine explained:

“I feel strongly that bitcoin-stealing malware is the biggest threat right now, especially for desktop wallets. A not-insignificant portion of the malware being discovered now is bitcoin stealing malware, and yet bitcoin is still very small.”

This is another reason to move into hardware wallets, commentators said, but hardware, too, has room for improvement.

Thomas Voegtlin, who created popular bitcoin wallet Electrum, said that he already has support for Trezor, and that BTChip integration is coming soon. The stage is set for the next evolutionary step in hardware wallets, he suggested:

“Hardware wallets are a great advancement over web and desktop wallets, however the current generation still has to trust a host system for block chain data and payment addresses. It will be great once hardware wallets can run SPV verification and payment protocol validation on the secure device.”

Nicholas Bacca, creator of BTChip, has created a smartcard wallet which he said cannot be easily recovered by an attacker gaining physical access to the chip.

Bacca said he expects to see virtualisation play a part in the future:

“Look for more hardware wallets implemented in secure elements, and having hardware wallets virtualized into secure environements such as TEEs [Trusted Execution Environments], however I don’t believe this virtualization will be available or portable before 2–3 years.”

The use of TEEs and the associated Trusted Platform Modules (TPMs) – both of which provide protected hardware areas for the execution of sensitive code – could end up negating the need for hardware wallets, argued Wendell Davis, founder of Hive Wallet:

“I imagine mobile phones will have a kind of TPM at some point, so that could be the nail in the hardware wallet’s proverbial coffin.”

People also want to carry around fewer devices, rather than more, he asserted, adding that they tend to opt for less secure but more convenient options.

Biometrics

Phone companies are already trying to marry security and convenience, in the form of biometrics; Breadwallet will soon have support for Apple’s TouchID, Vosine said.

Multibit’s Rowe isn’t a big fan of biometrics. He said he worries that fingerprints, voice recognition and even iris scans can be compromised. In any case, the accuracy rate isn’t perfect, he warned, which makes it difficult for widespread adoption.

Vosine, on the other hand, is putting a limit pin code on the phone to avoid people copying fingerprints and hacking a phone. Hearn has also considered using an NFC ‘badge’ that someone can wear in their pocket to help verify the phone that they’re using.

As all of these security measures make their way into wallets in one form or another, where does this leave Bitcoin-Qt, the reference wallet created by the core developers? In the past, Bitcoin’s lead developer has indicated that Bitcoin-Qt would be spun off from the core project.

It may be significant that recent releases of the bitcoin daemon – the underlying bitcoin code that keeps the network running – can now be compiled without bitcoin functionality at all.

The delta between the reference implementation and other wallets in the field is growing, warned Hearn:

“Bitcoin-Qt still isn’t even HD, let alone pluggable multisig HD, so I think we’ll see this wallet fall further and further behind.”

Usability

Atop all of this, we still have the usability problem to contend with. There’s always a tradeoff between security and convenience, and the same is true with secure wallets, Hearn warned:

“For instance Bitcoin Authenticator is pretty straightforward, but you still have to scan a QR code from your phone, write down a couple of 12-word wallet seeds, and so on. It can be made simpler but this is an ongoing challenge.”

One of the biggest problems, according to Hive Wallet’s Davis, is that people still fail to follow even basic security guidelines with wallets.

“We know that an absolutely appalling number of users simply ignore the two lines of instructions about writing down their seed phrase. They just breeze forward and ignore the warning, marked in red,” Davis explained.

Bitcoin wallets are more secure than ever before, and in many cases, already far more secure than the banking industry’s arcane credit card system, in which you give merchants your name, credit card details, and even your secret code – and often over the Internet.

Nevertheless, there is more work to be done. The tools can be improved, yes – there is always another technical trick to add. But at this point, when technical security is outpacing that in conventional financial industry, it may be user behaviour that needs enhancing.

Bitcoin security image via CoinDesk

 

What’s Next for Bitcoin Wallet Security?

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What Is Digital (Crypto) Currency-How Does It Work

Exactly what is electronic currency? It is defined as: money saved and moved in digital kind. Sounds straightforward sufficient, yet just how does it all job?

This type of money is thought to excel to make use of for making purchases online considering that if it functions the way it was indicated to, deals ought to be rather confidential and untraceable back to the payer or individual.

This indicates that hackers would certainly not have the ability to acquire individual information from folks who use their bank card to make online purchases. This would clearly lower the number of swiped identities that occur daily.

To assist you comprehend even more of, “what is electronic money?” I have done quite a bit of study on the subject as well as have actually located that there are many different types around, each with it’s very own special top qualities.

Here are merely a couple of with their descriptions following:

Digital Gold Currency– This kind is supported by gold kept in vaults. The gold offers an extra step of protection and if you hold this type of money, you can perhaps directly exchange it for strong gold bullion.
Centralized Money Units– these resemble PayPal and these companies permit you to send cash throughout the world as long as you have cash in the account. For some services offered by these sorts of companies, you get billed a charge on the receivers end of the purchase.

Decentralized Money Systems– Like Bitcoin are all based upon cryptography and/or rely on networks. Likewise called Hard Electronic Money, it is planned to be much more like making use of cash money to make your transaction yet your purchase is non-refundable as soon as made. This sort of system only works in one instructions.

The E-cash idea has actually evolved together with the advancement of the Web. Folks simply do not really feel comfortable with offering their personal bank card info over the Web when making a purchase.

Too many bad factors could happen like identity burglary. No one desires their identity stolen.

So, numerous companies have attempted to develop this kind of payment or financial system to minimize the threats of buying online.

Several countries have efficiently produced systems for “in-house” usage such as Hong Kong’s Octopus card. This card functions similar to a form of debit card where the user lots cash onto the card and then all the money is transferred right into a banking. They could then use the card for anything they should utilize it for.

Some nations are dealing with or have systems that enable the customer to move cash via mobile devices. I believe this is somewhat like what Chase lets their clients do. Their consumers could take a photo of their check, front and also back, with their phone as well as make their down payment digitally.

I do really hope that this offers you some suggestion of just what is digital currency as well as just how it is attempting to take it’s location around the world of e-commerce. There could be a little even more to it compared to I could possibly describe in simply one tiny post yet I think you could get a great idea.

    Bitcoin Hub

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