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    Categories: General

    Darkcoin's Approach to Anonymity is Truly Trustless and Opens Endless Possibilities

    July 27th, 2014 by fernando
    Darkcoin is best known for being the first cryptocurrency focused exclusively on anonymity and privacy. What is less understood is how these features are implemented as well as how they open many exciting possibilities.
     
    In order to achieve anonymity, Darkcoin has successfully implemented master nodes. They are both innovative and necessary to achieve the privacy that Darkcoin promises.


    What are master nodes?

    Simply put, master nodes are servers connected to the network that perform certain tasks hand in hand with DarkSend (Darkcoin's anonymity feature) and they get paid for it. This concept is called proof-of-service.
     
    Anyone can run a master node. The objective is decentralization: to have enough running so no one controls an important fraction of masternodes. However, to avoid bloating the network and to discourage reckless operators, there is one condition that needs to be fulfilled: proof-of-ownership of 1000 Darkcoins. The coins don't need to be in the master node, but they do need to be held. If the owner moves or spends those coins, the master node stops working.
     
    Master nodes get paid by the network for the services they provide. Twenty percet of the each new block's reward goes to pay the master nodes. Each reward is paid to one maste rnode randomly selected, so in the long term all master nodes should receive a similar amount of rewards.
     
    In the current release of Darkcoin (RC3), two master nodes mix the coins of the transactions that users send choosing to be anonymous. However, in a couple of weeks, a new release of the software (RC4) will be launched and their role will change.
     
    In RC4, master nodes will anonymize the Darkcoins users have in their wallets at preset intervals. This way, when they want to send them to somebody, they will already be anonymous and the transaction won't be tracable by third parties. Additionally, transactions will be much faster than otherwise.  That is, if the coins had to be mixed/anonymized at the moment of the transaction.
     
    Up to eight master nodes will be involved in the process of anonymizing the coins of a given user.  It wil be a completly trustless system because the risk of someone controlling all involved master nodes is negligible. Hypotheically, with 700 master nodes (slightly less than the current existing number) there is a one in 1.3 trillion chance of someone with the needed twenty-five master nodes (costing $160,000 at today's prices) controling the eight involved nodes necesary to trace the transaction. Even more reassuring is the fact that the Darkcoins are never at risk, even if there are rogue master nodes.  Because, the Darkcoins never leave the user's wallet.
     

    What master nodes mean for the future

     
    Having so many servers with the full blockchain and working for the coin can be extremely useful. Thanks to the reward system, there is no risk of not having enough masternodes.  So, the developers can rely on them for any new decentralized feature they want to implement. This is huge. Because, the developer can depend confidently on a thousand distributed servers working 24/7.


    One doesn't need a big imagination to speculate, as others have, about other great ideas such as light wallets that still rely on master nodesblockchains, messaging services, as well as distributed storage. Only time will tell!
     
    Disclaimer: I own a significant number of Darkcoins and I am quite involved with the Darkcoin community. But, I view Darkcoin with a critical eye because my money is at stake. 
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  • 40 Comments
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    Categories: General, Columns

    In-depth Review: BitPesa

    July 27th, 2014 by William
    Last week I reported on two Bitcoin startups in Africa that are working to cash in on the remittance business: Kenya-based BitPesa and Ghana-based Kitiwa. These startups are working to leverage Bitcoin’s low transaction fees to reduce the cost of sending money across international borders.

    In this week’s column, I give a detailed review of BitPesa, based on four test transactions. My tests reveal that BitPesa is indeed a convenient, comparatively low-cost way of remitting money to Kenya.

    I found that the total fees for using BitPesa are slightly higher than the advertised 3%. However, BitPesa is still more economical than other options like Western Union. Moreover, BitPesa enables micro remittances, which are not currently practical through established money transfer services.


    What is BitPesa?

    BitPesa is a remittance service based in Kenya that allows users to exchange Bitcoin for Kenyan Shillings that are sent directly to a recipient’s mobile money account.

    Mobile money is a growing phenomena in Africa and around the world. People deposit money into an account associated with their cellphone number, then use their phones to buy things in shops, to send money to other mobile money accounts, or to cash out into paper currency.

    Kenya’s Safaricom owns the M-Pesa service, which is at the vanguard of the mobile money movement. Almost every adult in Kenya owns an M-Pesa account, and a third of the country’s GDP passes through the system. Users are assessed fees when transferring money between accounts and when exchanging mobile money for cash. These fees make mobile money a lucrative business, and Safaricom is now East Africa’s most profitable company.

    BitPesa, which works seamlessly with M-Pesa and competing mobile money platforms, allows people outside of Kenya to upload BitCoin and specify a Kenyan phone number to electronically receive Shillings in return. As stated, BitPesa advertises a 3% fee for this service.

    Not Available in All Markets

    I initially attempted to test BitPesa from my home in New York City. However, the system blocked me from creating an account, likely due to the United States' stringent money transfer laws.

    Currently I am traveling in England, where I successfully opened a BitPesa account and completed four test transactions.  

    Account Registration

    The registration process for BitPesa is trivial, requiring only a name, email address, mailing address and date of birth. Users must also check a box that permits BitPesa to confirm their identity information.

    Transactions

    After registering, users are asked to input the quantity of Pound Sterling (£) that they would like to remit to Kenya. This sum is immediately translated into the quantity of Kenyan Shillings (KSH) that will be received and the amount of Bitcoin (BTC) that is required to process the transaction.

    The user then specifies a person to receive the money by inputing their name, email address and mobile money phone number.

    A Bitcoin address is subsequently generated and a 10 minute countdown timer is initiated. The user must deposit the indicated amount of Bitcoin to the specified address in order to complete the transaction.

    In all of my test transactions, the recipients’ mobile money accounts were credited after one confirmation on the BitCoin network, which took between 2 and 15 minutes.

    Identification Required for Subsequent Transactions

    After the first transaction, BitPesa will not work until the user uploads a government-issued identity document.

    Fees and Exchange Rates

    I completed four test transactions in the amounts of £1, £2, £5 and £6. The table below details each of these transactions:

    Amount sent Amount received Bitcoin used
    £1 KSH 145 .00283
    £2 KSH 289 .00566
    £5 KSH 723 .01416
    £6 KSH 868 .01699

    At the time of testing, the market exchange rate for Bitcoin was 1 BTC = £353.73. The following table shows that this is roughly the same exchange rate that BitPesa used in calculating the Bitcoin required for each transaction:

    Amount sent (£)

    Bitcoin used (BTC)

    BitPesa's exchange rate (£/BTC)

    Market exchange rate at time of transaction (£/BTC)

    Difference

    1  0.00283  353.36  353.73  -0.37
    2  0.00565  353.98  353.73  0.25
    5  0.01412  354.11  353.73  0.38
    6  0.01695  353.98  353.73  0.25


    At the time of testing, the market exchange rate for Kenyan Shillings was £1 = KSH 149.23. The table below illustrates that BitPesa’s fees were indeed approximately 3%:

    Amount sent (£)

    Amount received (KSH)

    BitPesa's exchange rate (KSH/£)

    Market exchange rate (KSH/£)

    BitPesa's fee*

    1 144 144.00 149.14 3.45%
    2 289 144.50 149.14 3.11%
    5 723 144.60 149.14 3.04%
    6 868 144.67 149.14 3.00%
         

    *(Market Rate – BitPesa's Rate)/Market Rate, expressed as percentage



    It should be noted that the above calculations do not include the costs of purchasing BitCoin. I buy Bitcoin in the United States, on a low cost exchange, for a 1% fee plus $0.15. This increases the total transaction cost to about 4% from BitPesa’s advertised 3%.

    Not everyone desiring to send money to Kenya will be able to access low-cost exchanges. Immigrants who are undocumented or do not have bank accounts will likely have to purchase their Bitcoin with cash, at up to 10% above the market rate.

    Additionally, the above calculations do not include Bitcoin miners’ fees paid to transfer Bitcoin from a user’s wallet to BitPesa’s site. For each of the above test transactions, I paid a negligible .0001 BTC ($0.06) using my Mycelium smartphone wallet.

    Finally, receivers in Kenya must pay additional fees to Safaricom to withdraw cash from the M-Pesa network or to send money to another M-Pesa user. In the above £5 (KSH 723) transaction, the receiver would pay KSH 33 (4.5%) to send to another M-Pesa account or KSH 27 (3.7%) to withdraw cash.

    Not all M-Pesa transactions accrue fees, however. Buying airtime on the Safaricom network is free, as are transactions within Kenya’s mushrooming network of M-Pesa merchants. For instance, the recipient of my test transactions uses M-Pesa to buy gasoline and does not pay transaction fees to do so.

    Comparison with Existing Methods of Money Transfer

    Western Union is one of the world’s most well-established money transfer companies. In the United Kingdom, Western Union allows people to send money online, from their bank account to a Kenyan mobile money account like M-Pesa. The chart below uses Western Union’s fee calculator to determine the effective exchange rate for various remittance amounts:

    Amount sent (£)

    Western Union transfer fee (£)

    Total used (£)

    Amount received (KSH)

    Effective exchange rate (KSH/£)*

    2 2 4 295.24 73.81
    5 2 7 738.27 105.47
    10 2 12 1476.2 123.02
    50 4.9 54.9 7380.98 134.44
    100 4.9 104.9 14761.96 140.72
    500 19.9 519.9 73809.82 141.97
            *higher is better

     

    Compare this to BitPesa’s effective exchange rates in the table below:

    Amount sent (£)

    1% Bitcoin purchase fee (£)

    Total used (£)

    Amount received (KSH)

    Effective exchange rate (KSH/£)

    2 0.02 2.02 289 143.07
    5 0.05 5.05 723 143.17
    10 0.10 10.10 1447 143.27
    50 0.50 50.50 7235 143.27
    100 1.00 101.00 14470 143.27
    500 5.00 505.00 72349 143.27

    This comparison reveals that BitPesa yields a better exchange rate in all cases. Importantly, savings are particularly pronounced for small transactions. These “micro-remittances” in the range of £2 - £10 ($4 - $20) are impractical via established money transfer companies like Western Union.

    Conclusions

    BitPesa—one of Africa’s first Bitcoin startups—could make waves in the international remittance market. In addition to offering competitive exchange rates across the board, BitPesa also enables micro remittances. This may be the company’s strongest selling point for Kenyans living abroad, who often encounter situations where they wish to quickly send home small sums. BitPesa thus destabilizes the prevailing business model for money transfer services where smaller remittances accrue far higher fees than larger remittances, as illustrated in the Western Union table above. 

    BitPesa is also appealing in its convenience. Using the service is almost effortless once a person is comfortable with buying BitCoin and transferring it between wallets. BitPesa thus allows users to send money from their laptops or smartphones, eliminating the frustration of standing in long queues at brick-and-mortar money transfer outlets.

    There are drawbacks to using BitPesa, however. For instance, the service is not available in the United States, which will undoubtedly frustrate a number of potential users there.

    The extreme volatility of Bitcoin is a second potential drawback. Users who purchase Bitcoin and do not immediately send it might find that the value of their Bitcoin decreases (or increases) drastically in a matter of days or hours. Receivers are not directly affected by this volatility, however, because BitPesa converts Bitcoin into Shillings as soon as it enters the platform. In fact, receivers do not need to know anything at all about Bitcoin, or even that it was used in the transaction.

    In sum, BitPesa appears poised to disrupt the international remittance market by offering competitive fees, by enabling micro remittances, and by offering users a convenient way of sending money. It is an up-and-coming company to watch in Africa's fledgling Bitcoin ecosystem.

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  • 28 Comments
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    Categories: General, LTB News

    LTB Community Roundup #2

    July 26th, 2014 by MikeJohnson
    (original copy below)
    Let's take a quick look at what has been happening in the Let's Talk Bitcoin community since the last time we spoke.

    CryptoConrad asked if people are living entirely off of cryptocurrencies as he will be leaving his traditional career soon. Several people have come in to the thread and a great discussion is now underway regarding the feasability of living entirely off cryptocurrency.

    loon3 has been thinking about a LTBc Football Fantasy League that seems to be gaining some significant steam. If you are a fan of the NFL or fantasy sports you might want to drop in and check it out.

    In Episode 129 of Let's Talk Bitcoin Adam spent a few minutes at the beginning to discuss Dogeparty a new Counterwallet type system built on DOGE which has lead to a discssion regarding proof of burn versus proof of charity. Listen to the first few minutes of that episode if you haven't already and then head over to this thread and chime in with your thoughts.

    Ecuador has made moves regarding a Bitcoin ban and I'm fully expecting to see some lively discussion in a thread created by Chain Radio regarding this. Ecuador is exploring a county issued cryptocurrency. I'm curious to see what other community members think of this so head over here and chime in.

    Would you consider a "premium" version of Let's Talk Bitcoin if it contained benefits such as audio articles for commuters and other features? Adam is asking over in this thread and the discussion and is alive. Be sure to leave your thoughts.

    What is your favorite alternative currency? This thread has a lively discussion going regarding the various merrits of various cryptocurrencies. This thread has seen a lot of action as lots of people chime in regarding the various cryptocurrencies and I am fully expecting it to grow even larger as new currencies are created every single day.

    Etherium recently opened a crowd sale to the public and William is asking the community for what they think about Etherium and if they are taking part in the crowdsale. Are you taking part in the sale or staying away?

    Cryptonaut took a few minutes recently to announce the new Let's Talk Bitcoin referal program. Check out this thread for the details. You can now earn even more LTBC for sending people to the community!

    The Let's Talk Bitcoin countinues to grow with new members joining each day, great discussion threads cropping up all over the place and things are only going to get better. If you are still on the fence about joining and reading this post be sure to hop right in because you'll be getting in on the ground floor of an ever-growing community. Read More
  • 42 Comments
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  • 43 Comments
    2,469 views
    Categories: General, Breaking News

    Lawsky Aims a BitLicense Missile at Bitcoin

    July 25th, 2014 by thinking
    Why NY’s Lawsky hopes to kill off Bitcoin and how he’s asking the crypto community to give him a hand.

    Backup (editting by dhimmel):


    Enter Benjamin Lawsky, reaching out to the Bitcoin community and showing he is a man of the people.

    I suggest otherwise at best a politician at worst a wolf dressed in sheep’s clothing.

    Bitcoin is Lawsky’s dream ticket to acceptance by the banking elite, as a New Yorker for many years and having witnessed the division between wealth and public office it has been clear to me since the outset that Lawsky would use the promise of reigning in of Bitcoin to further his financial relationships.

    Maybe ask yourselves with whom did he spend more time discussing the importance of Bitcoin, Jamie Dimon or Marc Andreessen, Jim Gorman or Fred Wilson?

    It’s imperative that everyone takes a deep breath and calms down, this is not the end of Bitcoin or the decentralised movement but it will be shaken more than needed if anyone buys that he has any interest in cultivating innovation and change.

    Lawsky’s proposal has made it ‘very clear’ that folks this is war. A David and Goliath war, decentralised logic versus the centralised behemoths from whom he seeks approval.

    Let’s look more closely at his plan, a plan I suggest that has been carefully hatched in accordance with the bankers he seeks to protect. A plan that is designed to attract support from non-thinking states and countries to mimic his lead and to contain the spread and ultimately the dismissal of digital money.

    Firstly his plan depends on NYC’s global influence over financial markets; whilst that seems obvious I suggest he won’t even get domestic buy in.

    Sure he will get some states to agree but what about California, how can he expect Californians to agree to a bill that would make participation in innovation conditional on regulatory inspection of purpose. Such suggestions ‘might’ work in NYC and Omaha but not in States where innovation is valued.

    Then look at the other financial capitals that will supposedly follow suit, London and Singapore have shown leadership in respect to Bitcoin why would they act to stop it in its tracks, are we now going  to see trade leverage used to ensure compliance with US leadership simply to protect the banks that led us to the abyss?

    Don’t get me wrong regulation is good, transaction identification is essential but having to register to pass Bitcoin to your friends or developing software that may never even be used? This wreaks of McCarthyism, it’s not hard to imagine Senate hearings where Crypto not Pinko is bestowed upon the technically gifted, where they are vilified for their association with financial innovation.

    Prohibition has never worked and has always led to enforcement costs that far outweigh the benefits, only a fool thinks he can contain cross boarder development, when they cannot contain shipment of illicit substances from a known point of production.

    This alone points to the obvious futility of the Bitlicense as a deterrent and highlights a more Machiavellian objective. Consider if you will how his ignorance draws you in, in your desire to point out his mistakes and to help craft refinements whilst in return, seeking changes that will never come.

    Ignorance or lack of interest is further displayed when you see mention of identity inclusion but with no thought given to how it should be included and what will be done with it once it is. Again another superficial attempt to address a legitimate issue and one that displays the lack of interest in a subject and rather how it might be used to gain assistance in defining robust incarceration.

    The essence of the argument against Lawsky’s bill is the apparent lack of thought into how these things might work and why they are important, rather it seems he has simply thrown thoughts over the fence in order to appear active when in fact he wants the industry to help him define a bill that is specifically designed to undermine the existence of decentralised technologies.

    Consider carefully any support you offer to guide this bill, as acceptance by Lawsky will be minimal and ultimately he will only use it to refine a casket for digital money, offer him NO assistance and he has nothing, a bill that cannot be enforced because it makes no sense and a challenge to refine it as he simply doesn’t understand the subject.

    Leave him to his own devices as he will make mistake after mistake as the technology and the challenge is beyond him and anyone not devoted to the task.

    By ignoring his cry for input we buy time for Bitcoin and digital money to further embed it’s way into our lives, help him and you accelerate his desire to kill of a nascent industry that is fundamental to future financial efficiencies.

    We should also look carefully at ourselves and what is driving the desire for change, we see everyone rallying around the call for decentralised services to marginalise the banks but tied to that cry is a radical desire to poke the beast.

    This last part is just plain stupid as it undermines the importance of the real message, that being the fundamental need to streamline the financial and commercial markets so citizens and businesses enjoy the savings and convenience of P2P transactions.

    Allowing emotive crusades to corrupt the success of these essential objectives is naive and counterproductive, ask Charlie Shrem deep down he knows he was an idiot to goad ‘the man’ and he’s now paying the price.

    So let’s see what lies ahead, firstly open source projects will officially move offshore yet developers won’t leave their desks, overseas deployment services will emerge to enable anonymous deployment of future initiatives, smart governments will encourage this as they will also offer incentives for developers to relocate so they might enjoy the freedom they deserve, sure the US will try to reach out and restrict development by US citizens overseas but how?

    Back in the US, project developers will be given open-source tasks that will not result directly in currencies but rather be innocuous components that if used a certain way might benefit currencies but then again might not.

    Digital friendly financial centres will spring up all over the world all competing for exchanges, developers and  innovation and in another 5 years, as it won’t take long for the foundations of discontent to be established, Lawsky will realise that he was personally responsible for throwing New York City under the bus having sacrificed potential leadership in the new economy and with it jobs and opportunities and all for no avail.

    Lastly I’d like to address the issue of anonymity, this is the scourge that allows Lawsky and people like him the evidence required to persecute Bitcoin and its derivatives.

    No matter your need for freedom it will never and can never be allowed to justify the financing of terrorism, slavery, extortion, pedophilia and other crimes that undermine society and to that end the crypto-community need to pull their head in and focus their attention to changing the narrative from anonymity to privacy.

    It is fundamental that we pay due respect to the obligation we have to not only protect society from corporate scum bags but also against crimes that destroy families and the innocence of children.

    For Lawsky I’d suggest no matter what you do anonymous transactions are here to stay but if you show a willingness to work with the development community towards a decentralised world you will be able to craft laws and technology that will limit its impact.

    Lastly beware the Silbert, Circle and other big players that have defined their commitment to Bitcoin and see alternatives (alt-coins) as distracting, they love Bitlicense as it allows them to cement an exclusive position.

    ThinkingActive

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  • 41 Comments
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    Categories: General, Fiction

    Doctor, doctor, I'm addicted to Bitcoin!

    July 25th, 2014 by Spengler
    (Backup below) (FYI links checked and/or corrected as necessary in content)

    Patient: Doctor, doctor, I'm addicted to Bitcoin! When I wake up, the first thing I do is shout, "BITCOIN AHOY!".

    I get in the shower and have to sing Ode to Satoshi really loudly until a passer-by throws a rock through my window (I guess so they can hear me better).

    Then I get dressed, smelling my socks which I bought with Bitcoin as I do so. I love to darn those socks - at least 27% of the cotton in them is original!

    I have to have alphabetti spaghetti for breakfast so I can spell out "I love Bitcoin" on the toast. Sometimes there's no letter "v" in the tin, so I just write on the wall instead.

    When I drive to work I catch up on the latest LTB podcasts. Occasionally I swerve all over the road a little bit as I try to remember the "magic word" for later. I can't wait to see if the LTB network will start a subscription service for early release episodes and audio versions of all their contentChain Radio's launching next week too.

    Sometimes I accidentally drive into the side of the local bank because I went into a daydream, imagining a time in the future when the bank is no longer there. When this happens I get locked up and have to spend my time inside thinking about Bitcoin.

    When I get to the office I send all of my work to someone the other side of the world, and they do it for me. I pay them with Bitcoin because it's better than using Western Union. I'm hoping to get locked up for this too, so I can spend my time in prison thinking about Bitcoin. I spend my time at work reading articles on Let's Talk Bitcoin because they haven't made them available in audio format yet. Nevermind, at least I earn LTBcoin for doing it.

    On my drive home I listen to year old episodes of LTB which I missed the first time round. I love it. It reminds me how lucky I am to have Bitcoin in my life.

    When I get home I turn on my computer and open up a couple of Bitcoin related windows in the browser. One of them will often be Let's Talk Bitcoin again, so I'll keep refreshing the page to see if there are any new topics or articles to read! The other may be something like Winkdex. I like to press Alt-Tab really really really quickly to flash between the windows until I feel sick! I call this a Bitcoin high. I think it's legal.

    Then I eat a tin of Spam and go upstairs to pray (A Bitcoin Prayer):

    *Our Satoshi, who art in hiding*

    *Hallowed be thy name*

    *Thy protocol done*

    *Wallets will come*

    *On clients as they are on paper*

    *Give us this day our daily Bitcoin*

    *And forgive us our speculation*

    *As we forgive those who use silk road*

    *And lead us not into no confirmation*

    *But deliver us from fiat*

    *For thine is the blockchain, the power and the glory*

    *For ever and ever*

    *Anon*

    Then I go to bed shouting, "BITCOIN AHOY!", and I dream of Bitcoins and Gravy!

    Is there anything you can do to help me?

    Doctor: What's Bitcoin?

     
    Patient: It's how I'm going to pay you. Here, look! Read More
  • 9 Comments
    3,866 views

    Congressional Research Service Quietly Revises Bitcoin Report

    July 25th, 2014 by CrimsonRoze
    Original (dhimmels):

    Last week the Congressional Research Service updated a the Bitcoin: Questions, Answers, and Analysis of Legal Issues document to better reflect current events.

    The document serves as an introduction to Bitcoin and and aims to cover all information necessary for members of the US Congress to make decisions and includes information on many various subjects such as how Bitcoin works on a technical level, Bitcoins benefits and drawbacks, discussions about mainstream usage of Bitcoin and current and future regulation and laws.

    Considering the pace of development, particulary in the regulatory environment, over the last months it is then surprising to see such an important document making only minor updates and completely omitting any information relating to some of the heavier events and debates, such as the Auction of the silk road BitcoinsPittsburgh planning to accept digital currencies, the document about Bitcoin regulation internationally, the current Discussions about NY regulation and current information about the Federal Reserves Bitcoin Policy.

    In fact, the update seems to consist only of statistical updates about prices and market caps and minor changes such as updating the list of current exchanges and a short one-sentence addition about the bankrupty of Mt Gox.

    With truly big companies such as Dell starting to accept bitcoin and a large quantity of smaller companies getting started around bitcoin the amount of people who is working with companies that has a relation to bitcoin should probably be significant, yet there is no information in the article about the number jobs that will get affected by regulatory decisions.

    Proper and good information is the basis of sound decisions and while this document is a decent primer to the technology behind bitcoin and the current tax and anti-money-laundering regulation there is a clear lack of information regarding the social and financial developments as well as informtion on the environmental aspects of handling money.


    Brian Cohen will be receiving 10% of LTBcoin disbursements for this article for his research leading up to the finding of the updated article. Read More
  • 18 Comments
    2,912 views
    Categories: General, Guest Blog, Columns

    On Value by Design: Boston and the Bitcoin Dream Protocol

    July 24th, 2014 by ry.walk
    Edited 7/21/14  denise

    Graphics Updated: 7/23/2014 - Ryan Walker Read More
  • 40 Comments
    3,648 views
  • 54 Comments
    2,417 views
    Categories: General, Columns

    Funding Anonymity with Crypto

    July 23rd, 2014 by mdw
    Proofread and edited7/21/14  denise





    The Tor network is a widely used tool which provides a degree of anonymity to users. Users have their location obscured from those watching certain destinations, and what they are doing hidden from those who know their location. 

    But Tor has some problems, one of which is a relatively small number of people running servers on the network. These so-called relay node operators would be rewarded under schemes currently being considered, by issuing a token in exchange for proof of bandwidth provided to the network. In this article we explore how this clever scheme might work in a bit more detail.

    Tor network is a unique tool on the Internet, providing a high level of anonymity to its users. Recently we reviewed a whitepaper proposing a plan to issue a crypto currency with the goal of incentivizing those key players who make it all possible. This would institutionalize a rewards structure, in the same spirit as a recently announced EFF initiative to give prizes and recognition to people who operate network nodes for twelve months.

    Tor network accomplishes this difficult feat of fuzzing what users do and where they're located by routing traffic through a set of randomly chosen nodes before reaching the intended destination. This can only currently be done because people volunteer to run nodes on the Tor network. As you might imagine, there's a shortage of volunteers. The brave folks who run the more important of these network components are not only unpaid, but they face frequent attack by malicious agents, and make themselves persons of interest to the NSA.

    This recent proposal aims to at least offer some small financial reward for those who will contribute to the continued operation of Tor. Network nodes who route traffic toward its destination can receive tokens for doing so, and would have an opportunity to exchange them for fiat, or bitcoins or other.

    Tor Terminology

    Tor network is made up of servers referred to as nodes. These servers relay information through the network, thus the moniker relay nodes, and are further categorized based on their specific roles.

    Guard nodes
     are the entry into the Tor network. They act as the gatekeepers, but due to Tor's ingenious omion routing scheme they cannot know the intended destination - only the next hop within the network.

    Exit nodes
     are the most important ones, sending traffic from within Tor network to the actual destination. These critical nodes are more scarce than ordinary relay nodes, largely because they are prime targets for attack. They are in a unique position to attack user sessions since they directly connect to the destination endpoint. If they are able to collude with guard nodes they can de-anonymize users, since together they will know both endpoints; e.g. who is using Tor and what they're doing.

    Each trip through Tor network is called a circuit, and consists of 3 pseudorandom nodes including a guard node, relay node and exit node. These nodes are chosen from a list of active nodes provided by a Directory Server. There are very few of these, since a high level of trust is essential. These Directory Servers are also key to making the proposed incentive scheme work.

    So who gets the coins, how would they be issued, and what exactly gets rewarded?

    The basic idea is to reward relay node operators who can demonstrate that they provided bandwidth which was used to route requests on the network. Every node interacts with at least one other node, and the nodes within a circuit can validate claims by adjacent nodes in a given circuit. Under this proposal these nodes could be rewarded with tokens, for each time they participate. A bit more information needs to be published by the Directory Servers, and nodes will need to do a little more work.

    It's widely believed that NSA and other agencies run many Tor nodes, especially high speed exit nodes. The nodes with the most available bandwidth get chosen more often, and as mentioned earlier, exit nodes are in a unique position to collude and to execute man-in-the-middle attacks. It has been shown also that the NSA targets Tor users for extra scrutiny, and key players even moreso.

    But before we forsake Tor, thinking it's a rigged game, it's important to realize that the facts are somewhat more confusing. Tor was built and funded by the US Navy. It's very useful for government agents conducting operations in the field with anonymity. But there are many other uses for law enforcement generally, as well as whistleblowers, political dissidents, and more.

    The US Government has continued to provide most of the funding for Tor over the years, and still does. But this does not mean that it's a honeypot. There is a need to have operatives in faraway places able to interact with their colleagues inconspicuously. The fact that people hide from government suveillance, and even use the network for criminal activity does not make it less useful.

    The leaked Snowden documents clearly suggest that the NSA has had mixed results trying to breach the anonymity of users on Tor. It's also clear that the more people who can be persuaded to run nodes on the network, the more anonymity is afforded to users. More guard and exit nodes mean less chance of some single entity operating both of these nodes for a given circuit. And generally the more users on a network, the harder it is to match users with destinations.

    relay, guard, exit nodes on TorCurrently there are just under 6000 relay nodes on Tor network, and of those it looks like there are just over 1000 exit nodes currently. Constrast this with about 2.4 million daily users and you can easily see how more nodes are needed. Thus the impetus for creating incentives. It costs money to operate a high bandwidth node, and now we have people discussing how to best offset that cost with an altcoin. One more victory for blockchain tech!
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    Categories: Beyond Bitcoin
  • Let's Talk Bitcoin! #129 Dogeparty and Delegated Proof of Stake

    July 22nd, 2014 by adam

    On Todays Episode

    Adam talks about the costs of Counterparty and introduces Dogeparty (dogeparty.io) an experimental solution, along with Proof of Charity - a new Token Initialization Method.  Join the conversation on the LTBn forums

    Daniel Larimer, CEO of Invictus Innovations (bitshares-x.info) (bitsharestalk.org) speaks with Stephanie, Andreas and Adam about the release of BitsharesX, their Delegated Proof of Stake system, automatic stealth addresses, bitUSD and more.

    Read More
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    1,390 views

    Uncoinventional Living Tour Day 12 Austin Alexander of NYC Bitcoin Center

    July 22nd, 2014 by SovBTC
    In this podcast, John and Cat visit the NYC Bitcoin Center to screen the Bitcoin episode of Sovereign Living the Reality Show. John sits down and chats with the Executive Director of the Center, Austin Alexander. Check out the regular audio updates on the SovereignBTC podcast feed and follow the live blog on Bitcoin Magazine - bitcoinmagazine.com/13694/uncoinventional-tour/ You can contribute to the project in the following ways (all donations will go toward travel and marketing the jo... Read More
  • 16 Comments
    8,852 views
    Categories: Breaking News
  • 43 Comments
    2,992 views
  • 37 Comments
    8,928 views
    Categories: General, Interviews

    The Real Sunny

    July 21st, 2014 by SeanM


    Sunny King delivers innovation.

    Sunny King, a pseudonym, is the creator of two crypto-currencies: PeerCoin and PrimeCoin. Each providing important advancements to the technology powering crypto-currencies. With PeerCoin, Sunny was the first to create a crypto-currency that uses proof-of-stake to secure the blockchain instead of proof-of-work. A method that requires very little energy for mining. 

    Next with PrimeCoin, Sunny was the first to show that a proof-of-work algorithm exists other than cryptographic hash functions. PrimeCoin uses mathematical algorithms to find chains of prime numbers.

    Because of these creations Sunny is a heavyweight when it comes to this space, and ends up doing many interviews.  However they are mostly technical.

    So the intent of this interview was to include a personal side. You will find that at times Sunny remains vague and declines some questions. However Sunny does express personal views I have not seen before, hopefully making for an interesting read and a glimpse into the person behind-the-mask. 

    Whether we like it or not 
    Sunny still remains like Satoshi: an intelligent, and mysterious figure, who shares free market principles and hopes for a better future through software innovations.


                

    Interview on July 10th, 2014 via Google Chat – [email protected] 

    Sean Mikha:Hi Sunny! Thanks for joining us today for the featured interview article in www.LetsTalkBitcoin.com. The purpose of this interview is to get a real understanding of the day-to-day life, experiences, and thoughts of one of the great crypto-currency inventors. The person 'behind the mask', so to speak.

    I completely understand your discretion and needs for privacy. However my plan is to be forward. I will ask questions that you may not want to answer, so let me know and be candid. It is totally fine, and I will not ask the same question again. I will also plan to send you a transcript of the final article before publishing so you verify content.
     


    Sunny KingOh thanks :)



    SMPreviously in your interview for Bitcoin Magazine with Vitalik Buterin (Aug 2013), you answered that you have not revealed your identity because of the political situation. Looking back over the year with the political situation now changing (federal government auctioning off Bitcoins, name-brand companies like Overstock.com, Expedia, and DISH Network accepting Bitcoin). Along with the fact that other crypto-currency inventors such as (Dan Larimer of BitShares, Charlie Lee of Litecoin) have exposed their real identity for over a year now. Do you feel your secrecy concerns are still valid?



    SK: People are easily getting complacent of the situation. Meanwhile during the year we have seen Russian and Chinese central banks showing concerns and restrict cryptocurrency, and some central banks of small countries even outright banning cryptocurrency. So it's certainly not all rosy. The political concerns have always been there. We know that the world is loosing freedoms at a rapid rate. So I think sooner or later we have to deal with the conflicts between freedom in cryptocurrency world and the reality in the political world.



    SMOk so it sounds like you believe that there are still some events unforeseen that need to come to pass before you consider it secure for you to reveal your identity. You somewhat alluded into the same interview with Vitalik that you currently live in the US. Or at least I assumed you do. Do you live in the US today?



    SKI have never alluded to that, no I don't think. Maybe in the future. I don't know yet. Everyone has different situation. So other developers might be more optimistic regarding the political situation in the world today, many of the peercoin/primecoin community also open to their identities.
     

    SMOk that was my assumption on the US thing. Sorry. Can you tell me about some of the fear and concerns you have (wherever you live) if you were to reveal your identity? Government raids, prosecution? Hackers messing with your identity? Others?
     


    SKSure all of these are quite possible. You never know what the governments are capable of these days. Even many years ago cryptographers have to live in fear of persecution. So in my opinion it certainly could be a lot worse today when not only cryptography is involved, but money is involved as well.



    SMWhat are your major philosophies on freedom? Who do you look up to? Who have you read?



    SKGenerally I am in favor of free market principles, you can say I am a libertarian, but I don't outright reject the existence of government, but I think it's better to give people more free choice, not always forcing people do this or do that. In terms of economics I am more subscribed to classical and austrian theories, not very much in favor of the central planning 'modern' theories.

     

    SMAny particular people you want to mention you look up to or have read? It can also be current people (other crypto developers).



    SKCan't say i read very deep in theories, but let's say Bastiat and Rothbard are among my favorites. Of course I respect Satoshi's work very much
     
    SMDo you think Satoshi was one person or a group of people?

     

    SKProbably one person. He is brilliant.



    SMYes it is pretty amazing what he/she has created. Not sure if anyone has asked you: are you one person or a group of people?
     


    SKI am just one person



    SMWhere did you get the name Sunny King?   
     


    SKWell it's just a pseudo name, no need to read too much into it



    SMDo you invest your own money in any crypto-currency? If so, which ones?



    SKFor myself, not very much. I wish I could have invested in bitcoin two years ago, probably like many of you I wasn't able to do for various reasons. It's tough. So no, I am not fit to provide any advices :P



    SM: How much money would you say you've earned from crypto-currency? If you have not converted to fiat, how much would you say your stake in PeerCoin is worth? In PrimeCoin? If you can't give us exact, maybe a range, if you can share?
     


    SKSorry I don't wish to disclose such information. Both peercoin and primecoin were released with open mining, so I don't have any advantages over other miners. Meanwhile many developers are releasing coins with IPO format so they can hold large sum of stakes without much investment whatsoever. Let's just say I have earned my living. So I don't have to earn huge sums from cryptocurrency to sustain my work. That's also the reason that I don't ask for any donations for my work. Also I don't aspire an extravagant lifestyle so I think I am doing quite okay.



    SM: Do you do development full time?
     


    SK: Yeah pretty much



    SM: Do you regular read, visit sites, or visit chat forums (besides PeerCoin/PrimeCoin) in the crypto-currency space?
     


    SK: I do visit our forums regularly

     


    SM: Any others? Blogs or Reddit?



    SK: sure occasionally, and some media sites as well



    SM: Do you listen to Let's Talk Bitcoin?
     


    SK: uh i probably should :p in the past i read bitcoin magazines more often



    SM: What is your favorite food?
     


    SK: haha I don't know ... how about chinese dim sums?



    SM: Do you have a formal education in computer science?



    SK: Let's just say I do have some experience in computer programming. Also designing algorithms and a cryptocurrency system requires a lot more than a degree in computer science.
     


    SM: Ok but you can't tell us if you went to a college for any of those subjects or not?



    SK: sure does it matter that much? I did, but to be fair I think especially in this Internet age, one can indeed self educate in these subjects, so I would generally not judge people with their degrees but instead of their actual communications and work produced.
     


    SM: Ok so you went to college for computer science?



    SK: Let's keep that private matter still.
     


    SM: What is your favorite hobby? Besides crypto-currency?
     


    SK: I do some meditation, tennis etc.



    (Start of technical focused questions)
     


    SM: What led to the creation of the proof-of-stake algorithm? What inspired you? Do you remember where you were or what you were doing when you came up with it?
     


    SK: That was in 2011, we had a small study group on bitcoin

    Back then there were already a few 'altcoins' floating around, and more being created, but of course not as much as nowadays. We were thinking about something different, not a clone of bitcoin, but different algorithms, for example, addressing the energy problem of bitcoin

    That's how we started looking into alternative consensus mechanism, that using coins itself to secure cryptocurrency. We came up with the ideas ourselves, but later we learned that some people were discussing related ideas on bitcointalk forums in 2011 as well. Overall I think proof-of-stake is a good term describing the general ideas. The difference is, in 2011 we were pretty much the only people committed to use pure proof-of-stake as consensus mechanism. Everyone else were just trying to see if proof-of-stake can provide some patchwork to bitcoin's proof-of-work.
     


    SM: Would you say you were the first 'altcoin' to implement proof-of-stake?
     


    SK: Yes we are the first to have implemented proof-of-stake, any kind. Most other proof-of-stake coins are still a clone/fork from our system.
     


    SM: Can you tell us who the "we" is? Are they still involved in the crypto space? Did they go on to make other altcoins?
     


    SK: Mainly my co-author of the peercoin paper, Scott. He hasn't been very active in the past year. No I don't think he made any other coin, at least not that I am aware of.



    SM: Anyone else?
     


    SK: There was another guy making minor contributions and studying with us. But mainly just me and scott.



    SM: Ok, same question for PrimeCoin. What led to the creation? What was the inspiration, etc..
     


    SK: Primecoin was conceived in March 2013. I came to the idea that prime number search can indeed serve as proof-of-work consensus, which most people believed only hashcash could work as such mechanism 

    That was back then. 

    Of course after primecoin people would know better. So far primecoin's proof-of-work is still pretty much the only alternative proof-of-work in production other than hashcash. Oh by alternative proof-of-work I mean alternative proof-of-work consensus

    Interestingly primecoin also tries to address bitcoin's energy problem, from a different angle. In a free market, there is bound to be coexistence of energy intensive currencies and energy efficient currencies, meaning, people have free will to consume energy to produce currency, for example, mining gold. So primecoin would demonstrate, such energy consumption can be made energy-multiuse, while preserving the critical decentralization property.
     
    SM: When you say energy multi-use you are referring to the fact that bitcoin hashing or mining provides no meaningful by-product whereas PrimeCoin delivers the chains of prime numbers?

     


    SK: Yes, primecoin is the first cryptocurrency with such property
     


    SM: Now with PrimeCoin running for over a year, has anything meaningful come out of the mining effort against the coin? Do you have plans to make any tweaks to it or have faith it will deliver value in the future if it has not already?
     


    SK: If you are fascinated with prime numbers sure enough primecoin has already delivered, it now holds 5 out of 21 world records in simultaneous prime numbers. For immediate practical benefit, there are firms attempting FPGA/ASIC development at primecoin mining, which is a lot more challenging than hash based ASIC, thus providing immediate value to cryptography and computing industry.
     


    SM: So you do believe that the algorithm used in PrimeCoin has the potential to affect scientific knowledge still? Some have argued that since PrimeCoin is not finding a single large prime number, and instead just the chains, it doesn't hold scientific value.
     


    SK: That's certainly debatable. For example, the 'Twin Prime Conjecture' is considered by many mathematicians as one of the top problem in number theory, versus, finding the largest Mersenne prime (currently the record for largest known single prime number). So it's not obvious that infinite existence of Mersenne primes are more valuable than infinite existence of twin primes. In my opinion, Cunningham chains and bi-twin chains are among the most beautiful prime number structures, but that could just be my taste.
     


    SM: Does PrimeCoin provide value towards solving the 'twin prime conjecture'?
     


    SK: It provides financial incentive to these math research, that if your theory advancement can provide better mining algorithm for primecoin mining. Twin prime is a special case of bi-twin chain, a bi-twin chain of length 2, that is.
     


    SM: I see. So what you’re saying is you have opened the door with PrimeCoin. You proved its possible to do a proof-of-work consensus other than hash cash and have potential math research along with the fact that FPGA / ASIC development incentive may lead to problems being solved that have never happened before.
     


    SK: It's possible, when you have asic primality testing chips, the computation capability in these fields would make a giant leap. That could also indirectly help theoretical research.
     


    SM: I understand there is developments in PeerCoin such as innovations with the 'cold minting'. I haven't checked PrimeCoin recently is there any other developments coming with it?Or any areas you want to touch up on? How it might change or where Primecoin will be in 2 years?
     


    SK: We were planning a minor protocol update with primecoin. I am also investigating the possibility of sidechain technology, so when it's ready, we plan to support both peercoin and primecoin sidechains
     


    SM: oh that’s awesome, I have heard you refer to it as the back-bone so I assume this will allow the ability to now scale out new types of applications and properties
     


    SK: Yeah I have been contemplating of data application for quite a while since 2012. For scalability reasons data for specific use is better stay out of the currency block chain. That's why side chain is a significant advancement.
     


    SM: When you say data application since 2012, are u talking about something like Storj? But on a side chain?
     


    SK: Right. Namecoin and ripple have been the pioneers in data applications. The problem is the impact on base currency scalability. It would be a lot better with sidechains, each application can use a different sidechain, say if you use email you deal with an email sidechain, so the scalability of email sidechain does not impact the scalability of another sidechain and the base currency blockchain.
     


    SM: In your research of side chains have you looked at tree chains by Peter todd? https://github.com/petertodd/tree-chains-paper

    In an interview with Let's Talk Bitcoin, he has some big concerns about side chains and why they won't work. I won't elaborate here as we are running out of time. But have you had a chance to look?
     


    SK: Not yet. I would love to look into it soon. Thanks for the pointer.
     


    SM: In your interview with the PeerCoin community on Saturday May 24th, you said*: "The BitShares team is working on another one, but I also have doubts there." In reference to proof-of-stake and their implementation of delegated proof-of-stake or (DPOS). What doubts do you have about BitShares implementation? Can you elaborate? 

    *From <http://www.peercointalk.org/index.php?topic=2862.0
     


    SK: I don't know enough details of bitshare's DPOS proposal, the main issue I am concerned is related to the cost of 51% attack on the delegates. But I think they are doing good work researching proof-of-stake in general. So I think it's a lot more meaningful than just clone peercoin's design.
     


    SM: Any thoughts or concerns on NXT?
     


    SK: NXT bears some similarity to ripple. Although it uses peercoin's consensus algorithm (or a close variation of it) rather than ripple's mechanism. I think it also aims to provide data applications inside blockchain, like namecoin and ripple.
     


    SM: What best practices would you recommend for people starting either new coins or communities?  Many people start new coins or communities because others fail. With your past experience and success with PrimeCoin and PeerCoin. What advice would you give others?
     


    SK: I would say be ethical. Everyone has different opinion this we all understand, it's a free market. But I think in order to win the battle of freedom, we would also need to look in the mirror, does free market equate to no ethics and endless fraud? Maybe the loss of freedom in society is also related to our own corruption. So I think it's always important to look at ourselves for higher ethical standard.
     


    SM: Well Sunny, what a great answer, and a perfect way to end our interview! I want to thank you so much for taking the time with us today and going over all these tough questions! I hope we can chat again sometime in the future, AND, if you ever decide to reveal your identity will you do an article with us first please?
     


    SK: Sure you have it :) Read More
  • 34 Comments
    21,693 views
    Categories: General, Noteworthy

    How Bitcoin enables family economics

    July 20th, 2014 by CrimsonRoze
    Bitcoin and Family Accounting.

    With the recent progress in the bitcoin evolution, particularly in regards to usability and multisignature key management, family accounting now has access to new economic tools to support a more reasonable and mindful family economy.

    Lets start off with ..

    The Parents.

    For those parents who choose to have individualized economies and do not share incomes and expenses, bitcoin offers the common single key which allows both parents to retain control over their own funds just as though they had individual bank accounts or wallets. Nothing has changed in this regard.

    For those parents who choose to have a shared economy however, bitcoin offers some very interesting multisignature solutions such as the one-of-two and the two-of-two keys which allows two specific use cases.

    The one-of-two keys scenario indicates that both parents are capable of spending money from their shared account without the need to ask the other parent for permission. This is good for purchasing things that both parents are responsible for, like groceries.

    The two-of-two keys scenario indicates that both parens are capable of spending money from their shared account, but only when both of them agree to do so. This adds an extra layer of protection against careless and/or unfair spending in a shared income environment.

    Using a combination of the these two key management options, as well as the single key option, families can now set up a system in which the basic household expenses are easily paid for from a shared account while maintaining consensus on the big economical decisions and helps prevent in-family fraud, giving families a new level of economical stability.

    Now lets have a look at ..

    The Children.

    When a child comes into a family, another layer of complexity is added to the family economy. The simplest of solutions for an economy to accomodate a child is yet another single key which gives the child full access to its funds and leaves the parents with no control at all. In some cases, this might be desireable, but in other cases the parents want to shield their children from making irresponsible economic decisions.

    In addition to the one-of-two and two-of-two keys we can now start looking at some very interesting multisignature scenarios involving three parties: one-of-three, two-of-three and three-of-three.

    In the one-of-three keys scenario much is as expected. Any one of the parents, or the child, can spend money from the shared account. This proves useful in most of the same situations where a one-of-two key had been useful for the parents given that they trust the child not to spend needlessly.

    In the two-of-three key scenario it start to get a bit more interesting. In this case the child can only spend money if at least one of the two parents agree to it. This is great for saving up for specific purposes where the child has some influence over how to spend the money but the parents want to retain enough control to make sure it is not spent for other purposes. This also allows the parents to spend the childs money should both parents agree. Depending on family situtations this might be necessary in order to sustain a functional family economy, particulary in times of economic crisis.

    However, there might be cases in which it is undesireable to allow the parents to forcefully spend the child's money and for these cases another type of system is needed which is a combination of those previously discussed.

    While I have not yet heard of solutions including specific keys in combination with multisignature keys I believe the programmable money that is bitcoin should be able to support the following scenario as well, we just might need to roll up our sleeves and get coding to see it happen..

    Using a one + one-of-two key you can set up an account where the child retain veto against spending, but is not capable of spending itself without one of the parents approval. This is particulary useful for earmarked money, for example an education fund where the parents donate money to the child, but want to control the spending to only go to the specific purpose, while making safeguards as to the future education of the child.

    In the three-of-three key scenario we have a place to save money for matters which are truly family related and both parents and the child have veto against any spending. The use is very situational and requires a family with trust and cooperation and is probably not well suited for the youngest of children.

    The economic management tools above will also have some implications for ..

    Statistics and Accounting.

    While using the proposed key distributions above, to create a family economy suited for the particular family needs, is good in and of itself, it also comes with many statistical benefits in regards to accounting.

    Since each parent and each child has their own private keys, any spending done by, or agreed to, by any of these family members is recorded into the blockchain with their signatures and this opens up for new ways of visualizing family economics on a person and family level in a fully transparent way.

    Which leads us to..

    The Conclusion

    I sincerely believe that there is an honest need and a real use case for this transparency and accounting as well as the various methods of restricting spending in a co-operational environment and I am glad to see that bitcoin comes with a built-in solution to all of this that doesn't require a family to sign any papers or pay any fees.

    While we have no good way of knowing how these new tools will shape the families of the future, I am particularly interested in seeing this being developed. Should the tools arise I will be among the first to try them out!

    Cover image courtesy of Jeffrey Tripp, licenced under creative commons. The image has been cropped to fit the LTB network requirements.
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    2,892 views
    Categories: General

    Detailed Instructions on How to Play a Bitcoin BrainWallet Scavenger Hunt Game

    July 19th, 2014 by jratcliff63367

    In today's article I am going to discuss how you can play a Bitcoin BrainWallet scavenger hunt game.  My goal is to explain, as simply as possible, the basic mechanics of how to play the game assuming a target audience who does not yet know a lot about bitcoin.   

     

     

     

     
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