Ultimately, Stripe is an API for online payments for businesses. If Stripe accepts Bitcoin, suddenly all of their clients have the capability to accept bitcoins. One will note that Stripe’s API is used by dozens of recognizable companies, meaning that every one of these household names will be able to accept bitcoins if they so choose. I’m not cheering just yet, considering the Bitcoin option is still in beta, and I’m sure clients will be able to opt out of accepting bitcoins. But considering the relatively small number of companies accepting bitcoin at the moment, this is extremely promising for Bitcoin as an independent currency. I’m looking forward to paying for my Lyft with bitcoins in the future, I’ll tell you that right now.
Square Market is more intriguing to me, considering Market lets individuals build their own online storefront through Square. This generates a potential for vastly many more peer-to-peer purchases using bitcoins as Square Market’s two-sided network grows. Theoretically, through Square Market, you can now purchase anything with bitcoins (if it happens to be sold by an individual using Square Market. The chance of this being true will increase as Square Market itself grows, of course). You could sort of do that before with Amazon gift cards from Gyft, but now the gift card middle man is eliminated in at least some cases. I simply like this because it really lets your everyday consumer use Bitcoin more easily and freely. Again, good for Bitcoin as a currency.
In my next post I’m going to talk less about Bitcoin as a currency, and more about it as a payment processor, and even as the “Internet of Money”.
If you enjoy my blog, please feel free to donate bitcoins at onename.io/cremins, and please both subscribe to and share my blog. I’m no be-all, end-all authority on digital currencies, but the more people I can learn about this fascinating phenomenon with, the better.
Bitcoin itself is a revolutionary technology. However, it will be how empowered individuals and startups innovate with it that truly defines how Bitcoin changes the world. This is the first of a series of blog posts – “Innovation within the Innovation” – examining people and companies using Bitcoin in ways that truly change the game.
I’ll keep this brief. We know Bitcoin itself is highly innovative, but most even vaguely versed in the technology know the currency concept is just the beginning. A startup I was introduced to recently is a perfect example of the possibility for innovation with the blockchain beyond currency. OneName is one of the first effective uses of the anonymity made possible by Bitcoin. As opposed to simply having your transactions stored in the blockchain, your entire financial identity is stored in the blockchain, and you are known simply by “one name” for your Bitcoin transactions. The possibilities here are intriguing, even if it’s as simple as you and I not having to fill out lines upon lines of billing information every time we make an online purchase. I think it potentially adds a unique layer of security to our online “identity,” so to speak. This decentralized identity concept allows us to not have as much personal information floating around the internet because of the excessive online shopping we indulge ourselves with. An identity thief will be at a loss if all the info they see is your “one name,” after all.
Curious if it’s easy to use? Check out my OneName page. It’s me, and it’s the QR code you can use to send me bitcoins. (Please do send me bitcoins, by the way.) My “identity” is stored in the blockchain, and all you see is the limited amount of info on the page. But you can still send me money for any given purpose, and given that it’s linked to my Bitcoin wallet, I get bitcoins securely without having to tell you much besides my name. I could take almost all of that information off the page, and the transactions would be damn near anonymous, but still secure. Absolutely fascinating, no?
An FDIC for Bitcoin, some are calling it. Bitcoin security service Xapo recently raised a $20 million round lead by Benchmark Capital and Fortress Investment Group, LLC. The premise of Xapo is to provide both a Bitcoin wallet and what they describe as a “vault” for your bitcoins. Yes, it is a physical vault, where servers that are offline and never have been online store the bitcoins, and the users’ private keys, used to access their bitcoins are guarded by layers of security, including armed guards, in multiple locations around the world. The wallet acts similarly to a checking account for one to use to readily make transactions, while the vault acts as a secure savings account. With the excessive fear regarding hackers stealing all your magic internet money, Xapo is a refreshing layer of security. The %.12 annual fee for the vault service is certainly more than you’d expect from your standard savings account, but as the first movers, they can really charge whatever fee they want right now, and the security paranoia surrounding Bitcoin currently could probably drive the price up even higher, if Xapo chooses to do so.
However, I find it odd that the security method chosen here that is making people breathe so easily all of a sudden is offline, physical security. Bitcoin is designed to take advantage of the open source, decentralized nature of the Internet. I’m certainly not making any arguments for or against Xapo with this line of thought. I just find it ironic that instead of furthering efforts to make the Bitcoin network, Bitcoin exchanges, and Bitcoin wallets more secure, a process that would likely lead to stronger Internet security in general, we are choosing to take a step back into our comfort zone. We’re basically burying our bitcoins underground and guarding it – a practice as old as time itself. Maybe that’s just a testament to “if it ain’t broke, don’t fix it,” but it just seems weird to me that a concept so old is having $20 million thrown at it. Then again, almost anyone that develops a phone app can get $20 million these days, it seems, so should I really be surprised?
All this being said, I’m glad Xapo has arrived. A service to make new adopters safe using Bitcoin is, well, necessary. Users that don’t have a technical background are more likely to look at Mt. Gox and other negative incidents and feel like their investment isn’t a safe one, instead of taking solace in the air-tightness of the code behind the more commonly used Bitcoin wallets, and the Bitcoin network itself. Until Java is taught in grade school, almost everyone will feel safer burying their bitcoins underground than they will relying on code and advanced mathematical algorithms. I personally have no plans to use Xapo at the moment – in the Blockchain I trust, if you will. However, it’s clear Xapo will make Bitcoin feel safer for the non-technical majority, and frankly, that’s what matters right now.
We’re a few weeks removed from the event that began the collapse of Mt. Gox, the Japan-based bitcoin exchange. This dramatic death of one of the first bitcoin exchanges was spurred by a report by bitcoin entrepreneur Ryan Selkis, revealing a leaked document detailing excessive bitcoin theft that happened on Mt. Gox’s watch. Unfortunately, this was probably the most press Bitcoin has ever gotten. It was catastrophic for Bitcoin, causing its price to crash, and perhaps worse yet, raising concern about the security of using bitcoins.
As one can read in the report (and elsewhere), Mt. Gox blamed these thefts on what they called a “flaw” in Bitcoin’s software. This “flaw” is a feature of Bitcoin’s software known as transaction malleability, in which the unique address associated with each transaction of bitcoins can in fact be altered. The thefts occurred when a Mt. Gox user would alter an address they used with Mt. Gox for a transaction, and complain to Mt. Gox when their new, altered address had no bitcoins sent through it. Mt. Gox used these addresses as essentially their only form of accounting, so they had no choice but to repeat the transaction at the new address. As a result, the thieves had double the bitcoins at Mt. Gox’s expense.
If you think something smells here, you’re not alone. Members of the Bitcoin community lashed out at Mt. Gox, pointing out that Bitcoin has been aware of transaction malleability, and has chosen not to address it. Transaction malleability has a number of potential constructive properties, which include any sort of operation where multiple users have to collaborate on transactions (crowdfunding, for instance). While that doesn’t change the fact that it was used for nefarious purposes in the Mt. Gox scandal, why did Mt. Gox have no accounting measures beyond the transaction addresses? Certainly a rhetorical question at best, but it begins to detail the lessons the Bitcoin community can learn from Mt. Gox.
While Bitcoin is a sophisticated software, it should not fall squarely on the shoulders of the Bitcoin programmers to ensure the safety of use of Bitcoin. That would be akin to asking the U.S. Federal Reserve to ensure that bank robberies and identity theft never occurred – the banks themselves are generally the organizations that provide security for our dollars. What I’m getting at is that Mt. Gox shouldn’t have blamed Bitcoin itself for their own oversight, and their own failure to secure the funds of their users. While Bitcoin still lacks the regulation that other currencies do, Bitcoin exchanges such as Mt. Gox are the organizations that we look to for the security of our bitcoins. We wouldn’t blame the nature of the U.S. Dollar itself if our bank account got robbed – we’d blame the bank that was supposed to protect our funds.
As Mt. Gox files for bankruptcy, we obviously can’t say the loss of 744,000 bitcoins was a good thing. However, Bitcoin is in its infancy, and we can, at the very least, accept that the responsibility for security when using Bitcoin falls on we the users. The fall of Mt. Gox is a bump in the road for Bitcoin, but it will spur other Bitcoin exchanges to bolster their security measures, and it will compel users to be far more cautious when conducting bitcoin transactions. Mt. Gox was ultimately good for Bitcoin because of what the public stands to learn through its collapse. And, of course, because any press is good press.
Hey all – haven’t been as active posting. Apologies.
However, I’d like to go ahead and declare the direction I plan to take this blog. Technology’s a very broad field to be writing about – ultimately it feels difficult to differentiate a blog when I’m talking about such a broad field. So I’m narrowing the focus of this blog significantly. This will still be a blog that occasionally talks about larger trends in technology, but it will mostly focus on Bitcoin and other cryptocurrencies from this day forward. Bitcoin, or some later iteration of the general concept that Bitcoin introduced, will change the world. Any truly disruptive innovation comes to market with a set of traits not initially desirable to the base of consumers at large. We’re seeing this through the growing pains Bitcoin is experiencing. Mt Gox was an unmitigated disaster that has negatively impacted many, many people. Yet is Bitcoin dead? Absolutely not – it’s trading at around $620 USD today. Skeptics are everywhere, but by now, skeptics should be a positive sign – haven’t we seen this movie a few times already in the past 10-20 years?
But I digress, this is not the blog post where I explain everything there is to know about Bitcoin, and forever convince you that Bitcoin is the way of the future. Why? Because I don’t know enough about it to do so yet. We’ll be learning together as Bitcoin continues to disrupt the world.