Bitcoin Boxing the Dollar

Today, being both the day after Christmas and a Saturday, is not a day to work, so let's have an easy post. How about a composite image as in the Halloween post Bitcoin : Trick -or- Treat? (31 October 2015).

Sure, that might work, except it's not really Christmas -- it's the day after -- so the moment has passed for a Christmas post. How about a Boxing Day post as in Boxing Day [Wikipedia]:-

Boxing Day is a holiday traditionally celebrated the day following Christmas Day, when servants and tradesmen would receive gifts, known as a "Christmas box", from their masters, employers or customers. [...] In the liturgical kalendar of Western Christianity, the day is dedicated to St. Stephen, so is known as St. Stephen's Day to Christians (especially Anglicans, Lutherans and Roman Catholics), and to the population generally in Italy, Ireland, Finland, Alsace and Moselle in France. It is also known as both St. Stephen's Day and the Day of the Wren or Wren Day in Ireland. In some European countries, most notably Germany, Poland, the Netherlands and those in Scandinavia, 26 December is celebrated as the Second Christmas Day.

Since I didn't know any of that, I'm now a little more knowledgeable. An image search on 'bitcoin boxing' brings up mostly Mike Tyson photos, as in Boxing Legend Mike Tyson Launching Bitcoin ATM. Exclude the word 'Tyson' and voila...

Google image search on 'bitcoin boxing -tyson'
(Sorry, Mike!)

For me, the most interesting images in the composite are the cartoons. The T-shirt (and the related cartoon next to it) in the top row goes to Bitcoin vs Money Boxing Fight Retro Design T-Shirt:-

The Greatest Fight in History World Currency Championship Fight BITCOIN Challenger vs. FIAT MONEY Champion * Ringside is where it's at * No home TV * No radio *

The image to the left of the second row goes to Bitcoin Stock Vector [dreamstime.com], captioned 'Bitcoin is boxing with dollar'. Dreamstime it is; a drawing depicting David vs. Goliath would be more realistic. What will next Christmas bring for bitcoin?

Bitcoin in the News - Oct/Nov 2015

Continuing to catch up with news that has been reported since I started this blog, let's look at the two full months following Bitcoin in the News - Q3 2015. In both months there was one story that stood out above the others.

October:

• Bitcoin exchange Gemini safe and legal: Founders (cnbc.com, *) • 'Cameron and Tyler Winklevoss, famous for their legal spat with Facebook founder Mark Zuckerberg, launched bitcoin exchange Gemini on Thursday.'
• Winklevoss Exchange Gemini Struggling to Win Bitcoin Traders (coindesk.com) • 'Gemini, the long-awaited New York-based bitcoin exchange founded by Cameron and Tyler Winklevoss and billed as the "Nasdaq of bitcoin", finally debuted on 8th October.

November:

• This convicted Ponzi-schemer may be responsible for bitcoin's massive price spike (businessinsider.com) • 'Bitcoin is ripping higher these days, and a report from the Financial Times suggests that a convicted Ponzi-schemer's latest enterprise could be behind the surge.'
• Bitcoin Fluctuates (techcrunch.com) • 'If you haven’t stared at the price of bitcoin over the past few days, you’ve missed some excitement.'

A useful graph showing recent bitcoin price movements can be found at Bitcoin Price Index Chart (coindesk.com).

Another story that garnered attention was EU clamps down on bitcoin, anonymous payments to curb terrorism funding (reuters.com). Negative stories on bitcoin are nothing exceptional, e.g. Ben Bernanke: Bitcoin Has 'Serious Problems'. It's worth paying attention when a former Federal Reserve chairman talks about money. What are those 'serious problems'?

"It hasn't shown to be a stable source of value" [...] and its role as "a vehicle for illicit transactions, drug selling or terrorist financing or whatever".

This sort of story often generates sharp comments from the bitcoin community and in this case there were more than 150. Most of them focused on the concept 'stable source of value' in contrast to the U.S. dollar.

***

(*) NB (to myself for later action): The CNBC page gave me a message that I hadn't seen before -- 'The audio or video on this page requires DRM software that Firefox does not support' -- along with an accompanying link, Watch DRM content on Firefox.

Bitcoin in the News - Q3 2015

Continuing with Bitcoin in the News - June 2015, I continued exploring the bitcoin world by catching up with the news for July, August, and September of this year. I noted about 70 stories, although September was problematic, because Google News Alert emails became sporadic around the beginning of that month. The upshot was less repetition, but more chance of overlooking something small and quirky.

There are a few ways of categorizing the news. The most important stories are picked up by the main news services and help to identify the big stories of a particular month. For example,

• 2015-07: Fearing return to drachma, some Greeks use bitcoin to dodge capital controls • Reuters
• 2015-08: MtGox bitcoin chief Mark Karpeles arrested in Japan • BBC News
• 2015-09: Bitcoin Is Officially a Commodity, According to U.S. Regulator • Bloomberg
• 2015-09: Bitcoin: Anything But a Currency, U.S. Government Says • Fortune

I give two examples of that last story, because the cited services specialize in business news and are more focused than general news services like Reuters and BBC. Also relevant are services that specialize in technological news. For example,

• The Bitcoin Schism Shows the Genius of Open Source • Wired
• Recording Nasdaq Trades on Bitcoin Platform: How It Works • MIT Technology Review
• Hacking Team broke Bitcoin secrecy by targeting crucial wallet file • Ars Technica

Two more business news services are worth mentioning because of their prestige. Although less useful because they sit behind a paywall (I'm willing to pay for one service at a time, not ten), the titles offer clues to the same stories on other, open sources.

• IBM Adapts Bitcoin Technology for Smart Contracts • WSJ
• Argentine small businesses turning to bitcoin • FT.com

One story that should have been included above, but missed all the cuts, was

• Bitcoin's forked: chief scientist launches alternative proposal for the currency • The Guardian

For the future of bitcoin, it could turn out to be the most important story of third quarter 2015.

Bitcoin in the News - June 2015

Is that right? This post is dated December 2015, but the title says, 'News - June 2015'. When I first got the idea to blog about bitcoin, I set up a Google News Alert to track the subject. That was at the end of May, when the first news reports didn't make much sense to me. With six months of bitcoin experience behind me, I thought it might be worthwhile to take a second look at the first full month of reports. Would they make more sense now?

Indeed they do. With 30+ days of alerts and Google reporting three bitcoin news items per alert (the alerts include other subjects that interest me), that's nearly 100 news reports to review. Most of the reports weren't particularly interesting -- price movements, scare stories, bitcoin is dead, that sort of thing -- but I short listed ~20 for further review.

The big news of that month was undoubtedly Bitcoin Rules Completed by New York Regulator (nytimes.com), reported by a number of sources. The NYT article started,

With just weeks to go before he steps down, Benjamin M. Lawsky, New York’s top financial regulator, on Wednesday released rules for running a Bitcoin business in the state. In a speech at the BITS Emerging Payments Forum in Washington, Mr. Lawsky announced the final set of rules that govern virtual-currency businesses, concluding a nearly two-year effort to regulate the growing Bitcoin industry. Mr. Lawsky said that the final form of the so-called BitLicense would put in place crucial guidelines for protecting consumers and preventing money laundering.

It doesn't take long to realize that, like oil and water, the ideas behind bitcoin and regulation don't mix well. Later the NYT article noted,

Throughout the process, some Bitcoin advocates have questioned whether Mr. Lawsky was overstepping his boundaries and proposing regulations that could throttle the nascent technology. Critics on the Internet site Reddit satirized the regulator by depicting him atop the Iron Throne from the HBO series “Game of Thrones” with the caption “Hail King Lawsky.”

Note the capitalization of 'Bitcoin' throughout. The full title and address (dfs.ny.gov) of the 44-page PDF is NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES; NEW YORK CODES, RULES AND REGULATIONS; TITLE 23. DEPARTMENT OF FINANCIAL SERVICES; CHAPTER I. REGULATIONS OF THE SUPERINTENDENT OF FINANCIAL SERVICES; PART 200. VIRTUAL CURRENCIES. I downloaded the file and set it aside for a rainy day.

Many of the items served by Google weren't news, but opinion. Sometimes it's hard to tell the difference, as in Bitcoin Rules Divide Wall Street's Digital Currency Community (ibtimes.com).

Bitcoin is facing a coming-of-age moment. The cybercurrency, beloved by techno-libertarians and notorious for financing the Web’s largest black market, will soon come under the formal purview of New York state financial regulators. That’s anathema to bitcoin diehards.

Wall Street is the financial district of New York, which is the financial capital of the USA, which is one of the economic engines of the world, so this story isn't disappearing anytime soon.

Did I really say that scare stories and 'bitcoin is dead' reports aren't particularly interesting? Maybe that's because there are so many of them; for example: Bitcoin isn’t the future of money - it’s either a Ponzi scheme or a pyramid scheme (washingtonpost.com), Lloyd's Report: Bitcoin Will Always Be Risky (coindesk.com), and Matt O'Brien: The scam called Bitcoin (nzherald.co.nz).

No wonder there's so much call for regulation. No one wants to sink hard-earned money into a scam. On the other, positive side of 'the coin', there's a concept of safe haven, as in Greeks are rushing to Bitcoin (money.cnn.com).

With bank doors slammed shut, frantic Greeks are turning to online trading platforms to see if the digital money Bitcoin is a better bet than the euro.

I could go on -- Bitcoin Will Be Money If It Becomes Boring (bloombergview.com), EBA: 51% Attack Remains Bitcoin’s Biggest Problem (coindesk.com), Blockchain Technology Will Transform the Practice of Law (bol.bna.com), and more -- but I'll save that for another time.

Bitcoin Mining Farm - Electricity

In my previous post, Bitcoin Mining Farm, I quoted Eric Mu, the brain behind the bitcointalk.org thread, saying,

Using cheap hydro-power and low-cost water-cooling system, this farm has achieved high ROI rate.

That one sentence pinpoints an essential aspect of the business model: cheap electricity. The following photo shows the bitcoin farm (blue roofs) colocated with a hydropower plant (red roof) in western China.

Multi-petahash BTC mine in Kangding, Sichuan, China (p.21)

Following are selected quotes from the thread, all discussing the importance of cheap electricity.

p.1

The equipment is actually relocated - the new location has cheaper electrical rate so it makes sense to relocate. We would have bought new ones but the supply has been tight and we deem the prices for the new ones are too high.

p.4

The electricity price in the new site is 43% cheaper than the previous one that we relocated from; the downside is that we will have to invest about RMB 4 million in the infrastructure. While the facility right now is filled with old machines of our own (about 5.3P), we have two warehouses under construction and are also looking to buy 6P worth of secondhand miners.

p.11

As some of you already know, I had been traveling. Right now I'm writing from my hotel room in Dalad Banner, a county-level administration in Inner Mongolia with a population of 0.34 million (according to Baidu Zhidao, the Chinese Wikipedia ). [...] The bus ride took 10 hours to bring us from the nameless valley we are located in to Chengdu. We arrived in late evening. We stayed in Chengdu that night and boarded the airliner from Chengdu to Hohhot the next morning. [...]

In the middle of nowhere, we saw this mammoth mine - I was told that it consumed half of the electricity the rest of the county collectively uses. Though I can't verify its claim being Asia's largest, it is obviously larger than ours in Kangding. But the thing is that the electricity that was regarded cheap a couple years ago, was no longer when compared with the newly discovered western Sichuan hydropower, so don't be surprised that it will be emptied over the next few months.

p.15

One caveat of relying on hydropower is that in winter, the supply is likely to be limited. • Q: Can you elaborate on why the hydropower would be limited in the winter? Something freezing somewhere? Electricity needed elsewhere? [...] Most likely the water freezes during the winter so the flow to the hydro station is substantially reduced. • A: More to do with the local precipitation pattern than temperature. We have been thinking of building mobile mines that can be towed by trucks like trailers.

p.16

[Quoting an external source] In spite of the a bright picture painted by the central government's "One Belt And One Road" plan for China's hydropower future, in parts of the country, imbalance of electricity consumption and development remains. Large amount of hydropower is "wasted", new projects are getting increasingly technically challenging, and the resettlement are becoming more and more costly – all threatening the healthy development of the industry.

Near the end of the thread, Eric Mu says, 'the total hashrate will eventually stabilize at 21 to 25 P'. That takes a lot of electricity.

Bitcoin Mining Farm

Posting about bitcoin once a week gives me a regular opportunity to look into different aspects of the subject. One of the most interesting resources so far is on the 'Bitcoin Forum' (bitcointalk.org; see the navigation sidebar on the right): Three months living in a multi-petahash BTC mine in Kangding, Sichuan, China. The blog-like thread was maintained by Eric Mu, CMO of HaoBTC.

I have embarked on a three-month project working and living in a BTC mining farm located in the mountainous region of western Sichuan province. Using cheap hydro-power and low-cost water-cooling system, this farm has achieved high ROI rate. Right now it generates 4.7 petahash/sec and according to our plan will max at 12P over the next three to four months period.

CMO stands for 'Chief Marketing Officer' and HaoBTC 'provides innovative and well-rounded solutions for global Bitcoin users and investors' according to haobtc.com. The forum thread is full of photos like the following.

Vocabulary - Bitcoin [bitcoin.org] informs,

Hash Rate - The hash rate is the measuring unit of the processing power of the bitcoin network. The bitcoin network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second.

For more, see What does One Petahash look like?; 'An Asicminer Blade is 10GH, so 1 PH is 100,000 of these.' For more from Eric Mu, see My Life Inside a Remote Chinese Bitcoin Mine [coindesk.com].

Bitcoin 2.0

A couple of weeks ago, in my Halloween post Bitcoin : Trick -or- Treat?, I was baffled by a new term.

That last reference mentions 'Bitcoin 2.0 technology'. I wonder what that means.

The reference was When, Not If: Bitcoin in Israel, and the context was

There were two things that struck me as particularly interesting about the Tel Aviv Inside Bitcoins conference. First, there was a heavy emphasis on Bitcoin 2.0 technology. Presentations from Colored Coins, Ethereum, Mastercoin, Lazooz, and others played a significant role in the tone of the conference. I found this to be very interesting, especially as many throughout the globe are still trying to understand and utilize Bitcoin 1.0.

Google to the rescue, as usual. Its first search result was Bitcoin 2.0 Applications, where I found,

The technology underlying the system -- the blockchain and mining effort to confirm and validate transactions on the blockchain -- is potentially even more exciting and valuable than the currency. Bitcoin mining serves a dual purpose: it creates new bitcoins to increase the money supply and simultaneously secures and verifies the blockchain, which is a public ledger of every transaction.

While this functionality serves to keep internal bitcoin-bitcoin transactions valid, it can also be used to confirm and validate external, non-bitcoin specific transactions. In other words, this enables the application of decentralized public ledgers for purposes other than digital currencies. These applications are referred to as Bitcoin 2.0.

In other words, Bitcoin 1.0 is where you find the people who are interested in bitcoin for its libertarian angle, for the currency. Bitcoin 2.0 is where you find the technologists. Many people are in both camps.

Another interesting quote I found in 'Bitcoin in Israel' developed the other half of 'two things that struck [the author of the piece]'.

Second, which I found more surprising, was the fact that Bitcoin was seen as a clear and obvious inevitability, by all parties. Now for ordinary Bitcoiners, this doesn’t sound like a shocking statement, considering our natural optimism. But it wasn’t just Bitcoiners sharing this sentiment. There were speakers from Israeli Parliament as well as the Central Bank of Israel. I remember my jaw hitting the floor when I heard a Central Banker make reference to when Bitcoin becomes systematically valuable, just like the dollar or euro. Not if, but when.

I've encountered a similar sentiment in other sources. Why Israel?

'Bitcoin Buy Online Books'

Getting back to Google Autocompletes 'Bitcoin Buy', my quest to actually buy something using bitcoin, Google's suggestion for the letter 'b' was 'bitcoin buy online books'. It turns out that the phrase can mean two different things: (1) 'buy books online paying with bitcoin' and (2) 'buy books about bitcoin online'. Since both activities are promising, I decided to combine them into 'buy books about bitcoin paying online with bitcoin'.

The first of the results returned was an Amazon.com link for 'Bitcoin: And the Future of Money' by [CNN Money reporter] Jose Pagliery. I doubt that Amazon accepts bitcoin directly -- and I can always use a credit card if I really want the book -- so I decided to continue searching. I did note that the book was '#31 in Books > Business & Money > Economics > Digital Currencies, a reference which might be useful later.

A significant number of search results appeared on the theme of 'What is an Order Book?', as in Bitcoin Trading: Interpreting Order Books. Thanks to a longtime personal interest in investing and markets, I'm already familiar with the term, and didn't need to spend any time on the subject.

Many search results led to outdated pages like Where to Spend Your Bitcoins (October 2012). Here a comment directed me to SynergeticPress.com, 'first book publisher to accept bitcoin for payment'. I couldn't find any books about bitcoin, so I noted the resource for future reference and moved on. It was reassuring to know that I'm not the only person who can't figure out what to do with bitcoin.

Eventually I came to bitcoinbook.info, a sales page for 'Mastering Bitcoin' by Andreas M. Antonopoulos, one of the gurus for the bitcoin movement. Although several other references hinted that I could buy the book using bitcoin, the publisher's checkout page offered only credit card payment. Perhaps I overlooked something, so I'll come back to this later. While I was looking at different resources for the book, I found one that offered a PDF version marked 'Early Release: Raw and Unedited'. Try before you buy? I'm good with that.

Most of the other resources that I encountered for books about bitcoin pointed to sales pages on Amazon. Finally I came to The Book of Satoshi.

Provides a convenient way to parse through what Bitcoin’s creator wrote over the span of the two years that constituted his "public life" before he disappeared from the Internet ... at least under the name Satoshi Nakamoto.

The page even had a link to 'Buy Ebook with Bitcoins', exactly what I was looking for! I followed the procedure to pay using my bitcoin wallet and about an hour later received an email informing me that 'Your files are ready to download'.

The book arrived in a ZIP file containing two formats -- EPUB & PDF -- and I immediately opened the PDF version to verify the content. In retrospect, it's completely appropriate that my first bitcoin purchase was for an ebook about the inventor of bitcoin. The entire exercise helped me to generate plenty of ideas for future blog posts.

Bitcoin : Trick -or- Treat?

Since it's Halloween today, let's take a short break from the thread last seen on It's for Speculating, Not Buying Stuff, and look at the following composite image. Is there anything to take away here?

Google image search on 'bitcoin halloween'

Jack-o-lanterns top row, left: I'm not sure who gets the credit as creator for this image -- it's a clever carving -- so let's take the one on a bitcoin domain. Bitcoin; Carving Out History! (31 October 2013, BitcoinNe.ws); 'Finishing up October with a treat, bitcoin remains over $200 on popular exchange Mt Gox which is a ~66% increase since the 1st.'

Costumed family pictured twice in the second row, left: Bitcoin Takes on a Scary New Look for Halloween; 'Online Halloween costume store Halloween Nation asks customers to pay with Bitcoin and Paypal instead of credit cards.'

Jack-o-lantern second row, center: BitClub Network International on Pinterest; 'BitClub Network International : A Global Wealth Building Company for the Digital Currency Market. The most innovative & lucrative way to earn digital currency. Join BitClub today!'

Jack-o-lantern group picture bottom row, center: When, Not If: Bitcoin in Israel; 'Have you seen Coinapult’s pumpkins for this year?'

That last reference mentions 'Bitcoin 2.0 technology'. I wonder what that means.

It's for Speculating, Not Buying Stuff

I finally see the light! The scales have fallen from my eyes! In Google Autocompletes 'Bitcoin Buy', I wrote

Why suggest other means of payment (credit card, debit card, paypal)?

In other words, why use one means of payment (like a credit card) to buy something (bitcoin) to buy something else (as in Buying Stuff with Bitcoin)? Why not just use the credit card to buy the 'something else'?

There's a useful site at en.bitcoin.it/wiki which keeps popping up on my searches. In a post, How To Buy Bitcoins With Your Credit Card, I learned,

Intro: While in the recent past it has been risky for sellers to offer this option, some services are now allowing you to buy bitcoins with your credit card. However, that does not mean it is entirely risk free in all markets; if you are from Asia or Africa your funds may be frozen by credit card payment processors for further inspection due to the large amounts of fraud that come from those continents.

Note: If you only want to take advantage of Bitcoin's price volatility you can trade CFDs on Bitcoin via a credit card on sites like AvaTrade or Plus500. When trading online your capital may be at risk. Trading CFDs is suitable for more experienced traders.

According to Wikipedia, CFDs are 'financial derivatives that allow traders to take advantage of prices moving (see Contract for difference). So the main interest in bitcoin isn't to buy stuff; it's to speculate in the price movement of bitcoin. This was confirmed in a CoinDesk article, How can I buy bitcoins?

Surprisingly, it's still not easy to buy bitcoins with your credit card or PayPal, depending on your jurisdiction. This is because such transactions can easily be reversed with a phone call to the card company (i.e. 'chargebacks'). Since it's hard to prove any goods changed hands in a transfer of bitcoins, exchanges avoid this payment method and so do most private sellers.

It's not that the credit card companies won't allow bitcoin transactions. For them it's just another commodity or service that a third party is buying. It's the sellers of bitcoin who won't accept credit cards. Since they can't prove that they've actually delivered something to the buyer, they risk a chargeback.

Given that I'm not interested in speculating with bitcoin -- let's not use the euphemism 'investing' -- does it still make sense to look into it? I'll think about that as I continue this blog.

Buy Bitcoin Geographically

At the end of my previous post, Google Autocompletes 'Bitcoin Buy', I noted,

That gave me plenty of ideas for further research -- Why the emphasis on geography? (australia, canada, ...)?

Starting with 'buy bitcoin online australia', first on the list was Buy and sell bitcoins in Australia, with cash and online.

LocalBitcoins.com is a marketplace for trading bitcoins locally for cash or online payments of your choice. Find local bitcoin exchangers in your country or start your own bitcoin exchange for profit.

The LocalBitcoins.com page has three sections:-

• Buy bitcoins online in Australia
• Sell bitcoins online in Australia
• Buy and Sell Bitcoins in these popular cities in Australia

In the first two sections, the various 'Buy' prices (~380 AUD) were about 20 AUD higher than the 'Sell' prices, making this the online equivalent of a currency exchange. In the third section, the first listing was for 'Trade bitcoins in Sydney NSW, Australia', where the highest prices were for 'Buy bitcoins with cash'. Since I think I know where this is going, I'll leave it there.

What about 'buy bitcoin online belgium', where I happen to reside? The equivalent page is Buy and sell bitcoins in Belgium. I don't have any cash that I need to convert to bitcoin, but I'll keep it in mind. Also interesting is Dutch Bitcoin Exchange Bitplaats Expands to Belgium (January 2014).

Belgian users can now trade digital currency from Bitplaats using the country's dominant online payments platform, Bancontact/Mister Cash.

Bancontact++ is the country's primary system for paying with bank cards, aka debit cards. This brings me to the next question from the 'Google Autocompletes' post:-

Why suggest other means of payment (credit card, debit card, paypal)?

I'll tackle this in my next post.

Google Autocompletes 'Bitcoin Buy'

After my attempt at Buying a Chess Set with Bitcoin flopped, I wondered,

Maybe I'm going about this the wrong way. Rather than try to buy a specific item -- this isn't about Amazon or eBay, after all -- I should look at the types of goods and services where bitcoin is preferred.

Here I fell back on the old 'Google Autocompletes' trick. I fed Google the keywords 'bitcoin purchase' and Google immediately suggested adding the words

online, uk, paypal, canada, india, usa, ...

On the keywords 'bitcoin buy' Google suggested adding

online, and sell, with credit card, price, instantly, debit card, paypal, gold, stuff, usa, ...

Since 'online' started both lists, I added that to both phrases, e.g. 'bitcoin purchase online', and sent it to Google. Here I received a list of pages for buying bitcoin. Since that wasn't what I was looking for, I extended the search by adding a single letter at a time, e.g. 'a', then recorded the suggestions that Google made for that letter. On adding 'a', it suggested

australia, alcohol, anything

On adding 'b',

books

On adding 'c',

credit card, canada

And so on. Now that gave me plenty of ideas for further research -- Why the emphasis on geography? (australia, canada, ...)? Why suggest other means of payment (credit card, debit card, paypal)? -- but I ran out of time to pursue them. I'll come back to the subject on my next post.

Buying a Chess Set with Bitcoin

I ended my previous post, Buying Stuff with Bitcoin, with a specific idea for this current post.

How about using bitcoin to buy a chess set? I didn't notice any possibilities while I was researching this post, but I didn't put any effort into it either. I'll look at that for my next post.

The first results on a search for 'bitcoin chess set' turned up many of the same pages I found in 'Buying Stuff'. The first real chess set was Bitcoin Gifts | Traditional Mandarin Design Chess Set (bitcoinbazaar.co.uk), which is more of a decorative item than a set I would use to play.

How about a Staunton style set? Here the first few results were from HouseOfStaunton.com and Amazon.com with the note 'Missing: bitcoin', i.e. let's first show this guy Staunton sets, because that's probably what he really wants. After those were a couple of metal sets from Peerhub.com with the note 'Payment accepted: PayPal / Bitcoin'. That's more like what I had in mind, but I prefer a wood set. Here I found nothing.

How about 'bitcoin chess board'? Here I also found nothing in the first few pages of results, which were mainly articles on bitcoin using a chess metaphor. The first result suggested an image search, which gave me the idea to redo 'bitcoin chess set', this time on images. The result is shown below.

Four of the six items in the first line, including the first two on the left, were again from bitcoinbazaar.co.uk, so I took the hint. The site's About Us page says,

Here at BitcoinBazaar we have some of the coolest gifts that Bitcoin can buy.

We like the fact that Bitcoin provides the easy transfer of value on an unprecedented scale. [...]

We like the fact that the Bitcoin network is secure. [...]

We like that the use of Bitcoin offers users increased anonymity to that of the traditional banking sector – the network verifies the payment and not the identity. [...]

Our primary aim as a company is to help promote the use of Bitcoin around the world and help it to gain traction as an accepted currency. [...]

Got it, thanks. It's as much about the political statement as it is about the medium of payment. I'll keep that in mind for a future post, but first I want to finish my search for a chess set.

Maybe I'm going about this the wrong way. Rather than try to buy a specific item -- this isn't about Amazon or eBay, after all -- I should look at the types of goods and services where bitcoin is preferred. I'll pursue that in another post.

Buying Stuff with Bitcoin

After buying some bitcoin -- as outlined in The Bitcoin Price and its follow-up posts -- my next question was 'What can I do with it?' If you click to my Google+ profile on the navigation bar to the right, you'll see that most of my online writing is focussed on chess. That gives me the natural question, 'What can I do with bitcoin in the chess world?'

A search on 'chess bitcoin' uncovers a number of resources, of which the first is a FAQ-style page on Chess.com: Can I purchase a membership with Bitcoin?

You can now pay for your Chess.com membership using Bitcoin! We have partnered with Coinbase to accept payments.

It appears that the option has been available for almost two years: Chess.com Now Accepts Bitcoin! (November 2013). Since my own bitcoin is on Coinbase, this would be an easy place for a starter transaction, but I'm already a Chess.com Platinum member and am happy with that. What else is there?

How about this: Chess.com Has a Bitcoin Sister Platform Called Gambit.com (Cryptocoinsnews.com; October 2014)? The introduction to the article explains,

Gambit.com is the name of an up and coming Bitcoin gaming website created by Jay Severson, one of the internet entrepreneurs who took Chess.com from a small business webpage to one of the most frequented online gaming websites (bigger than Zynga) in the world. Users that go to Gambit.com are able to play familiar games against each other in classic PvP internet arcade style; however, there is one featured twist that spices things up quite a bit: real-time betting. Users can choose to wager Bits, Bitcoin bits, or Points, virtual points that are nonredeemable for Bitcoin.

That's nice to know, but although I like to go to a casino once in a while, I'm not much of a gambler and I'm not interested in online gambling. There's also the important issue of whether I can legally do it. I've had several offers from parties who wanted to place ads for online gambling on my web site and I've always thrown them in the digital trash.

How about using bitcoin to buy a chess set? I didn't notice any possibilities while I was researching this post, but I didn't put any effort into it either. I'll look at that for my next post.

OKCoin Not OK?

While researching the post on Bitcoin Bid/Ask and Arbitrage, I discovered an interesting resource for tracking global bitcoin prices. A sample display is shown below, with bitcoin exchanges listed in descending order of 'volume'.

bitcoincharts.com/markets

The green and red colors show the current price trend on the exchange, while 'Colors will fade to black slowly depending on how long ago the last trade happened.' OKCoin, the first exchange listed, shows a volume nearly six times the volume of the second exchange listed (it might even be more than all of the other exchanges combined), although the data is from '3 days 3 hrs ago' and is shown in black. The Wikipedia entry for OKCoin says,

OKCoin.com is a Chinese digital currency trading platform and exchange based in Beijing. OKCoin was founded in June 2013 and by 2014 had grown to become the largest Bitcoin exchange in China. As of June 2014, the company has over 80 employees.

Coindesk.com has a news page for the exchange -- OKCoin Bitcoin Exchange News -- where the most recent entry says, 'OKCoin Restricts Bitcoin Deposits for US Customers' (31 Aug 2015). That doesn't explain the entry in black. Is it a public holiday period in China or is there a technical problem? To be continued...

The Bitcoin Price Peak

A couple of weeks ago, in The Bitcoin Price, I noted,

The peak was $1145 on 30 November 2013.

What was the reason for the peak? I found a neat chart that answers this question and many others.

Source: Bitcoin Price Chart with Historic Events
(bitcoinhelp.net)

The site's explanation is

2013-11-29 - Exchange Rate Peaks at $1,242 on Mt. Gox • Rapidly growing Bitcoin investment from China steadily drives prices higher and higher, reaching a peak on November 29th. Subject to strict controls concerning the movement of money across the country's borders, Chinese citizens embrace the freedom provided by Bitcoin with open arms, seeking an alternative to the state's inflating official currency, the Renminbi. [...]

and

2013-12-05 - Chinese Government Bans Financial Institutions From Using Bitcoin • Putting its first restraints on Bitcoin's surging popularity, the People's Bank of China declares Satoshi Nakamoto's novel invention not to be a currency. The policy change prohibits any financial institution to trade, insure, or otherwise offer services related to Bitcoin. [...]

This was confirmed in a report from The Motley Fool, Making Sense of Bitcoin Since the Latest Crash:-

On Dec. 5, China's central bank issued a warning about the usage of Bitcoin as a currency against the country's own yuan. As part of this warning, Chinese Bitcoin exchanges such as BTCChina were required to stop all deposits in yuan to their exchanges, making it nearly impossible for newcomers to Bitcoin to be able to invest their yuan into the cryptocurrency. This statement by China's central bank was seen as a major blow to the confidence of Bitcoin and comes with continuing skepticism for the coins.

From this and other stories, I'm starting to understand that the success of bitcoin depends heavily its success in China.

Bitcoin Bid/Ask and Arbitrage

In my previous post, The Bitcoin Price, I bought a small quantity of bitcoin on Coinbase and then wondered, 'How was that price determined?' I started searching for bitcoin bid/ask quotes and found dozens of them on Bitcoin Markets [bitcoincharts.com], sorted in descending order by 'Volume'. Since Coinbase wasn't shown, I checked that site (I could have done that first) and found the question, Why is the price on Coinbase different from other websites?

The price of bitcoin on Coinbase is based on the average of a variety of exchanges, so sometimes our price differs from any one particular exchange. As the price between different exchanges stabilizes, our price will be naturally self-correcting.

That answer implies that some sort of arbitrage is active. I started searching for that and found Bitcoin Price Arbitrage Explored [cryptocoinsnews.com; dated '04/11/2014' (11 April or 4 November? I really dislike dates written like that)]. The essence of the article is simple.

Pure arbitrage in the Bitcoin exchange market is not viable because of the slow transaction mechanism imposed by the blockchain.

I found similar conclusions on other pages. Putting it all together, the price on Coinbase is whatever they say it is.

The Bitcoin Price

In my previous post, Buying Bitcoins, I wasn't actually able to buy anything. I initiated a transfer from my bank to an online bitcoin account. A few days later the transfer completed and I exchanged my Euros for a fraction of a bitcoin. The price, which I didn't note, was something like 206 Euros per bitcoin.

How was that price determined? I'm not sure because I couldn't find an explanation of the pricing mechanism. Since the value of anything is whatever people are willing to pay for it, I imagine there are bitcoin traders scattered throughout the world exchanging their hard-earned bitcoins for various national currencies. These people -- maybe they are robots -- are setting the price.

Here is a chart of bitcoin prices since December 2012. The peak was $1145 on 30 November 2013. It's been a long downhill slide since then.

coinbase.com/charts

I'll continue to research the pricing mechanism and will report any findings in a future post.

Buying Bitcoins

Now that I've acquainted myself with the fundamentals of bitcoins, the next step is to start using them. The Coindesk.com article, How Can I Buy Bitcoins?, explains the basics, starting with 'First, get yourself a bitcoin wallet'. Of the four options for a wallet -- desktop, mobile, online, and hardware -- the best fit for me is 'Online'. I opened an account with Coinbase and transferred a small amount of money to it. Now I have to wait for the transfer to complete.

A Blog Logo

Returning once more to Admin Tasks, I assumed that adding a bitcoin logo to this blog's header would be straightforward. As so often happens with assumptions, I was wrong

The first task was to choose a logo. The several styles of logo, all built around an upper-case 'B', are also designed to serve as an eventual currency symbol. I chose a blue logo, shown on the left, to match the design of this blog.

The second task was to add the logo to the blog's header. At this I failed. All of my attempts were in some way unsuccessful and it appears the safest way to do this is to alter the blog's template. That makes the design a little less portable and I decided to save the effort for another time.

In the meantime I added the closest HTML symbol I could find, the Thai bhat, '฿'. This is intended to be a placeholder until I work out a better solution.

Market Resources

In my previous post, Admin Tasks, I mentioned the desirability of displaying market quotes in the right navigation bar. The following chart shows a list of securities++ related to the term bitcoin.

finance.yahoo.com symbol search on 'bitcoin'

The most promising symbol appeared to be Bitcoin Shop Inc. (BTCS), listed in the pink sheets plus two German exchanges. I didn't manage to find a way to show quotes for the company, so I settled for displaying the latest news. I'll continue to tinker with quotes++ as I get new ideas.

***

It turns out that when I changed the name of the blog a few weeks ago, I inadvertently damaged two navbar resources: 'Comments' and 'Blog List'. This is now fixed.

Admin Tasks

In First Post, New Blog, I included a checklist of administrative tasks, all of which have been done. Here are a few more:-

• Logo
• Market quotes

I also need to verify that comments are working properly.

Adding a Description

Since every blog needs a description, I added one. For now it consists mainly of keywords. If I could change the name of the blog, I would now call it 'Bitcoins and Blockchains'... [...] ...and so is it now titled!

Beginning Bitcoin Videos

In First Post, New Blog, I wrote,

I entered the term 'bitcoin' into Youtube and started watching videos. This was more fruitful. General impression: lots of young, fast-talking Silicon Valley types proselytizing on the subject; many references to sinister aspects that make me wonder if it's a sound place to put any money. I'll come back to the videos on my next post.

First, here's a short, simple introduction to the concept.

The Essence of How Bitcoin Works (Non-Technical) (5:24) • 'A brief intro to the main ideas behind How Bitcoin Works, including how money is transferred, who keeps track of it, and how the whole thing is secured.'

A longer version, more technical version by the same video maker can be found at How Bitcoin Works Under the Hood, currently with 659.583 views and 1.274 comments.

For an introduction to the history and some of the social aspects, see Everything You Need to Know About Bitcoin : VICE Podcast 027; 'Reihan Salam sits down with Jerry Brito, one of the leading experts on Bitcoin.'

To hear from some of the main insiders, see The Bitcoin Phenomenon. Near the end we learn,

Starring in order of appearance:- Gavin Andresen, Peter Vessenes, Bennett Hoffman, Angela Keaton, Jeremy Liew, Fred Ehrsam, Erik Voorhees, Trace Mayer; Shot on location at Bitcoin 2013 in San Jose.

After these clips, almost anything featuring Andreas Antonopoulos is worth viewing (except when he's speaking in front of people who are eating -- 'crunch, crunch, slurp, crunch').

First Post, New Blog

Why this topic? Because I sense that it's important and because I know absolutely nothing about it. A weekly post on this blog will give me the time to investigate a different aspect regularly.

How to start? First I read the main Wikipedia article, from which I took away absolutely nothing. I'm comfortable with both software development and math, but that didn't help at all. My guess is that to understand the Wikipedia article, you first have to understand the subject.

After Wikipedia, I entered the term 'bitcoin' into Youtube and started watching videos. This was more fruitful. General impression: lots of young, fast-talking Silicon Valley types proselytizing on the subject; many references to sinister aspects that make me wonder if it's a sound place to put any money. I'll come back to the videos on my next post.

Why this title ('Bitcoins and Bytes') for the blog? The obvious choices were already taken and I wanted something that wouldn't embarrass me later. Time will tell if I succeeded. I've been blogging long enough to know what else needs to be done. Here are a few administrative tasks to be considered, in the same order that they appear on my other blogs.

• Description
• Adsense
• Resources [links]
• Comments
• Archive
• Search
• Labels
• Other blogs
• News

How long will I blog on the topic? As long as I need to. I'm the sort of person that appreciates a beginning, some continuity, and an end. This post is the beginning...