Dec 232016
 

Circle Alternative

We covered earlier this month that Circle ended support for buying Bitcoin. Since then, we’ve gotten a lot of queries about what the best methods to buy Bitcoin are. This post is to give you alternatives to Circle to buy Bitcoin that are as convenient as Circle (actually, Circle was really good and convenient to buy Bitcoin, so it isn’t the same, but close enough I suppose).

The news and timing of Circle pulling out of the Bitcoin market couldn’t have been worse. The price of Bitcoin is rallying, and as of writing this, the price is hovering around $903 per Bitcoin. Compare this to the price of Bitcoin around $750 when Circle announced the shut down of the ability to buy Bitcoin on its platform and you get the idea why people were really unhappy. With the price rally, many people new to the Bitcoin markets are looking to get into it. Here are some good ways for them to buy Bitcoin.

Coinbase: Coinbase is the service most like Circle, and is the closest alternative to Circle. It is available in 30+ countries including the United States. If you’re a US-based person, Coinbase is probably the easiest way to buy Bitcoin. You just need to connect your bank account with your Coinbase account, and you’re all set to go. There are varying limits and verifications. If you’re sufficiently verified, you can buy Bitcoin instantly. Coinbase also has an exchange called GDAX. In addition, you can use Coinbase to buy Ethereum as well.

Buy Bitcoin on Coinbase

Gemini: Gemini is the latest US based exchange run by the Winklevii twins (of Facebook/the social network fame). The twins are seriously trying to get the first Bitcoin ETF approved in the US, and have a pending ETF application with the SEC. In addition to being a regulated exchange, Gemini has a closing auction that moves a significant amount of volume sometimes (similar to what the NYSE does at closing). It is newer than Coinbase but is focused exclusively on Bitcoin and is professional-grade.

Gemini auction data

Local Bitcoins: This allows you to buy Bitcoin peer-to-peer. To buy Bitcoin, you will transfer money to someone and you will receive Bitcoin into your wallet after the transaction is confirmed. The prices tend to be a bit higher but this method provides you with greater anonymity when buying Bitcoin. In addition, there are many different sellers, and you can use many different methods to buy Bitcoin, from ACH to Wire transfer to PayPal. Obviously the prices may be higher if you’re using chargeback methods like PayPal but you have the option. Depending on the city, you might also be able to buy Bitcoin with cash here.

Buy Bitcoin from LocalBitcoins

Bitsquare: This is not the best alternative to Circle in the sense that they are on the opposite spectrum when it comes to ease-decentralization spectrum. Circle and Coinbase are very centralized, and easy to use. Bitsquare is completely decentralized and hard to use. However, in the spirit of decentralization that Bitcoin promotes, here’s an alternative if you’re looking for one.

Photo Credit: derekbruff

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Jan 062016
 

Bitcoin API Providers Pivoting

Today, Gem, a Bitcoin API provider, raised $7.1m in its Series A round bringing the total money it raised to $10.4m. That’s a significant chunk of money for the California-based startup and a nice piece of news in 2016 for the Bitcoin economy. After all, another Bitcoin API company, Chain, raised a total of $43.3m and completed its series B raising $30m.

Also, it is not as if there is a shortage of Bitcoin APIs in the market – BitPay for example has several open sourced APIs into the Bitcoin network such as BitCore for getting data and statistics from the Bitcoin blockchain and Copay as a Bitcoin wallet. There are other options for developers too, such as BlockCypher to get data from the Bitcoin blockchain.

So why are Bitcoin APIs hot with investors again, pouring in scores of millions of dollars into these companies? The answer is, they are not – these companies are all pivoting into something more than just an API.

APIs Make Sense for Developers

From a developer perspective, Bitcoin APIs make a lot of sense. If you’re building an application that needs to look up the Bitcoins stored in a wallet, you can either do that through a one-line call to an API or download the entire Bitcoin blockchain, write your own parser and hope you’ve not made an error. Then, you need to keep the blockchain updated, so you’ll have to run a node.

Instead, these Bitcoin API services do all the hard work for you (presumably) and protect you from attacks, stale data, etc. so that instead of every small developer trying to reinvent how to get data off of the Bitcoin blockchain, they can instead just focus on building their application instead.

However, APIs are not too Profitable

Merely providing an API cannot be very profitable for the companies and won’t justify a $100m valuation. After all, companies in the Bitcoin space can provide these APIs with relatively low upkeep and therefore the business is fairly commoditized. It is hard to get revenue off of a product when a better capitalized rival is offering the same service for free.

The Pivots

Chain, which was one of the first Bitcoin API providers and one of the best funded startup in the Bitcoin space actually killed its original product of providing an (free) API to the Bitcoin blockchain for developers. It’s a shame, since they courted developers quite actively through conferences and other ways. Chain is now pivoting into ‘digital assets’ i.e. helping companies like NASDAQ track the shares that they issue on their private markets on the blockchain. Gem itself is looking to expand into the ‘blockchain economy’.

Blockchain Buzz

Note what’s common in all these – the blockchain. That’s where the next wave of investor interest is going into, and it is not necessarily going to be the Bitcoin blockchain, although many products that are actually live today use the Bitcoin blockchain for asset tracking using some kind of a colored-coin protocol. However, the language the companies are using is deliberate – read the Gem blog post if you want proof – “The excitement around blockchain technology is high”, “…great potential for new distributed ledgers…”, “…emergence of the blockchain economy…” etc.

It will be interesting to see how this progresses in the future. Venture capitalists are funding companies that provides the rails for developers to use. Presumably, behind the scenes, what happens is abstracted away from the developers, so it’s easy to switch to Bitcoin or another blockchain like Ethereum or a completely private blockchain like the banks are experimenting with. It’s something to take note of when Bitcoin API companies are expanding into ‘blockchain’.

Photo Credit: clappstar

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Sep 232015
 

Invest in Bitcoin

As Bitcoin gains popularity as an alternate asset class, there are several ways how to invest in Bitcoin, but as an investor, it is important to note the pros and cons of each, and also learn to protect yourself. This should not be construed as an investment advice in Bitcoin. The post will just help you how to invest in Bitcoin if you’ve already decided to invest in it.

Why Bitcoin?

I assume you’ve already decided to invest in Bitcoin based on your research. Bitcoin is a lot of things to a lot of people – it is a currency that can be used to pay merchants, online and offline, and reduce transaction times to minutes instead of days with credit cards. Bitcoin is an asset class for investors looking to diversify their holdings. Bitcoin is ‘digital gold’ with predictable supply programmatically controlled, and can be a store of value during times of high inflation (think countries like Argentina or Venezuela). Bitcoin is a protocol for value transfer over the internet and enable new innovations in the ‘internet of things’ space and micropayments.

It is important to note that Bitcoin can be all of the things above, and that’s what it derives its value from. As an investor, you perhaps don’t need to know the intricate details of everything Bitcoin does, but it definitely helps to know, at a high level, why Bitcoin is valuable at all in the first place (this is, after all, the first step in the investment process).

Bitcoin as an Asset Class

Before learning how to invest in Bitcoin, it is important to formulate how you view your investment in Bitcoin. Remember that Bitcoin has historically been extremely volatile with wild price swings. If you can’t handle this, it is best to steer away from Bitcoin as an asset class. Also, keep in mind the investment time-frame that you’re looking at. Is it 1 year or 30 years? A lot of things can happen in long time-frames, especially in fast-changing technology fields.

It is also good to learn about the supply-side of Bitcoin. This will help you know the current inflation rate around Bitcoin. Even though ultimately only 21 million Bitcoins will ever be in existence, they are not all available today. They are created through a mining process (which is too big a topic to explain here), and the current rate is 25 Bitcoins about every 10 minutes. This corresponds to an inflation rate of around 9% per annum.

This rate is going to be cut in half sometime in the middle of 2016. Here’s a countdown, which will give you an approximate date. Unlike most other asset classes, Bitcoin’s inflation is known in advance, and there is no way to increase its supply outside of this schedule.

How to Invest in Bitcoin

The best way to invest in Bitcoin is, in my view, to directly buy Bitcoin. There are many well-established companies today that will sell you Bitcoin for dollars or Euros. If you’re in a country serviced by Coinbase (like United States, United Kingdom, most of Eurozone countries, Singapore), it’s easiest to buy from there. With Coinbase, you can buy Bitcoin directly from your bank account and store it in their online wallet, or have additional security in their vault. There are other options as well, depending on the country you’re in. See the page on Buy Bitcoin to find more options.

The next step is to determine if you want to hold your Bitcoins online with a provider like Coinbase or transfer them to your own wallet. The advantage of holding it in your own wallet is that you don’t have to worry about a company freezing your funds, or going out of business or anything else – you are in complete control of your Bitcoin and can spend them as you see fit. However, on the downside, it is very important to take good security precautions if you hold your own Bitcoins, because if you are careless and get hacked, you will lose all your Bitcoins with no protection or resources to help you regain your funds. If you plan to invest a lot of money in Bitcoins, consider buying a Bitcoin hardware wallet like Trezor or Ledger or KeepKey.

Another way to gain exposure to Bitcoin is through funds. This is not a very developed market yet, and therefore very illiquid. However, one big advantage is that you can hold it in such accounts as your IRA or retirement account, thus gaining a small exposure to Bitcoin for retirement accounts. GBTC is the only one available today in the US. The Winklevoss brothers are working towards a Bitcoin ETF but that’s not live yet.

Finally, remember never to invest more than you can afford to lose in a volatile, high-risk investment like Bitcoin.

Photo Credit: GotCredit

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Aug 092015
 

New York DFS BitLicense

The full effects of New York’s dreaded ‘BitLicense’ laws for startups are becoming more apparent as the deadline for compliance looms, with many Bitcoin startups and entrepreneurs closing their services to New York residents rather than spend hundreds of thousands of dollars trying to get a BitLicense. This move could have a profound effect on New York’s image, which wants to be a ‘fintech hub’ of the world, but the onerous regulations on startups make it an unattractive destination for entrepreneurs.

The biggest winners from New York’s loss could be other financial hubs like London, which have been far more welcoming of Bitcoin and cryptocurrency companies. In the US, states like California with huge venture capital funds’ presence might steal business away from New York. Catering to the East Coast, jurisdictions like Jersey might become attractive, considering its closeness to New York, which still remains a hub of traditional finance in the country.

BitLicense was issued by the New York Department of Financial Services (NYDFS) and championed by Ben Lawsky, who left the department shortly after issuing this regulation to get into private sector consulting. These regulations affect startups the most heavily and leave out the bigger banks and financial institutions, thus significantly raising costs of starting a company in this niche in New York, greatly benefiting in the incumbents and reducing competition in the marketplace.

Even seemingly well-funded startups have made the decision to leave New York rather than try and comply with the very expensive regulations. Bitfinex, the largest Bitcoin exchange by volume in USD which accounts for almost half the trading volume, has decided it is not worth their time and money to comply with BitLicense and will not service anyone from New York. Kraken, another Bitcoin and cryptocurrency exchange that was the first to trade Ethereum (ETH) has also decided to leave New York owing to BitLicense. Similarly, Poloniex, the largest altcoin exchange by volume has done the same.

The long-term effects of this regulation are still to be seen. If other states adopt a more sensible approach to regulating innovations in Bitcoin and cryptocurrency, it is very conceivable that startups will move to those states. Advocacy groups like Coin Center are heavily involved in helping law makers understand this new technology and how best to let it flourish without killing it with burdensome regulatory frameworks.

Photo credit: ianmyles

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Jun 142015
 

Bitcoin Settlement Systems

Can you create a settlement system on Bitcoin blockchain? It’s an important question, with consequences not just for the future of Bitcoin, but for the whole financial industry, and what we deem feasible in the securities industry currently.

Two big pieces of news came about in the last couple of months or so, which I feel got less attention than they deserved. The first one was a decision by NASDAQ private markets to move trading private securities to the Bitcoin blockchain, and the second was the issuance of a private bond by Overstock on the Bitcoin blockchain.

Each of these is important in its own way, showing that it is possible to settle and trade both stocks and bonds on the current Bitcoin blockchain, even without the many improvements coming to the protocol in the next few years.

Trading vs. Settlement

Current trading systems on Wall Street require extremely low levels of latency, especially in the High Frequency Trading (HFT) world. Even without that, trading engines need to be blazing fast and be able to handle anywhere from tens of thousands to several million trades per second. Bitcoin today, in contrast, has a throughput of 5-7 transactions per second, which means it is nowhere near the scale required if every trade is published on the blockchain.

However, after a trade happens, it needs to settle in the back office, which is in  sharp contrast to the high trading execution. Most trades take at least 2 days to settle. The settlement process happens after the end of the trading day. This is where Bitcoin can help establish a superior technological solution than the current system.

A great book to understand what happens in the back office of securities transactions is After the Trade is Made by David Weiss, which I would recommend for any company working in the Bitcoin settlement space, any entrepreneurs working with Bitcoin-based settlement systems and anyone curious enough to learn the settlement process.

Beyond Currency: Bitcoin as a Settlement Platform

Bitcoin’s initial conception was as an online, decentralized currency, which is as easy to transfer as sending an email, thus negating the ideas of geographic closeness or extended trusted networks for commerce. The various innovations behind creating Bitcoin, however, have far reaching consequences beyond its use as a simple currency. Most notably, this includes the ability to have a decentralized database with consensus built into it in the form of economic incentives for participants in the network.

Once you look at Bitcoin beyond its first use case of a currency, it becomes clear that it can be used as a powerful settlement system, because it has the ability to reach a globally accepted consensus state, thus proving without doubt who owns what at a given point in time.

Therefore, if a Bitcoin were to represent not just a currency but 100 million stocks of a company (with each Satoshi representing one stock), then a trade could easily settle on the Bitcoin network with no disputes as to who (or rather which address) owns any number of stocks at a given point in time. This process makes this specific Bitcoin ‘special’, which is no longer the same as the rest of the Bitcoins, due to this value addition process.

As a final clarification, there has been an increasing trend in the media to talk of ‘blockchain’ instead of ‘Bitcoin’ as if the two were separable and as if one could separate out the ‘good parts of blockchain’ from the ‘bad parts of Bitcoin’. You cannot. However, if it helps in the change of perception, knock yourself out. It doesn’t change the underlying dynamics though.

Major Challenge: Corporate Actions

The Bitcoin protocol does allow for the creation of these very basic securities, simply by ‘coloring’ a Bitcoin to represent something other than currency, thus establishing a level of centralization to some Bitcoins (backed by the full faith of the company that says they represent what they represent, without which a satoshi is just a satoshi, not a stock in a company) and also destroying their fungibility in the process.

In addition, Bitcoin allows for the creation of smart contracts, which are essential for creating an online blockchain-based settlement system. However, to create a fully functioning settlement system in Bitcoin, the above process is not enough. This is because the process only takes into consideration the birth of the security. The challenging aspects are going to be in implementing corporate actions. And corporate actions can be tricky to implement with or without a blockchain.

What are corporate actions? Simply put, they are events that happen to a security (stock or bond) after it is born. The birth is actually the easy part – you can simply ‘color’ a coin to your liking, using protocols like Open Assets, or even push your tokens on a protocol like Counterparty (or NXT or other altcoins even). Corporate actions, however, affect the security after it is born and is ‘out there’ in the world.

Corporate actions for stocks can range simple cash dividends to spin-offs and split offs. They also encompass events like mergers and rights issues. Corporate actions for bonds can range from simple coupon payments to convertible bonds, call/put exercises, early redemption, tender offers, etc.

Finally, real-world issues like compliance, tax laws and reclaims, reporting requirements, and other specific jurisdictional legal quirks are essential to get right for any such settlement platform.

Futures, Forwards, Swaps, Options, MBS, CMO, CDO, CDS, and Others

Can you implement a Bermudan swaption on Bitcoin? What about a Credit Default Swap? What about this other newest wall street innovation?

In most cases, a robust smart contract system coupled with some levels of centralization (e.g. with regards to defining what a default event is, in case of a CDS) should be sufficient. However, there are plenty of very intricate nuances involved in most derivatives, that only the simplest ones are feasible at least in the near future with the tools that we currently have.

From a point of view of what is potentially possible, no one can say the state of technology in 20 years. It remains to be seen how blockchains evolve over time in terms of their technology and ability to codify a lot of these nuances, along with the willingness of the participants to use this technology.

It is important to remember that there are plenty of benefits in terms of having varying degrees of centralization. It is possible that better technological tools are made available to improve the existing infrastructure than Bitcoin and the blockchains, considering the degree of centralization already present in most securities transactions.

Near-Real Time Settlement

With Bitcoin, it is possible to have a settlement system that is near-real time. This is a major improvement over the current system that takes, in general, 2 days to settle a trade. Not all of this is due to obsolete technology, however, and it is important to understand this.

Bitcoin-based settlement systems can be quite powerful for peer-to-peer trading or cross-border trade settlement. The settlement process can be made cheaper and faster in these cases.

The Initial Push and Catalysts

There has been a very big push coming from the government agencies to make settlements faster, both for bank money transfers (ACH in the US) and securities. By making marginal improvements to the existing procedures, it is perhaps possible to settle a trade in T+1 (1 day after the trade) instead of T+2 (2 days after the trade).

However, to settle in near-real time, such as an hour, the technology needs to be radically rethought. A Bitcoin-based solution is certainly one of the most promising solutions to significantly improving the system in terms of settlement times. This also comes with additional benefits such as improved transparency, ability to create regulatory rules in the contract itself, thus obviating many regulatory rules, and cheaper trade settlement especially in a global context.

Cost savings can be another very important push towards moving to a blockchain based settlement system. This is especially true for cross-border securities transactions. If you’re a US resident and wish to purchase a UK listed company, you’ll likely have to go through the American Depository Receipts/Shares (ADR/ADS) route. However, this is a very expensive process. For example, JP Morgan is the Depository and Transfer Agent for BP shares (BP trades in the UK) and they charge $0.05 per ADS creation. This fee structure is fairly standard in the industry.

Bitcoin Value vs. Blockchain Security

It is a common media theme to talk of ‘blockchain’ instead of ‘Bitcoin’ while referring to any use of the Bitcoin blockchain beyond currency. However, it is important to note that any such use is limited in its utility and scope by the market capitalization and power of the Bitcoin blockchain. It is unfeasible to expect the blockchain to track and settle a trillion dollars worth of securities, if its underlying value is 2 billion dollars.

Price and utility need to move hand in hand. If the total value of Bitcoins in circulation is significantly less than the assets represented on it, there is increased risk and probability of a 51% attack, thus invalidating a lot of previously settled transactions.

Photo Credit: Flickr

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Mar 012015
 

How to Buy Fractions of Bitcoin

Firstly, yes, you can buy fractions of Bitcoin. Each Bitcoin is divided into 100 million units, each called a ‘satoshi’. If you’re looking how to buy fractions of Bitcoin, the process is similar to buying a full Bitcoin. However, when you only want to buy smaller amounts of Bitcoin, there are some additional ways you can do so, which don’t scale up if you’re looking to invest tens of thousands of dollars. Before we proceed, here is a quick Bitcoin conversion guide to keep things straight.

Bitcoin is a cryptocurrency that can be divided up to 8 decimal places. That means you can easily buy fractions of a Bitcoin, even if you can only afford one cent! Just to get you familiar with the terminology, here are the conversions:

1 mBTC (milli-Bitcoin) = 0.001 Bitcoin or 1/1000 of Bitcoin (a thousandth of a Bitcoin)

1 uBTC (micro-Bitcoin) or 1 bit = 0.0000001 Bitcoin, or 0.001 mBTC (a millionth of a Bitcoin)

1 satoshi = 0.000000001 Bitcoin or 0.01 uBTC (a satoshi is the smallest unit of Bitcoin)

Note: bits is becoming more and more popular method of denoting the number of Bitcoin, and you generally don’t have to deal with pesky decimal places!

If you’re living in the United States or most of Europe, the easiest and most trusted way is to buy Bitcoins at Coinbase (This is a full list of countries served by Coinbase: Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Malta, Monaco, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom, United States).

This is a company valued at $400 million, and raised over $75 million in its last funding round. It is a trusted player in the space. You can buy Bitcoin by linking your bank account, and you can buy even small fractions of Bitcoins. When you initially login, the funds might take up to 3 days to appear in your account, after which you can purchase Bitcoins. You can also sell Bitcoins via Coinbase, and you can use it as a convenient online Bitcoin wallet. In addition, they offer multi-signature wallets too, which means Coinbase will no longer have any custody of Bitcoins.

In recent months, a formidable challenger to Coinbase has emerged: Circle. Circle doesn’t charge you any fees (although its prices to buy Bitcoin tend to be a little higher than Coinbase), and the best thing is, you can buy Bitcoin through credit cards. This is not possible at Coinbase. However, you have to pay the credit card processing fees in that case. You can avoid this fees by linking your bank account, just like with Coinbase. How to buy fractions of Bitcoin with Circle? Just enter the dollar amount, even as small as $10 and Circle will buy it for you.

Coinbase and Circle are the best ways, but if you’re looking for options, you can try Expresscoin or BitcoinInsanity. Both these places allow you to buy fractions of Bitcoin through credit card. BitcoinInsanity also allows you to buy through PayPal. However, the prices are higher.

For peer-to-peer trading, LocalBitcoins is a nice option. Use this if you’re outside the United States (or really want privacy with your Bitcoin purchase) and it’s hard to buy on online exchanges in your area.

Here are some other trusted places you can buy Bitcoins online in various countries:

US: Coinbase or Circle

UK: Check out this guide written by Coindesk. Be aware of the fees, which seems to be the norm for UK exchanges

Europe: Coinbase operates in these European countries, and should be the best option: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland

India: Unocoin

Philippines: Coins.ph or Rebit.ph

Finally, if you just want a small fraction of a Bitcoin and willing to work online for them, there are a few options that you can explore (the payout is usually much lower than having a full-time job, so take that into consideration) in my Free Bitcoin Guide.

Photo Credit: Chris Devers

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Dec 212014
 

Buy Gold with Bitcoin

Here’s a guide on how to buy gold with Bitcoin. You’d be surprised by how many different options you have in converting between Bitcoin and gold/silver, some of them physical gold coins or bars and some of them at an IOU level so you can speculate on the value of gold vs. Bitcoin.

Lots of people who are interested in Bitcoin are also interested in precious metals, especially the early adopters who were disproportionately libertarian in their philosophical and economic thought. Bitcoin, in fact, was and still is, often touted as ‘digital gold’ based on the scarcity of each. Gold has also been used in commerce for thousands of years and has a free market proven vibe to its properties. Both gold and Bitcoin attempt, in small ways, to bypass fiat currencies issued by governments, and both have become a store of value during turbulent economic times when there’s high inflation (think current day Russia, Venezuela, Argentina, etc.)

Here are some options for how to buy gold with Bitcoin, either the physical commodity or just getting the exposure to gold prices through a third-party. I’ll explain the options individually.

Amagi Metals: Amagi is another long-time Bitcoin supporting precious metals seller. They probably have the best pricing for your gold and silver coins if you pay with Bitcoin.

Agora Commodities: Agora is another Bitcoin supporting company that accepts Bitcoin for gold and silver coins and bars. The company is also a long-time supporter of Bitcoin and its community. You can buy your bullion in USD or Bitcoins.

Bitreserve: Bitreserve is a company founded by Halsey Minor (the founder of CNET) and aims to be a convenient currency exchange platform. It is definitely centralized like Coinbase, in that it holds your private keys. In return, you get the ability to seamlessly convert between Bitcoin, USD, GBP, Euro, CNY and yes, also Gold. If you want to get ‘BitXAU’ from Bitreserve, you just send Bitcoins to the ‘Gold’ card on your account, and that’s it. It will be worth a few ounces of gold, depending on how much you send. The gold is held in reserve by Bitreserve (and is therefore fully backed by the physical commodity, not ETFs and use GBI for this). The conversion is instantaneous, and you are effectively buying gold with Bitcoin when you send Bitcoins to your gold card. You can spend it as you would spend Bitcoin, by sending to any Bitcoin address. Do be aware though that there is a transfer fees of 2.4% in and out. The company is promising, has raised about $15 million already, and has a plan for the future. They are trying to add Oil to the mix, which would be quite interesting.

Bitreserve Gold Card

Ripple Singapore: This is a Ripple gateway for gold, silver and platinum. This is an IOU of course, and if you trust this Ripple gateway, you can buy and trade gold and silver throughout the world on the Ripple protocol. Ripple gets strong reactions from people in the Bitcoin community, but this is definitely one of the options. If you want to buy XRP (Ripple tokens), you can try Poloniex or Kraken.

BitGold from Bitshares: This is another interesting idea, using Bitshares. This isn’t an IOU (unlike Ripple) and the price of BitGold on the Bitshares network (one of the BitAssets, along with others like BitUSD, BitCNY etc.) is market determined, and is maintained close to the real price of gold by delegate feeds (101 delegates for the network). This is still a work-in-progress but as more people join the network, the tighter the spreads between BitGold and Gold price should be, and the liquidity is currently poor but hopefully will improve in time. You can buy BTS (Bitshares tokens) on an exchange like Bter.

Photo Credit: TomD77

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Dec 082014
 

Advertise Bitcoin Site

If you’re looking to advertise a Bitcoin site, you’ll learn soon enough how difficult it can be. One of the main reasons is that it is a small and niche community, and therefore harder to reach via traditional advertising platforms and methods like Google Adsense or Facebook ads. If you’re looking for the most bang for your buck in advertising dollars (or Bitcoins!) then it is best to promote directly to the people in the Bitcoin community instead of trying to advertise on venues that are open for all.

Even though hundreds of millions of dollars have flown into Bitcoin startups in the last few years, funded by venture capital firms, there are surprisingly few very good avenues to advertise a Bitcoin site to the community directly. Most of the best avenues are the ones that were built by the early community. Perhaps some startup will work on this problem soon enough, but for now, we have the following advertising methods.

Here are some of my top recommendations on where you can advertise a Bitcoin service or site that gets some eyeballs within the Bitcoin and cryptocurrency economy.

1. Anonymous ads: Anonymous ads is one of the most widespread advertising networks in the Bitcoin space. It is a pay-per-view (CPM) type of advertising, so you pay a flat rate to anonymous ads and it shows your ad to an audience. Although most of the sites here are in the Bitcoin and cryptocurrency niche, there are many that are not, so be sure to target your ad specifically to Bitcoin sites. They manually review all publisher sites and classify them accordingly. For instance, this blog is classified under Bitcoin, Blogs and News tag.

2. CoinURL: This is the largest pay per click advertising network in the Bitcoin space, and the rates are quite cheap, especially compared to something like Google Adsense. If you’re using Adsense to advertise your Bitcoin site, then I think it makes a lot of sense to try out CoinURL as well, since it is geared towards the community and the rates are lower too.

3. CoinAd: I would recommend using a paid-to-click type of service only for low-budget type projects, even though some of the biggest names in the industry, like cex.io, advertises here. If you have a good landing page with a fair conversion rate, this is a nice way to attract a lot of eyeballs in the community. This type of advertising is particularly good for Bitcoin gambling sites.

4. Reddit: I hope I don’t have to explain Reddit to you. If you can afford it, advertising on Reddit can be a very effective way to reach the wider Bitcoin community. You get the top link on the page, which is visited tens of thousands of times a day or more.

More ideas? Let me know in the comments.

Photo Credit: Wrote

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Jun 112014
 

Tourism Industry Bitcoin

Today there was interesting news that Expedia has started accepting Bitcoin for hotel bookings. This is an important milestone, as the travel industry is an important one for Bitcoin to crack. It is, I believe, the first step towards Bitcoin usage and adoption by travelers and tourists, a very big industry that would hugely benefit from using Bitcoin. In fact, international tourism is a $1.4 trillion dollar industry – let that sink in for a minute.

As more and more merchants start accepting Bitcoin, it is now time to look at the other side of the equation – consumers. What incentive do consumers have to pay with Bitcoin instead of credit cards? In the future, consumer adoption would be the key to Bitcoin’s success as a currency. Traveling/tourism is one of those industries where consumers have a clear incentive to use Bitcoin – they can end up saving as much as 10-15% on a trip as they don’t have to convert money back and forth into different currencies and pay the middleman a huge fees. Anyone who has used an airport currency exchange knows what a ripoff this can be.

Bitcoin Travel

With Expedia opening its doors to Bitcoin, it is only a matter of time before other travel/booking websites and agents do the same. They have a clear incentive to promote Bitcoin – lower credit card fees. The travelers have a clear incentive to use Bitcoin not only for booking but also for expenses incurred in a foreign country without inefficient currency conversion.

In addition, think of countries like Venezuela where there are strict capital controls. It’s much easier to use Bitcoin as a substitute for hard money instead of your dollars, which might always get you in trouble if you’re exchanging them at the unofficial market rate. Same with Argentina. Bitcoin needs to reach a critical mass of merchants, which seems to be happening at a rapid rate. After all, there is absolutely no downside to any business accepting Bitcoin through payment processors like Coinbase or BitPay that convert the Bitcoin to local currency immediately.

When it comes to currency, I think the travel industry would be the stepping stone for Bitcoin’s success.

Photo Credit: George Redgrave, Ed Yourdon

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Feb 072014
 

The concept of Bitcoins has taken the world by storm, ever since its inception in 2008. Since it is considered to be one of the best sources of legitimate cryptocurrencies, a lot of people and companies alike are beginning to see the importance of using Bitcoins to do their financial bidding.

There are 3 major ways to transact in Bitcoins: mining, buying and trading. Now the pertinent question here is, “Is it better to mine, trade or buy Bitcoins?”

Let’s check each in detail and see which comes out to be the best of the lot.

Bitcoin Mining

Bitcoin Mining is the process through which Bitcoins are created and circulated into the Bitcoin system, as well as added to the blockchain, which is a record of all Bitcoin transactions through time. The mining process is rather complicated and needs an expensive and well planned strategy in order to make a profit. A lot of Bitcoin mining today is run via large data centers and not in people’s homes. There are some reasons which make mining all the more difficult and cumbersome to carry out. These can be categorized in the following manner:

  • Security of the networkThe mining process is decentralized. Anyone who possesses a good strong hardware system and a stable Internet connection can carry out the mining process. However, if an individual or an organization possesses more than half the control of the Bitcoin network’s mining capacity, then there are chances of the network being unduly influenced. This is where the breach of security happens, making the procedure insecure.
  • Transaction fee: Given the high transaction fee involved with the mining of Bitcoins, there is a diminishing interest within the minds of people. The declining rewards and the increase in the transaction fee, creates a negative ripple in the market, causing a substantial shift in the minds of the people.
  • Mining complexities: The level of mining difficulty gets adjusted every 2 weeks. As the complexity level fluctuates, so does the mining possibilities. If more computational power is employed, chances are that the mining procedures would also become more difficult, causing miners to avoid mining in the long run.

Buying Bitcoins

Before you actually think of buying Bitcoins, you should think through all the options and then arrive at a well informed decision. Today, there are many great sources throughout the world to buy Bitcoins, like Coinbase. Here are some reasons why you may want to stay away from buying Bitcoins:

  • Losses: With some of the other financial instruments available in the markets these days, there are safety procedures in place, which help you in case of any imminent disaster. However, with Bitcoins, there is no such safety net, which can bail you out in case your Bitcoins get lost or stolen. While you can store the Bitcoins in a wallet on your hardware or keep them with a third party, there is still no surety, that your investment will remain safe eventually.
  • Regulation: If regulatory advice is to be believed, one would realize that there are higher chances of being swindled out of your hard earned investment as would be the case otherwise. The lack of strong regulation on this volatile virtual currency can leave you bare, making it hard to invest in Bitcoins.
  • Trading Bitcoins: Like any financial instrument, even Bitcoin trading is somewhat reliable and profitable. The trading procedures use the rise and fall in the price of the virtual currency, to actually estimate the profit/loss in the exchange. Sharp skills to trade Bitcoin’s value fluctuations is what makes a successful Bitcoins trader; a trader by profession is required to offer exchange services to other Bitcoin traders, so that he/she can himself make a net profit on other investors’ transactions. A trader can make buying offers, when the price is low, and later on sell the currency at a higher price, allowing him to make a profit. However, in order to be a successful trader, one has to possess impeccable knowledge on how the system works.

Conclusion

These are the three ways to transact in the Bitcoin economy, and in the process, gain some Bitcoin. Simply buying Bitcoin is the simplest of all but has a limited profit potential. Trading Bitcoin is risky but can have the highest return among the three methods.

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