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Investor Doug Casey: Bitcoin May Be Money, But It Still Might Fail

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Investor and anarcho-capitalist Doug Casey recently argued that bitcoin qualifies as money – even if he’s not sure it’ll last in the long term.

In an interview published yesterday, the Casey Research founder discussed his viewpoints behind bitcoin. During the chat, he noted that he first got into bitcoin back when it was valued at around $13, thanks to a gift of a physical bitcoin he received.

Casey notably argued that bitcoin meets the characteristics defined by the Greek philosopher Aristotle. Namely, that it is divisible, durable, convenient to use (in some circumstances) and consistent, according to Casey. At the same time, Casey returned to a belief that he previously held but now argues is wrong: that bitcoin has no “use value.”

He explained in the interview.

“If you have a million US dollars and nobody accepts them, they have no use in and of themselves. They’re just unsecured liabilities of a bankrupt government. Like a million Zimbabwe dollars. And a fiat currency is easily destroyed by its issuer. The things are burning matches. They have half-lives, like radioactive elements. And I said that was the problem with bitcoin. But I was wrong about that.”

Going on to call bitcoin “an excellent transfer device” that sits outside of the traditional banking system, Casey said that his original argument against bitcoin’s use value was invalid.

“So, this is the use value of bitcoin. It allows you to transfer something that is accepted as money outside of the banking system, and outside of fiat money currencies,” he said.

However, Casey was less bullish on the long-term prospects of the cryptocurrency. He argued that while he believes that bitcoin meets the conditions to serve as a form of money, this state of affairs won’t last forever.

“The bottom line, bitcoin passes the medium of exchange test for the moment and store of value test for the moment. So you can definitely say it’s money – for the moment,” he said, adding:

“But so’s the Argentine peso. I have little confidence bitcoin will be here say five years from now.”

Welcome to Bitcoin Country: Silk Road and the Lost Threads of Agorism

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Dr Paul Ennis is a research assistant at the Centre for Innovation, Technology & Organisation at University College Dublin, specializing in bitcoin and blockchain studies.

In this opinion piece, Ennis takes a dive into the kinds of sub-cultures bitcoin and cryptocurrencies enable, tracing their origins in libertarianism – and beyond.


Not everything is tameable – that’s a truism that might apply to bitcoin above all.

Recently, researchers from City University and Stockholm University introduced the concept of the “bandit organization,” calling it “a form of association or ‘band’ (frequently led by a charismatic individual) that occupies a space outside national and/or international credibility but inside the everyday practical and moral organization of specific audiences.”

Bitcoin, as we all intuitively seem to sense, is not quite a community in any usual sense.

For this reason, I’ve started to describe it as a land of bandits, “Bitcoin Country,” a term that denotes a semi-autonomous lawless region full of bandits, some noble, some not, and most certainly not cohesive.

Too formless to be a country, too amorphous to be a company, you can think of Bitcoin Country as a kind of digitally decentralized frontier.

The outlaws

Historian Eric Hobsbawm provided an early model of outlaws as social bandits that, although often violent, were celebrated by the local community as heroic or defiant.

In this way, the origin story of bitcoin is deliciously outlaw, essentially one of the individual who, through an amazing feat, harangues the evil king. It’s all the better if the king has devolved into vice and avarice to the point of financial ruin.

The other, slightly more contentious hero, operated on the edge of the edge, is the black market within the black market, the bayous of Bitcoin Country.

“The fascists always use the narrative of ‘We are the white knights in shining armor protecting against the threats. We come here and we move out the dark with pure whiteness.’ That’s a false narrative because there is corruption in those castles. The real base of power lies with us. We are the darkness.”

In the above quote, anarchist bitcoin developer Amir Taaki sets out, in the context of a documentary about the original darknet marketplace, Silk Road, a common theme within digital libertarian culture: the establishment, broadly construed, is corrupt.

Not just corrupt, its corruptness is clouded in “whiteness,” traditional forms of organizational legitimacy, and it uses narratives of fear to ensure we place our trust in them.

We need police to stop crime, we need armies to stop invaders and intelligence services to stop terrorists. Taaki’s rhetoric is hyperbolic, but it contains, implicitly, two important insights. The first is that the organizational legitimacy of central authorities is connected to our placing our trust in them in exchange for protection from threats (Taaki calls this “babysitting” a little later in the speech).

The second, a cypherpunk view, is that a powerful response to this situation, in the context of the digital world, is the creation of technological systems that subvert this power relation, “the real base of power lies with us.”

Radical dimension

These systems Taaki discusses would strive to be trustless, having no central authority and, strikingly, they would not require legitimacy. It is crucial to remember that digital libertarians do not propose a counter-legitimacy belonging to them.

They do not claim to be the truly legitimate position. Rather they revel in being “the darkness.”

Their ideal systems necessitate no “babysitters,” no trusted third party, no “legitimacy” in any traditional sense. Given such an anarchic spirit, it is no surprise that digital libertarians are drawn toward those areas deemed off-limits by authority, such as the shadow economy.

Silk Road was never just an exercise in deviant entrepreneurship, but was “presented as a means to dismantle the state.” University professor David Golumbia notes that in the wider bitcoin discourse “the idea that government itself is inherently evil” appears with “particular force.”

It was a form of activism involving a political “prefiguration” that sustained the community.

Prefiguration is a concept found in the left anarchist and autonomist Marxist traditions and developed in relation to cryptomarkets. Like most forms of political radicalism, libertarianism relies on envisioning a world that does not yet exist. Aware that this is the case, radical activists often must discover methods that justify their faith in the project.

For the anarchist and autonomist traditions, this tension has emerged quite visibly in movements such as Occupy Wall Street.

As Mathijs van de Sande explains, prefigurative politics need to be seen in terms of the ever-evolving act of bringing into being the world its adherents wish to see, but without any mainstream engagement. Crucial to prefiguration is a subtle inversion within leftist thinking.

In traditional Marxism, the relation to the state is directly antagonistic; one is against the state.

In the anarchist and autonomist view, this becomes inverted. There, to borrow from the Spanish Indignados, “We are not against the system. The system is against us.”

This redefines the nature of defiance as a focus on how best one can build new worlds despite state “interference.” It manifests as a process of instantiation of abstract ideals to come through practices occurring in the here and now.

The overriding aim is to act “as if one is already free.”

Exit over voice

The state is to be escaped rather than replaced. In other words, “exit over voice.”

According to economist Albert Hirschman, the two options open to all dissatisfied members of an organization are exit or voice. One can either exit the organization or voice dissatisfaction.

Libertarians are infamous for their preference for exit or, at least, the option of exit and, as journalist Brian Doherty charts, there have been many attempts to escape what they perceive as the ultimate closure of options, the state.

The concept of exit has even led to attempts to establish entirely new countries, known as micro-nations, their failures documented in an obscure libertarian classic “How to Start Your Country.” Arguably the most successful forms of exit have occurred by simply moving out to sea, as encapsulated in our romantic vision of anarchistic pirates, but also in the most successful micro-nation of all time, the Principality of Sealand, an offshore oil platform located not far from the coast of Suffolk, England.

The Dread Pirate Roberts name evokes this pirate outlaw status quite explicitly (Ross Ulbrich, who ran Silk Road under that name, even notes this in discussion with Variety Jones). He had not just prefigured the world his community wanted to see, but had generated a space, a micro-nation located off the coast of the clearnet, where the law (seemingly) no longer applied.

In effect, what Ulbricht achieved was a quite unique marriage of high-minded digital libertarian ideals with the routine process of buying and selling narcotics.

For most participants, their engagement with Silk Road operationalized a sense of freedom to consume their drug of choice in the context of doing no harm to others, aligning participants with the cyber-libertarian philosophy of DPR.

Konkin’s influence

In more formal terms, organizational legitimacy on the Silk Road was ensured by reimagining the “mundane” act of buying and selling narcotics as an act of liberty.

For Ulbricht, the success of Silk Road was precisely in line with the teachings of his most important intellectual influence, Samuel Edward Konkin III. A relatively obscure figure, Konkin developed a strand of libertarianism known as agorism in the early 1970s. In his exceptionally detailed and thorough-going history of American libertarianism, Doherty references Konkin a mere five times and not once in any especially important manner.

Indeed, Konkin seems to have “fallen” out of the tradition, but this is consistent with his rejection of the Libertarian Party as inherently paradoxical, preferring instead to promote black market activism where one might “commit civil disobedience profitably.” It is not clear how Ulbricht first came across Konkin, but perhaps there was something of the kindred spirit to them, both had studied chemistry to an advanced degree.

Konkin proposed a dual course to bringing agorism into being: (1) a theoretical position known as “counter-establishment economics,” or “counter-economics” for short, and (2) the practical dimension of “counter-economic activity.” For Konkin only a small handful understand agorism, in the theoretical sense, but this does not mean that counter-economic activity does not occur.

Konkin was keen to celebrate the unconscious agorists that populate our world: tax-dodgers, black market operators, prostitutes and so on. This is where Konkin can be considered explicitly radical.

The creation of black markets was for Konkin an agorist act where small “pockets” of outlaw culture create markets more efficient than the state can provide. The more efficient these pockets the more people in the white economy will turn to agorism.

Konkin died in 2004, but he had foreseen, as early as the middle of the 1980s, that the internet opened up agorist possibilities. His remarks are worth quoting in full, given his influence upon Ulbricht:

“The internet explosion has led the American State – for now, at any rate – to throw up its tentacles at regulation of the information industry. Every legislative session, however, brings up new attempts to tax and control the World Wide Web. But consider this well: should the counter-economy lick the information problem, it would virtually eliminate the risk it incurs under the State’s threat. That is, if you can advertise your products, reach your consumers and accept payment (a form of information), all outside the detection capabilities of the State, what enforcement of control would be left?'”

This is, to be direct, quite simply what Silk Road was.

Even more prescient is that Konkin recognized the importance of encryption around the same time.

Noting that encryption meant the state “cannot reach the invoices, inventory lists, accounts and so on of the Counter-Economist,” Konkin’s proto-conception of the cryptomarket means he arrived at the idea before even the cypherpunks.

Better in Byzantium? Ethereum Takes Baby Steps Toward a Privacy Boost

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Ethereum users may soon be getting a much-needed privacy boost.

Long a shortcoming for all public blockchain networks, the world’s second-largest blockchain is nonetheless aiming for big improvements in its upcoming Byzantium release. For most buy-and-hold users, these limitations might not be apparent, but that’s not to say there aren’t potential implications that could affect the wide variety of users the network is trying to attract.

As an example, the software upgrade comes at a time when regulation is putting a strain on the network – at least one government has already taken aim against what has emerged in 2017 as its biggest use case. In the past month, China issued not only an all-out ban on ICOs, but ordered exchanges (including those that buy and sell ether) to hand customer data to the authorities.

This added attention is just one of the things that has shone a light on the limitations of the network. Currently, every transaction is permanently visible on the ethereum blockchain, meaning that investments made by individuals – including those that might be illegal – can be widely observed. Not quite a bug and not quite a feature, this availability of user information is still something that many developers have set about to correct.

Complicating matters, however, is that ethereum hasn’t been known for its privacy features to date.

While zcash helped pioneer the use of zk-snarks and monero popularized ring signatures and stealth addresses, ethereum has perhaps struggled to find a similar value-add when it comes to anonymity.

But the upcoming Byzantium hard fork, currently expected to occur in October, will introduce two new cryptographic procedures which should eventually pave the way for increased privacy.

Ethereum’s first major upgrade since 2016, Byzantium is actually one-half of a much larger upgrade designed to enhance the usability of the platform, named Metropolis. It will also be the first major technical upgrade since the network has been valued in the billions, a development that could add drama to the proceedings.

Looking ahead, the second part of Metropolis, Constantipole, has been postponed indefinitely, meaning users will have to wait before they can enjoy maximum privacy on the platform.

Still, that’s not to say there aren’t substantial efforts toward that goal.

Where are we now?

Privacy on ethereum is a notoriously complex endeavor, as it contradicts some basic methods of how a blockchain functions.

Transparency on a blockchain is vital such that it protects its users from the risk of double spending, which is when a malicious user sends the same coin to two different places at once. This risk is resolved by rendering the details of each transaction visible and storing them in a widely distributed ledger.

As this procedure is fundamental to the technology, rewriting it requires high-level mathematics which have never before been attempted.

As such, ethereum’s developers are taking that attempt seriously and are reaching out to peers in other blockchain platforms for new ideas and features. For example, ethereum’s team has been working togetherwith the privacy-centric currency zcash on zk-snarks, which could make it possible for ethereum users to make their transactions more private.

By using that technology, a statement can be verified without requiring any information to be revealed beyond its validity. As an encryption method, zk-snarks work by translating what you want to prove into an equivalent form – without anyone knowing the solution to the algebraic equations that produced it.

Notably, the upcoming Byzantium hard fork introduces new elliptic curve primitives and a pairing function for a specific curve which will make the cryptography possible and toughen the security of a zk-snark computation. The larger the curve, the more secure it is, but it does bring higher costs for each operation.

As a result, these heavy mathematical procedures are now far too expensive to run on the ethereum platform.

In principle, prior to Byzantium, a zk-snark could be completed by the ethereum virtual machine, but it would be too expensive to fit inside a single block. However, the Byzantium hard fork will introduce a gas-subsidized pairing check that makes a zk-snark less costly to compute. If you’re unsure, “gas” is a unit used to measure the computational effort that goes into a transaction and is used to calculate fees.

What needs to be done?

Due to this new feature, the first zk-snark transaction was verified on the Byzantium testnet earlier this week. The transaction, which is viewable on the test network here, cost a total of 1,933,895 gas. To put this in some context – a non-private transaction currently costs far less, around 21,000 gas.

Still, aside from this costliness, and beyond the verification itself, there’s nothing in ethereum that today can support the tech.

As explained by ethereum’s lead zk-snark researcher, Christian Reitwiessner, the “missing piece” is the part of the system that would communicate with the ethereum virtual machine, which translates instructions and relays them to network nodes.

“We need practical implementations of all the other components of a zk-snark system (apart from the verification),” he told CoinDesk.

Some of these features might be figured out soon. For example, work needs to be done to translate a computational task from source code into the form required by a zk-snark. Reitwiessner said this is currently in heavy development, and will likely be released by the ethereum developer conference in November.

However, other milestones still need extensive research before they can be reached.

At present, regardless of whether an ether transaction is private, it will always be visible to the person who pays for the gas.

Eventually, new features released in the second ethereum upgrade, Constantinople, will aim to provide a newly flexible ether wallet, allowing users the option to pay for gas in tokens instead of ether. According to Reitwiessner: “This could include paying for gas with tokens which might be zk-SNARK tokens.”

Postponing this feature until Constantinople also gives ethereum developers some time to tease out other complex challenges.

For one, ethereum must counter a security problem within zk-snark tech itself, known as the trusted setup. When zcash launched its zk-snark-powered currency back in October 2016, it corresponded with an elaborate performance, whereby each member of the z-cash development team set fire to the computers they had used to bring z-cash to life.

This was to prove that there was no backdoor into the technology that could potentially allow developers the ability to manipulate the network. The catch now is that ethereum must develop something equivalent to this, but one that can scale to thousands of participants.

Alongside this, solutions need to be developed so that mathematical proofs are generated alongside a zk-snark. And, more programming is needed to establish the possibility of zk-snarks occurring off the blockchain.

In light of this, it could be that a smoother alternative to zk-snarks is developed in the meantime.

Reitwiessner hinted at this, adding:

“Furthermore, we are not tied to a specific zk-snark or even zk-snarks themselves.”

As such, his statements hint that, for ethereum, the privacy conversation is only just beginning.

CPU Mining is Making a Comeback (But Only on Botnets)

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CPU mining malware increased sixfold during the first eight months of 2017, according to a new report from IBM X-Force.

As CCN has reported, the number of computers infected with cryptocurrency mining malware has increased every year and is on pace to reach 2 million in 2017 alone. However, the number of computers infected with CPU mining malware has surged sixfold this year–far beyond the rate of overall increase in infections.

For the average user, CPU mining has been dead for what seems like ages–replaced by more powerful GPU and ASIC miners. However, the IBM X-Forcethreat intelligence service has identified a remarkable increase in computers infected with CPU mining malware during 2017.

The report theorizes that cyber attackers turn to this flavor of mining malware because, even though CPU mining is not worthwhile on an individual level, hackers often control botnets containing thousands of infected computers. Since they do not have to foot the cost of electricity, what little profit each individual computer makes quickly adds up. The X-Force team found that a standard Intel i5-6500 4 core processor running an Ubuntu server could net about $2.35 per month. Hackers most commonly used the botnets to mine anonymous CryptoNote currencies such as Monero and Bytecoin.

The attacks were often deployed using steganography, the practice of hiding data within image files. After hiding the malware inside a fake image file, the hackers placed them on compromised web servers.cpu mining

Chart from IBM

According to the report, the manufacturing and financial services sectors tied at 29% for the highest volume of CPU mining attacks. They stated that many of the attacks exploited inexcusable lapses in security, such as failing to validate input fields on web applications.

Notably, the researchers found that Internet of Things (IoT) devices are not attractive to hackers, despite the fact that they are often vulnerable to exploits. Due to their low computing power, even a 1 million-device botnet would likely not produce enough profit to justify the effort to create and maintain it.

Aussie Solar Startup Power Ledger, Energy Giant Origin Begin Blockchain Trial

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Australian solar startup Power Ledger has partnered with retail energy giant Origin to begin a trial based on Power Ledger’s blockchain-based peer-to-peer energy marketplace.

Power Ledger–the first Australian startup to launch an initial coin offering (ICO)–raised $17 million AUD ($13.4 million USD) during its presale and expects to surpass $30 million by the end of the public ICO.

The company is developing a P2P energy marketplace that enables users to buy and sell surplus solar energy. Based on the results of a recently-completed trial, Power Ledger believes its service will save households about $475 per year.

Now, Power Ledger is partnering with Origin, the largest retail energy provider in Australia, to test the benefits and challenges of trading energy across a regulated network. Using anonymised consumer data, the company aims to demonstrate that the platform is both accurate and secure.

Tony Lucas, executive general manager of Origin’s future energy division, says he looks forward to getting a firsthand look at how blockchain technology could provide value for their customers.

While it’s still fairly early days for this technology, we are keen to explore the potential benefits that peer-to-peer energy trading could offer our customers. Power Ledger is one of a number of emerging technologies we’re currently exploring, which we believe could help us meet the changing needs of our customers.

The trial will begin in October and continue for three months. “We hope the trial will help us better understand the value proposition for consumers, as well as the regulatory and technical implications of the peer-to-peer trading model,” Lucas added.

Power Ledger is one of several high-profile energy startups emerging within the crypto space. Grid+ just concluded a $40 million token presale ahead of its October ICO. Like Power Ledger, Grid+ plans to eventually launch an energy-sharing marketplace, but in the near-term, the U.S. startup will establish blockchain-integrated retail electricity businesses in deregulated markets such as Texas.

Both of these projects aim to take advantage of the efficiencies of blockchain-automated processes. “Peer-to-peer energy trading presents an opportunity to unlock enormous value for consumers,” explains Power Ledger managing Director David Martin. “It disintermediates the energy supply model, putting consumers in direct contact with other consumers.”

Cryptocurrency Trading Volume Set to Surpass Apple Stock: Market Strategist

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Stock market strategist Jens Nordvig predicts that daily cryptocurrency trading volume will “soon surpass” that of Apple, the most-traded company stock.

Nordvig, the founder and CEO of Exante Data, made this prediction in a note published earlier this week and quoted in CNBC:

Cryptocurrency trading volume is now more than of $3bn/day on average, and will likely soon surpass that of the world’s most liquid stock: Apple ($4bn/day).

Currently, the trading volume of Apple Stock averages about $4 billion per day, making it the most liquid company stock. Noting that trading between cryptocurrencies and fiat currencies has risen eightfold in 2017 alone, Nordvig anticipates that total crypto market volume will “soon surpass” that of Apple.

As CCN has reported, cryptocurrency trading volume recently hit a 24-hour record of $11 billion, but the 30-day rolling average is closer to $3 billion. This is partly due to the fact that volume always decreases on the weekends. In the past day, for instance, volume only reached $2.5 billion and bitcoin was the only currency whose volume exceeded $500 million.

Although digital currency and Apple stock represent two completely different asset classes, this would be an important milestone for the crypto markets. Specifically, it would be another indication that, in the words of Goldman Sachs, cryptocurrencies are “getting harder to ignore.”

Another evidence of this trend occurred last month when bitcoin’s market cap surpassed PayPal’s total valuation. However, the September market downturn has reversed that phenomenon.

Nevertheless, Nordvig is not quite ready to jump on the cryptocurrency bandwagon. “We do not believe that one can predict with confidence at this point that any given cryptocurrency will continue to thrive and gain status as an alternative to traditional currencies in the long term,” CNBC reports him as saying. “But we look forward to using the information from an increasingly active cryptocurrency market in our tracking of global capital flows, when appropriate.”

AXA Uses the Public Ethereum Blockchain for Flight Delay Insurance

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French insurance giant AXA is using the public Ethereum blockchain to offer automatic compensation to air travelers in the event of a delayed flight.

With ‘Fizzy’, the new blockchain-powered insurance product, AXA is laying claim to be the ‘first major insurance group to offer insurance using blockchain technology.’ The ‘smart-contract’ insurance offering compensates passengers with a direct, automatic money reimbursement if the plane is delayed for over two hours.

AXA describes ‘Fizzy’ as “a 100% automated, 100% secure platform for parametric insurance against delayed flights.”

The insurance giant explains its use of the public Ethereum blockchain in both recording the purchase of the insurance product and triggering the automated payout by using a smart contract on the blockchain. The Ethereum smart contract is also connected to global air traffic databases to constantly monitor flight data. When a flight delay of over two hours is noticed, the compensation is automatically processed, making it a blockchain-enabled decision independent of even AXA’s decision in the matter.

AXA R&D director Laurent Benichou stated:

Through Fizzy, the independent smart contract, rather than the insurer, triggers consumer indemnification. I believe this is a new element of insurance architecture that will become mainstream in future offers.

AXA also revealed plans to see Fizzy used at multiple airlines and airports, with the product made available through direct consumer channels, travel agents and brokers.

Benichou added:

Initial uptake of Fizzy has been really positive and passengers like the simplicity of the product and the automation of compensation claims.

Details from Fizzy’s website reveals reimbursements are made in fiat currency to the policy holder’s ‘credit card’ account, with no information of compensation with cryptocurrencies, like Ether.

The French insurance multinational is currently resting Fizzy on transatlantic flights between the Charles de Gaulle airport in Paris and the United States with a planned UK launch in 2018.

Australian Govt: ‘Blockchain Will Support Innovation and Productivity Right Across the Economy’

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In a published paper to discuss the country’s digital strategy, the Australian government has picked blockchain technology, among others, as a transformational innovation toward enabling and supporting the digital economy and infrastructure of the future.

Earlier this week, the Australian Government announced an ambitious Digital Economy initiative via the Department of Industry, Innovation and Science. The national Digital Economy Strategy sees the government attempt to stir conversation and bring together the private and public sectors with the government to digitize the economy and wider society.

With a newly published consultation paper, the Australian government picks out a number of emerging technologies including 5G spectrum mobile networks and artificial intelligence (AI). Notably, the government also highlights blockchain technology as a key core driver toward supporting its digital strategy.

“The next phase of the internet, where we are always on and always connected, has the potential to transform our economy even further,” reads an excerpt from the paper. “Horizontal platform technologies like distributed ledger technology (for example, blockchain) and machine learning will support innovation and productivity right across the economy.”

Underlining blockchain as an “emerging technology”, the paper went on to add:

Distributed ledger technology (for example, blockchain) has the potential to disrupt and revolutionise financial transactions and services. It can be applied wherever a verified and trusted transaction is required—health, government services, real estate, media, energy and more. Blockchain allows parties to transact without the need for a centralised intermediary (like a bank) to verify the transaction.

Big on Blockchain

The Australian government, with its FinTech-forward agenda, has notably set out to engage in discussing and even promote blockchain technologies and their applications, including cryptocurrencies. Earlier this year, the Australian Securities and Investment Commission (ASIC) – the country’s financial services regulator – published an encouraging information broadsheet to guide companies and startups leveraging blockchain technology. Australia’s primary research organization has already published two extensive research reports on blockchain technology which deemed Australia could not afford to follow others in adopting the innovative decentralized technology.

In April this year, there was the notable revelation of Australia’s central bank studying and even developing blockchain solutions with an ‘internal working group’ tasked toward that purpose.

Earlier this week, Australian adopters of bitcoin and other cryptocurrencies finally gained tax-related respite after the government introduced the bill to put an end to the double taxation of digital currencies and their transactions.

CFTC Suit Files Suit Against $600K Bitcoin Ponzi Scheme in New York

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In an agency first, the U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit accusing a Brooklyn, New York man of operating a bitcoin Ponzi scheme.

Earlier this week, former CFTC commissioner Bart Chilton called for the cryptocurrency community to embrace regulation to protect investors and reduce price volatility and market manipulation. Now, his former agency has filed its first lawsuit against a purported bitcoin Ponzi scheme.

Nicholas Gelfman allegedly told investors that his fund, Gelfman Blueprint Inc. (GBI), “employed a high-frequency, algorithmic trading strategy” called Jigsaw to net monthly profits of 7% to 9% trading bitcoin. Under that guise, he acquired more than $600,000 in investments from 80 people between 2014 and 2016.

However, the CFTC says that Gelfman was actually operating an early bitcoin Ponzi scheme. Rather than trade bitcoin, he distributed new investments to earlier investors as “profits” from the trading algorithm.

From the legal filing:

In fact, the strategy was fake, the purported performance reports were false, and – as in all Ponzi schemes – payouts of supposed profits to GBI customers in actuality consisted of other customers’ misappropriated funds.

Gelfman covered up the ruse by showing investors false performance reports. When the pyramid began to collapse–as Ponzi schemes always do–Gelfman attempted to make it appear that GBI had been hacked.

In a press release published on the agency website, CFTC Director of Enforcement James McDonald reiterated the Commission’s support of FinTech innovation. However, he added that a key component of supporting the growth of the FinTech industry is rooting out and punishing bad actors.

“Part of that commitment includes acting aggressively and assertively to root out fraud and bad actors in these areas,” he stated. “As alleged, the Defendants here preyed on customers interested in virtual currency, promising them the opportunity to invest in Bitcoin when in reality they only bought into the Defendants’ Ponzi scheme.”

“We will continue to work hard to identify and remove bad actors from these markets,” McDonald added.

Radical Academy: Amir Taaki’s New Hacker Team Is Spreading Bitcoin in Syria

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Lugging an AK-47, fighting ISIS in Syria – Amir Taaki has seen some shit.

But, through it all, the hacker – best known for writing crypto code in abandoned London flats and creating one of the earliest dark markets powered by bitcoin – has kept the technology at the forefront of his mind. Now, emerging from his latest chaotic period, he’s promoting the idea that the cryptocurrency needs to be taken back from central banks, governments and other powers that be.

In his first interview about a new unnamed project – which he simply calls “the academy” – Taaki laid out his plan to convert an entire region in northern Syria to a bitcoin-based economy.

While Taaki expects the project to take nearly 20 years to implement, he’s completed the first step, recruiting a team of five “revolutionary hackers,” who he describes as committed to ensuring bitcoin doesn’t fall victim to the same fates as other once-revolutionary technology movements.

He told CoinDesk:

“Bitcoin is now in that crucial balance where it can either find itself, like the other technology movements that have come before it, confined to irrelevance, or people can start to gather together to try to really, truly think about, on a social level, what bitcoin is really about.”

The idea for the academy came from Taaki’s months on the front lines, fighting with a group of revolutionaries — the Rojava Kurds — who believe in direct democracy with little to no government. Financially cut off by embargoes against Syria and facing an inflating Syrian lira ($1 is worth over 500 lira), Taaki began to imagine how the cryptocurrency he had previously worked with could be used to connect the Rojava people in entirely new ways.

Following a period he described as being dedicated to study (after his time in the Middle East, he spent about 10 months in England on house arrest), Taaki drew up a two-year plan for an entity based in Greece that was part hacker collective, part social engineering experiment and part school.

Now with a small team assembled to work toward that vision, Taaki said his next step will be to expand it to as many as 20 individuals within the next eight months.

As part of the early stage work, the academy intends to organize a series of educational events to lay the foundation for a “large-scale payment network” powered not by central banks or even the internet, but with a combination of Wi-Fi-enabled ESP 12 modules and counterfeit-proof paper wallets, which he hopes the academy will be able to develop.

But while this might all sound radical, Taaki argues it’s actually the normal, everyday people that are living a lie.

“What’s happened in recent years is technology has lost that big vision that it had before, and it has just sunk into now a lot of people escaping into a kind of dreamworld,” he said. “Bitcoin really comes at the end point, the tail end of that bigger political movement of the hackers, [but] even bitcoin is experiencing a lot of problems with a lack of vision.”

A new kind of business

Core to the academy’s ethos is a synthesis of various existing technology movements, including the free-software movement, the crypto-anarchist movement, the Anonymous movement and the pirate movement.

But while the radical nature of Taaki’s different projects, this one being no exception, could seem anti-business in its calls for individual empowerment, Taaki is actually neither full-on iconoclast nor rabid anti-capitalist.

For instance, crucial to a bitcoin-powered economy is the idea of open-source software, which powers not only all public blockchains, but also most permissioned blockchains too.

He describes business-led contributions made to the open source community, such as IBM’s Fabric and Intel’s Sawtooth – both part of the Hyperledger blockchain consortium now – as “necessary for the success of free software and open source.”

Central banks, though, he does have a beef with.

In fact, Taaki is skeptical that central bank interest in the technology is anything more than a distraction from bitcoin’s potential to empower individuals, but understands they could offer stiff competition for his vision of large-scale adoption and day-to-day use of bitcoin.

“We need to re-situate the economy back to something that’s connected to life and humanity,” he said. “And to people’s personal sense of fulfillment, and bitcoin … is a big tool that we use to challenge the power of central banks.”

The roadshow

While challenging central banks is a ballsy move, Taaki is currently undertaking a roadshow of sorts in search of financial sponsors, partner organizations, more “revolutionary hackers” and an actual location within Greece for his academy.

Most recently, the roadshow took him to a stage at the Breaking Bitcoin conference in France, where he revealed for the first time, what the academy is all about.

During that talk, he said he wants to make bitcoin the “national currency of Rojava,” complete with a series of exchange shops where local bitcoin traders can buy vouchers for any number of products.

The next stop for Taaki is to address the attendees at the M-0 conference in Zug, Switzerland, next month. Hosted by the ethereum-based Melonport asset management platform, the conference is geared toward portfolio managers, investors and lawyers looking to save costs by conducting trades on a blockchain.

For a man who both embraces the power of business to help make his ideas a reality and has in a sense turned his back on traditional finance, such a venue is perhaps both fitting and alien to the programmer.

“It’s not for money that I work,” he emphasized, concluding:

“And the people that I surround myself with as well, they should be driven by working on their ideas, not for material gain in this life – because they want to leave something behind, put their image into the world, their ideas, their spirit.”