Sir Richard Branson (Billionaire) Supports Bitcoin, Buy Subway Sandwiches With Bitcoin, Bitcoin Auction Website Threatens Ebay, China Is Dominating Bitcoin Market
I Bought Subway With Bitcoin and It Was Awesome
“Bitcoin can’t be used to buy anything” they said
I’m a huge fan of bitcoin. For those of you who don’t know, bitcoin is a decentralized digital currency that is disrupting the way we exchange money on a global level. I’ve been following bitcoin for about six months now, but up until six weeks ago I never really dove in and learned what this mystical new digital currency actually was.
After spending a countless number of hours researching, I ended up buying some bitcoin while it was still under $200. The more I understood, the more fascinated and passionate I became with the digital currency that was quickly gaining popularity around the world.
On 12th November I was excited to learn that one of the first business establishments in the United States to accept bitcoin was located in my own backyard.
I knew I had to make the 45-minute drive to be one of the first people to complete a real-world transaction with bitcoin.
On a whim, my good friend and professional photographer Christopher Nash and I made the trip to Allentown, PA – home of the first Subway in the United States to accept bitcoin as a payment option. During the ride we spoke about the unbelievable potential bitcoin had to completely revolutionize global commerce and finance, which only heightened the anticipation to make our first purchase.
We pulled up to the small Subway shop on Hamilton Boulevard and proceeded to geek out at the sight of the bitcoin sign on the front door.“Bitcoin accepted here.” We wondered how many people walked by this sign on a daily basis and had no idea that they were stepping into history. After making a slight scene in front of the store and following some odd looks from employees and customers, we made our way to the counter and placed our order.
While our sandwiches were being made we bombarded the employees with questions. They were cool about it and happy to help. I asked how many people had come in this past week to make a purchase with bitcoin.
The employees looked at each other and told us that between them they have had well over one hundred bitcoin enthusiasts stop in during their short shifts alone. “Some told us they traveled four hours, and all they only bought a few cookies.” A wise investment, not only because Subway’s cookies are amazing; but also because next month the bitcoin they spent on food could well be worth double the value.
That being said, transactions will be the backbone of bitcoin’s future. If you really want to support bitcoin’s long-term success, you need support bitcoin businesses by making purchases. Unfortunately due to the current volatility of bitcoin over the past year, many are choosing to sit on their investment and watch it rise and fall in value.
Once our subs were made the employee took out an iPad and opened Coinbase. She punched our total in the register and then in the iPad, which immediately generated a custom QR code linked to the store’s Coinbase account which was preloaded with our exact total calculated. I took out my iPhone, opened my Coinbase app, and scanned the QR code. Instantly the total popped up on my screen and gave me the option to leave a note about my purchase. “Subway” seemed appropriate.
I hit send and within seconds she received confirmation on the iPad that her account had received the bitcoin. It took no longer than a credit card transaction, and it didn’t require my signature.
Thankfully the business owner and I had the Coinbase app installed before Apple unexpectedly removed the app from the App Store less than a month after it was launched. This could be a blockade to bitcoin adoption in the US, hopefully Coinbase can get this issue resolved with Apple immediately.
Perhaps after the recent positive Senate hearings, Apple will have a change of heart. Bitcoin surged this week to a new high of over $700 after US agencies told a Senate committee that bitcoin is a “legal means of exchange.” However, it’s important to note that adoption in China is also a major force behind this spike in value.
After we finished our subs, we knew we had to make another purchase. This time we opted for the cookies and even recorded a short Vine of the transaction.
Chris and I weren’t as keen with our bitcoin purchase, but mainly because we were hungry. Ironically I forgot to bring any cash with me, luckily Chris had enough to pay the tolls on the Turnpike.
Overall the experience was remarkable. A great story to tell the grandkids someday. Love it or hate it, you can’t deny that bitcoin is an exciting new technology that will undoubtably change the world.
I am proud to say I played a small part of history in the making.
China Central Bank Official: People Should be Free to Use Bitcoin Exchanges
Yi Gang, the deputy governor of the People’s Bank of China, this week mentioned bitcoin in comments that have sparked optimism in the country’s bitcoin business community.
Speaking in Chinese at an economic forum, Mr Yi made statements to the effect that it would be impossible for China’s central bank to recognize bitcoin as a legal, legitimate financial instrument “in the near future”. But perhaps more significantly, he added that people should be free to buy and sell bitcoins on exchanges with no interference from the central bank, and that he would personally look at the digital currency with a long-term perspective.
While the New York Times’ Sinosphere blog reported Mr Yi’s comments as a “cautious nod” to digital currency, sources in China itself were more excited by what they saw as a sign the Chinese government would not make any move to restrict bitcoin commerce. The reference to a long-term view also raised hope there would be some kind of more official endorsement at a later point.
“The fact he made any comment at all is significant,” said Bobby Lee, CEO and co-founder of the world’s largest bitcoin exchange by volume, BTC China. He added:
“It means, in the near term anyway, China’s central bank won’t give bitcoin any official legal status. But the key point here is ‘near-term’. Given his position, of course his statements need to be conservative. Anything else would be too much of an official statement.”
Lee saw particular significance in Mr Yi’s reference to people being allowed to buy and sell bitcoins on exchanges.
“He’s the most knowledgable person in the Chinese government making comments about bitcoin today. To me, that’s a strong endorsement for the future potential of bitcoin in China. I am optimistic about bitcoin’s role in the future,” he said.
BTC China this week continued its record of having the world’s highest bitcoin value. As bitcoin peaked at around $900 on Mt. Gox in ordinary trading on 19th November, it passed CNY 7,000, or $1,100, on BTC China. At the time of writing, it sits around CNY 4,969 (around $815).
Curiously, Mr Yi’s comments did not cause any dramatic increase in bitcoin value in China. This could be attributed to a persistent lack of knowledge about bitcoin in the Chinese general public, or the comments were taken as ambiguous by those not watching digital currencies closely.
As other governments hold cautious inquiries and continue to speak of digital currencies in terms of ‘threat’ and ‘risk’ before considering benefits, even indirectly positive comments from other parts of the world show that digital currency is a global phenomenon. Most officials in the world’s advanced economies have remained silent on the sidelines, while private banks have even unilaterally shut down accounts belonging to businesses and individuals with bitcoin connections.
Shortly before the start of US Senate hearings into digital currencies last week, US Federal Reserve Chairman Ben Bernanke also provoked hope with a letter stating the Federal Reserve “does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market”.
He also said digital currencies “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system”.
As a deputy governor of the People’s Bank of China, Mr Yi Gang sits in the upper echelons of China’s financial administration. He reports directly to the governor and his comments have considerable gravity for regulators.
There is also little doubt Mr Yi has followed bitcoin’s progress both in China and abroad, and is aware of China’s recent dominance in trading activity and value.
It’s of interest to note he obtained his Ph.D in economics from the University of Illinois, and was an associate professor with tenure at Indiana University – Purdue University Indianapolis (IUPUI) before returning to his native China. He has published numerous academic papers in English and is likely China’s highest-ranking scholar on foreign currencies and exchange.
Over the past year, China has become both a hub for bitcoin startup activity and also mining, given the large concentration of semiconductor manufacturers in Guangdong Province. Another sign of official endorsement of digital currencies came with CCTV2’s documentary on bitcoin earlier this year.
The bitcoin story in China sounds like a mini-metaphor for the Chinese economy itself: while the rest of the world was looking elsewhere, its citizens worked to acquire vast amounts of new wealth before bursting into the headlines only recently as a superpower.
As of this November, China is home to the world’s largest-volume bitcoin exchange (BTC China), some of the largest mining operations, and could well be leading the global rise of bitcoin.
It was in May that China surpassed all other countries with 84,000 bitcoin wallet downloads, a world record few noticed.
Then came a half hour CCTV2 (Chinese state-owned television) documentary on digital currencies which sparked local interest, and even provoked a mining boom.
There was a gold rush as the Chinese tech community constructed mining rigs on a grand scale, paying $12,000-$15,000 for hardware and recouping their setup costs within a few weeks. Although increased difficulty means it’s now more a matter of months before breaking even, mining remains a popular pursuit.
China now also has the world’s second-highest number of bitcoin nodes according to Bitnodes, with 14,100 online in September 2013 (that’s 11.3% of the global total).
BTC China, World #1
China’s main exchange, BTC China, beat Mt. Gox and Bitstamp to become the world’s highest volume bitcoin exchange at the end of October. Also this week, BTC China secured $5m in funding from Lightspeed Venture Partners‘ local arm Lightspeed China to expand its operations further.
Some 109,841 bitcoins changed hands in the week preceding 4th November, compared with Bitstamp’s 93,372 and Mt Gox’s 76,673. Unlike the world’s other large-volume exchanges, BTC China does not charge any transaction fees.
CEO Bobby Lee, a long-term resident of the US, returned to China a few years ago and joined BTC China in April 2013 to help bitcoin fulfill its promise in the world’s second largest economy.
He notes it was actually China that set the record for bitcoin value that month:
“The all-time high price record was set in mid-April, at CNY 1,944. Very few people know about this — our all-time high price equated to $308, whereas most media sources quote $265 as the all-time price (on MtGox/Bitstamp), back in mid-April.
So for a good 12+ hours back in April this year, people in China were trading bitcoin well above the $265 levels.”
BTC China then went on to surpass its own record with a CNY 1,978 value on 8th November 2013. At the time of writing, the value was CNY 2,726.01, or around $447.43.
At present, BTC China trades only Chinese currency* for bitcoins. Though the site has an English interface, limited access to that currency globally limits its user base to China residents.
A Local View
BTC China Bitcoin Exchange
One such resident is Zennon Kapron, a Shanghai-based Canadian bitcoin enthusiast who performs research and consulting to the financial technology world through his company Kapronasia.
He also writes regularly on Chinese business issues and delivered a presentation titled Bitcoin in China: Chomping at the Bit? at the recent Bitcoin Singapore 2013 conference.
To what does he attribute bitcoin’s popularity in China, and how could others benefit from it?
“There’s BTC China’s no-fee trading for starters. You can leave your money on the platform, your coins on the platform, and trade in and out for free,” he said.
The entry and exit points aren’t free, with a 0.5% Tenpay (China’s PayPal equivalent) cash in/out fee, and a 1% bank transfer fee.
Capital controls in China are strict. It’s easy to bring money into the country, but getting it out (to invest or spend) is more difficult. That means there are are plenty of wealthy Chinese citizens and residents looking to move their money around the world with greater freedom. Kapron explained:
“Some people have the equivalent of tens of millions in dollar-equivalent value in China and they want to get it out.
They want to send their children to school in Canada, the US, Australia. Wealthy families, new and old money — it’s not a lack of trust in the local system, it’s just a need to diversify their investments.”
China’s huge population is cash-heavy yet increasingly wired, he said. Domestic investment options are limited to stocks, property, and more property.
Kapronasia itself has separate entities registered in mainland China and Hong Kong, but even moving funds between the two is problematic. To do so in the fiat economy, one actually has to invoice the other and perform a currency conversion.
To test bitcoin’s efficiency Kapron bought 10 BTC in the US through CoinBase, sent it directly to BTC China and withdrew the money in CNY, which “takes 20 minutes or less once you know what you’re doing”.
“I was shocked by how easy it was. The value was CNY 20,000 when I cashed in and CNY 30,000 when I cashed out because of bitcoin’s increase in value, so I made even more,” he added.
Despite the increased trading activity and media hype, the story ‘on the ground’ in China is smaller-scale.
The only physical stores accepting bitcoin are a couple of enthusiast cafes in Beijing and, while about 134 individual sellers on Taobao (China’s answer to eBay) accept bitcoin, it is far from a popular payment option.
“This is all being driven by a very very small part of the population. When I speak to other people they’re very interested and want to get involved, but they know nothing about it yet.”
You may or may not have heard, but China has been down the digital currency road before. Quite a way down, as it happens.
Q coin, a centralized digital currency controlled by instant messaging service QQ, became wildly popular in the mid 2000s with a trading volume equal to $60,000+ per day by 2007.
Government regulators stepped in, stamped down and severely limited its use, fearing it was being used for ‘black market transactions’ and money laundering.
Bitcoin may be bringing back memories of Q coin’s glory days: with a more user-friendly interface, and with government control restricted to fiat entry/exit points, it could give the Chinese a transaction method for which they’ve already shown a preference.
Kapron recently covered a story about local company Shanda, whose real estate arm promoted a recent upmarket condo development by announcing it would accept bitcoin as payment for property.
Whether the Shanda real estate deal was an authentic financial experiment or just a promotional gimmick is unknown; nor do we know how many people actually paid or part-paid for new apartments in bitcoin. But Shanda is primarily an IT company and its customers mainly young and tech-savvy professionals, so their choice of PR tool was an effective one.
Search giant Baidu’s ‘announcement’ it would start accepting bitcoin was a little underwhelming in reality: it was an unofficial statement by the company’s security software arm, perhaps also trying to create hype.
Chinese Are Still Really Into Mining
“It’s also hard to tell exactly how much mining activity is coming out of China these days,” Kapron said. Shenzhen-based company Bitfountain is also a popular manufacturer of USB mining hardware worldwide.
“The numbers were pretty incredible when we looked into operations,” he said, adding:
“Some were providing ‘hosted mining’ — renting out the space and equipment, or providing rental equipment for miners to host themselves.
Around April-May 2013, the fast payback (just a few weeks) from doing that was amazing.”
China’s challenges are your challenges
Bitcoin’s reputation in China faces the same hurdles as it does in other countries. There is software and security usability, public awareness and the threat of government attempts to intervene.
There are also the problems of inexperienced and rogue business elements jumping in to take advantage of the hype. Just last week, a (supposedly) Hong Kong-based exchange called GBL went missing in action, taking with it $4.1m in its customers’ wealth.
Will Cryptoauction Become the ‘New eBay of Bitcoin’?
Irish company Cryptoauction is aiming to become the new eBay of bitcoin.
The company is due to launch on 30th November at the London Bitcoin Expo under the helmsmanship of entrepreneur Daryl Cusack.
He believes that, since the closure of Bitmit.net, the field is wide open for a new bitcoin-based auction marketplace.
Cusack is presenting a talk at the expo on decentralised corporate models “in order to achieve a people-not-profit corporate outlook”. He will explain how Cryptoauction’s trustless model fits in with concepts from game theory that incentivise trusting relationships between users without the need for third party mediation.
“There’s no way to eliminate bad actors entirely. The best we can do is mitigate the risk by incentivising trust amongst users. We employ an innovative mechanism to discourage improper use of the site whereby those with good reputations are rewarded financially and those with bad reputations are penalised.
We’re trying to create a system where the users create the best possible outcomes for themselves without the need for a trusted third party. When you take that variable out of the equation you end up with a purer vision of user to user interaction.”
Users will be able to post one listing a day for free, and can post subsequent listings for 2.9% + €0.10 each (capped at €95) – a measure designed to stop spammers from listing endless junk items. Each auction will last between one and 14 days.
Sellers, whose identities are always protected, can choose to hold a regular auction where the item can sell for any price, or they can opt for a fixed-price auction, with or without a ‘buy it now’ price. They also have the chance to choose which cryptocurrency they prefer to sell for, bitcoin, litecoin or primecoin, when they register.
“We’ll be moderating the items that are posted and do periodic reviews for inappropriate items, items in bad taste, illegal items and so on, so you won’t find drugs there,” Cusack stated.
To mitigate against a ‘bad actor’ not sending funds to the seller, Cryptoauction has integrated an automatic settlement feature, which Cusack says will resolve any disputes by “comparing the relative karma of each of the transactors”.
The aim is to judge buyers and sellers on their reputations in a user review system, effectively creating a ‘wall’ around good buyers and sellers, protecting them from those who are less reputable.
Cusack said building trust among a distributed network of users is a “chicken and egg situation”, but he hopes it will catch on as trust flows into the system organically.
“Users with high ratings will benefit when the escrowed funds are in dispute, as they’ll be awarded equally to users with an approval rating above 80%,” he explained.
According to Cusack, the company uses a dynamic system, so if a user’s reputation starts going down, their rewards will too. He explained:
“There’s a weighted review system over a fixed number of reviews that ensures, over time, good sellers will develop good reputations.
We also have a cancellation system where … once the funds are held in escrow, the buyer cannot cancel it but the seller can, and we employ a messaging system for buyers and sellers to work out their differences if need be. It’s an off-block chain escrow system too.”
Cryptoauction has registered multiple domain names in different locales around the world to cater to different national markets, and, if the idea takes off, it will push out in new directions.
When asked about the site’s security measures, Cusack said the company has made every attempt to keep as few bitcoins online as possible. However, he says there’s always an element of risk, so the user has to exercise due diligence. Cryptoauction has also tried to minimise the amount of time each user’s funds are held, he explained.
“We use cloud flare to avoid going offline during a DDoS, and we’re registered in Ireland, under the Business Names Act, as an Irish company and under Irish law, and we intend to work with the Bitcoin Foundation and DATA to ensure that we meet best practices for handling cryptocurrency,” Cusack added.
In terms of Cryptoauction’s profitability, the company claims to be taking a cut of 1% on each sale, plus a $0.10 fee to avoid creating dust on the block chain, but their take is capped at 75 euros per transaction and there’s an minimum user account activation fee of 0.0001 BTC per account, to cover any transaction fees the user incurs.
The company has taken tax advice on using cryptocurrency and has spoken to Elizabeth Ploshay of the Bitcoin Foundation to ask for guidance. However, crypto-currency has yet to be recognised by the Irish Government as legal tender, so the firm will be paying its taxes in euros.
University of Nicosia in Cyprus Becomes First in the World to Accept Bitcoin
The University of Nicosia in Cyprus has announced that it will accept bitcoin for the payment of tuition and other fees.
The university, also known as UNic, is not only the first accredited university in the world to accept bitcoin from its students, but is also launching a Master of Science degree in Digital Currency in Spring 2014.
UNic’s Chief Financial Officer Dr. Christos Vlachos believes in the virtues of bitcoin, stating:
“We are acutely aware that digital currency is an inevitable technical development that will lead to significant innovation in online commerce, financial systems, international payments and remittances and global economic development.”
Vlachos also believes that digital currency will “create more efficient services and serve as a mechanism for spreading financial services to under-banked regions of the world.”
UNic’s initial impetus for accepting bitcoin came from receiving requests from online students in such under-banked countries, with Vlachos noting Kenya as a prime example.
After looking into it some more, the administration decided that bitcoin was faster, cheaper, easier and more convenient, and decided to offer it as an option for its students.
Garrick Hileman, economic historian at the London School of Economics, suggested that UNic’s move is a sign of growth in bitcoin’s credibility as a medium of exchange at more traditional institutions.
He added: “The most fertile ground for bitcoin is in places like Cyprus, Argentina, Iceland, China and other countries which have experienced significant financial disruptions and/or maintain strict financial controls.”
When questioned about its decision in light of bitcoin’s recent volatility, a university spokesperson told GeekWire: “The intention of this initiative is to ease transmission difficulties for certain students and to build our own practical knowledge about this field, not to engage in currency speculation.”
Founded in 1980, the University of Nicosia is the largest private university in Cyprus, with campuses across three of its cities and over 8,500 students in total across its affiliated institutions. It is also one of the largest universities in the Mediterranean region of Europe.
UNic also plans to lobby the Cypriot Government for a framework to develop Cyprus into a hub for bitcoin exchange, trading and banking.
The bitcoin price saw a massive surge to $266 in April during the financial crisis in Cyprus.
Paul Smocer, president of BITS, which promotes discussion of technology issues for the financial services industry, mentioned discussed the influx of interest in digital currencies that resulted from the crisis this at a recent US Senate hearing on bitcoin.
In the past few weeks, the bitcoin price has soared to even greater highs, and remains high despite some recent fluctuations.
UNic may be the first accredited university to accept bitcoin, but other educational services have already embraced the digital currency.
Earlier in the year Khan Academy launched a series of educational bitcoin videos and announced it is accepting donations in bitcoin. Draper ‘entrepreneur heroes’ University, a VC-founded school for entrepreneurs based in Silicon Valley, also has a tuition programme that accepts bitcoin.
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