The Definition of Bitcoin bitcoin investment return
Almost everyone now knows about bitcoin investment return trading. While most people have had success with the currency, there are others that have faced challenges. If you are planning on getting into the market here are some of the things you should be wary of:
The bitcoin wallet
To use the coins, you need a digital wallet. It can be an app, hardware or cloud based. Some bitcoin investment return companies help beginners by automatically generating the wallets for them. You can store the purses online or offline. For security reasons, save yours online and ensure that the password protects it. Avoid an online wallet as it can easily be hacked. If you have to use the unit keep a limited amount of money in it.
While this is the case, it doesn’t mean that you shouldn’t be conversant with the prices in the market. Regularly visit forums and related places to find the current prices of the coins. Who knows you might find it profitable selling it at the current prices? Bitcoin investing can be quite lucrative
Getting Started With bitcoin investment return:
Today, a look at what’s going on with bitcoin in Singapore, a tiny Southeast Asian island city-state which boasts the world’s fourth-biggest financial centre, third highest per-capita income and (arguably) best regulatory jurisdiction for bitcoin startups. Only 5.5 million people live in Singapore, but its high ranks in education, healthcare, and economic competitiveness make it an interesting case study for how bitcoin might impact developed economies in Asian. Antony Lewis, a Director at itBit Bitcoin Exchange in Singapore breaks down the opportunity.
“Bitcoin in Singapore” | Antony Lewis, Director, itBit Bitcoin Exchange
In 2014 there were major advancements in the use, regulation and development of bitcoin and related technologies worldwide. In Asia, Singapore played a particularly significant role in this progress, and its citizens and businesses continue to be in the vanguard of the digital currency industry. Bitcoin in Singapore has benefited from a combination of community enthusiasm, entrepreneurial innovation, and regulatory restraint.
It all started in December 2013, when the Monetary Authority of Singapore (MAS), the country’s central bank and financial regulator, suggested in an email to Coin of Sale, a brick-and-mortar point of sale software provider, that it would not regulate the acceptance of bitcoin by businesses. MAS called participation in such transactions a commercial decision in which the Authority should not intervene. Then in January, the Inland Revenue Authority of Singapore (IRAS) became one of the first regulatory bodies in the world to make a determination on how digital currencies should be taxed. The IRAS ruled that individuals who made money through bitcoin investments, would be taxed at the current zero percent capital gains tax rate. Digital currency transactions involving real money or services, such as buying and selling bitcoins with dollars or paying for services with bitcoins, would qualify for GST (Goods & Services Tax), but there would be no such tax on “virtual world” transactions (e.g. in-game currencies).
In March, Singapore became one of the first countries to take an official regulatory stance on digital currencies. MAS announced its plans to regulate digital currency intermediaries operating in Singapore in order to ward off money laundering schemes or terrorism financing that leveraged the anonymity of digital currencies, and indicated that intermediaries who bought, sold or facilitated the exchange of digital currencies for other currencies would be required to verify customers’ identities as well as to report any suspicious transactions to the Suspicious Transaction Reporting Office. However, MAS did not consider bitcoin or other digital currencies to be securities or legal tender, and as such bitcoin avoided regulation under Singapore’s Securities and Futures Act or Financial Advisers Act.
Regulatory clarity has propelled Singapore to the forefront of the digital currency industry.Temasek Holdings, a government-owned Singapore investment company, even ran a bitcoin experiment, wherein four hundred employees at the company, “from driver to board member,” learned how to use digital currency for charitable donations. As a result of this commitment to innovation, other venture capitalists from across the globe have taken notice.
Our company itBit raised a total of $5.5m in funding in 2013. In March, GoCoin (incorporated in Singapore), a payments processor that facilitates online businesses to accept bitcoin, litecoin and dogecoin, closed a $1.5 million Series A financing. BitX, which provides bitcoin products and services including wallets, exchanges, merchant integration and APIs to consumers, businesses and developers, announced in August it had raised USD $800,000 in seed funding from investors in New York, Palo Alto and London. That same month, Boost VC, a Silicon Valley bitcoin accelerator company, announced it had selected Singapore-based bitcoin exchange and wallet service CoinHako as its first Asian investment, which also included a six-figure personal investment from venture capitalist Tim Draper. And two months later, Coinpip, a cryptocurrency payment gateway for international contractors and freelancers, was selected to join 500 Startups.
Other ventures might soon join those funded ranks as well. In September, CRXzone became the first Singaporean exchange to offer both bitcoin and litecoin trading in Singapore. Point of sale technology from Coin of Sale converts retail prices into bitcoin for brick and mortar stores and is being used in a number of different countries today. And Singapore now has at least eight operational bitcoin vending machines, the first of which was manufactured, installed and operated by Singapore company Tembusu Terminals. Numoni, a mobile airtime vending machine manufacturer, Bitcoin Exchange which installed the popular Lamassu bitcoin vending machine in shopping malls, and Coin Republic, which launched Singapore’s first bitcoin kiosk capable of “cashing out” or disbursing banknotes in exchange for bitcoins have also entered the bitcoin ATM scene locally.
Trade associations and bitcoin educators are also thriving. In May, a group of Singaporean bitcoin businesses officially formed a trade association, the Association of Cryptocurrency Enterprises and Start-ups, Singapore (ACCESS), which aims to promote Singapore as one of the premiere bitcoin business locales in through education and dialogue with the government. Singapore Management University, as part of its commercial law program, offered a seminar in November on the regulation of digital currencies as well as a seminar series focused on the technical aspects of the cryptocurrency. And in addition to March’s Coin Congress, which featured many global digital currency experts and enthusiasts, Bitcoin also made its debut at Asia’s largest tech conference,Echelon, which featured a panel on Bitcoin as a disruptive technology.
Not a bad start for a country less than 2% as populous as the United States! Here’s to a prosperous 2015 for digital currencies in Singapore and abroad!
The MIT E-Lab is a well established (20+ year) program that helps startups by matching them with MIT & Harvard business school students for a semester. The E-Lab is now looking for cryptocurrency related startups at various stages, so apply if you think this could help your efforts. (You don’t need to be local, but a c-level exec has to be in Cambridge frequently.) To apply, or for more info on E-Lab visit http://elab.mit.edu/.
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Plus, TBI Daily readers get 10% off the Berlin and New York events with code TBIDAILY. See you there!
Jobs, Jobs, Jobs
Bitnet, San Francisco, Belfast, London (VC-backed)
-Leading digital commerce platform & former Visa team.
-Open positions: Engineering (Customer Success, Lead UI, Product, DevOps), Sales Director (EMEA), Sales Engineer (San Francisco)
-Check out Bitnet (https://bitnet.io/careers.html) and email email@example.com
Coinbase, San Francisco (VC-backed)
-Largest “universal services” bitcoin company.
-Open positions: Security Engineer, Software Engineer (2–3 years mobile product development), Regulatory Compliance Investigator, (1 year conducting SAR investigations)
-Check out Coinbase (https://www.coinbase.com/careers/)
BitGo, Palo Alto (VC-backed)
-The leading Bitcoin multi-sig security company
-Open positions: Back-end / Front-End / iOS / Security Engineers, UX Designer
-Check out BitGo (www.bitgoinc.com/jobs) and email firstname.lastname@example.org
Bolt, San Francisco (VC-backed)
-Stealth startup focused on consumer applications of Bitcoin.
-Open positions: Security Engineer, Ruby Engineer, UI/UX Designer, Executive Assistant.
-Check out Bolt (bolt.com) and email email@example.com.
Elliptic, London (VC-backed)
-Vault and enterprise digital currency services.
-Open positions: Data Scientists and Front-end developers.
-Learn more and apply at elliptic.workable.com
Today’s Tid Bits
Hong Kong’s MyCoin Disappears With Up to $387 Million, Reports Claim
MyCoin, a Hong Kong based bitcoin exchange, has shut down, taking with it possibly as much as HK$3bn ($386.9m) in investor funds. If true, this would be an incredible amount, considering bitcoin’s entire market cap today stands at around USD$3bn. Some customers suspect MyCoin was operating a ponzi scheme. The victims of the company’s actions are expected to make a statement to the Hong Kong police on Wednesday.
Inside the Chinese Bitcoin Mine That’s Making $1.5M a Month
Motherboard gained access to a massive Bitcoin mine located in a repurposed factory in the Liaonin Province in rural northeast China. The mine is one of six sites owned by a group of four people, who run a mining operation that cumulatively generated 4,050 bitcoins a month, and grosses around $1.5 million. The mines represent 3% of the entire Bitcoin network. A video of the mine can be found in the link above, but the details of the operation’s ASIC miners or who supply them is not revealed.
New BitLicense Draft Draws Half-Welcome from Bitcoin Reps
The updated BitLicense, released last Wednesday, appears to have lived up to Benjamin Lawsky’s promise. The new draft includes an exemption from having to obtain a license for software developers that aren’t directly engaged in money transmission, and it also offers a softer regulatory touch for small startups. However, most bitcoin leaders believe the draft still has a long way to go.
Andreas Antonopoulous: “Give Bitcoin Two Years”
Andreas Antonopoulous spoke at the Bitcoin & the Blockchain Summit in San Francisco last week, emphasizing it’s underlying technology, praising it’s dumb, transaction-processing network saying that this type of network supports smart devices, pushing all of the intelligence to the edge. Andreas went on to say that if 2014 is the “worst year in bitcoin,” which saw $500 million in investment generating tens of thousands of jobs were going to be all right. Andreas finished with a prediction that in two years, bitcoin will be taking off.
New Jersey State Legislature Holds Hearing on Digital Currencies
The Assembly Financial Institutions and Insurance Committee of the State of New Jersey is holding a public hearing on bitcoin and digital currency today. The committee has invited select guests to testify to the applications, consumer protection risks and concerns, advantages and current US regulatory schemes related to digital currency use. The lineup of speakers includes attorney and Blockchain global policy counsel, Marco Santori, itBit CEO Charles Cascarilla, and Tera Exchange co-founders Christian Martin and Leonard Nuara.
Ex-Credit Suisse CEO: Invest in Gold and Bitcoin Long-Term, Not Fiat
Oswald Gruebel, ex-CEO of UBS and Credit Suisse, has openly criticized the inability of banks to prevent economic crises, while championing gold and Bitcoin as credible long-term investment opportunities. Gruebel believes that bank’s weaknesses would continue to have an increasing detrimental effect on the global economy. No supporting evidence has been released to indicate Gruebel’s openness towards Bitcoin’s propagation domestically or internationally.
Payments Processor ChainPay Launches to Challenge Coinbase, BitPay
ChainPay, an Isle of Man-based bitcoin payment processor, has launched in the hopes of competing with BitPay and Coinbase. ChainPay takes 1% of every transaction and offers bitcoin exchange rates from Kraken of Bitstamp. ChainPay currently has banking relationships set up, according to James Carter, ChainPay’s co-founder, but would not release the name of the bank.
Diamond Circle Suspends Operations Amid Cash Crisis
Diamond Circle, an Australian bitcoin hardware manufacturer, has suspended operations citing a lack of capital. The company, which launched Australia’s first cashless ATM last year, is looking for a buyer for the majority of its services. The wallet service is expected to be permanently suspended in the next few days. The company is currently considering buyers, but specifics could not be revealed at his time.
The Race to Replace Bitcoin: ‘Bad Blood’ Between Ripple and Stellar Aires in Tell-All Report
Yesterday, The New York Observer published a 15,000-word story that takes a detailed look at the “bad blood” between the decentralized payment networks, Ripple Labs and Stellar. The story between the two, penned by Michael Craig, “Has everything: sex, huge money, fraud, genius, betrayal, international intrigue and government raids.” Jed McCaleb, the founder of defunct bitcoin exchange, Mt. Gox, Ripple Labs and Stellar, and Stellar executive director Joyce Kim take the brunt of the article’s burns. The story also reports that Wells Fargo had assembled a task force compromising 20 of its “top executives and advisors” that was aimed at finding a way to be the first bank to embrace cryptocurrency, but it fell apart. Craig also covers the fallout of a deal that involved Stripe purchasing Ripple Labs for $13m in cash.
Irish University to Explore ‘Bitcoin Credit-Checks’
A group of computer science students and professors from Trinity College Dublin are working on Bitcoin related projects that aim to tackle and reduce fraud, by combing the blockchain in search of patterns. The group is looking in to “bitcoin credit-checks,” which would allow businesses to peek at a database to check for credit, or other information. Overall, the group wants to enhance Bitcoin transparency.
bitLanders to be a Sponsor of the 2015 New York Open Judo Team Championship
bitLanders, a digital platform whose user base earns Bitcoin for creating, engaging and sharing visual content, will once again be a sponsor of the New York Open Judo Team Championship on Sunday, March 29, 2015. The New York Athletic Club will host the event and the award for the event will be the bitLanders Bitcoin Judo Cup.
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Bitcoin in SingaporeA diagram of a bitcoin transfer
The bitcoin network is a peer-to-peer payment network that operates on a cryptographic protocol. Users send and receive bitcoins, the units of currency, by broadcasting digitally signed messages to the network using bitcoin cryptocurrency wallet software. Transactions are recorded into a distributed, replicated public database known as the blockchain, with consensus achieved by a proof-of-work system called "mining". The protocol was designed in 2008 and released in 2009 as open source software by Satoshi Nakamoto, the name or pseudonym of the original developer/developer group.
The network requires minimal structure to share transactions. An ad hoc decentralized network of volunteers is sufficient. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will. Upon reconnection, a node downloads and verifies new blocks from other nodes to complete its local copy of the blockchain.The best chain consists of the longest series of transaction records from the genesis block to the current block or record. Orphaned records exist outside of the best chain.
A bitcoin is defined by a sequence of digitally signed transactions that began with the bitcoin's creation, as a block reward. The owner of a bitcoin transfers it by digitally signing it over to the next owner using a bitcoin transaction, much like endorsing a traditional bank check. A payee can examine each previous transaction to verify the chain of ownership. Unlike traditional check endorsements, bitcoin transactions are irreversible, which eliminates risk of chargeback fraud.
Although it is possible to handle bitcoins individually, it would be unwieldy to require a separate transaction for every bitcoin in a transaction. Transactions are therefore allowed to contain multiple inputs and outputs, allowing bitcoins to be split and combined. Common transactions will have either a single input from a larger previous transaction or multiple inputs combining smaller amounts, and one or two outputs: one for the payment, and one returning the change, if any, to the sender. Any difference between the total input and output amounts of a transaction goes to miners as a transaction fee.GPU-based mining rig, 2012 Lancelot FPGA-based mining board, 2013
To form a distributed timestamp server as a peer-to-peer network, bitcoin uses a proof-of-work system. The work in this system is what is often referred to as bitcoin mining. The signature is discovered rather than provided by knowledge. This process is energy intensive. Electricity can consume more than 90% of operating costs for miners. A data center in China, planned mostly for bitcoin mining, is expected to require up to 135 MW of power.
The rule of requiring a proof-of-work to provide the signature for the blockchain was Satoshi Nakamoto's key innovation. The mining process involves identifying a block that when hashed twice with SHA-256, yields a number smaller than the given difficulty target. While the average work required increases in inverse proportion to the difficulty target, a hash can always be verified by executing a single round of double SHA-256.
For the bitcoin timestamp network, a valid "proof-of-work" is found by incrementing a nonce until a value is found that gives the block's hash the required number of leading zero bits. Once the hashing has produced a valid result, the block cannot be changed without redoing the work. As later blocks are chained after it, the work to change the block would include redoing the work for each subsequent block.
Majority consensus in bitcoin is represented by the longest chain, which required the greatest amount of effort to produce. If a majority of computing power is controlled by honest nodes, the honest chain will grow fastest and outpace any competing chains. To modify a past block, an attacker would have to redo the proof-of-work of that block and all blocks after it and then surpass the work of the honest nodes. The probability of a slower attacker catching up diminishes exponentially as subsequent blocks are added.Mining difficulty has increased significantly
To compensate for increasing hardware speed and varying interest in running nodes over time, the difficulty of finding a valid hash is adjusted roughly every two weeks. If blocks are generated too quickly, the difficulty increases and more hashes are required to make a block and to generate new bitcoins.
Bitcoin mining is a competitive endeavor. An "arms race" has been observed through the various hashing technologies that have been used to mine bitcoins: basic CPUs, high-end GPUs common in many gaming computers, FPGAs and ASICs all have been used, each reducing the profitability of the less-specialized technology. Bitcoin-specific ASICs are now available. As bitcoins become more difficult to mine, computer hardware manufacturing companies have seen an increase in sales of high-end products.
Computing power is often bundled together or "pooled" to reduce variance in miner income. Individual mining rigs often have to wait for long periods to confirm a block of transactions and receive payment. In a pool, all participating miners get paid every time a participating server solves a block. This payment depends on the amount of work an individual miner contributed to help find that block.
Bitcoin data centers prefer to keep a low profile, are dispersed around the world and tend to cluster around the availability of cheap electricity.A mining farm in Iceland
In 2013, Mark Gimein estimated electricity use to be about 40.9 megawatts (982 megawatt-hours a day). In 2014, Hass McCook estimated 80.7 megawatts (80,666 kW). As of 2015, The Economist estimated that even if all miners used modern facilities, the combined electricity consumption would be 166.7 megawatts (1.46 terawatt-hours per year).
Journalist Matt O'Brien opined that it is not obvious whether bitcoin is lowering transaction costs, since the costs are transformed into pollution costs, which he characterizes as "environmental spillovers on everyone else, or what economists call negative externalities."
To lower the costs, bitcoin miners have set up in places like Iceland where geothermal energy is cheap and cooling Arctic air is free. Chinese bitcoin miners are known to use hydroelectric power in Tibet to reduce electricity costs.Avalon ASIC-based mining machine ASICMINER ASIC-based USB mining device
A rough overview of the process to mine bitcoins is:
- New transactions are broadcast to all nodes.
- Each miner node collects new transactions into a block.
- Each miner node works on finding a proof-of-work code for its block.
- When a node finds a proof-of-work, it broadcasts the block to all nodes.
- Receiving nodes validate the transactions it holds and accept only if all are valid.
- Nodes express their acceptance by moving to work on the next block, incorporating the hash of the accepted block.
By convention, the first transaction in a block is a special transaction that produces new bitcoins owned by the creator of the block. This is the incentive for nodes to support the network. It provides the way to move new bitcoins into circulation. The reward for mining halves every 210,000 blocks. It started at 50 bitcoin, dropped to 25 in late 2012 and to 12.5 bitcoin in 2016. This halving process is programmed to continue for 64 times before new coin creation ceases.
Various potential attacks on the bitcoin network and its use as a payment system, real or theoretical, have been considered. The bitcoin protocol includes several features that protect it against some of those attacks, such as unauthorized spending, double spending, forging bitcoins, and tampering with the blockchain. Other attacks, such as theft of private keys, require due care by users.
Unauthorized spending is mitigated by bitcoin's implementation of public-private key cryptography. For example; when Alice sends a bitcoin to Bob, Bob becomes the new owner of the bitcoin. Eve observing the transaction might want to spend the bitcoin Bob just received, but she cannot sign the transaction without the knowledge of Bob's private key.
A specific problem that an internet payment system must solve is double-spending, whereby a user pays the same coin to two or more different recipients. An example of such a problem would be if Eve sent a bitcoin to Alice and later sent the same bitcoin to Bob. The bitcoin network guards against double-spending by recording all bitcoin transfers in a ledger (the blockchain) that is visible to all users, and ensuring for all transferred bitcoins that they haven't been previously spent.:4
If Eve offers to pay Alice a bitcoin in exchange for goods and signs a corresponding transaction, it is still possible that she also creates a different transaction at the same time sending the same bitcoin to Bob. By the rules, the network accepts only one of the transactions. This is called a race attack, since there is a race which transaction will be accepted first. Alice can reduce the risk of race attack stipulating that she will not deliver the goods until Eve's payment to Alice appears in the blockchain.
A variant race attack (which has been called a Finney attack by reference to Hal Finney) requires the participation of a miner. Instead of sending both payment requests (to pay Bob and Alice with the same coins) to the network, Eve issues only Alice's payment request to the network, while the accomplice tries to mine a block that includes the payment to Bob instead of Alice. There is a positive probability that the rogue miner will succeed before the network, in which case the payment to Alice will be rejected. As with the plain race attack, Alice can reduce the risk of a Finney attack by waiting for the payment to be included in the blockchain.
Each block that is added to the blockchain, starting with the block containing a given transaction, is called a confirmation of that transaction. Ideally, merchants and services that receive payment in bitcoin should wait for at least one confirmation to be distributed over the network, before assuming that the payment was done. The more confirmations that the merchant waits for, the more difficult it is for an attacker to successfully reverse the transaction in a blockchain—unless the attacker controls more than half the total network power, in which case it is called a 51% attack.
Deanonymisation is a strategy in data mining in which anonymous data is cross-referenced with other sources of data to re-identify the anonymous data source. Along with transaction graph analysis, which may reveal connections between bitcoin addresses (pseudonyms), there is a possible attack which links a user's pseudonym to its IP address. If the peer is using Tor, the attack includes a method to separate the peer from the Tor network, forcing them to use their real IP address for any further transactions. The attack makes use of bitcoin mechanisms of relaying peer addresses and anti-DoS protection. The cost of the attack on the full bitcoin network is under €1500 per month.Main article: Online transaction processing
Each miner can choose which transactions are included in or exempted from a block. A greater number of transactions in a block does not equate to greater computational power required to solve that block.
Upon receiving a new transaction a node must validate it: in particular, verify that none of the transaction's inputs have been previously spent. To carry out that check the node needs to access the blockchain. Any user who does not trust his network neighbors, should keep a full local copy of the blockchain, so that any input can be verified.
As noted in Nakamoto's whitepaper, it is possible to verify bitcoin payments without running a full network node (simplified payment verification, SPV). A user only needs a copy of the block headers of the longest chain, which are available by querying network nodes until it is apparent that the longest chain has been obtained. Then, get the Merkle branch linking the transaction to its block. Linking the transaction to a place in the chain demonstrates that a network node has accepted it, and blocks added after it further establish the confirmation.
While it is possible to store any digital file in the blockchain, the larger the transaction size, the larger any associated fees become. Various items have been embedded, including URLs to child pornography, an ASCII art image of Ben Bernanke, material from the Wikileaks cables, prayers from bitcoin miners, and the original bitcoin whitepaper.
The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and the media. The FBI prepared an intelligence assessment, the SEC has issued a pointed warning about investment schemes using virtual currencies, and the U.S. Senate held a hearing on virtual currencies in November 2013.
Several news outlets have asserted that the popularity of bitcoins hinges on the ability to use them to purchase illegal goods. In 2014, researchers at the University of Kentucky found "robust evidence that computer programming enthusiasts and illegal activity drive interest in bitcoin, and find limited or no support for political and investment motives."Main article: Darknet market
A CMU researcher estimated that in 2012, 4.5% to 9% of all transactions on all exchanges in the world were for drug trades on a single dark web drugs market, Silk Road. Child pornography, murder-for-hire services, and weapons are also allegedly available on black market sites that sell in bitcoin. Due to the anonymous nature and the lack of central control on these markets, it is hard to know whether the services are real or just trying to take the bitcoins.
Several deep web black markets have been shut by authorities. In October 2013 Silk Road was shut down by U.S. law enforcement leading to a short-term decrease in the value of bitcoin. In 2015, the founder of the site was sentenced to life in prison. Alternative sites were soon available, and in early 2014 the Australian Broadcasting Corporation reported that the closure of Silk Road had little impact on the number of Australians selling drugs online, which had actually increased. In early 2014, Dutch authorities closed Utopia, an online illegal goods market, and seized 900 bitcoins. In late 2014, a joint police operation saw European and American authorities seize bitcoins and close 400 deep web sites including the illicit goods market Silk Road 2.0. Law enforcement activity has resulted in several convictions. In December 2014, Charlie Shrem was sentenced to two years in prison for indirectly helping to send $1 million to the Silk Road drugs site, and in February 2015, its founder, Ross Ulbricht, was convicted on drugs charges and faces a life sentence.
Some black market sites may seek to steal bitcoins from customers. The bitcoin community branded one site, Sheep Marketplace, as a scam when it prevented withdrawals and shut down after an alleged bitcoins theft. In a separate case, escrow accounts with bitcoins belonging to patrons of a different black market were hacked in early 2014.
According to the Internet Watch Foundation, a UK-based charity, bitcoin is used to purchase child pornography, and almost 200 such websites accept it as payment. Bitcoin isn't the sole way to purchase child pornography online, as Troels Oertling, head of the cybercrime unit at Europol, states, "Ukash and Paysafecard... have [also] been used to pay for such material." However, the Internet Watch Foundation lists around 30 sites that exclusively accept bitcoins. Some of these sites have shut down, such as a deep web crowdfunding website that aimed to fund the creation of new child porn.[better source needed] Furthermore, hyperlinks to child porn websites have been added to the blockchain as arbitrary data can be included when a transaction is made.
Some malware can steal private keys for bitcoin wallets allowing the bitcoins themselves to be stolen. The most common type searches computers for cryptocurrency wallets to upload to a remote server where they can be cracked and their coins stolen. Many of these also log keystrokes to record passwords, often avoiding the need to crack the keys. A different approach detects when a bitcoin address is copied to a clipboard and quickly replaces it with a different address, tricking people into sending bitcoins to the wrong address. This method is effective because bitcoin transactions are irreversible.:57
One virus, spread through the Pony botnet, was reported in February 2014 to have stolen up to $220,000 in cryptocurrencies including bitcoins from 85 wallets. Security company Trustwave, which tracked the malware, reports that its latest version was able to steal 30 types of digital currency.
A type of Mac malware active in August 2013, Bitvanity posed as a vanity wallet address generator and stole addresses and private keys from other bitcoin client software. A different trojan for macOS, called CoinThief was reported in February 2014 to be responsible for multiple bitcoin thefts. The software was hidden in versions of some cryptocurrency apps on Download.com and MacUpdate.
Some ransomware demand payment in bitcoin. One program called CryptoLocker, typically spread through legitimate-looking email attachments, encrypts the hard drive of an infected computer, then displays a countdown timer and demands a ransom, usually two bitcoins, to decrypt it. Massachusetts police said they paid a 2 bitcoin ransom in November 2013, worth more than $1,300 at the time, to decrypt one of their hard drives. Linkup, a combination ransomware and bitcoin mining program that surfaced in February 2014, disables internet access and demands credit card information to restore it, while secretly mining bitcoins. Bitcoin is currently being used as the ransom medium of choice in the WannaCry ransomware hack hitting many buildings in Asia and Europe.
In June 2011, Symantec warned about the possibility that botnets could mine covertly for bitcoins. Malware used the parallel processing capabilities of GPUs built into many modern video cards. Although the average PC with an integrated graphics processor is virtually useless for bitcoin mining, tens of thousands of PCs laden with mining malware could produce some results.
In mid-August 2011, bitcoin mining botnets were detected, and less than three months later, bitcoin mining trojans had infected Mac OS X.
In April 2013, electronic sports organization E-Sports Entertainment was accused of hijacking 14,000 computers to mine bitcoins; the company later settled the case with the State of New Jersey.
German police arrested two people in December 2013 who customized existing botnet software to perform bitcoin mining, which police said had been used to mine at least $950,000 worth of bitcoins.
For four days in December 2013 and January 2014, Yahoo! Europe hosted an ad containing bitcoin mining malware that infected an estimated two million computers. The software, called Sefnit, was first detected in mid-2013 and has been bundled with many software packages. Microsoft has been removing the malware through its Microsoft Security Essentials and other security software.
Several reports of employees or students using university or research computers to mine bitcoins have been published.
Bitcoins may not be ideal for money laundering, because all transactions are public. Authorities, including the European Banking Authority the FBI, and the Financial Action Task Force of the G7 have expressed concerns that bitcoin may be used for money laundering. In early 2014, an operator of a U.S. bitcoin exchange, Charlie Shrem, was arrested for money laundering. Subsequently, he was sentenced to two years in prison for "aiding and abetting an unlicensed money transmitting business". A report by UK's Treasury and Home Office named "UK national risk assessment of money laundering and terrorist financing" (2015 October) found that, of the twelve methods examined in the report, bitcoin carries the lowest risk of being used for money laundering, with the most common money laundering method being the banks.
In a Ponzi scheme that utilized bitcoins, The Bitcoin Savings and Trust promised investors up to 7 percent weekly interest, and raised at least 700,000 bitcoins from 2011 to 2012. In July 2013 the U.S. Securities and Exchange Commission charged the company and its founder in 2013 "with defrauding investors in a Ponzi scheme involving bitcoin". In September 2014 the judge fined Bitcoin Savings & Trust and its owner $40 million for operating a bitcoin Ponzi scheme.
There have been many cases of bitcoin theft. One way this is accomplished involves a third party accessing the private key to a victim's bitcoin address, or of an online wallet. If the private key is stolen, all the bitcoins from the compromised address can be transferred. In that case, the network does not have any provisions to identify the thief, block further transactions of those stolen bitcoins, or return them to the legitimate owner.
Theft also occurs at sites where bitcoins are used to purchase illicit goods. In late November 2013, an estimated $100 million in bitcoins were allegedly stolen from the online illicit goods marketplace Sheep Marketplace, which immediately closed. Users tracked the coins as they were processed and converted to cash, but no funds were recovered and no culprits identified. A different black market, Silk Road 2, stated that during a February 2014 hack, bitcoins valued at $2.7 million were taken from escrow accounts.
Sites where users exchange bitcoins for cash or store them in "wallets" are also targets for theft. Inputs.io, an Australian wallet service, was hacked twice in October 2013 and lost more than $1 million in bitcoins. In late February 2014 Mt. Gox, one of the largest virtual currency exchanges, filed for bankruptcy in Tokyo amid reports that bitcoins worth $350 million had been stolen. Flexcoin, a bitcoin storage specialist based in Alberta, Canada, shut down on March 2014 after saying it discovered a theft of about $650,000 in bitcoins. Poloniex, a digital currency exchange, reported on March 2014 that it lost bitcoins valued at around $50,000. In January 2015 UK-based bitstamp, the third busiest bitcoin exchange globally, was hacked and $5 million in bitcoins were stolen. February 2015 saw a Chinese exchange named BTER lose bitcoins worth nearly $2 million to hackers.
A major bitcoin exchange, Bitfinex, was hacked and nearly 120,000 bitcoins (around $60m) was stolen in 2016. Bitfinex was forced to suspend its trading. The theft is the second largest bitcoin heist ever, dwarfed only by Mt. Gox theft in 2014. According to Forbes, "All of Bitfinex's customers,... will stand to lose money. The company has announced a haircut of 36.067% across the board."
Thefts have raised safety concerns. Charles Hayter, founder of digital currency comparison website CryptoCompare said, "It’s a reminder of the fragility of the infrastructure in such a nascent industry." According to the hearing of U.S. House of Representatives Committee on Small Business in April 2, 2014, "these vendors lack regulatory oversight, minimum capital standards and don't provide consumer protection against loss or theft."
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