Bitcoin News Roundup: ecologically responsible, safe, and officially currency: or is it???

Posted on March 14, 2014

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The name is Nakamoto. Satoshi Nakamoto

The name is Nakamoto. Satoshi Nakamoto

It’s a mixed bag on the Bitcoin front today.

  • The Wall Street Journal (via Dealbreaker) reports that Singapore, flying in the face of most other Asian nations, is all good with Bitcoin and has ruled that it comes under the domain of The Monetary Authority of Singapore. This means they’re saying it is a currency, not a commodity, and that Bitcoin exchanges must comply with banking regulations such as verifying the identity of their customers and reporting suspicious behavior of accounts. That clearly strips away most of the benefits of Bitcoin; at least, most of the benefits of using a Bitcoin exchange. In peer-to-peer transfers, things remain unchanged. Is it possible that hearing rumours of this pending change is what drove youthful Bitcoin exchange CEO Autumn Radtke to suicide? It effectively negated her entire business model.
  • The Wall Street Journal also reports on a new, “impregnable” underground Bitcoin vault. Yes, impregnable underground vault. We have now gone Full Bond, James Bond. The Silicon Valley-based Xapo claims that they are offering an ultra-secure alternative to hack-ridden exchanges such as the late MtGox. They claim to have (or soon will have; it’s unclear) a network of secret vaults tucked away in mountainous regions all over the globe. They also claim (and this one is verifiable) to have $20 million in VC funding. “To break in, would-be robbers would have to face armed security guards, biometric scanners and a 24/7 video surveillance system. The company says it currently stores bitcoins for roughly 2,000 clients—many of which are hedge funds, family offices and other financial institutions.” Interesting that hedge funds are getting into this game, as are unnamed “other financial institutions.” But most interesting is that none of this is necessary, as the safest storage for Bitcoin is simply anything offline. They say:
    “With Xapo, a customer uploads bitcoins to a unique address. The bitcoins’ private keys, the secret data used to send funds, are encrypted and stored on physical hard drives and on paper, which are then placed in Xapo’s vaults.”

    “When a customer wants to transfer funds from the vault to their “wallet,” an authorized Xapo employee must first confirm the transaction by taking several steps to verify the identity of the user. Once a day, these authorized employees descend into the vault to fetch the private keys to execute the transactions.”

    As you can see, it’s a very labour-intensive, white glove process. I wonder how much more they charge to bring it to you on a silver platter, along with a pink gin. Xapo offers the service for a very reasonable 0.12% fee, and says that all deposits are fully insured, although they decline to note the name of the insurer. According to this fascinating paper from the International Association of Deposit Insurers, a typical rate would be 0.0125% monthly; in other words, the company’s cost to insure this would be a minimum of one-tenth what it charges. Add to that the cost of these multiple, Bond-villain-like mountain lairs, infrastructure, guards, biometric scanners, and the rest of it and you can eat through $20 million pretty quickly. Two words, friends: PAPER WALLET.

  • Bitcoin’s carbon footprint is, apparently, nowhere near what Pando Daily reported it to be, according to this post by Adam Rothstein on Medium. It’s got a pretty wide margin of error, but it’s very clear that the actual amount of energy consumed by Bitcoin is much less than has been discussed. It only stands to reason that a currency that doesn’t require mining, stamping, clearcutting, pulp mills, printing, or shipping, would have a smaller environmental impact than fiat currency.