Generic Viagra Industry Is Pro-Choice In Payments

By Jon Matonis
Forbes
Friday, October 26, 2012

http://www.forbes.com/sites/jonmatonis/2012/10/26/generic-viagra-industry-is-pro-choice-in-payments/

"Right now most affiliate programs have a mass of declines, cancels and pendings, and it doesn’t depend much on the program IMHO, there is a general sad picture, fucking Visa is burning us with napalm," screams one pharmaceutical operator.

Payment intervention is defined as the use of the payment mechanism to detect or prevent certain transactions that are deemed to be politically incorrect or against a particular jurisdiction's law. The latest target is online pharmaceuticals and their affiliates providing medications such as generic or unlicensed Viagra, Nexium, or Lipitor, all of which are illegal for Americans to have mailed into the United States.

In the recent paper "Priceless: The Role of Payments in Abuse-advertised Goods" presented at the 19th annual ACM Computer and Communications Security Conference in Raleigh, North Carolina, five academic researchers outline the methodology behind the aggressive practice known as payment intervention and arrogantly conclude that it is in society's interest.

This is the ugly face of monetary repression. It is shameful! Using the payments system as a repressive tool for or against certain behavior is like using Catholic Church attendance as a way to target illegal immigrants. In a free society, private payments should be covered by merchant-customer privilege just as attorney-client privilege covers confidential legal communication. Like the telephone network used to execute a transaction, the payments network is a neutral actor. Pro-choice means placing the decision of payment type in the hands of the money owner. Grandma wants her affordable generic Lipitor.

Oddly coupling the pharmaceutical sector with the counterfeit software sector in a dual study, researchers acknowledge the fragility of payments and show how an eradication effort can lead to the pursuit of riskier alternative payment methods:

"Overall, we find that reliable merchant banking is a scarce and critical resource that, when targeted carefully, is highly fragile to disruption. As a testament to this finding, we document the decimation of online credit-card financed counterfeit software sales due to a focused eradication effort. We further document how less carefully executed interventions, in the pharmaceutical sector, can also have serious (although less dramatic) impacts, including program closures, pursuit of riskier payment mechanisms, and reduced order conversions. Finally, we document the set of countermeasures being employed now by surviving merchants and discuss the resulting operational requirements for using payment intervention as an effective tool."

Herein lies the problem with the current payments network. It is far too dominated by Visa and Mastercard whose contracts with acquiring banks stipulate that merchants are prohibited from selling goods that are illegal in the purchaser's destination country. Therefore, simply participating in those payment networks inextricably links the law to a voluntary transaction between two consenting parties providing an enforcement mechanism that wouldn't necessarily exist under other payment types.

Access to safe and affordable pharmaceuticals should be a natural right for all Americans and denying it would be unacceptable, unethical, and a threat to the public health. A strong case can be made that uninsured, low-income patients obtaining affordable medications is a morally legitimate activity. "Does legality establish morality?" asks economist Walter E. Williams, who answers, "Legality alone cannot be the talisman of moral people."

In June 2011, Visa (and Mastercard similarly) made a series of changes to their operating regulations and explicitly classified pharmaceutical-related merchant category codes as "high-risk" along with gambling and various kinds of direct marketing services. Kudos must be given to the State Bank of Mauritius for being the only bank that both correctly codes pharmaceutical transactions and supports a large number of affiliate programs.

Leaving aside for the moment the twisted economics of privileged drug manufacturers collaborating with generic manufacturers, the immorality of the patent system, and the case against intellectual property, supranational authority was bestowed upon the IACC (International AntiCounterfeiting Coalition) in 2010 through a series of agreements made between brand holders, payment providers, and the White House’s Intellectual Property Enforcement Coordinator. The agreements streamlined targeted actions against 'rogue' websites and merchant accounts used to monetize counterfeit goods and services.

Bragging about the simplicity and effectiveness of the initiative, the study's researchers reveled in determining who was 'rogue' and then preparing them for 'termination':

"Security interventions should ultimately be evaluated on both their impact in disrupting the adversary and their cost to the defender. On both counts, the payment tier of abuse-advertising appears to be a ripe target. For the few tens of dollars for a modest online purchase, our data shows that it is possible to identify a portion of the underlying payment infrastructure and, within weeks, cause it to be terminated."

Unfortunately, the practice of targeting the payments mechanism is on the rise by governments and sufficiently "chilled" payment network lackeys, but it will backfire in spectacular fashion. Consumers will be driven to more liberated alternatives such as the privacy-oriented and cash-like bitcoin. They certainly don't want VISA, Mastercard, PayPal and the rest of the gang telling them what is and is not an acceptable purchase. Interestingly, the study cited bitcoin among creative alternatives when Visa processing becomes abruptly disabled:

"A few US-based pharmaceutical programs, notably Health Solutions Network (which we did not study in our analysis), enabled Cash-On-Delivery (COD) payments for their customers when their Visa processing was disabled. Ultimately, the effectiveness of such mechanisms depends on their familiarity and overhead to consumers, the readiness of alternative sites offering more traditional payments, and the extent to which consumers are well motivated. Indeed, while we witnessed some programs (notably in the OEM software space) attempt to continue their businesses using alternative payment mechanisms including PayPal and, most recently, Bitcoin, by all accounts this has not been successful."

I expect that to change radically for Bitcoin as the features of decentralized cryptographic money become more widely appreciated. Used properly, bitcoin can have the privacy attributes of paper cash and bitcoin doesn't make morality judgements about what you choose to do with your money. It is a natural fit for the online pharmaceutical industry. Payment providers, especially mobile payment providers, claim to represent the best in consumer-centric solutions, but if they truly care about consumers, why do they block so many important transaction types that consumers want?

Somebody has to say it. Big Pharma is a racket and Americans are being duped by the government and the powerful drug manufacturers that push their overpriced medications while simultaneously hiding behind the veil of protecting patient safety, for your own good of course. But "the little blue pill" will be protected as Pfizer's expiration date for the Viagra patent has just been extended until April 2020 which means no legal "generic Viagra" in the U.S. for several more years.

Perhaps more broadly disturbing is that the five individuals authoring the study seem to tacitly recommend the 'payments network' as the delegated enforcement arm of the justice system and sanctioned brand holders. These complicit payment providers do not practice payment neutrality nor do they recognize the importance of remaining nonpolitical and challenging encroachments that lead to politicalization.

The reason that it has become possible to utilize the payments apparatus in this manner is because society has become too complacent on insisting that our money not be used for identity tracking. The general attitude towards the privacy of cash (both physical and digital) has been eerily nonchalant and too readily conceded. Until that changes, expect evermore diminishing privacy in your transactions.

For further reading:
"Forbes on Viagra, Bitcoin and Intellectual Property", Stephan Kinsella, October 29, 2012
"Rogue Pharma, Fake AV Vendors Feel Credit Card Crunch", Brian Krebs, October 18, 2012
"Pharma vs India: a case of life or death for the world’s poor", Nick Harvey, October 17, 2012
"Fake pharmaceuticals: Bad medicine", The Economist, October 13, 2012
"What Payment Intermediaries Are Doing About Online Liability And Why It Matters", Mark MacCarthy, July 5, 2010

The Old Radical: How Bitcoin Is Being Destroyed

Posted by Julia Dixon
DGC Magazine
Wednesday, October 24, 2012

http://www.dgcmagazine.com/the-old-radical-how-bitcoin-is-being-destroyed/

This piece was recently sent to me by “an old radical.” The message is perhaps a bit harsh, but I have to admit, all I can do is grimace and nod in agreement to this thesis… “Bitcoin and state banking systems are born enemies: only one can survive. If you are imagining that they can peacefully coexist, you are fooling yourself.”

I was a radical before most of you Bitcoin users were born. That doesn’t make me any better than you (hopefully I did a few things to make you better than myself), but it does give me a better perspective; time just works that way.

I’ve been watching the recent developments in the Bitcoin markets, and having seen this drama before (too many times), I thought I’d pass along a lesson. This will strike its target in some of you, but others of you are also likely to reject it, because it doesn’t match what you want to be true.

Here’s the lesson: Trying to go ‘legit’ will destroy the Bitcoin market.

For those of you who haven’t turned away, I’ll explain:

There’s nothing really wrong with Bitcoin itself. The developers are doing a nice job of addressing its problems and a heartening number of people have jumped up to create new tools and new services. No problem here.

The problem is that too many people in the Bitcoin market are thinking the old way.

Understand this: Bitcoin is a new thing – it is  not compatible with the old financial system.

Bitcoin and state banking systems are born enemies: only one can survive. If you are imagining that they can peacefully coexist, you are fooling yourself.

Bitcoin exposes the fraud that is state banking. If you think that politicians and bankers will calmly allow it to take over a significant percentage of world financial flows, you’re in denial. States will come after Bitcoin, and hard. They have no choice. Their money can only exist if there are no competitors.

Alan Greenspan may have done a lot of bad things, but he is not stupid. And before his adventures at the Fed, he wrote this:

"(Under a fiat system), there is no way to protect savings from confiscation through inflation… If there were, the government would have to make its holding illegal, as was done in the case of gold."

What gold was then, Bitcoin is now… times five.

So, let me try this again: Going legit gives the state a handle to grab you with. ‘Legit’ means registered and regulated, doesn’t it? You have to tell them your name, where you live, and where you put your money, right? It means that they can control you whenever they want to.

There are two big reasons why Bitcoin people are tempted to go ‘legit’:

1. They want to get mega-rich fast, like Mark Zuckerberg.
2. They have been trained to be obedient and can’t unlearn it. They are compelled to believe that the government is basically good. It must just be one bad politician or one bad law.

#2 is what destroyed e-gold, and it looks like #1 is what killed GLBSE.

Because of GLBSE, Bitcoin is now being regarded as a currency and states will start to regulate it as one. That means that they’ll attack the public exchangers and force everyone possible to comply with their rules.

So… it’s time to man-up, or to crumble.

(Interestingly, there is often a larger percentage of women that “man-up” than men.)

Will you have the guts to do the right thing when the pressure is on? If yes, I applaud and honor you. If not, here are a few cheap excuses to use (after all, who wants to admit conditioning or cowardice):

• Without the rule of law, everything would fall apart.
• Without regulation, criminals would destroy everything.
• Yes, regulation is coercive, but along with it comes a certain amount of public benefit!
• I got ripped off, and someone has to fix it!
• If I can’t sue someone, they can get away with ripping me off!
• We can’t get people to use Bitcoin unless it’s authorized.
• We need approval or we will forever remain a tiny market.

A significant number of Bitcoin people will say these things (and others), but the real truth will be that they are scared, or are still hoping to get mega-rich, or just can’t rip the “government is our friend” meme out of their heads. But mostly it will be fear.

We all feel fear of course, but some of us are determined enough to do the right thing, even when we’re afraid.

So, here’s a final tip: If you run into someone who can feel the fear and still do the right thing, don’t let go of them.

Reprinted with permission. 

Bitcoin, Dollars and Pot-Banging Protests in Argentina

By The Blue Market

Thursday, October 18, 2012

http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollars-and-pot-banging-protests-in-argentina/

200.000 people in the Plaza de Mayo

This post is a peep into the underground exchange markets for dollars and bitcoins in Argentina. For the last couple of weeks, I have experienced the informal exchange of bitcoin and dollars on first hand in Buenos Aires. Furthermore, I have realized how both locals and expats may reap significant gains by using bitcoins as a medium of exchange.

Inflation and Monetary Restrictions

Before we dive into the details of the underground markets in Argentina, let me try to paint the picture of the current economic situation in Argentina.

For several years the Argentine inflation rate has been bumping around 25-30% per annum, according to figures published by independent institutions. The Argentine government doesn’t recognize the independent estimates and has allied with INDEC, the National Statistics Institute, to calculate inflation figures 2-3 times lower than the independent figures. The interesting fact is that the peso’s fixed exchange rate with the dollar is only taking into account INDEC’s inflation rate of 8-12%, causing overvaluation of the peso by not incorporating the true higher inflation rate. INDEC is indeed a neat implementation of an Orwellian “Ministry of Truth”, and the magic calculations have raised concerns with IMF who is threatening to expel Argentina from the organization.

Naturally the high inflation rate has caused capital flight out of Argentina, and every Argentine with a bit of savings is looking to exchange their pesos into something more secure. In order to stop the capital flight and fortify the central bank’s reserves, the government has implemented strict measures to prevent Argentines from obtaining foreign currencies. For example, only if you are travelling abroad are you allowed to exchange pesos for dollars legally, but there is a limit of 100$ per day abroad. Recently the government also imposed a 15% tax on all foreign credit card purchases, and a 50% custom duty on any goods which Argentines purchased abroad. Aside from the outrageous taxes, this legislation completely flashes your personal banking details to government officials, who can then snoop on your shopping list.

The complex regulatory environment has caused Paypal to suspend all domestic transactions in Argentina. Ebay and Amazon has followed suit with similar restrictions.

The Blue Dollar

In Argentina the dollar you care about is blue. The reason is that the difficulty for locals to acquire dollars through traditional means has fueled a secondary dollar exchange market. The unofficial exchange rate, known as the “blue dollar rate”, is approximately 25% higher than the official rate.

For expats, it’s a no-brainer that you are being ripped-off by withdrawing cash at ATMs from established banks, where the withdrawal is conducted at the official exchange rate currently around $ARS 4.70 pesos per dollar. In comparison, if you exchange USD on the “blue market” you get around $ARS 6.20  pesos per dollar.

Luckily before travelling to Argentina, my girlfriend and I were tipped off to this news and carried along dollars in cash when entering the country. One can exchange dollars at the blue market rate simply by heading to Bs. Aires main shopping street, Calle Florida. Here lots of street vendors are drifting around advertising their business to anyone who looks like a potential customer. The street vendors here are known as arbolitos by locals. Arbolitos means “little trees”, a reference to the street vendors are full of “green leaves”. If you are looking to exchange dollars the street vendors will quickly approach you and provide a quote. If you accept the quote, you just head to a nearby jewelry or electronics shop and complete the transaction.

Above approach is generally safe but I wasn’t too keen on exchanging dollars with street vendors. Instead I posted a small note on an online forum and got in contact with a couple living in Buenos Aires, who were eager to exchange dollars for pesos at the blue market rate. The snapshot below is the result of this exchange – and what an underground dollar market looks like.

The Bitcoin Hero

The dollars we brought into Argentina are soon running out, and we have been looking for alternatives to increase our dollar reserves. One approach is to cross the border to Uruguay – but you have the hassle of ATM withdrawal limits and the risk of travelling with lots of cash. There is also a service called Xoom, which allows you to transfer money from abroad to various pick-up locations in Bs. Aires. The magic of Xoom is that they somehow manage to provide the blue dollar exchange rate. Unfortunately they also require a US bank account to use its services.

Another possibility is Bitcoin, a new electronic currency, which has been flourishing online for the last couple of years. In our situation Bitcoin has turned out to be a great vehicle to transfer money into Argentina and achieve the blue dollar exchange rate. I completed my first bitcoin to pesos transaction last week and gained 25% in comparison to the official exchange rate.

The way it works is that you simply buy some bitcoins online through one of the many bitcoin exchanges. Mt.Gox is by far the largest but there are local alternatives as well, such as Bitcoin Nordic. Once you have your bitcoins you identify an Argentine who is on the market for bitcoins at the blue dollar rate. Given the economic situation there are lots of Argentines who are looking to get rid of pesos in exchange for other more secure assets.

In my case I circulated a note to Eudemocracia’s bitcoin mailing list announcing that I was interested in selling bitcoins. The price I offered was the Mt.Gox USD price converted to pesos at the blue USD exchange rate. Based on the number of replies this was an attractive offer, and after some email correspondence, I agreed  to meet up with one contact and conduct the transaction. After getting the agreed pesos in cash I made a one-click transfer of bitcoins to his online bitcoin wallet. A bitcoin transfer is instant and non reversible, and the picture below shows how we could confirm completion of the transaction on the spot.

Because of the dollar restrictions and the escalating inflation the demand for bitcoins in Argentina is greater than our personal need for pesos. Therefore, if you are an expat or just travelling through I encourage you to explore bitcoin as an alternative to finance your stay. Not only will you get a 25% higher exchange rate but you will also help locals protect their savings from being hollowed by inflation.

I believe the bitcoin adventure is just kicking off in Argentina. Also I’m keen to see how the 200.000 Argentines demonstrating for libertad in the Plaza de Mayo might use bitcoin to fight the monetary restrictions themselves. Maybe it’s an even better approach than banging a pot?

Large Cash Transactions Banned In Mexico

By Jon Matonis
Forbes
Wednesday, October 17, 2012

http://www.forbes.com/sites/jonmatonis/2012/10/17/large-cash-transactions-banned-in-mexico/

Outgoing Mexican President Felipe Calderon has signed into law a ban on large cash transactions. The ban will take effect in about 90 days and it is part of a broader effort to control monetary flows within the country.

Under the law, a Specialized Unit in Financial Analysis operating within the Attorney General's Office will be created to investigate financial operations "that are related to resources of unknown origin."

For real estate transactions, cash payments of more than a half million pesos ($38,750) will be forbidden and, for automobiles or items like jewelry, art, and lottery tickets, cash payments of more than 200,000 pesos ($15,500) will be forbidden. The law carries a minimum penalty of five years in prison.

In 2010, Mexico instituted strict limits on foreign exchange cash transactions to $1,500 per person per month, which caused several cash dollar exchanges to withdraw from the business and had the effect of penalizing tourists.

Of course, US dollars are a huge portion of the actual paper cash that this effort is aimed at, but the Mexican peso is the 12th most traded currency in the world and by far the most traded currency in Latin America.

Reuters reported that, "Sales of drugs from marijuana to cocaine and methamphetamine in the United States are worth about $60 billion annually, according to the United Nations. About half of that amount is estimated to find its way back to cartels in Mexico."

The Woodrow Wilson International Center For Scholars' Mexico Institute published a comprehensive study in May 2012 entitled "It's All about the Money." The report recommended tight integration and coordination with the United States in the areas of legal framework, financial institution regulation, intelligence on cross-border currency flows, and non-conviction based asset forfeiture.

Two years in the making, the new law also requires notaries, real estate brokers, and other dealers to report the forms of payment for transactions above the respective limits. Financial institutions will also be required to report monthly credit card balances in excess of 50,000 pesos ($3,875).

Although it's part of a global trend among governments, Mexico will still have a long way to go to catch up. Spain recently banned cash transactions above 2,500 euros and Italy banned cash transactions above 1,000 euros.

Payoneer Quietly Enters Gibraltar Prepaid Market

By Jon Matonis
Forbes
Monday, October 15, 2012

http://www.forbes.com/sites/jonmatonis/2012/10/15/payoneer-quietly-enters-gibraltar-prepaid-market/

Payoneer, a New York-based global payments and money transfer company, has quietly launched an EU subsidiary situated in Gibraltar having been approved by the financial regulator there in mid-2012.

Payoneer (EU) Limited is steadily building out its infrastructure and it is not clear when, or if, they intend to migrate their prepaid card portfolio to the Gibraltar location. Howard Gibbs is Managing Director with Lisa Ah-Moye as Finance Director and Mark Taylor as Money Laundering Reporting Officer.

In addition to facilitating global low-cost money transfers to over 200 countries, the EU subsidiary is focusing on payout solutions for international corporates, multi-level marketing companies, and affiliate networks.

Payoneer maintains its R&D center in Tel Aviv, Israel and is a privately-held venture with funding from Greylock Partners, Carmel Ventures and Crossbar Capital. They are most known for their Prepaid Mastercard product that corporate customers use to pay staff, affiliates, freelancers, and other service providers. However, since Payoneer is not a licensed banking institution they have had to outsource their card issuing business.

The self-governing jurisdiction of Gibraltar changes all of that. There are only three non-bank E-money institutions authorized under the Financial Services (Banking) Act for issuing means of payment in the form of electronic money. In addition to Payoneer (EU), the Gibraltar Financial Services Commission lists Wave Crest Holdings and Transact Network.

Why is this significant? For starters, it's a relatively small number of firms and it is not a new regulatory designation for Gibraltar as it falls under the EU E-Money Directive of 2009 which amended the 2006 and 2005 Directives that repealed the 2000 Directive. The E-Money Directive is transposed into law and applied nationally by the various member countries within the EU Single Market.

It is surprising that the Directive is not being leveraged more by the established U.S. players because it grants a license and the authority to issue prepaid Mastercard and VISA products directly after attaining card association membership thereby dramatically lowering the barriers to entry. Furthermore, it gives international brands an issuance platform throughout the whole European continent.

Previously, non-banks in the U.S. would have to negotiate a contract with a chartered, regulated banking entity like Choice Bank Limited in Belize or First Covenant Bank in Georgia or MetaBank in Iowa for their prepaid card issuing. Now they can become an issuer themselves.

In related prepaid debit card news, Delaware-based The Bancorp, Inc. has agreed to acquire the assets of Transact Network Limited, the largest e-money licensee and prepaid issuer in Gibraltar.

Frank Mastrangelo, President and COO of The Bancorp stated, "The acquisition of this platform from Transact Network, a well regarded Pan-European electronic money institution, will establish a European Payment Solutions presence for Bancorp and facilitate European expansion for many of Bancorp’s existing 'Payment Solutions' clients. It will also enable Bancorp to leverage its current BIN Sponsorship and Program Management Platforms for a wider set of European Payment solutions and offer enhanced products, flexibility, capability, and scalability. We will utilize our success and experience with our US payment solutions platform to grow our European presence."

Quasi-Commodity Money

By George Selgin
University of Georgia
Monday, February 6, 2012

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2000118

Abstract

This paper considers reform possibilities posed by a type of base money that has heretofore been overlooked in the literature on monetary economics. I call this sort of money 'quasi-commodity money' because it shares features with both commodity money and fiat money, as these are usually defined, without fitting the conventional definition of either; examples of such money are Bitcoin and the 'Swiss dinars' that served as the currency of northern Iraq for over a decade. I argue that the attributes of quasi-commodity money are such as might supply the basis for a monetary regime that does not require oversight by any monetary authority, yet is capable of providing for all such changes in the money stock as may be needed to achieve a high degree of macroeconomic stability.

For further reading:
"The Rise and Fall of the Gold Standard in the United States", George Selgin, University of Georgia, August 27, 2012

As Inflation Rages In Iran, Bitcoin Software Not Available

By Jon Matonis
Forbes
Tuesday, October 9, 2012

 http://www.forbes.com/sites/jonmatonis/2012/10/09/as-inflation-rages-in-iran-bitcoin-software-not-available/

Hyperinflation has hit Iran hard. The government has stepped up censorship of currency exchange websites such as Mesghal.com and Mazanex.com, which had rates blanked out for the rial’s value against other nations’ currencies on Tuesday. Several major foreign airlines announced that they were discontinuing service into Tehran due to the volatility of the Iranian rial and shipping giant Maersk halted all port calls to Iran.

If severe currency devaluation and disruptive Internet cyber-attacks were not enough, the regular people of Iran have had access blocked to certain open source software sites for downloading applications such as Bitcoin. The 32-month-old blockade hasn’t been instigated by Iran’s mullahs but by the U.S.-led embargo which prohibits certain persons from receiving services via open source hosting sites.

The original and ‘reference’ Bitcoin client is hosted in the United States on GeekNet’s SourceForge.net who explained their denial of site access policy on their blog:

"The specific list of sanctions that affect our users concern the transfer and export of certain technology to foreign persons and governments on the sanctions list. This means users residing in countries on the United States Office of Foreign Assets Control (OFAC) sanction list, including Cuba, Iran, North Korea, Sudan, and Syria, may not post content to, or access content available through, SourceForge.net. Last week, SourceForge.net began automatic blocking of certain IP addresses to enforce those conditions of use."

Then, after an angry reaction from project administrators and developers, SourceForge removed the blanket blocking and modified their policy to put the power of determining a block trigger in the hands of each project’s leadership, as announced in their February 2010 blog posting:

"Beginning now, every project admin can click on Develop -> Project Admin -> Project Settings to find a new section called Export Control. By default, we’ve ticked the more restrictive setting. If you conclude that your project is *not* subject to export regulations, or any other related prohibitions, you may now tick the other check mark and click Update. After that, all users will be able to download your project files as they did before last month’s change."

Therefore, the export control determination has to be made by the project’s registered administrator on SourceForge, which for Bitcoin is lead developer Gavin Andresen after assuming the role from Bitcoin creator, Satoshi Nakamoto.

Export of software from the U.S., including software that deploys encryption functions, is controlled by the Bureau of Industry and Security (BIS) in accordance with the Export Administration Regulations (EAR).

Andresen, who is also Chief Scientist for Bitcoin Foundation, stated that Bitcoin compiles against the full OpenSSL library and the wallet encryption feature uses AES-256 which is what places Bitcoin in the above category. The SourceForge option that Bitcoin.org selects to remain in compliance with U.S. law states, “This project incorporates, accesses, calls upon or otherwise uses encryption software with a symmetric key length greater than 64 bits (“encryption”). This review does not include products that use encryption for authentication only.”

Forget about the mere difficulties of obtaining and trading bitcoin for national fiat currency in Iran — without the client software, they are not even there yet. Other Bitcoin “experts” have alluded to alternative methods of downloading the Bitcoin client such as using non-U.S. independent mirrored sites, Virtual Private Network (VPN) for IP address masking, Tor if your country has an exit node, or BitTorrent file sharing.

Aside from the inherent weaknesses within the entire SSL infrastructure, other download channels, and even SourceForge itself, present challenges. The initial install code would need to be verified for authenticity and the only way to accomplish that is to have the core developer sign the code personally or have a neutral third-party like the Bitcoin Foundation sign downloadable code with their certificate as a registered developer.

In extreme circumstances the verified source code can be compiled directly by the user so that downloading binaries is not necessary. Source code can also be distributed in text-based form like a PDF or scanable book which is what MIT did for Phil Zimmermann and later what 70 international volunteers did for the PGPi Scanning Project in 1997. More and more, the Bitcoin Project is starting to look like the Pretty Good Privacy (PGP) secure email program with each passing day.

For further reading:
"More surreal events in the Crypto Cold War - the BitCoin blockade of Iran", Ian Grigg, October 14, 2012
"US Laws Restrict Individual Freedom and SourceForge Complies", Ryan Bagueros, March 4, 2010
"Should open-source repositories block nations under U.S. sanctions?", Sharon Machlis, Computerworld, January 25, 2010

The Golden Revolution

By John Butler

Alchemist

Saturday, April 7, 2012

http://www.lbma.org.uk/assets/Alch6504Butler.pdf

Adapted from The Golden Revolution: How to Prepare for the Coming Global Gold Standard by John Butler.

Contrary to the conventional wisdom of the current economic mainstream that the gold standard is but a quaint historical anachronism, there has been an unceasing effort by prominent individuals in the US and also a handful of other countries to try and re-establish a gold standard ever since President Nixon abruptly ended gold convertibility in August 1971. The US came particularly close to returning to a gold standard in the 1980s. This was understandable following the disastrous stagflation of the 1970s and severe recession of the early 1980s, at that time the deepest since WWII. Indeed, Ronald Reagan campaigned on a platform that he would seriously study the possibility of returning to gold if elected president.

Once successfully elected, he remained true to his word and appointed a Gold Commission to explore both whether the US should and how it might reinstate a formal link between gold and the dollar. While the Commission’s majority concluded that a return to gold was both unnecessary and impractical – Fed Chairman Paul Volcker had successfully stabilised the dollar and brought inflation down dramatically by 1982 – a minority found in favour of gold and published their own report, The Case for Gold, in 1982. Also around this time, in 1981, future Fed Chairman Alan Greenspan proposed the introduction of new US Treasury bonds backed by gold as a sensible way to nudge the US back toward an explicit gold link for the dollar at some point in future.

In the event, the once high-profile debate in the US about whether or not to return to gold eventually faded into relative obscurity. With brief exceptions, consumer price inflation trended lower in the 1980s and 1990s, restoring confidence in the fiat dollar. By the 2000s, economists were talking about the ‘great moderation’ in both inflation and the volatility of business cycles. The dollar had been generally strong versus other currencies for years. ‘Maestro’ Alan Greenspan and his colleagues at the Fed and their counterparts in many central banks elsewhere in the world were admired for their apparent achievements.

We now know, of course, that this was all a mirage. The business cycle has returned with a vengeance with by far the deepest global recession since WWII, and the global financial system has been teetering on the edge of collapse off and on for several years. While consumer price inflation might be low in the developed economies of Europe, North America and Japan, it has surged into the high single- or even double-digits in much of the developing world, including in China, India and Brazil, now amongst the largest economies in the world.

The economic mainstream continues to struggle to understand just why they got it so wrong. They look for explanations in bank regulation and oversight, the growth of hedge funds and the so-called ‘shadow banking system’. They wonder how the US housing market could have possibly crashed to an extent greater than occurred even in the Great Depression. Some look to global capital flows for an answer, for example China’s exchange rate policy. Where the mainstream generally fails to look, however, is at current global monetary regime itself. Could it be that the fiat- dollar-centred global monetary system is inherently unstable? Is our predicament today possibly a long-term consequence of that fateful decision to ‘close the gold window’ in 1971?

I believe that it is. But what that implies, given the damage now done to the global financial system, is that there is no way to restore a sufficient degree of credibility and trust in the dollar, or other major currencies for that matter, without a return to some form of gold standard. This may seem a rather bold prediction, but it is not. The evidence has been accumulating for years and is now overwhelming.

Money can function as such only if there is sufficient trust in the monetary unit as a stable store of value. Lose this trust and that form of money will be abandoned, either suddenly in a crisis or gradually over time in favour of something else. History is replete with examples of ‘Gresham’s Law’, that ‘bad’ money drives ‘good’ money out of circulation; that is, that when faith in the stability of a money is lost, it may still be used in everyday transactions – in particular, if it is the mandated legal tender – but not as a store of value. The ‘good’ money is therefore hoarded as the superior store of value until such time as the ‘bad’ money finally collapses entirely and a return to ‘good’ money becomes possible. This monetary cycle, from good to bad to good again, has been a central feature of history.

In the present instance, we find a growing number of countries expressing concern about the stability of the dollar amid relentlessly expansionary US monetary policy, excessive dollar reserve accumulation and the associated surge in inflation, including China, India and Brazil. The ‘Arab Spring’ of 2011 originated in part from soaring food price inflation.

Concern is increasingly giving way to action. China has entered into bilateral currency swap arrangements with Russia, Brazil, Argentina, Japan, South Korea and Thailand as all these countries seek to reduce their dependence on the dollar as a transactional currency. As the dollar’s role gradually declines, global monetary arrangements are likely to become increasingly multipolar, as there is no single currency that can realistically replace the dollar as the pre-eminent global monetary reserve. The euro area has major issues with unsustainable sovereign debt burdens and an undercapitalised financial system. Japan’s economy is too small and too weak to provide a dollar substitute. And while China’s economy has been growing rapidly, its financial system is not yet mature or robust enough to instil the necessary global confidence in the yuan as the dominant reserve currency. Yet growth in global trade continues apace, to the benefit of nearly all economies. A global currency facilitates global trade.

It was precisely a multipolar world amid rapidly growing international trade that ushered in the classical gold standard in the 1870s. Although gold had been in the ascendant in global monetary affairs for several years, growing German political and economic clout provided an important tipping point as Germany favoured gold for settlement of international balance of payments. While the Bank of England was the dominant central bank of its day, reflecting British economic power, it never sought to impose a gold standard on its trading partners. Rather, it accepted the gold standard as an international fait accompli.

The US Federal Reserve may find it plays a similar role in the near future. While it is certainly possible that, in order to restore confidence and trust in the dollar, the US relinks the dollar to gold on its own initiative, more likely is that another country, or group of countries, where economic power is in the ascendant, where there are large and growing current account surpluses, and where a meaningful amount of gold has already been accumulated, will be the first movers. All of the BRICs are potential candidates, as are certain oil-producing countries and, possibly, Germany and Japan.

When presented with a fait accompli, the US will have little choice but to go along or find that the dollar not only loses reserve currency status entirely, but also is no longer accepted for international transactions. In the event, we believe a decision to accept the new global gold standard will be rather easy to reach. While it is unclear just what kind of gold standard will prevail – history provides a range from which to choose, some of which worked better than others – the key point is that, whatever form of standard prevails, it must restore a sufficient degree of credibility and trust in global monetary affairs. That requires that, simultaneously and alongside the return to gold, there must be a dramatic deleveraging of the undercapitalised financial system in the US, euro area, UK, Japan and also a handful of other countries. Fortunately, this is easily accomplished. All that is required is that the rate of gold convertibility is set at a gold price sufficiently high to imply that existing debt burdens, now clearly excessive, are reduced to levels that can be credibly serviced from existing levels of national income and, in the case of sovereign debts, from tax revenues.

However, given just how overleveraged financial systems are, and how large sovereign debt burdens are becoming amid unprecedented peacetime deficit spending, the rise in the price of gold will need to be an order of magnitude higher than it is today. That may surprise some, given that the price of gold has been rising for years. But what should really surprise us is that the growth of money and credit has been far greater. Simply taking the numbers as they are and allowing the gold price to rise sufficiently to compensate for decades of cumulative, excessive money and credit growth implies that a credible gold conversion price in dollars would be above $10,000. The credible, sustainable conversion prices in euros, yen, sterling and other developed world currencies would also lie far higher than where they are today.

From an investor’s perspective, there are far greater implications of a return to a gold standard than merely the large rise in the gold price. The dynamics and determinants of interest and exchange rates, and risk premia for the entire range of assets, are going to change. For example, for those countries that return to gold, exchange rates will become essentially fixed. Interest rates, however, while nominally still under the control of central banks, will need to be set at market-determined levels, not below, or gold reserves will be depleted, eventually leading to a funding crisis. Risk premia for most assets will need to rise, primarily because, constrained by the gold standard, both monetary and fiscal authorities will have less flexibility to provide stimulus during economic downturns. As such, cyclical profit swings will tend to be larger, as will the number of bankruptcies.

While a lack of policymaker flexibility and increased risk of corporate bankruptcy might concern some investors, consider that it was precisely an excess of policymaker flexibility – chronically loose monetary and fiscal policy – which got the developed world into its current predicament. This point is clear: poorly managed fiat currencies and the financial systems built upon them caused the global credit crisis, not gold. And what a world of ‘too big to fail’ needs are reforms that indeed allow large firms to go bankrupt from time to time, so that capitalism can in fact work as intended.

It is worth considering why bankruptcy has become such a bad word. While no investor wants to lose money on a bankrupt enterprise, when looking at a capitalist economy as a whole, bankruptcy is absolutely essential to economic progress. Josef Schumpeter’s ‘creative destruction’, unlocking resources in unproductive enterprises and moving them to where they can be more efficiently employed, or mixed with new technologies or business techniques, is what capitalism is all about. Real long-term economic progress depends on it.

There are other reasons not to fear gold but rather embrace it. A gold standard will reward savings, something that is sorely lacking in much of the developed world. It will rationalise government finances, in particular by making it difficult if not impossible for countries to incur large debts and then try to pass these off on future generations, something of dubious morality. Absent easy money, it will force economies to become more flexible, and labour and capital to become more mobile. By implication, financial leverage will also be limited and ‘too big to fail’ will instead become ‘too big to bail’. Indeed, absent easy money or bailouts, the financial sector will only grow to the extent that it actually serves the broader, productive economy. Huge numbers of engineers and other quants who went to the City looking for outsize bonuses will make their way back into real industries making real things, where they will be joined by fresh graduates and lay the groundwork for what is likely to be an era of great industrial innovation.

Investors should not fear the golden revolution. Rather, they should welcome it. After all, they don’t call particularly prosperous historical episodes ‘Golden Ages’ for nothing.

Reprinted with permission. Currently serving as the Chief Investment Officer of a commodities fund, John was previously Managing Director and Head of the Index Strategies Group at Deutsche Bank in London, where he was responsible for the development and marketing of proprietary, systematic quantitative strategies for global interest rate markets. 

For further reading/viewing:
"Book Review: The Golden Revolution", Keith Weiner, August 20, 2012
"Podcast #22 with John Butler", TF Metals Report, May 25, 2012
"Beyond currency wars, the coming Global Gold Standard with John Butler" (video), Capital Account, April 3, 2012

Bitcoin Prevents Monetary Tyranny

By Jon Matonis
Forbes
Thursday, October 4, 2012

http://www.forbes.com/sites/jonmatonis/2012/10/04/bitcoin-prevents-monetary-tyranny/

Mel Gibson as William Wallace wearing woad.

Bitcoin is not about making rapid global transactions with little or no fee. Bitcoin is about preventing monetary tyranny. That is its raison d’être.

Monetary tyranny can take many ugly forms. It can be deliberate inflation, persecutory capital controls, prearranged defaults within the banking cartel, or even worse, blatant sovereign confiscation. Sadly, those threats are a potential in almost any jurisdiction in the world today. The United States does not have a monopoly on monetary repression and monetary tyranny.

Once the State is removed from the monetary sphere and loses the ability to define legal tender, its power becomes relegated to direct legislative and enforcement measures that do not immorally manipulate a currency. Taxes for wars and domestic misadventures will have to be raised the old-fashioned way — that is to say government money cannot be raised by simply debasing the currency.

Just as the Second Amendment in the United States, at its core, remains the final right of a free people to prevent their ultimate political repression, a powerful instrument is needed to prevent a corresponding repression — State monetary supremacy. That task has fallen to an unlikely open source project that is based on cryptography protocols and peer-to-peer distributed computing. As the mechanism for a decentralized, nonpolitical unit of account, the Bitcoin project uniquely facilitates this protection.

The timing of Bitcoin’s appearance, and subsequent growth, is no accident either. If one follows the relevant sentiments and trends, it’s evident that society was approaching a breaking point. Essentially, bitcoin is a reaction to three separate and ongoing developments: centralized monetary authority, diminishing financial privacy, and the entrenched legacy financial infrastructure. An alternative money provider that was centralized would probably not survive long in any jurisdiction. The emergence of Bitcoin was baked into the cake already.

We can see from the case against digital money provider e-gold that an efficient challenger to the provision of a stable monetary unit will not be permitted… really. In 1996, a humble oncologist named Doug Jackson bravely built an auditable and verifiable system of transferring ownership rights to gold and silver bullion in an online digital environment. Wired’s Kim Zetter described it this way:

"E-gold is a privately issued digital currency backed by real gold and silver stored in banks in Europe and Dubai. Jackson says about 1,000 new e-gold accounts are opened daily, and the system processes between 50,000 and 100,000 transactions a day.

With a value independent of any national legal tender, the electronic cash has cultivated a libertarian image over the years, while drawing the ire of law enforcement agencies who frequently condemn it publicly as an anonymous, untraceable criminal haven, inaccessible to police scrutiny."

Where have we heard that before? Then in December 2005, the U.S. Federal Bureau of Investigation and Secret Service raided e-gold’s Florida offices. Jackson tells Wired, “They basically raped our computers and also took us offline for 36 hours, took all the paper out of our office.” Jackson says that the government also froze parent company Gold and Silver Reserve’s U.S. bank account but the company survived, “only because its euro, pound and yen accounts are maintained outside the United States.” The physical bullion assets were subsequently seized as well.

With the prosecution resting on a civil complaint charging Gold and Silver Reserve, Inc. with operating as an unlicensed money-transmitting business, Jackson finally acquiesced in July 2008 and plead guilty to conspiracy to commit money laundering (a victimless crime) and operation of an unlicensed money transmitting business rather than the alternative threat of 20 years in jail and a half million dollar fine.

Wired magazine, in June 2009, published this excellent account of the e-gold business in the wake of the federal investigation entitled “Bullion and Bandits: The Improbable Rise and Fall of E-Gold”. Also included in the article is probably the most telling photo of all — Doug Jackson sitting on the floor surrounded by file boxes labeled U.S. Secret Service.

Zetter writes, “At e-gold’s peak, the currency would be backed by 3.8 metric tons of gold, valued at more than $85 million.” E-gold founder Doug Jackson wanted to solve the world’s economic woes, “but instead got an electronic ankle bracelet for his trouble.”

Recently, in 2009, Bernard von NotHaus was indicted on counterfeiting charges for manufacturing a private metallic coin that actually contained some precious metals. After 23 years of research and development plus 11 years of operating in the marketplace, Liberty Dollar suspended operations. Following the conviction and for the appeal, the prominent Gold Anti-Trust Action Committee filed an amicus curiae brief in support of acquittal and revolving around the question of whether anyone but the government has the right to issue money. Afterwards, many commentators pointed out the absurdity of penalizing honest money to strengthen the facade of manipulated money.

Further contributing to the disturbing trend against monetary freedom and financial privacy are initiatives like the Foreign Account Tax Compliance Act (FATCA), which has been written about many times on these pages and also in The New York Times. Other countries around the world would not even contemplate such a brazen endeavor that imposes a costly withholding and disclosure regime on sovereign foreign entities and financial assets. Furthermore, they see it as American arrogance and American hegemony run amok.

However, society will not be ready to fully embrace the promises of decentralized nonpolitical currency until it can come to terms with the fact that money in a free society should not be used for the purposes of identity and asset tracking. Banks and governments may be concerned with that goal, but it is not the role of our money.

Bitcoin & Precious Metals, The First Diversified Portfolio of the Rebel In History

By Silver Vigilante
Monday, July 30, 2012

http://silvervigilante.com/bitcoin-precious-metals-the-first-diversified-portfolio-of-the-rebel-in-history/

For the first time in history, the rebel alliance can compile a diversified portfolio that reflects his or her inter-essences, that is interests.  While not only can investments be made under the dominant financial system which undermine that system, such as physically delivered precious metals, mediums of exchange can nowadays also be taken outside that paradigm.  German alternative analog world paper currencies have gained attention and velocity more-so than the digital, universal bitcoin, but it is the latter which is the first publicly traded, globally accepted currency, predisposing it to longer-term popularity.

The man in whose name millions were murdered, Karl Marx wrote of commodities:

A commodity is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another. The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference.

The nature of the need of virtual items such as bitcoin is that, first and foremost, in this day and age, we live in a “global village.” Although 90% of the population lives in the city, a meridian in the history of civilization, they can be in constant contact with each other. So why not setup a similar, p2p system to ensure constant transacting as well – full service,  24/7. It satisfies the desires of millions if not billions of individuals to step outside the dominant paradigm. It comes from the stomach and from fancy. Our stomachs, our instinct for self-preservation, tell us that our survival depends on an understanding and moral opposition to the way things are, and those who ensure they stay us as such. Our fancy, our style, tells us we better use the dancing or lose it.

Karl Marx’s definition of a commodity explains accurately also the state in which fiat currencies find themselves. They satisfy the wants of the majority well enough, but this status is grounded in force, and not choice. As Karl Marx states, this does not matter. So, the  US Dollar has been chosen by the Empire to satisfy the wants and needs of the public at large. Out of the vacuum this creates for other means, bitcoin has arisen, in a manner somewhat different from the precious metals, but due to similar consciousnesses; consciousnesses which recognize the wants and need for another way of peace, tranquility and prosperity.

Historically, rebellions have depended on the dominant currency of a time and place or barter. Silver has been the poor man’s gold, but not all rebels are poor. A war on silver has also led to practical genocides against silver holders, as the United States experienced as the Crime of 1873.  Silver does not offer the properties to be adopted by the general population as a mainstream medium of exchange. The most important of these properties, given the current socio-economic paradigm, is convenience. Silver is bulky, and takes currently too much work for the average person to send overseas in an exchange. Bitcoin solves this problem. Now bitcoins can be readily available to be sent in an exchange with the promise of other goods anywhere in the world, instantly. This automatically creates the monetary space for a worldwide and unified peace and freedom movement to evolve.

Read the rest of the article.

What is Free Banking?

In this video interview, George Selgin defines free banking as a monetary arrangement where currency is competitively supplied by private commercial banks and, consequently, not monopolized by a central bank.

He sets as examples the Scottish and Canadian’s free banking systems, which flourished in the eighteenth and nineteenth centuries; yet, he clarifies that a completely free banking structure has not existed, since there has always been some form of government involvement. He discusses the possibility and feasibility of implementing such system in the present time, stating, as well, the negative macroeconomic implications that a central banking system has, especially for a developing country such as Guatemala, and suggests that more liberty and less government intervention could be a source of wealth and growth.

Selgin concludes by explaining how transaction costs are managed within this system, in addition to the effectiveness it entails when dealing with crises, such as bank runs or instability, in the current banking organization.

Lucas Rentschler
Universidad Francisco Marroquín
Business School
Guatemala, July 31, 2012

Bitcoin Foundation Launches To Drive Bitcoin's Advancement

By Jon Matonis
Forbes
Thursday, September 27, 2012

http://www.forbes.com/sites/jonmatonis/2012/09/27/bitcoin-foundation-launches-to-drive-bitcoins-advancement/

Several months in the making, the Bitcoin Foundation launches this week to accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol. As a nonprofit corporation and neutral forum for collaboration, the Bitcoin Foundation follows the successful model of open source bodies like the Linux Foundation and the Tor Project.

Bitcoin is a decentralized electronic cash system using digital signatures and cryptographic proof to enable irreversible payments between parties without relying on trust. Leveraging the breakthroughs of public-key cryptography, bitcoin also uses peer-to-peer networking to operate without a central authority whereby the new issuance and transaction verification functions are carried out collectively by the network. In the absence of a third-party processing intermediary, transactions are rapid and simple to send and receive with little to no fees.

As both a payments platform and a nonpolitical unit of account, Bitcoin has already seen astonishing growth in just over three years. Bitcoin’s total base money supply is currently valued at $125 million. Number of transactions has gone from 219 in 2009 to 4,964,513 year-to-date in 2012. The value of bitcoins transferred per year has gone from 35 trillion BTC to 60,896 trillion BTC. And, the network hashing rate, which is a measure of computational speed or horsepower, has increased from 0.008 Giga hashes per second in December 2009 to 19,284 Giga hashes per second in September 2012, thereby making it the largest distributed computing project in the world today in terms of processing performance. (Source: State of the Coin 2012)

With a growth trajectory like that, it becomes even more imperative to standardize and manage the ongoing change process to the core software while simultaneously enhancing overall security and robustness. Since 2009, Bitcoin.org has served as the focal point for the collaborative open source development effort.

A lot will be changing as the foundation ramps up. The Bitcoin Foundation mission leads to the early specific goals of financially sponsoring the efforts of the core development team, funding core infrastructure such as a test network and a DNS seed node, publishing a set of best practices for bitcoin integration, coordinating responses to business and media inquiries, and organizing an annual bitcoin conference with the first one being held in Silicon Valley.

In addition to individual membership, the Bitcoin Foundation provides a way for corporate enterprises from all industries to participate in the expansion of the bitcoin network and platform. We see new bitcoin exchanges sprouting up on a daily basis and we see innovative bitcoin applications coming to market across all industry sectors. Magnificent for bitcoin, this worldwide adoption strengthens the credibility and value of the peer-to-peer network. A nonpolitical currency doesn’t have a morality — it is simply a process for value transfer.

The overriding intent that runs through all Bitcoin Foundation activity is that it be membership and community driven, including succession planning. Reflected in the governance structure, individual and industry corporate members will have voting rights consistent with Bitcoin Foundation Articles and Bylaws. Annual individual membership is 2.5 BTC with a 25.0 BTC lifetime option; corporate membership is 500 BTC for silver tier, 2,500 BTC for gold tier, and 10,000 BTC for platinum tier.

Donations in support of the Bitcoin Foundation can be made by going to the website.

Initial board members include Gavin Andresen, Mark Karpeles, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes.

Executive Director Vessenes proclaims, “My hope is that the Bitcoin Foundation will be the organization that focuses and unlocks all of your energy and talents towards promoting Bitcoins, protecting them, and increasing their legitimacy through standardization. Bitcoins truly are the Internet’s currency in my opinion and it’s so exciting to be a part of this disruptive and engaging technology!”

[Disclaimer: Author serves on the Foundation's Board of Directors as Secretary.]

Bitcoin: The Political Virtual of an Intangible Material Currency

By Mark A. Jansen
Utrecht University, New Media and Digital Culture, MA Thesis
August 2012

Bitcoin: the Political Virtual of an Intangible Material Currency


Abstract

This paper concerns the open source software project Bitcoin. Bitcoin is often described as virtual cash and this paper asks what the term ‘virtual’ signifies when applied to ‘cash’ and in turn what ‘virtual cash’ says about Bitcoin. Bitcoin is related to the 1990s activist movement of libertarian cryptographers known as ‘cypherpunks’ and to the cyber-libertarian political philosophy, demonstrating the historical intertwining of cryptography and politics. Cypherpunks argued that privacy is a prerequisite for an open society and that cryptography and anonymous transaction systems were needed as assurance. Bitcoin is the latest effort by cryptographers to create digital tokens similar to cash, where Bitcoin’s designer Nakamoto argues that with Bitcoin users no longer have to trust a third party, traditionally the bank. Bitcoin does not fulfill this promise as trust remains to be established, albeit in a different manner. Power is not destroyed, but transferred from banks to Bitcoin’s protocol. The paper concludes that ‘virtual’ refers to Bitcoin’s model of how cash appears to function in everyday exchange, allowing user privacy. Bitcoin does not model another aspect of cash, namely that it is a credential referring to debt. Bitcoin discontinues the concept of debt.