Tuesday, November 5, 2013

#Bitcoin surge, new privacy and anonymity tools, gold vs. bitcoin, predictability and random walk

Today, bitcoin jumped in value - over the weekend, it could be purchased for under $200 USD in some places, and at the moment (around 10:30 am PST / 1:30 pm EST)  it has jumped almost to $260.  If you have not yet purchased bitcoin and are looking for a way to do so, you can watch the ticker and wait for the drop that is bound to come - it is known to fluctuate.  The short term outlook for bitcoin is a sharp increase in price, and the long term outlook, as usual, and based on its history over the year, reveals a constant climb in value marked by periodic volatility.  Even with this volatile activity, bitcoin has remained remarkably stable over the past 60 days, with the net climb in value trumping any periodic loss.

In this post I'll mention a few ways that you can easily get yourself set up to purchase bitcoin, as well as present a brief compilation of some new tools that provide privacy and anonymity of bitcoin transactions.
As well, a brief comparison of gold vs. bitcoin is provided today, along with some commentary on how decentralized virtual currencies are developing (predictability and random walk).

If you are new to this blog and do not yet have bitcoin, after clicking on 'Read more' below, you can see the rest of this post for free. The BitMonet setting for this blog currently allows one article view without charge or paywall. Additional posts can be seen by selecting the blue button under 'article access,' then click on the tweet button (tweet this article to read) in order to bypass the paywall, alternatively, you can pay in bitcoin equivalent to 5 cents (USD). (This supports my work on this blog, as do any contributions received through the 'Donate Bitcoin' button at the top of the blog).  In case you are wondering why the paywall only has a bitcoin or tweet-to-read option (no $USD option to pay), just look at the performance of bitcoin.  The BitMonet quasi-paywall is designed to encourage you to use bitcoin and demonstrate how it can be used to request or accept payment.

[[ Philosophical addition as of Nov. 7, 2013: @tristan_winters has released a very insightful post breaking down the "us vs. them" myth associated with schools of thought on the direction of bitcoin. ]]

Today I'm going to present for you some recommended privacy and anonymity tools.  Bitcoin transactions are arguably more private than dollar-based transactions, though the transparent nature of bitcoin allows anyone to see any transaction that has occurred across its chain, even though the observer can't discern who has conducted which transaction.  In a system such as this, people with enough power and resources (generally, governments) can, if they want to, unmask the identity of a person associated with these transactions.  However, new bitcoin developments will soon provide a mechanism for identities of those persons conducting transactions with bitcoin to be able to, if they choose, attain complete anonymity.

Some readers here may be wondering, "How exactly do I get started with this bitcoin thing?"  That's a great question.  Probably the easiest thing you can (and should) do is set up what is known as a blockchain wallet, which gives you a bitcoin address and allows you to back up, export (online [or offline, to a paper record]), conduct transactions, and perform other tasks.  A type of wallet which has a high grade of protection and is available to anyone is Bitcoin Armory.  The name says it all, and I highly recommend this wallet.  So far as purchasing bitcoin goes, you can use any number of widely available tools, which include Coinbase (which requires identity and bank account verification), BTC-e, and various others.  You'll notice I've recently placed a 'Donate bitcoin' button on my blog, which is powered by Coinbase. You can also purchase bitcoins locally and in person, from someone willing to sell them to you.  In some countries, 'bitcoin card' developments are quickly moving to the marketplace.

For those who are into licensing and trading developments, CoinX recently became the first exchange offering bitcoin to be licensed in all 50 states in the USA.  Prior to this development, CoinX was mentioned in Business Insider and other online publications.

To briefly discuss some privacy and anonymity tools, an example of a technology that has been in place for quite some time is employed by services such as BitLaundry.  With this tool, one can obscure the record of one's bitcoin transactions, by moving bitcoins on a schedule through BitLaundry, resulting in a one-time use address for each bitcoin (or any fraction of one) that is sent through the BitLaundry system.  The bitcoins are then 'mixed' with others, BitLaundry deletes the database link between the one-time use address and the destination, and then sends the bitcoins to your desired destination (either to someone else or back to yourself, as you wish) according to the delivery schedule that you have set.  This system does not require Tor or any anonymizing software in order to operate.  You can, however, access and use it through your own chosen VPN.  [[ Note added Nov. 5, 2013:  Following today's launch of 'The Darknet' service offering as announced from the @cryptocloudVPN twitter account, it is my recommendation that anyone currently interested in a VPN with hardcore security, go straight to http://sos.ph/ where Cryptocloud is announcing the new service [has links to purchase via bitcoin], which has been in development for a long time. For the primary page on the @cryptocloudVPN 'Darknet' see: https://cryptostorm.is/index.html ]]

Of even greater significance than BitLaundry-style services are the completely decentralized solutions more recently proposed, such as Zerocoin, a proposed bitcoin protocol that could also be used in wallet technology and SX, which does not require any changes to bitcoin at all in order to function and provide anonymity of transactions.

The latter solution mentioned is also being incorporated into DarkWallet, a newly proposed wallet that will be available to use directly in Firefox or Chrome browsers.  DarkWallet is presently in a fundraising stage, and in the first few days of fundraising, netted over $30,000 in USD and 55.72 bitcoins.  With bitcoin donations complementing the process, this has resulted in the DarkWallet fundraiser garnering the equivalent of $44,000 in less than five days, with over forty days left in the fundraiser as of the date of this post.  Their target of $50,000 may have been setting the bar too low, as there is a high level of public support for this tool's development.  DarkWallet will become the first of many widely adopted "bitcoin anonymity" solutions, which by providing anonymity, will eventually (and fundamentally) alter the relationship between the indidual and the state, empowering individuals and associations to eventually exercise greater ability to do what they want with the product of their labor in a manner completely outside of the purview of governments.

This raises questions about how individuals and associations will manage resources to maintain and enhance "the public good" at a time when government capabilities to do the same are diminishing.  That topic will be covered in the next post on this blog.

Gold versus bitcoin is worth mentioning today.  Many people are investing in silver and gold, but when assessing whether or not to buy gold (or more of it), consider and watch its value carefully, as it has been in a decline.  Gold futures recently achieved their first gain in three sessions.  This is generally attributed to the weakening of the US dollar.  The best timing for investment is the long-term view, and while stocks do move in a random walk, the value of gold, silver, and bitcoin are essentially climbing over time, providing a certain predictability even for volatile investments.  If you are looking in the more short term to determine whether you should buy more gold or more bitcoin, I recommend waiting a little longer for gold to decline further, and purchasing bitcoin as soon as you see it drop.

I hope you've enjoyed today's post, and I look forward to your comments.

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