Summary

The Point

This movie takes a deep dive into the government takedown of Ross Ulbricht and the Silk Road. It showcases the confluence of technology, libertarian ideals, and government intervention.

My Take

Though this movie only touches lightly only Bitcoin, it is a fascinating story. It details one potential, albeit criminal, use case for Bitcoin. And it touches on issues of privacy, cryptography, government concerns and legality around the technology. I highly recommend it.

General Review

Strength

The Deep Web provides, for the layman, an in depth look at The Silk Road and how Tor and Bitcoin were used in a mashup to create a truly free and anonymous marketplace. It further shines in the way it gives us a look behind the curtains, from the perspective of the accused, his colleagues and loved ones, into the investigation and prosecution of a dark web target. That we are guided through this journey by Wired magazine writer Andy Greenburg provides a consistent thread of credibility as well as bookends to the story.

Weakness

There is not really much about this documentary that misses the mark. The 90 minute runtime was used judiciously to effectively tell the story. If one were forced to complain, it might be that more time was not spent discussing Bitcoin and cryptocurrencies. But those technologies played supporting roles in this story. Ulbricht is the star.

Highlight

What’s telling about this documentary is the lens it places on the government and its treatment of those who employ technology in the pursuit of criminal enterprise. In many ways, the justice system is playing catch up and the legal system appears to be further behind than law enforcement. The United States appears to be on the precipice of setting new and interesting precedence as it relates to Constitutional rights and technology. We should all watch this space, as it will likely have an outsized impact on Bitcoin, its regulation, and long-term viability and market penetration.

“Bail-ins” are a relatively unknown risk associated with centralized banking that can be mitigated with consumer adoption of cryptocurrencies. Centralized banking is inherently risky for consumers and bail-ins are just the latest addition to its growing portfolio of risk. Cryptocurrencies, such as Bitcoin and Ether, can offer protections agains bail-ins. However, replicating existing banking models by merely switching fiat currency with cryptocurrencies leaves consumers exposed to similar risks.

What is a bail-in?

Unless you’ve been living under a rock, you know what is a bank bail-out. That is when the government “loans” tax-payer money to failed banks in order to cover losses, typically incurred through high-risk speculation. What you may not be aware of is an alternative solution to that problem: the bail-in.

…a bail-in, a term first popularised in the pages of The Economist, forces the borrower’s creditors to bear some of the burden by having part of the debt they are owed written off.

According to Investopedia, a bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. In certain instances, this is doubly painful for consumers because they twice take a haircut. The bank ends up taking all or a portion of the money that they have deposited into their checking and savings accounts and, if their pension funds have been invested with the same bank via relatively safe bonds, they lose part or all of that, as well.

At this point, you may be asking yourself how this is even possible. Part of it has to do with a little-understood feature of banking. Most people believe that when they deposit money into a bank account that the bank is merely holding their money for them. This is simply not the case. As soon as a person deposits money with the bank, that person is no longer the owner of the funds. Ownership has been transferred to the bank, of which the depositor has just become an an unsecured creditor. The bank issues a promissory note to its new creditor and now it is free to do whatever its wishes with its new money.

If one believes that one’s money is safer in the bank than it is underneath one’s mattress, then the banking relationship described above appears to be a fair exchange. However, this exchange is not without risk. And that risk appears to be growing.

The US has already put in place bail-in-like powers as part of the Dodd-Frank financial reform act passed last year. The law includes a resolution scheme that gives regulators the ability to impose losses on bondholders while ensuring the critical parts of the bank can keep running.

Employees would be paid, the lights would stay on and derivatives contracts would not have to be instantly unwound, one of the areas that caused market confusion when Lehman Brothers collapsed in September 2008.¹

We have already witnessed the 2013 and 2015 bail-ins involving the Bank of Cyprus and several Italian banks, respectively. These were not one-offs. Evidently, bail-ins are the new, preferred bank rescue strategy in the European Union and the United States. In the US, this is possible due to a provision in the 2005 bankruptcy law that made derivatives liabilities more senior than depositors. This means that when a bank becomes insolvent and the line of debtors forms to collect their money, the derivative sellers get to be in the front of the line while the bank’s depositors get pushed to the back. As one might expect, the bank will have run out of money by the time it gets around to paying its depositors; which are unsecured creditors². In 2016, the EU issued similar bail-in rules. A new term has entered the pop culture lexicon that captures this phenomenon. It’s called getting Cyprused.

Cryptocurrencies To The Rescue

Cryptocurrencies, such as Bitcoin and Ether, can offer protections against some of the risks inherent in traditional banking. Cryptocurrencies allow one to be one’s own bank. Though this is akin to storing money underneath your mattress, there are risk mitigation strategies that make self-banking a bit more practical and safe.

Bitcoin and cryptocurrencies, in general, are fundamentally peer-to-peer banking systems. They enable individuals to become their own banks. If you are your own bank, then there is no need to trust a third party. If you haven’t handed your money over to a third party then you are not at risk of losing your money due to institutional failure, either through a bail-in or bail-out. You are not at risk of being charged overdraft fees. You are also not at risk of the government taking your money without your knowledge when you store it in your private bitcoin wallet.

A bitcoin wallet is essentially a public / private cryptographic key pair within which value (BTC) can be stored on the blockchain. Bitcoin can be deposited into a wallet using the wallet’s public key. But bitcoin can only be removed from a wallet, or spent, using the wallet’s private key. Users typically store their bitcoins in a bitcoin wallet application. Bitcoin wallet applications come in one or more of three flavors: desktop, web, and mobile. In addition to wallet applications, there also exist paper wallets; which document the wallet’s public and private key on printed paper. In order to own and spend Bitcoin, you must be in possession of both the public and private keys.

This model of banking is not risk free, however. As with keeping fiat currency under the mattress, cryptocurrency users are responsible for securing their own money. On the one hand, you have to provide for the physical security of your money. If you store your cryptocurrency on your phone, then you have to make certain that your phone is not stolen. Further, the ability to spend cryptocurrency is dependent on access to private keys. You must also protect and remember your private keys otherwise, your money can be stolen or forever lost. There are a number of methods that can be employed in order to secure a bitcoin wallet, some of which include:

• Use 2-factor authentication
• Disconnect from the internet so that hackers cannot steal private keys
• Encrypt everything
• Use paper wallets

Nothing is 100% fool-proof but these methods can be employed to produce an acceptable level of risk with regards to protecting your cryptocurrency assets.

Or, Maybe Not

Simply using cryptocurrencies does not automatically protect one from classic banking risks. The risk posed by replicating existing banking models with cryptocurrencies is similar, if not greater. Leveraging third-party exchanges to store cryptocurrencies in much the same way as we use banks to store our cash involves similar third-party risk.

Bitcoin, as envisioned by Satoshi Nakamoto, is intended to be decentralized money. It is meant to be traded from person to person as anonymously as one might place fiat currency into the cup of a homeless person. It was never intended to be controlled by one or more centralized third parties.

The nearly half a billion dollar theft from and subsequent failure of Mt. Gox bears this out. A centralized repository of money on the internet represents a rich target for hackers. Further adding to the risk is that fact that there is very little regulation and oversight on these bitcoin exchanges in the US and internationally. So it is difficult to know whether the appropriate security measures matching the threat level have even been put in place. To this day, it is still unknown whether it was due to negligence or complicity. But 800,000 bitcoins were stolen from Mt Gox users. And since there is no FDIC equivalent for cryptocurrency exchanges, those users lost all of their money.

The recent situation at BitFinex was slightly different. The bitcoin exchange was hacked, much like Mt. Gox, and hackers got away with nearly 120,000 bitcoin ($60M at the time). The difference is that Bitfinex implemented a bail-in, forcing each customer to take a 36.067% haircut.

After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. This is the closest approximation to what would happen in a liquidation context. Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%. In a later announcement we will explain in full detail the methodology used to compute these losses.

Bitfinex continues to operate, almost as if nothing ever happened.

Conclusion

Bail-ins can occur within any centralized financial institution where people deposit money or assets. This has started happening often enough that we call it getting “Cyprused” when a consumer loses his money in a bail-in. The bail-in, as a strategy, has been used to rescue a number of banks. And it has been used to rescue at lest one cryptocurrency exchange. The only way that consumers can defend against bail-ins is to use cryptocurrency in the way that it was meant. That is by using cryptocurrency to be one’s own bank.

Resources

Bitcoin …a completely dumb idea, IMO. - Some Bloke

Then general sentiment toward bitcoin was quite cold in the discussion thread. One bloke (more Aussie slang, Jamie ;-)) even referred to bitcoin as a “completely dumb idea”. I asserted that, though there might be challenges in the United States as it relates to bitcoin adoption, other parts of the world have shown much more interest. Asia, for instance, is a part of the world that seems very open to the idea of digital currency, in general, and cryptocurrency, more specifically. But, even this notion was challenged. So I did some quick googling to get some evidence to help make my case.

As it turns out, the future of bitcoin in Asia didn’t look so bright back in 2014. Though the two large online Filipino merchants began accepting bitcoin payments, adoption as a payment mechanism for the rest of Southeast Asia seemed tepid. 2017 seems to mark a significant increase in Asian cryptocurrency adoption. China is currently testing a national cryptocurrency. And though Japan already has roughly 4,500 merchants accepting bitcoin payments, the partnership between Coincheck and Recruit Lifestyle is a game-changer. Enhancing the Recruit Lifestyle Airregi point-of-sale application to support bitcoin will enable consumers to spend their bitcoin at more than a quarter million food and retail locations throughout the country. I think the point was made. But still, Jamie is going to confirm this on his next trip. Stay tuned.

Steemit

Meanwhile, I decided to see how the Bic Camera bitcoin payment test, in Tokyo, was going. This led me to a reddit thread on the subject. The conversation was interesting but I looked further and found myself watching video of an actual bitcoin transaction at Bic Camera. (The video was also available on the reddit thread. But I was searching faster than I was reading.) All of this was cool but I noticed that I was not watching the video on youtube. I was watching it on this web site called steemit.com; which I had never heard of before today. So I started to explore.

What is Steemit?

Turns out, Steemit is super cool. As far as I can gather, steemit.com is a social network built on top of the steem.io platform. (I could be wrong about this. It could be that steem is just the name of the rewards/currency.) Its a social network that affords users the opportunity to earn cryptocurrency for their contributions. There is an algorithm that determines how much steem you get for posts, upvotes, comments, etc. The more steem you have, the more you can earn. And users have the option of converting a portion of their steem into other currencies: bitcoin, for instance.

Steem is a blockchain-based social media platform where anyone can earn rewards.

Naturally, there are many blockchain and cryptocurrency enthusiasts on Steemit. I immediately started consuming some great content. But, I didn’t want to just be a passive reader. I wanted to contribute to the conversations the same way that I do on GitHub or StackOverflow or even Facebook. I read one really good article EOS vs Ethereum for Dummies!. It was such a well-written and informative piece that I wanted to give the author an up-vote. In fact, it spawned such an educational discussion that I wanted to give a few of the commenters up-votes. However, you cannot participate unless you have an account. So, of course, I kicked off the account creation process.

Steemit is Not Anonymous

For whatever reason, I was under the impression that I could operate under a veil of anonymity. Those hopes were quickly dashed when Steemit requested my cell phone number so that it could text me a registration code.

Steemit Makes You Wait

My hopes for anonymity would not be the only ones that were dashed. So, too, were my hopes for instant gratification. It appears that I’ve been placed on some type of waiting list. At the very least, Steemit has some super-strenuous verification process. I’m not exactly sure what they are verifying, though. All they have to go on is a made-up username, a phone number, and an email address that may or may not be associated with a real identity. I hope they don’t make me wait too long. I’m ready to start contributing and earning.

Since I have to wait, though, I may as well watch this educational video that explains what exactly is a blockchain-based social media platform. Perhaps, you might want to do the same.

Resources

Interestingly enough, Netflix does not (as of June 2017) have a single Bitcoin title available. On the other hand, Amazon Prime Video has at least 11 documentaries and one feature film on the topic.

It all started when I was in the process of refinancing my house. Mortgage rates were in free fall and I stood to save a great deal of money by getting into a lower interest-rate loan. Once my mortgage broker and I had worked out a deal to my liking, he pulled my credit report so that we could begin to execute. That’s when things went left. I was expecting everything to go smoothly, as this was the second home that I had owned and I went through two separate finance events on my first home. But my broker called me back and told me something that I was not expecting. He informed me that he could still do the loan but that I’d have to buy down a half a point, based on my credit report. When I asked him what happened, he told me that there was a negative tradeline on my account for $180. The company reporting the tradeline was the daycare provider in my old neighborhood.

First off, I didn’t owe my former daycare provider any money. I gave them proper notice that I was leaving and made the final payment. But when I contacted them to inform them of their bookkeeping mistake, they told me that they had no record of my making the final payment. It had been over a year since I moved and I no longer had records of any payments to them. We were at an impasse. They were not budging and I needed my mortgage refinanced. So I paid them the $180 and got them to fax me a letter stating that the account was current. My mortgage broker used this letter to perform a rapid rescore against my credit report. This resulted in our ability to close the mortgage under the terms upon which we had originally agreed. I was very happy with this solution. Even though it cost me $180, the mortgage savings were orders of magnitude greater than this amount. All was well with the world, or so I thought.

Eighteen months later, after interest rates continued to fall, I decided to refinance my mortgage, again. I contacted the same broker that I had used before and we began the process. But, after he pulled my credit report, he saw the same negative tradeline that was there before. He was puzzled, stating that he remembered my having resolved that issue during the last refinance. He was correct. But, the tradeline was never updated. So I called the daycare provider and informed them of their mistake. I was told, once again, that they had no record of my having ever paid the $180. Unfortunately, for me, I had misplaced the letter that they had previously given me. So I ended up paying them another $180 in order to get another letter that enabled me to close on my new loan.

Fast-forward another year. When I refinanced a third time the $180 tradeline was still showing up on my credit report as not paid. Luckily, I saved the previous payment letter and did not have to pay a new ransom in order to close my loan. But I was very upset about what was happening. Clearly, a pattern was revealing itself. Though required by law to do so, the daycare provider was not updating the credit report tradeline that they filed on me. And though I could have disputed the tradeline, dispute resolution would take thirty (30) days. Each time this came up, I needed to close my mortgage now. There had to be a better way. And if there wasn’t, I was determined to make one.

The first thing that comes to mind when we learn that someone is late paying their bills is that they are irresponsible. However, when people pay their bills late in today’s economy, it is often due to circumstances beyond their control. They could be suffering the impacts of any number of macro- or microeconomic factors such as a weak economic recovery, shifts in the global economy, or an unforeseen medical emergency.

Even though the economy is in recovery, there is a great deal of underemployment and many people have been forced into low-paying jobs that don’t meet their pre-recession debt obligations. Worse yet, many are still unemployed. The number of part-time workers is up 84% post-recession and the number of low-wage jobs has increased by 2.4 million. Many people who were unemployed were forced to take jobs that were paying much less than what they used to earn. This can have a very negative impact on one’s ability to pay bills on time.

Additionally, shifts in the global economy can have an outsized impact on local geographic markets and, thus, impact entire communities’ ability to pay their bills on time. For instance, there has been a recent substantial increase in the number of Texans who are late paying their credit cards and car loans. This is due to the fact that oil is now less than $30 a barrel; which is crushing oil-dependent local economies. Louisiana, North Dakota, Oklahoma, and West Virginia are experiencing a similar impact. This is definitely beyond the control of the people affected by this.

Finally, an unforeseen medical emergency is naturally beyond anyone’s control. It can quickly sap a person’s income requiring them to make choices between paying for much-needed medical care or paying their other bills. In the wake of the Affordable Care Act, high medical bills are still sending people into bankruptcy.

So don’t be quick too judge if you learn that someone is slow to pay their bills or unable to pay, altogether. There is actually a very good chance that they could be dealing with circumstances that are completely beyond their control.

“P” is for Protection

The Consumer Financial Protection Bureau is responsible for protecting the rights of consumers against abuses from the financial industry. Certain populations have a higher likelihood of being targets of various finance schemes. As such, it is no coincidence that two (2) of the companies that the CFPB took action against, during this period, were found to be taking advantage of blacks or military personnel and their families. Additionally, the CFPB has take action action against companies in the medical billing and collections business. It is common practice for medical debt collectors to report adverse information to consumers’ credit reports prior to the consumer even knowing that they owe money. Home owners impacted by the financial crisis, and students are also susceptible to abuses. The CFPB recently addressed businesses who took advantage of these consumers, as well.

Need the Dough

In the last sixty (60) days, alone, the CFPB has sanctioned more than thirteen (13) financial institutions and it has assessed nearly one billion dollars ($1B) in fines and compensation for aggrieved consumers.

This flurry of activity is not unique to the last two (2) months. The CFPB has been very active for the entirety of 2015. One can only hope that it continues. It is obviously a saving grace to the consumers who have been directly affected by the surfaced issues. But, it is equally good medicine for the offending financial institutions. The CFPB helps them uncover blind spots and the improvements should, ultimately, make these businesses more profitable.

Resources

Like most guys, I want to look good. On the one hand, I can admit, it is pure vanity. On the other hand, it really is about being healthy and achieving longevity. Putting in work now will ensure that I maximize my quality of life in the later years.

This is why I took up bodybuilding, or weight training or whatever you want to call it, in the first place. Now, don’t get me wrong. I’m not a professional. I have no intentions of getting on stage (in a speedo) and competing with anyone. This is something that I do for me.

Training Wheels

After years of trying to grow my legs yielding only marginal results, one tip from Rich Piana changed everything.

Rich delivers two major tips in the Training Wheels video

1. Be sure to squat full range of motion (which I already learned from Poliquin)
2. Don’t rest at the top

I’ve ALWAYS rested at the top. No wonder I wasn’t seeing results that I was looking for. Heavy squats hurt. They don’t just hurt your legs, they hurt your soul. Resting at the top was my way of intermittently relieving the stress on my CNS (central nervous system) to allow me to carry forward with the next rep. The problem is, the stress on the muscle is actually what is requried to promote growth. So ultimately, I had been working against myself.

Fighting Genes

Genetically speaking, my parents blessed me with “the gift and the curse” (obligatory Jay Z reference). As more of an ectomorph with a super-high metabolism, it is fairly difficult for me to put on weight. So I am naturally a skinny kid. This is great if you want to be a runway model. …not so much, when you are walking up and down South Beach.

Aside from the high metabolism, my genetic makeup seems to be schizophrenic. My upperbody and glutes seem to be wired for size; which has allowed me to achieve impressive gains in those areas. My quads, hams, and calfs got the short end of the genetic stick, though.

I’ve tried a number of different things, for years, and was unable to achieve any substantial growth in my legs. I was becoming fearful that I was forever doomed to have chicken legs. Now I can see the light at the end of the tunnel. Thank you, Rich. …thank you.

Amazing, isn’t it? :-)

All kidding aside, it is a testament to the evolution of this new accelerator that the Triangle Startup Factory has evolved into THE Startup Factory. The acronym still holds, but the accelerator has outgrown it’s geography.

In the Fall 2012 class, one of the five portfolio companies (Alekto) was from Washington, DC. In the Spring 2013 class, two of the five portfolio companies were from outside the Triangle. One was from Washington, DC and the other was from New York.

Chris Heivly explained it well when he said that rebranding by dropping the word, “Triangle”, was a move toward ensuring that TSF attracted the best startups and the best investors from across the country, if not the globe. But rest assured that TSF isn’t moving anywhere. It’s going to stay put, right in downtown Durham.

It took me long enough. But, I’m finally back from my long hiatus. It’s not like I don’t have anything to talk about. I’ve been meaning to start blogging again for the longest time. I’ve just been super-busy.

Luckily, in the interim, I’ve grown quite fond of git and Github. So when I came across the article, “blogging like a hacker” (which should be titled “blogging like a BOSS“), it was all the excuse I needed. I could kill two birds with one stone. …tinker a bit. …and get back into blogging.

So my new blog is powered by jekyll, hosted by GitHub, and I’m writing this post using prose.

Tight.

read more

Can the same be said about cloud computing, today?

It is evident that cloud computing is the next major step in computing, in general. But is it the next major step in the evolution of corporate information systems? Everyone is certainly talking about it; but who is actually doing it?

According to Pew Research, anyone with a Gmail or YouTube account is participating in the cloud computing revolution. Perhaps I need to change my perspective about cloud computing in order to agree with them. The Pew report focuses on end-user adoption of cloud-based services, or SaaS. The way I see it, end-users don’t engage in cloud-based computing. End-users use applications. Regardless, neither Gmail nor YouTube represent an evolution in corporate information systems.

So again, what corporations are engaged in cloud computing?

Kevin Jackson and Peter Laird have started some interesting analysis on Cloud Computing mindshare. It is not surprising that, in Kevin’s analysis, the usual suspects show up in the top three (3): Amazon, Google, and Microsoft. But these three represent companies that have made huge infrastructure investments and are figuring out how to gain further returns from those investments. What they don’t represent is the adoption of cloud computing by the managers of corporate information systems.

It seems that information on which companies are adopting cloud computing is hard to come by. For this reason, Peter Laird issues a call to action at the end of his post; “Cloud vendors, what can you say about your customers? Please reveal.”

For now, at least, it looks like cloud vendors don’t kiss and tell. That said, I can’t wait to be enlightened.

Article originally published on Sys-Con Media

read more

read more

read more

I don’t watch much television, so the fact that I’ve seen these commercial a few times is indicative of a strong marketing campaign.
When visiting its web site, Hyundai let’s you know that “WE’VE GOT YOUR BACK”.  The Hyundai Assurance Program, in a nutshell, […]

read more

read more