Ex-Googler Gives the World a Better Bitcoin

 

Litecoin creator Charles Lee. Photo: Alex Washburn/Wired

Charles Lee was a software engineer at Google, spending his days hacking networking code for the search giant’s new-age operating system, ChromeOS. But in his spare time, he rewrote Bitcoin, the world’s most popular digital currency.
Early one October morning two years ago, Lee unleashed his project, Litecoin, onto an online universe that was still coming to terms with its more famous progenitor, and though Litecoin is still firmly rooted in the Bitcoin code base, it has found a place in the world, showing just how strong the appetite is for a new breed money.
Bitcoin has had an extraordinary run this year, but if you’d sunk your money into Litecoin instead of Bitcoin on January 1, it would have done better. Since then, Bitcoin jumped from just over $13 to its current value of more than $115. Back in January, Litecoin was trading in the $0.07 range. Today, it’s worth close to $2.40. In other words, while it took 200 Litecoins to buy a Bitcoin in January, today it takes only 50.
Government regulation may put the squeeze on Bitcoin — and perhaps Litecoin too. But digital currency will continue to evolve and grow. It’s what so much of the world wants.
Although its dwarfed by Bitcoin’s popularity, people seem to like Litecoin because it’s a more credible alternative to the growing list of Bitcoin imitators, which Lee saw as either technologically challenged or straight up pump-and-dump scams. “I wanted to create something that is kind of silver to Bitcoin’s gold,” says Lee, who left Google last month to seek his fortune in the wild west of alternative digital currencies.
He took the basic ideas behind Bitcoin — a currency created by a pseudonymous character who goes by the name Satoshi Nakamoto — and refined them. Litecoin was designed to pump out four times as many coins as Bitcoin, in an effort to keep the digital currency from becoming scarce and too expensive. It processes transactions more quickly, and discourages the kind of high-volume but very small transactions that have become a nuisance on the Bitcoin network. And it lets regular folks more easily “mine” coins — i.e. provide the online currency system with the computing power it needs, in exchange for digital money.
The result wasn’t a Bitcoin killer. But it was something that gave digital currency yet another stamp of approval.

Down the Silk Road

The Ivory Coast-born son of an entrepreneur, Charles Lee has long had an interest in economics. He describes himself as a gold investor, skeptical of the Federal Reserve. Like his dad, he graduated from MIT, having studied computer science and electrical engineering. And after kicking around in Silicon Valley for more than a decade, he was looking for something new in 2011.
He found that in Bitcoin: an open-source-software project that seemed to perfectly marry his passions for finance, cryptography, and technology. He first heard about it while reading an article about Silk Road, the online drug shopping mall, and soon, he started playing around with the peer-to-peer software that powers the digital currency. From there, the natural next step was to create his own.
He released one currency called Fairbrix — but it was a dud, plagued with technical problems. Litecoin was his second effort.
His Bitcoin fork was worthless the day he launched it, and it was hardly the only Bitcoin alternative out there. But Lee took a different tack from some of the other Bitcoin imitators. He released the currency to the world after mining a mere 150 Litecoins. That meant that the whole world could get in on the currency on the ground floor.
There was also a bonus for miners, who in October 2011 were engaged in an escalating technology race in the Bitcoin world. Bitcoin miners earned coins by participating in a kind of cryptographic lottery and the folks who could do the most mathematical calculations were rewarded with the most Bitcoins. But as Bitcoin surged in value, people started building complex Bitcoin mining rigs that could do more calculations and therefore earn more Bitcoins.
Litecoin leveled the playing field, using a technology called Scrypt to lower the advantage miners would get by switching to GPU rigs or custom-designed mining systems.

Mirror, Mirror

Thanks to a few small changes to the Bitcoin way, Lee succeeded where others couldn’t. Two years on, Litecoin has started to reproduce the Bitcoin ecosystem is many respects.
The Silk Road underground drug shopping mall gave Bitcoin a boost, and now Litecoin is accepted at an alternative to The Silk Road, called Atlantis. There’s a company in Utah called Casascius that mints its own physical Bitcoins, and Litecoin has got this too, only the Litecoin version is from Hawaii.
You may have a much harder time finding a pub in London or a taxi cab in San Francisco that will accept Litecoin, but hey, Jay’s Jerky and Goodies takes them. So does the online tech store BitElectronics.
Still, Litecoin is mostly a vehicle for investors who want to get in early on what could be the next wave in digital currencies. But there are a few signs that it’s continuing to strengthen its foothold. Earlier this year, Bitcoin’s most widely used exchange, Mt. Gox, said that it was going to start trading Litecoin.
To get a sense of how things have changed, consider this. About a year ago, Noah Luis — the guy who mints the Litecoin coins in Hawaii — convinced someone on the internet to buy him a pizza in exchange for 3,500 Litecoins, worth $30 at the time. At today’s valuation that medium-sized meat-lover’s pizza was worth $8,400.
Luis says he has no regrets.

Photo: Noah Luis

In May the project got a boost when Warren Togami signed on. A former software engineer at Red Hat, he’d founded the Fedora Linux project about a decade earlier.
Togami is now Litecoin’s lead developer and he’s creating a nonprofit foundation to manage the Litecoin software development and advocacy, much like the Bitcoin Foundation.
And just last month, a Bay Area startup called Coinbase hired Lee away from Google.
Lee says that he isn’t there to work on Litecoin. He’s written some code that allows Coinbase users to swap Bitcoins via SMS. But he wouldn’t rule out the possibility of Coinbase adopting Litecoin.
Bitcoin’s story has been a bumpy ride. The currency has crashed and risen from the ashes. Bankers, regulators, and law enforcement agencies eye it with suspicion. In all likelihood, Litecoin will have many similar bumps ahead of it, if it continues ride in Bitcoin’s wake.
But even if it doesn’t survive, it’s serving an important purpose, says Jerry Brito, a senior research fellow at the Mercatus Center at George Mason University. Bitcoin is “like any other open-source project where people are going to fork it,” he says. “That’s good in that people are going to take it in interesting new directions.”

Bitcoins: Will It Make A Difference?

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The Indian economy is in shambles and we're having a hard time trying to combat the global onslaught coming our way. The rupee keeps on falling and the sensex haven't seen days as worse as these. And while we're at this dark time and age, there remains one untouched entity in the cyberspace that is well above and beyond the economic warfare that embraces us. It is Bitcoins.

Wait, What?

© Images Bazaar
There are two bewildered faces out there; the ones who know such a thing exists and a few who're completely baffled by it. For beginners, Bitcoins is a virtual currency that is exchanged over the internet. What makes this truly stand out, you ask? Simple, it does not exist in the physical form, is completely encrypted, and cannot be traced. Bitcoin in a cryptocurrency that can be generated and traded on the worldwide web without any hassle. The Bitcoin market has a strictly finite supply of 21 million bitcoins that are exchanged over time by various users.
The system is designed in such a manner that it automatically regulates the generation of Bitcoins to ensure a steady growth of the currency with minimal inflation. Other than that, you can sign in to create your own bitcoin address for free and go around trading in them.

Will That Bring About A Change?

© preev.com
Think about it, bitcoins are solely traded on the online sphere, meaning there is no production cost of the notes and the coins and you can carry thousands of them on your smartphone without any hassle. The trading is encrypted guaranteeing that nobody can mess around and try to siphon off with your precious coins. This encryption is untraceable, which can work either way but proves to be a plus point for the ones trading in illegal activities. Because of the untraceable quotient, a person can transfer huge amounts without paying the tax and other legal payments necessary to do the transaction. Also, the fixed sum of 21 million coins guarantees that the inflation will be kept in check. Another important aspect is the value of bitcoins; it is usually determined by the supply and demand, equivalent to a precious metal like gold.
Unfortunately though, there is a dark side to this, as the supply and demand can never be comprehended. The pricing of bitcoins tend to drastically vary on a daily basis. For instance, the current rate of bitcoins as of today was 7191 Rupees but was half of this few months ago. This value may rise or fall depending upon the bitcoins in circulation. Also, since there is no central authority monitoring the supply and demand, the liquidity is at an all-time low.

What Does That Hold For Us?

© Images Bazaar
For starters, this happens to be a platform to transact money without having the fear of someone stealing it. It also acts as a failsafe place to store any money that you might need in desperate situations. Also, since you can access your account from anywhere on the earth means you can carry an ample lot of cash without the worry of someone flicking your wallet and you losing your money. Of course, the fluctuation does scare the living daylight as your investment might end up becoming its half and you may never know.
Maybe Bitcoins may not make sense as a mainstream form of currency, but the global economy can definitely take few pointers and change the way our economy flows. Google Wallet happened to be a hybrid of sorts, but never quite made it big. Hopefully, in another few years once we happen to have a world much more aware of the prowess of the internet can we truly incorporate this technology on a wider scal

Bitcoin aims to counter regulatory pressure

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epresentatives of companies that trade in Bitcoin are stepping up their efforts to promote the virtual currency in Washington, in an attempt to counter regulatory suspicion that they say will drive financial innovation away from the US.

Leaders of the Bitcoin Foundation, a trade group, are having meetings with US administration officials and on Capitol Hill this week, as the powerful Homeland Security Committee runs an investigation into potential threats from virtual currencies.
Bitcoin is a digital-only currency where transactions are processed through a network of volunteer computers spread across the world, outside the traditional banking system.

The total value of the currency in circulation has risen to $1.25bn, but its growth has led to heightened interest by federal and state authorities. The attention is being driven, in part, by suspicions that Bitcoin is being used for illegal activity such as money laundering, drug trafficking and tax evasion.

Foundation leaders are expecting to meet representatives from the Treasury and Department for Homeland Security, as well as staff from several Senate offices. The aim is to promote the potential social and economic benefits of decentralised currency, including cheaper and more secure payments processing, and to complain about a complex federal and state-by-state regulatory structure that they say is hampering the set-up of Bitcoin trading businesses.
Many early Bitcoin trading businesses, which help users switch their virtual currency for dollars, are struggling to turn themselves into regulated money services businesses.
“If the US can’t solve these problems, all these frustrated entrepreneurs will relocate and take their jobs and capital to places like the UK or Germany,” said Patrick Murck, general counsel of the Bitcoin Foundation.
The Senate Homeland Security Committee recently launched an inquiry into “threats and risks related to virtual currency” while earlier in August, Benjamin Lawsky, New York State’s chief financial regulator, subpoenaed 22 digital currency companies on grounds of potential illicit activity – referring to Bitcoin as “a virtual Wild West for narcotraffickers and other criminals”.
Suspicion of Bitcoin on Capitol Hill goes back to a 2011 denunciation by New York senator Chuck Schumer of the currency as an “online form of money laundering”.

In recent weeks, Bitcoin companies have acted to boost their presence with a new group called the Data Asset Transfer Authority (Data), which has been formed to serve as the self-regulatory body of the US virtual currency industry and is being advised by Promontory Financial Group, a consulting firm comprised of former top US financial regulators. It has also begun meeting the regulatory and law enforcement community in Washington, including officials at the Department of Treasury and the Financial Crimes Enforcement Network.

The federal seizure this year of Liberty Reserve – the Costa Rica-based digital currency provider – and money laundering charges against its founders have complicated matters, said Constance Choi, a spokeswoman for Data. There is concern that a “guilt-by-association” mentality will cause regulators to react to virtual currencies in an ad hoc manner, she said.

“It’s really a PR problem for us. Everybody here is talking about Liberty Reserve, which didn’t even involve Bitcoin.

Bitcoin lobbyists meet US authorities amid growing focus on digital currency 

Bitcoin. Authorities have expressed concerns about potential money laundering abuses and its use in funding illegal activities. Photograph: Rick Bowmer/AP

Representatives of Bitcoin's largest lobby group met federal law enforcement and financial agencies on Monday as the US authorities increased their scrutiny of the controversial digital currency.
Patrick Murck, general counsel for the Bitcoin Foundation, confirmed the group was meeting the Federal Reserve, FBI, Treasury Department, tax officials and members of the secret service among others.
Unlike traditional currencies, Bitcoin is not backed by a central government, but instead created by a computer program. It can be traded or used to buy goods and services. Authorities have expressed concerns about potential money laundering abuses and its use in funding illegal activities including drug purchases.
In an email, Murck said the agenda of the Washington meeting was to "help regulators, policymakers and law enforcement officials better understand the Bitcoin protocol and distributed finance so they can make better decisions and develop new methodologies for identifying and interceding illicit activity.
"Bitcoin and distributed finance is here to stay and our preferred path forward is a co-operative one, where we all can help ease each other's transition into an inclusive and distributed global financial system."
The meeting comes amid signs of a crackdown on Bitcoin. Earlier this month the Senate committee on homeland security wrote to Janet Napolitano, the secretary of homeland security, asking for details of any "plans or strategies regarding virtual currencies and information regarding any ongoing initiatives you have engaged in regarding virtual currencies and the name of the person most knowledgeable about any such plans, strategies, or initiatives."
Also this month, New York's department of financial services sent subpoenas to 22 companies involved with Bitcoin seeking information on their business practices. The Bitcoin Foundation clashed with California's regulators in July with the state's regulators accusing the foundation of being engaged in money transmission without proper authorisation – a charge vigorously denied by the Bitcoin Foundation.
Murck said he hoped the Federal meetings would clear up misunderstandings. "We view this as the beginning of a conversation about the appropriate role of government and law enforcement in this emerging space. Our hope is that this is the beginning of an open and transparent dialog between good-faith stakeholders to find common ground and develop public-private partnerships," he said.
"It is refreshing to see US regulators at the federal level take a responsible approach to working with the industry to understand these issues.
"Contrast that with what we are seeing at the state level: regulators seem more interested in rushing to conclusions and tripping over themselves to be first movers, without regard to the unintended consequences for the industry and US policy at the national level."