Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Half-Man-Half-Fish Wearing Sunglasses

Episode Date: January 12, 2014

Topics covered in this episode: Bitcoin ATMs as they pop up around the world Zynga starts accepting Bitcoin in some of its games A new service that allows you to easily create your altcoins India changes positions on regulation GHash.io reaches critical mining power and how the centralization of mining threatens the stability of Bitcoin Elliptic Vault offers a new Bitcoin insurance service This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/002

This is Epicenter Bitcoin, episode two, recorded on January 11th, 2014. Half Man, Half Fish, We're wearing sunglasses. On today's show, we'll talk about Bitcoin ATMs, Zinger. All coins with fish heads. We'll also be covering news about regulation in India, jiharadaiyo and decentralization of mining, overstock.com's new Bitcoin acceptance, and a new insured Bitcoin storage service by Elliptic Vault.

If you want to support the show, please go to epicenterbidcoin.com slash tips for our tipping addresses. It covers the latest news and developments in Bitcoin and cryptocurrencies. My name is Sebastian Gmchutu. I'm a user experience designer and Bitcoin enthusiasts living in Lille, France. And I'm Brian Fabian Crane. I'm a Bitcoin entrepreneur in Berlin. So, Sebastian, what's new with you?

Well, listen, not too much. Just finished my first week back to work after Christmas holidays. That was challenging in itself, I got to say. I'm actually working on a Bitcoin meetup here in NIL. And that's been, that project's been moving forward. I wouldn't say quickly, but it's moving forward. I actually found a venue. I found a bar I made it here that accepts Bitcoin, so I was naturally inclined to go see them and see what they were all about.

And it turns out it's kind of a geek bar that I had never seen before. I had never been in before. So I went and met with them and they're really excited about hosting the event. So I think we're going to be doing it in early February. For now it seems like we're going to be doing it on the 6th of February. and for now I'm looking for I'm looking for people who would want to speak at the event that's cool yeah how about you yeah I'm also I also just got back to Berlin now and you know as you know I've been doing a Bitcoin meetup here for a few months now and we're having

we're having our next meetup on Tuesday and we just moved into a bigger a bigger location because we were kind of overflowing last year. And I'm really excited. We're going to have, I'm going to be talking about the predictions, which, you know, we did a podcast about. So I'll basically kind of tear this down and do talk about our predictions for 2014. And then we have a talk about master coin and, you know, colored coins. And we have one about the, some guys that was working on Drupal integration. So they're always lots of fun.

Cool. That's a good idea, actually. I was thinking of doing a talk about some of the protocol layers of Bitcoin, but I don't think I'll have enough time to do all the research and be sufficiently informed about it to do a talk song. I might just do the predictions, maybe an easier way, an easier route for my first talk about Bitcoin. Yeah, yeah, they absolutely do that.

Yeah. So that's great. How many meetups have you had so far? I think this is going to be a fourth. Great. And how many people do you track now? So we've been, from the very first meetup, I think we were about 30 people. And we have, I think, about 30 people for RAS repeat for Tuesday.

So I presume it's going to be, you know, between 30 and 40 people. Yeah. But we also moved to a new place because we would like to grow the meetup this year. And, you know, I think it will, the meetup group has been growing rapidly, you know, like almost every day someone new joins the meetup group. So I think by the summer, I expect the meetup group to be, you know, 60 people attending regularly or something like that. Wow. That's great. Well, we've got lots to talk about today. lots of news in Bitcoin this week.

So let's get into it. Yeah, absolutely. So we said we're going to start with Bitcoin ATMs now. Yeah, this is a big one. Yeah, so I have a lot to say about Bitcoin ATMs because I've actually spent a lot of my time in the last few months looking into Bitcoin ATMs, and I was working on bringing Bitcoin ATMs

to Germany and I've kind of decided now that I won't do this because it's because of regulations basically. It's not a simple project to do and it got a lot more a lot more overhead than I wanted. I mean, we also discussed Bitcoin ATMs briefly in a predictions episode. But maybe let's take a step back and talk a bit about how Bitcoin ATMs work. So people have have a background picture. Because I think the word ATM is actually slightly misleading. Yeah, I think you're right. So this story is specifically the story of how the second,

the world's second Bitcoin ATM is opening in Hong Kong. Well, yeah, well, second, that is kind of a, depending on the point of view. I don't think that you can really say that. Right. So let's just, let me briefly describe how Bitcoin ATMs work and then we can then we can move on to the kind of recent developments. Okay. So there are, there's basically two companies that are leading in Bitcoin ATMs right now. One is Robocoin.

They're based in Las Vegas. And the other is called Lamaso. They're based in New Hampshire. And RoboCoin, they're well known for setting up the very first operating Bitcoin ATM in Vancouver in last October. And it was a huge success. I mean, I think it was all over the news. And it's been really great for Bitcoin, all the publicity it got. It also has been a big success financially.

I think they had more than a million dollars in transaction in the first month. So how does the Robicoin work? The robocoyne, you can both sell bitcoins. So basically put in Bitcoins and get dollars or the other way around. So if you want to, so let's first say about if you want to buy Bitcoins, which is, I think, the more frequent case. You basically go to that Robicoin machine. You put in, you know, let's say $200 in cash. And then you already need to have a wallet software on your cell phone.

and you would hold the QR code of your wallet, or I guess you could have a paper as well. And the Bitcoin ATM sends you the money or the bitcoins onto that address. And with the Robicon, you can also do the other thing. You can go there and you can say, I want to sell Bitcoins. So the Robocoin machine will show you an address in form of a QR code. you would send the money to that address, you get kind of a receipt from the robocoon,

and then once the robocon has one confirmation, you can go back and basically get your cash. What's also interesting is that ATM is a bit misleading, because ATM usually you have some account and you withdraw money from that account, but that's not what's happening here. Here, what's really happening is that you're trading.

you're trading similar to as if you were on Mount Gogs or some exchange you know you're either selling bitcoins or buying bitcoins it's just that you're doing that on a physical location that's kind of like a gateway to an exchange so the so the term ATM for automatic teller machine which relates to you know an automatic bank teller is misleading because well there's no bank and there's no teller and there never has been a teller yeah absolutely and it's It's also, it's not like you have an account that you're accessing through that machine. Right. It's that you are actively trading with that machine.

Or basically that they're connecting you to, you know, liquid Bitcoin market. Maybe ATM is, maybe it's an automatic trading machine. Maybe ATM is a good, I mean, I was just. Exactly, yes, yes. I was thinking of different names. I mean, it could be a, I don't know what we could call these things, but automatic vending machines or. Well, that's, so that's the point, right? So you before mentioned that the second Bitcoin ATM will be set up in Hong Kong.

Well, the other company, as you mentioned, the Lamassu, they have a different machine. It's much smaller. It's cheaper. It's more lightweight. And you can only sell Bitcoin. You can only buy Bitcoins for, you know, dollar or euros there. You can't sell any. So that works basically the same way.

You put in your money. You hold the QR code there. It sends you the Bitcoins onto that address and that's it. And they actually call it a Bitcoin vending machine. I think that also has to do with regulation and that they think this somehow makes it less of a, you know, it might fall into a different regulatory category. If it's like a vending machine, just like you have vending machines where you can buy like Mars bars or something like that.

I see. Okay. Yeah, but what I find interesting about the Robocoin machine, it's kind of funny that we're going back to this idea of using cash. I mean, it just goes to show how entangled we are in the banking system and how difficult it is to deal with the banking system that takes several days to do a transaction is that we actually have to go back to cash, like withdraw cash and put cash into this machine. in order to buy a in order to buy bitcoin where the automated uh computerized i'm using air quotes here way to do it which in theory should be much quicker it actually takes much longer it is much more difficult as i just find that kind of ironic no totally and then the other thing that's also very popular no with bitcoin is that person's person trading we're actually meeting up someone you give

them cash they send it to you you know it also has this very archaic touch to it. You're right. But of course, the reason is very simple. The reason is that the banks are just, you know, not welcoming Bitcoin exchanges. And they're making it very difficult. If it was easy, you know, if that didn't exist, of course you wouldn't need those ATMs. And it would all be a different situation, you know.

To a large, I said that it goes, it shows me that banks are. broken because if if banks were able to make person to person transfers instantly, I mean, if basically banks were to implement the same sort of, I wouldn't say technology, but I mean, the same user-facing features of Bitcoin, which is I can transfer money instantly and that person received the money I can use it right away. Maybe Bitcoin wouldn't be so attractive. people wouldn't be turning to Bitcoin as an alternative. I mean, to me, this just goes to show how banks are broken and how they're very, I mean, how they're archaic in their, in the way they function and how they're based on an old

system that has simply been adapted to new technologies, but not built from the ground up. Yeah. And what it also shows, I think, is just how restrictive the financial system is and how, how hostile it is against any new technology that just kind of goes against those entrenched procedures. I mean, technically it will be very easy for banks and for the financial system to make buying Bitcoin's easy too. But of course, it's something new, it's something different. So they're very hostile against that.

But let's talk about these recent news. you know, so that's why when you said the second Bitcoin ATM, that's kind of misleading because there are some Lamassu machines also in operation. It will be the second Robocoin machine, and Robocoin, they call it ATM, as the other ones call it vending machine, although some of the people who operate Lamassus who also call it ATM. So let's just mention a few others that have been in operation now. I know there's been one set up in Finland a few weeks ago.

That's also a Lama Soo machine. One is operating in Sweden, also a Lama Su machine. Then there is one in Slovakia that's been operating since early December. I think that might have been the first Lama Soo machine, but I'm not 100% sure. So there's at least three Lama Su machines currently in operation. And then I think sometimes they'll put it up. briefly some, you know, they bring them to meet up with conference, but they're not like permanent. And then there was also the story that in Brazil there would be a Lamassou machine

at a very large tech conference in two weeks. And I think they're going to look for a permanent location in Sao Paulo after that. So they're, well, they're growing rapidly then. I mean, it seems to me like we're going to be seeing more and more of these machines. in 2014. And this is what we talked about in the predictions episode. We're on the way to a few dozen machines being opened up all around the world. I mean, I know, because I've talked to all these people and, you know, so I know Llamasu, and Lama Su's announced this recently, they've sold over 100.

And RoboCoin, they've sold, I mean, I think they've sold close to 52, I think. I don't know the exact number, but they sold quite a lot. So these are all being shipped in, you know, January and February. So, you know, both of these companies do like monthly batches, I think. So the issue has been, I think the main issue here is regulation. That's the main thing that slows it down. And that's the reason why even after receiving those machines, many haven't been able to kind of take them in operation yet.

I mean, a friend of mine bought one in San Francisco, and, you know, it's not clear if he can put it up or not. So, you know, in the U.S., for example, we haven't seen one yet. And, of course, the reason is regulation. And even Taiwan, like, just after it was announced that Hong Kong would be getting a machine, Taiwan regulators blocked RoboCoin ATMs outright. Yeah. Yeah, that's right. So I guess it's not going to happen there for the time being. But, you know, even though this regulation is bad and it makes it much more difficult, people find way rounds.

And there's the big differences between different countries. So in some countries, you can actually put them up and it works as we are seeing. I think in some places, they just go ahead without having permission. And I can imagine that some of these will be shut down again. But, you know, but that being said, I absolutely agree. I think we're going to see a lot of them. and this is coming and it's coming quite rapidly. Yeah, my, here's what I think about Bitcoin ATMs.

The regulatory aspect obviously is going to be a challenge and we'll need to get through those hurdles. But I think that Bitcoin ATMs, and I said this during the predictions episode, I think that they played a huge role in public perception of Bitcoin as they get installed around the world. So let me just explain to you what I mean by this. So put a Bitcoin ATM or whatever you want to call it on the street where people work and live. And this gives Bitcoin a new visibility that it didn't have before. It brings Bitcoin closer to you as a person or citizen or whatever. And it gives the perception that Bitcoin is money.

So to the regular person, it would give them the impression that, oh, this is money. This is something that I can use to buy products or services. And it's here in my city. That must mean that I can use it to do other things than just buy drugs on the internet, which is what most people that I talk to think it's for. obviously this can also be kind of detrimental because it further distances people from the notion that Bitcoin is a protocol and it can use for all sorts of other things. And even though the Bitcoin ATM is going to be obviously subject to the local regulations

in terms of proving identity, I think that for most people it's going to facilitate the exchange of Bitcoins, especially for the layperson who's sort of reluctant. to send his picture or his passport or utility bill over the internet. I think that the fact that there's a physical machine there will help people overcome. It's kind of fear of the unknown that Bitcoin exchanges that they see in Bitcoin exchanges. Yeah, absolutely. I think, and you just also have to look at the publicity. It's massive.

I think the Robocoin machine in Vancouver has been covered all over. You know, and it's most newspapers, you know, a lot of newspapers in the world, over this one. It was, you know, tons of TV stations and it probably had a, you know, I would think it probably had a significant effect on this kind of price boom we saw too just about around when it was released because, you know, it makes it much more tangible and you're absolutely right. It takes it kind of away from this digital thing that's hard to grasp and it's like, okay, I can actually take my money, put it in there and I have some Bitcoin, whatever that is, you know. So I think you're absolutely right. And I think they will play a crucial role. If you have

those all over the world, they will make Bitcoin much more real to people. And they will make it much harder to argue this is just some kind of weird tulip crave, uh, to the craze bubble thing that's going to pop and then we will never hear of it again. So I agree it's, because, ATMs are a hugely positive thing and they're very important and I think they're going to be they're going to be something we will see in many places in 2014. Yeah and let's be clear. I don't think that Bitcoin ATMs are, I want to say, the future of how people are going to trade Bitcoin outside of exchanges. I think that the next step and the next improvement would be that

and again the conditions of this would have to be in favor of the Bitcoin ecosystem but if for instance you can just buy Bitcoins from your bank where you can go on your online banking and say okay I want to buy I want to buy so many Bitcoins

and that gets converted into Bitcoins if you get on an address much like an exchange but without having to transfer the money to the exchange I think this would be great obviously the conditions would have to be such that it doesn't harm the Bitcoin ecosystem or that the fees are reasonable. Yeah, and we really have things like that already.

I think there's Coinbase, which basically is that. You can connect a bank account to Coinbase and then you can instantly buy Bitcoins. And in Germany, there's a bank called Fedor Bank. and they are also working on connecting with Bitcoin DE. I don't think they've done that yet, but I think it will come shortly, and it will basically enable something similar. And then maybe another thing that is a bit different,

but also goes towards making it really easy to buy Bitcoin's, is Sip-Sap, which I think is a remittance-focused company, but from what I understand, they are working on making it possible for you to buy Bitcoin at, you know, a huge number of kind of corner stores and kiosks and a lottery stands and things like that in the UK. You know, so if that exists, of course, your need for your Bitcoin ATM is lower. but the visibility thing is great and of course it's hard to see where bitcoin ATMs will be in a few years and i can i can certainly see a case where they're just not necessary anymore but i think in the next two three years they will be very important is there anything else you want to add um concerning

the hongong story no i think let's let's move to zinga yeah so uh zingka the casual gaming company, they make Farmville, Cityville, Castleville, a whole bunch of other games that you can play on Facebook and such. So they announced this week that they'll be conducting a Bitcoin test with BitPay, one of the leading Bitcoin service providers.

So the test is only available on Zinga.com, so the games that you play on the website, so that means you wouldn't be able to pay with Bitcoin for games that you play on Facebook, on your mobile and what have you. So, and the test is available on Firmville 2, Castleville, Sheffville, Coasterville, Hidden Chronicles, Hidden Shadows, and Cityville.

So for anybody who plays any of these games, I certainly don't. But for anybody who plays these games, you can purchase, you can do in-game purchases with Bitcoin. So what's interesting about this is that the announcement was made by the Zinga team on the Bitcoin subreddit on January 3rd. So I think that was Tuesday. and it did cause quite a bit of discussion. If you go on that post, there's like over 290 comments.

And actually somebody did a video on how showing how easy it is to pay with Bitcoin. It's quite simple. He just goes in. He's got the crypto, what is it called? Crypto kit. Crypto kit, yeah. Plug in on his browser. He goes in.

He pays, it takes literally like 20 seconds. So what I find, what kind of found interesting about this is that Zingya chose to announce this on Reddit. They, like, I went and looked and I searched their blog, their investor page because they're a public company. So I looked on their investor page, their press release page. Like, there's, nobody talks about this anywhere else on any official Zinga property. I didn't check Twitter, but it would surprise me if they spoke about it there. So why, I guess the question is, why? I talk about it on Reddit or only on Reddit rather than announce it officially on your

blog, at least on your blog. So I think that this is purely a PR move on the part of Zingga. I mean, sure, maybe they want to dabble in Bitcoin payments to see what they can learn, but just the fact that it wasn't even in any official manner on their website shows me that there doesn't seem to be in the long-term commitment. and maybe they just want to score points with the Bitcoin community. I mean, if you just look at the games that it's being accepted on, I mean, they're casual games, you know, like Farmville, Chefville,

like people who play these games are probably just casual gamers, most likely women in the 25 to 40-year-old market. I mean, not exactly the typical Bitcoin enthusiast. But you can't blame Zingo for not having users in the Bitcoin, the most typical Bitcoin demographic. Right. Yeah. I spoke to, I'm not, I'm not a gamer in any means,

much less a casual gamer that plays Zinka games, but I spoke to a friend of mine who works in the video game industry and kind of knows a lot about this kind of stuff. And what he pointed out was that he kind of agreed with me on the fact that this was a PR move and there's very little risk for Zinga in that users can't, players can't exchange assets amongst themselves. Like in some games, I guess you can trade stuff in Zinga games. This isn't the case.

So if you buy berries, you can't like them sell berries to somebody else. So it's very little risk for them. So, um, yeah. I, I don't quite share your views, I think. I think this is a positive thing. You know, it's just more companies accepting Bitcoin and it's, or, you know, if they're testing it, perhaps it's not. complete, et cetera. And of course, if they do it through Facebook, then they have to have Facebook

agree, and Facebook's going to be conservative in that sense. So I think it makes sense. They just have it on the website. You know, what you said, that it's low risk. I mean, I think that's a good thing. You know, it's great how much, you know, how little risk it is for a company to accept Bitcoin. I certainly agree. It doesn't mean that much, right? All they do is to say, okay, instead of using your credit card, you can pay us with Bitcoin. For them, it's not a risk, but it's, I think it's a great thing. It's a great positive thing. And it just, like, it goes towards having more acceptance of Bitcoin as a payment system.

And I also wouldn't downplay this in the sense that I think we should probably, we'll talk about this briefly as well, but, you know, Overstock.com announced that, you know, it is life now. You can buy things with Bitcoin there. But after that, I think Zingo is probably the largest company now accepting Bitcoin payments. That's true. That's true. But the statements made by overstock.com, you can tell by the way that it was announced,

and even by some of the statements of the CEO, that they're really interested in this new currency. They're investing in it because they see a long term. advantage in accepting it. I don't think that Zinga has that same kind of position. I mean, I think that this was most likely just some board members or, you know, management team guys saying, okay, so let's, you know, this Bitcoin thing, let's accept Bitcoin now and see what happens. I don't think that they have a long-term strategy or that they're committed to accepting

Bitcoin because they see it as, I'm just wondering, do you even need to be committed? It's like companies accept American, you know, if you look at Bitcoin as a payment system, and you know, in this context for Zingar accepting Bitcoin payments, then that's all it is, right? It's all, it's really a payment system where people can, instead of using some other means to pay, they can pay with Bitcoin. So for them, like, do they need to have long-term commitment? I don't know.

or do they need to feel have these strong feelings and strong reasons to accept Bitcoin? It seems to me like let's compare it to PayPal. They probably don't feel very strongly about PayPal. They just accept PayPal because a lot of people use it. So I don't know. I mean, I certainly see a point that overstock.com seems to be like,

or the CEO of that company seems to be like, you know, deeply passionate about Bitcoin. and I haven't seen anything of that sort with Singer, but I don't think that's necessary, you know. I don't think we can expect that. In the end, companies will start accepting Bitcoin simply because it makes sense, you know, because it gives them some PR,

because maybe it saves him a little bit of money on transaction costs because enough people want to pay with Bitcoin. And, you know, I think that's just there. another case of that. Yeah. No, maybe you're right. To me, it seemed like it was, they didn't want to make too much noise about it.

Because if they would have, they would have announced it. I mean, if this was sort of a, okay, so we're going to do this, we're going to accept Bitcoin now because it's a viable payment option. And, you know, we know that, I mean, we think that so many users are going to use it. They would have at least made a press release about it.

Whereas this is just, being announced on Reddit to a very small community of people. I would have preferred just for the kind of awareness. And I guess all the media, I mean, the media took this story and then spoke about it. So I guess it was talked about, but if they really wanted to make some noise about it, they could have at least had a press release for a blog post. Yeah, sure. Perhaps it will come, you know, we don't know.

Maybe they'll roll it out more. Yeah, let's see. So there was an interesting thought about this in the Reddit, somebody in the Reddit comments, somebody spoke about this. And I wanted to get your thoughts. So let's say a public company starts accepting Bitcoin. And let's say, for instance, that their primary payments, processing system is PayPal, let's say.

Would it be interesting? Do you think that the fact that moving to Bitcoin would reduce processing fees might have a positive outcome on the stock price? Well, I mean, the first question, I guess, is does it have a positive outcome on the profitability of the company? And that, of course, depends on how widely Bitcoin is used. But perhaps we can just use this to talk briefly about Overstock.com, because I think in that context, this is very interesting. So Overstock.com, they announced, I think, just around Christmas, that they were planning to start accepting Bitcoin,

and they said they would do that in mid-2014. So the CEO of the company is very interesting Bitcoin. He's kind of an outspoken libertarian, and he likes Bitcoin for ideological reasons and also for other reasons. So they've worked on that, and now instead of six months, it took them like three weeks to do it, and Bitcoin payments are live there. And now Overstock is also the biggest company that is accepting Bitcoin at this point.

They have over a billion in revenues. So, you know, this is very big news for Bitcoin, I think. But let's look at the significance of accepting Bitcoin for them as, you know, from an economic perspective for Overstock.com. Now, overstock.com, they've, they have a profit margin of 2%. Now, with, you know, let's say they pay 2% credit card processing fees, you know, that perhaps they pay a little. bit less, but something like that. And now if they accept Bitcoin, they can, they probably pay less than half a percent. So, you know, that they save at least a percent on the processing fees with Bitcoin.

And now that can make a big difference, of course. You know, if, I mean, that increases their profit margin by 50 percent or maybe more, you know, on these Bitcoin sales. So it can make a massive difference. Now, I know in the first day, they've had something like $150,000 in revenues from Bitcoin transactions. Now, how much was about 4% of their total revenue? So, you know, this would, I mean, assuming that rate continues, which you probably won't. But even if they get 2% of their revenues, so 1 or 2% this year in Bitcoin,

it does make a noticeable impact. And if you have more, of course, it can really make a difference. So I think if Bitcoin is starting to become more prevalent among consumers, then we will see a lot of companies starting to accept Bitcoin, especially companies where they have very low profit margin and where these credit card processing fees make a huge difference. This is especially true for small transactions. And this is exactly the type of micro-transaction that Zinga does.

And our listeners in the U.S. and North America are not really used to this, but in lots of countries in Europe, in particularly here in France. You can't pay with your credit card with your debt. debit card in a store, in many stores or many, like even if you're buying sandwich or if you're buying something under five or six euros, like a lot of places will not even accept your your bank card if it's under like five, ten, sometimes 15 euros because the transactions are so high or they don't want to pay them. So like for example, if you're buying like two packs of cigarettes, not that I smoke, but if you buy two bags of cigarettes, you can't pay with your bank

card because that transactions, the transaction fees are too high. That's too little profit for them, two little margin. Yeah, I mean, I guess, but there's two, there's both sides here. I mean, you certainly write that micro transactions is important. But even if you have big transactions, if you know, if you make, ohostock.com, they sell like furniture and jewelry and all sorts of stuff. So if you sell a sofa for, let's say, $2,000 and your profit margin, is a 2%, right? So that's $40. Now, if you pay 1% a transaction fee on that,

or they probably pay, I don't know exactly how much they pay, they will probably pay a bit less than your corner store because they have special contracts with Visa, et cetera, because they're so big. But let's say they pay $30 on transaction fees, you know, that's a lot of money for them too. You think it's, really, I didn't think it would be, You think it's that high?

Like $30 for a $2,000 purchase? I mean, that would be 1.5%, right? I know on average credit card companies charge around 3%. Right. And so we would be assuming that they pay half of that. I don't know exactly. Maybe they have a slightly better deal even. I don't know.

I honestly don't know. But it wouldn't be surprising. And a smaller merchant, let's think of a small furniture shop, probably will pay 3%. So they will be paying $60 on that so far. Yeah, I know they're paying 3% because a lot of my clients are small e-commerce sites like small businesses, small medium-sized businesses. And I've had to deal with banks quite often to set up payments. And not only is there a percentage fee, there's also a fixed flat rate fee like 30 cents plus $0.2. or three percent. And obviously that goes down as transaction volume increases, but for a lot of

these small merchants, they're paying a lot of money in processing fees. Yeah, I know. Yeah, I think this will also be an interesting area in 2014. We will see how much merchant adoption we will see. I've always been kind of of the view that we will see more on the side of investment and institutional investment and speculation, etc. But perhaps I'm wrong. And perhaps we will see Bitcoin as a payment system taking off this year as well. I mean, I think we will. The question is just to what extent. And whether the real breakthrough as a payment system will be 2014 or,

I think it's more likely going to be 2015 or 2016 even. But yeah, it's an interesting topic. Do you want to add anything? I think I've said anything about everything I've got to say about this story. No, totally. Let's talk about coin generation. Have you created your own coin yet, Sebastian? No, I have not.

But so this is kind of a just. interesting. So there's a new service this week that came out called CoinGen. So it's coingen.io, which allows anyone to create their own cryptocurrency quite easily. So CoinGen is created by a well-known Bitcoin developer called, and his name is Matt Corrello, aka Blue Matt. And it's apparently received a flood of new users since launching. So here how it works. You go on coin gen.io and you enter in basic information about your coin. So the name, the abbreviated symbol, and an icon. And then you choose some of the technical aspects of your coin. So what proof of work algorithm do you want to use? Is it going to be shot at 256 or script?

The block rates in seconds, the initial value for block and the block halving rate. And that's it. Like you created your all coin. So he charged. charges 0.01 Bitcoin just to generate it. So he makes a bit of money from this. I think 0.05, no? No, so it's 0.01 to generate. It's 0.1 to remove the coin gen branding from your coin. So I think this means like when you download the client,

you won't get the coin gen branding. And it's 0.05 to get the source code. Okay. Right, so I didn't try it myself, but I downloaded a client from a coin that had already been generated. And basically what I got is a Windows client. And I got the source code for compiling the Linux client. So you can go on coingen.io and you can create your coin there for pretty cheap. And there's a status page where you can see all of the coins that have been generated.

and some of them are just ridiculous and most of them are in fact i don't think most of them have any real use there's one called adolf hitler too and jesus coin i'm just saying yeah jesus coin that should take off real really good so what the the creator starving artist coin so what he says is that the and this is kind of true that the beauty of this is that it decreases the barrier of entry for someone with with no technical expertise and that just has marketing expertise so it it makes it really easy for for brands or just people to create alt coins and what he says and I'm not too sure what this means but that transactions are being processed semi-manually and there's a currently a major backlog and the coins waiting to come into existence so it may take a while for your coin to

actually start working so if you're looking if you're looking to make a real serious alt coin you might want to go you know do it through another route like actually oh so so he doesn't also create the mining software and then you're going to start you do your own mining but there's like I said there's one mining that doesn't make sense you don't know I'm not sure really I mean I know you get a client

but I think that the client gets created semi-manually but I think you're gonna have to set up nodes afterwards and mine that thing yourself and process transactions so yeah

it's cool yeah so my thoughts on this is that I think it's interesting because it gives the potential for creative brands to create their own cryptocurrencies I see one use of this is where a brand could issue a cryptocurrency instead of fidelity points or fidelity dollars redeemable for products or services.

And there's also other innovative use cases for all coins, which are the obvious, you know, using them to share properties such as shares or bonds or to do proof of existing work, to prove proof of existence work, such as copyright. So I think that this kind of opens up possibilities, and maybe this is not the definitive alt-coin generator service, but I think that we're going to see more and more of these alt-coins come into existence and that will have very specific uses. Yeah, it's just, it's incredible how many have been created on there.

Like, the demand seems to be insane. so yeah I all of coins is definitely very interesting you know and I think

we've just seen how easy it is to do that and it really doesn't take very much expertise and now with this

it's literally anyone can do it and then it's kind of fun you know I think people are having a lot of fun with it

and doing like really interesting and original things but that you know that being said of course in terms of real value, most of these coins don't have any of it.

I think there's no doubt about that. No, absolutely. I mean, a lot of them I think are just created as a joke. So this coin gen topic kind of brings us to the next story, which is kind of funny. Most people probably heard about it. So these guys decided to make an old coin, not on coin gen, but these guys decided to make an old coin called Coinier, which is an obvious shot at Kanye West.

So, like, his picture was even on the... the coin. Well, it was called Coinier West first. Right. And then he threatened to sue them now. Right. So the coin was to be released over the weekend, but they received a cease and desist letter from Kanye's lawyers, which instructed them that this was a supplement project because they were using his likeness. So they said that given Mr. West's wide-ranging entrepreneurial accomplishments, consumers are likely to be mistakenly believed that Kanye West is a source of your services. So their response was like, if this, we're launching the coin now, which was January 7th. And we're going to have a good laugh at it.

So they changed the logo of the coin to a half man, half fish wearing sunglasses, which is an obvious South Park reference. For those of you who watch South Park, you'll know what that means. And then they change the domain name from a dot com to a dot I.N, which I'm not exactly sure what kind of legal safety that gives them. And then they sent a letter back to Kanye West's lawyer saying that, well, obviously now we're not using Kanye West's image. We're using this half man, half fish wearing sunglasses image. So there's no there's no confusion that we're not speaking of your client. And in fact, now your client should stop using the,

the term coinier should never speak of coinier because now you're infringing on our copyrighted work. Yeah, it's very funny. I mean, I think more than anything else, it just shows that Kanye West obviously doesn't have a very, I would say, a very developed sense of humor, whereas these guys do. Yeah. So I just wanted to talk about that briefly. Not that it's very important, but I just thought it was kind of funny. Okay, let's briefly cover India again because we've kind of mentioned it before. I think I've written about it in the newsletter.

And recently, just around Christmas, in India, the regulator said Bitcoin is not regulated. And the Bitcoin exchanges took this to mean that they can't operate. So they shut down. Two of them had their offices raided. And it really looked as if India was going to take a really prohibitive stance and kind of clamped down on Bitcoin hard. And then that somehow doesn't seem to be the case after all. Some guy named Nishit Desai, who's supposedly one of the top taxation and legal experts in the country, said Bitcoin is a legitimate currency. and now the exchanges have been given the green light to go ahead and open again.

So I think they've done that now. So it's interesting. It's just interesting how we've had this from prohibiting Bitcoin to being open about it again. And of course, I think the reason is that they just don't quite understand Bitcoin and that regulators have this challenge of having exists. existing rules and they need to put, take Bitcoin, put it in these existing rules and it doesn't fit very well. So what do they do? You know, they either can say they don't apply, they can put it in some category that sort of fit. They can say don't do it at all. And then they may do one thing

and realize it doesn't work after all and then do another thing. And I think this is just an expression of that. And it's one of the things we've talked about in our predictions podcast as well. it's just this is this is the topic we're going to come back to again and again is that regulators struggling with bitcoin trying to make sense of it and putting into existing categories and then failing in it and then you know trying it again and you know being very negative and then having a positive stance i think we're going to see the other thing too regulators that are very kind of open towards bitcoin and then they're going to clamp down on it and so i think it's symptomatic of that but of course it's good news because

Bitcoin has a tremendous potential and there's a huge remittance market and of course a gigantic population. So this is great. I think it also goes to show that how governments and central banks are, how influenced they are by experts. at first they seem to be reluctant to accepting Bitcoin and once this taxation and legal expert said something well okay well maybe we were wrong about it and yeah although of course we have no idea whether this guy actually had an influence on the decision made and you know that was just a story in some media outlets but if if it's accurate or if it's you know we don't know so Let's cover kind of our next big topic.

I think it's the last big topic we have in this podcast, which is a topic that created a bit of a stir last week, and we just kind of wanted to dive in and see exactly what this was about and whether all this worrying was really warranted. And that's the story of g-hash.io, which is a mining pool. and during the past few days or a few days ago, they reached a total share of the mining power of 42% at one point. And on Reddit, there was all these posts, you know, like,

if you're on G. Ash or the I.O., you know, switch to another pool, you know, abandoned this pool and, you know, try to prevent them from becoming so big. And at this point, it has, never heard of Jehash Dio before this story. I haven't either. I think it's come up very recently. I'm not, I don't, so I don't exactly know how they were working, but there are a few reasons I think why it became so big.

One is that it didn't charge any, it doesn't charge still not, it doesn't charge any pool fees. But perhaps let's first briefly talk about what mining pools are. and why they're used. So right now, if you're a miner and you have your mining equipment, because it's so difficult to mine a bit, a block, it can take you a very long time to do that, or it might even not work at all, ever. So what do you do?

Of course, you could take that risk and just mine and hope you get lucky, and then you would get the current mining reward, which is 25 Bitcoins and all the transaction fees and that would be great for you. But more likely you would be waiting a very long time. So what miners do is they join pools. So basically they take all their mining power, they kind of pool it together, and then they get a regular rate of a block's mine. You know, they might have a few a day or even dozens a day if it's a very big pool.

And then they take the rewards they earn, and they basically distribute among the miners according to how much they contributed to the mining power. So this is due to the fact that blocks are issued randomly. When you're mining, you're issued a block randomly once every few minutes. And so if you're by yourself, you're less likely to be issued a block, but if you're to be mined, but if you've got a lot of mining power, then there's more chances that you can be mining both blocks.

That's right. I mean, there are some other minor things like efficiency advantages that mining pools may have, but the main reason is just that you can have regular payouts. You know, you can like every day you get some Bitcoin if you're part of a mining pool. Whereas if you're not, you can wait three months until you have your first payout. And if you're, let's say you have one of these USB miners, so a smaller device, then you probably will never see a payout. So I think the main advantage of mining pools is that they smooth out the payout

and you can have regular steady payouts, predictable payouts, instead of intermittent random large payouts and then large periods of nothing at all. So that's mining. That's what a mining pool does. And usually they charge a fee for that. But this Chi Hashrodio didn't charge a fee for that. And they did also something else, which is that you could basically trade shares. You could kind of, I think, like trade your mining power to someone else through that pool

because it was connected to basically a trading platform for mining shares. So I think that's also one of the reason why this pool was very popular. So you had the 0% fees and then this possibility of, I think, selling your mining shares. So there were those two things and became very big. And that creates some worries. And the one worry, or the primary worry, something a lot of people have heard about, which is called this a 51% attack. And the basic idea is that when a mining, when someone,

has the majority of the mining power, they can do some things that, you know, they shouldn't be able to do with Bitcoin. For example, they could spend Bitcoin and they could even wait for six confirmations. So, you know, let's say they would buy a car. They would send the garage whatever Bitcoin's the car costs, let's say 50 Bitcoin's. And then the car dealership would wait for six confirmation. They would see, okay, it's there. They're given the car. And then this mining pool could basically go six blocks back.

And instead of sending this transaction to the car dealership, they send it to another address they own, and they just mine on top of that. And if they have enough mining power, they can basically overtake the real blockchain and reverse that transaction. So that's one thing they can do. This is really kind of technically complicated for even me to comprehend. So they can go back.

They could basically reverse transactions, their own transactions, not someone else's transaction. But they could double spend money. They could refuse to process transactions, right? So let's say you wanted to make a Bitcoin transaction. If someone has the majority of mining power, they could just not take it up in a block. So there are some things they could do that would be bad. Of course, by far the worst thing would be the degree to which something like that would undermine the trust in Bitcoin. Because it's still limited.

They couldn't create coins out of nowhere or spend your coins, something like that. They couldn't do that. But of course, they would really, really shake the trust into the Bitcoin network, the Bitcoin Protocol. So that's really, I think, the main negative thing. And so there has been worries because G. H.H.O. is getting so big. It's like, well, perhaps they could try that if they wanted to. So what are the other components that need to be put in place for this to happen?

I mean, can the people who own G hash.com. basically do this with the mining power that's being generated by the miners or do the miners also have to sort of be in on it? Is that IO are able to do this by themselves

with the mining power that they have? Yes, I think so. Yeah, yeah. I think the miners would not have to collaborate with this. But at the same time, a 51% attack would be noticed. You know, it can't,

it will be, notice very quickly and then of course Milus could pull off their hardware and put it pointed somewhere else and this wouldn't be possible. What's also important to realize is you don't actually need to have 51% attack. You can try this with less.

So with their 40%, they could have still tried this and they would have had a very good chance of actually pulling off like let's say 50% or something. And so the chances of them pulling it off are based on nobody noticing is that right? No, the chance of this

pulling it off is it depends on how much mining power they have. So if they have above 51%, then they're basically, you know, they will be able to pull it off. If it's less, then there's a certain chance. But once they try it, in any case, it would be noticed. And then people would, of course,

move their hardware away from this pool. And then, you know, I think probably this pool would be rolled back and in the end it wouldn't be the end of bitcoin but it would be uh you know would be quite a disaster are there any ways that we can are there any ways to prevent this from happening even if a miner or a mining pool or a centralized mining data center does gain more than 51 percent are there any ways that future versions of bitcoin or new features of bitcoin and we'll be able to prevent this from happening? Yeah, well, I don't think this is really Bitcoin's job to prevent this.

There's a few things to say here, right? The first thing is that for a miner, executing such an attack, even if they're able to, is probably not in their interest. You know, because a large mining pool, they are in a good position. You know, they, for example, perhaps make a lot of money from fees And if they did such an attack, you know, maybe they could double spend some money, but there is fairly limited amount of revenue they could get from something like that.

But of course, what would happen, and I am absolutely certain of that, is that Bitcoin price would completely crash. I mean, I think we would, if a miner actually or a mining pool executed such an attack, I mean, I think we would see, you could easily see Bitcoin prices below $100 or something. I mean, it would be a disaster. So who's hard by that? Of course, a large mining pool is very much harmed by that. And their own position of power would be undermined by such an attack.

So I think that's one positive thing is that miners or the people who are able to execute such an attack generally don't have an incentive to do so. Because it would actually destroy their own wealth and the source of their own wealth. Right, they don't. But somebody who compromises, somebody who wants to do. with harm on Bitcoin could perhaps you know,

hack it to their servers and perform that 51% attack. Yeah, that's right. So there's still a risk of, you know, their servers being compromised and that attack taking place.

Yeah. No, that's totally right, right? Or they could be coerced or something like that. So there's a few things that can be done. Of course, one is what we've seen happen

this week, because Chi-i-Shodio is down to 32% mining power, and that's already much, much less, because the chance of being successful or something like that is much lower when you're at 32%, whether it's 42%. It makes a massive difference. So one thing, of course, is that people say,

well, you know, this is a problem, it's getting too big, we need to switch another pool, which does happen. So that's one thing. Another thing that people are working on, and I know that exists already, but it's not used very widely, is something called peer-to-peer pool. There is one that's actually called P-2-P pool, and it's a decentralized pool,

so it will have the same kind of distributing of mining returns, so you'll have to spawning out and you don't have to take these large risks with mining, but at the same time, there's no centralized control, so nobody would actually be able to do that. So that does exist. I think there are some issues in terms of usability. And I think from what I understand is that you need more resources. Maybe you need to run your own note to do it. So it's not as popular.

But people are definitely working on that. So it's something people are aware of and they're trying to prevent this from happening. And there's a certain accountability on the mining pools also that they need to make it clear that they're in no interest in having more than, say, 45% total mining power and that they won't accept new users or that they'll put, they do that. Yeah, Chi Hachadio did that. I mean, they are not accepting new independent miners. I know I think BTC Guild is a large pool and they actually in September, last September, they were at 45% of the total mining power. They've also done things like that, like restricting, you know, new miners to join.

Another thing they could do is they could increase the fees they charge. A Chi Hashi Dio didn't want to do that. I mean, they don't charge any fees. but let's say they started charging 2% fees which i think is standard for mining pools then that would also have an effect of decreasing and they did that to some extent i mean and the chia shodaya also did that i mean they didn't want to take over bitcoin they have a certain responsibility they feel they have a certain responsibility to protect the network even though they're a company and do they make money i i i

Absolutely. I mean, in the end, you know, if you just look at the economic self-interest, they probably have, they have more to lose by taking, you know, let's say getting to 51% mining power. Even if they didn't do anything, you know, this would be something that would be very troubling to a lot of people and they would kind of shake the trust in Bitcoin. It might make people move more to light coin and other coin. You know, so they don't want that. And I think there's a positive thing here that in general, at this moment at least, the interest of mining pools and miners are kind of aligned with Bitcoin's long-term interest. But I just want to mention that briefly, and let's talk Bitcoin.

The last episode, there's a very interesting interview with Peter Todd, who's kind of a Bitcoin developer and he's done a lot of work on. the protocol and the implications of it. And he talked a lot about the implication of centralized mining and especially what that means in the future. Because even if it's not a problem now, it's definitely something we have to be aware about and you have to think about because it could be a problem at some point.

Because we don't quite know if that's going to remain the same. Maybe at some point in the future, those rewards wouldn't be aligned anymore. Right. There isn't only centralized mining in the forms of pools. I mean, like we talked about this in the last episode, there's also centralized mining in the form of cloud mining data centers, like very large data centers,

which have their own centralized mining power. I mean, this is different from a mining pool, and that mining pool brings together the mining power of several, smaller miners. Well, but they will still be part of a pool probably. Or they will have their own pool. Perhaps, right. Yeah, but I mean, if you look at, if you go on blockchain.

Not info, you can look at the distribution of mining power, according to pools. And, you know, most of it is with pools, large pools. I think there are also some software they provide and some things. they do to make mining slightly more efficient. But you're pointing out a good thing because there's kind of two things there. With these cloud mining things, often they actually allow you to choose what pool to point your hardware to. So you could basically have this company operating your mining hardware, and then you could

still choose which pool through operating. You could probably even mine it independently if you wanted to. but of course they have physical control over your device so in a sense they could just do you know point it to their own pool or they could abuse it in some way if they wanted to and then the other thing the other kind of locus of control is with the mining pool operators who can who can at least as long as people don't notice and at least as long as people kind of just point their mining power to that pool they have a lot of power. Okay, I see.

So centralized mining and too much mining power for one pool is something you want to be careful of. You know, for this, nothing really bad happened because of the Gian Shadaios story, it was something where people like, oh, we're worried about this.

And I think this is important also to, you know, kind of keep perspective here because there's no reason to be too worried about mining at this point. And it's just something I think people think about, people are aware of, and we don't know how it will be in the future. Exactly, which is, I think why we need to be careful and we need to keep a close on this. Yes, absolutely. And the outcry from this one particular story, I think, says a lot about the risks

and how this will play out in the future. I think people are going to be very careful to make sure that this doesn't happen. Because it would be catastrophic to the 51% attack, like you said, it would be catastrophic to the price into the ecosystem and just the trust that people have in Bitcoin. And therefore, the potential that Bitcoin has to do all these things that we wanted to accomplish. Yeah, no, I mean, this is one of the biggest dangers to Bitcoin, you know, much bigger than regulation or something. So because if something there goes wrong, you might actually see people abandoning Bitcoin for another cryptocurrency or something like that.

I mean, I think that is possible. I don't, I mean, I don't think it's likely, but it's possible. You know, whereas regulation, it can slow things down. It can make things more difficult, push it broad, etc., etc. It's a big problem right now. but I think as far as the long-term potential of Bitcoin go, I don't see it being such a problem. So yeah, it is an important area to watch,

and I'm sure we'll come back to this topic in the future when more things happen in this area, and I think we'll see a lot of developments, and hopefully a P2P pool and similar efforts at making mining pools more decentralized will be successful, and perhaps you won't have this problem. there's one perhaps do you have anything else to

to say about mining or this G. Ashadio story? No, I think we covered it pretty well. I mean, I think you covered it pretty well. You know a lot more about it than I do. I don't know very much about it, but it's certainly an interesting topic. I've been reading a bit about it.

There's one more story I want to briefly mention because I find it very interesting. I don't know if you heard about it as well Did you hear about Elliptic Vault? No, I haven't. So that's a UK company, and they're starting to offer insured Bitcoin storage. So as we've discussed numerous times, we've trust in the predictions episode, and it's kind of a very important topic, is keeping Bitcoin save is not easy.

And it's very easy to get your computer. hacked into, to, you know, lose your heart disk or God knows what. So Elliptic Vault now offers you that basically you can store your bitcoins with them and they will have to cold storage and, you know, I'm sure do all kinds of things like key splitting and put it in bank safes and things like that. And the interesting thing is you can choose to basically get, or they provide insurance for that. So let's say you put 10 Bitcoins with them.

So 10 bitcoins are worth, you know, like let's say $9,000 now. Now you could say I'm going to insure a certain amount of dollars per Bitcoin. So I could say I insure $900 per Bitcoin. Now if they get robbed, an insurance pays me back $900 per Bitcoin that they lost. and they did this with Lloyds of London, which is a, it's kind of like an insurance market. They're very old from like 300 years old. So they're doing it with them.

And it's cool. It's, I think it's really cool. It's super, super necessary to have a service like this because, you know, people having substantial amount of money. A lot of people getting into Bitcoin and really know. how to keep Bitcoin's safe and this seems very safe to me and they have a very

reputable kind of insurance behind it. So I think this is fantastic. Maybe one thing that's not so great about it is that they charge a 2% annual premium. Yeah, I was just looking at that.

Which I think is too expensive. I think that needs to come down. But as a basic offer, I think this is a tremendously valuable thing, and it makes so much sense for that to be here. And I think a lot of people who, you know, let's say recognize the potential of Bitcoin. They want to invest in Bitcoin because they believe in Bitcoin. But they don't want to spend 20 hours learning about security, or maybe that's not necessary, but they don't want to really learn about security.

they want to have that responsibility you know this is very interesting they actually have a simulator here which so let's just talk about some of these features so they have insurance so your services our services insured against loss and theft by alloys of london underwriter they are stored in colds they're kept in cold storage the private keys are kept in multiple locations it's deep it's deep cold storage Deep hold storage. I don't know what the deep part refers to. You can track your holdings through the blockchain.

They have customer support for reserve storage. So we do nothing. We do not do anything with your stored bitcoins. They're a simply made in dormant storage. You can easily withdraw. And so this, let's just see here. So for example, let's say you have 50 bitcoins. So you want to cover, just trying to understand their.

simulator here. So it says I have this many bitcoins, so 50 bitcoins, giving me this much to cover 50,000 pounds. Okay. So that would cover you up to a value of 1,000 pounds per Bitcoin at a current exchange rate. And that would cost you about 0.169 bitcoins per month. So that would be what, like, uh, it's 2% annually. So 2% right. On, on the part you insured. Of course. Of course. what's also important is if the Bitcoin price goes up, you might have to buy additional insurance for the price increase because your insurance cover is denominated in, you know, in dollars or pounds or something.

This is interesting for, like, who would this be interesting to? Like large businesses, people who hold a very large number of Bitcoin's. This isn't for everybody. No, this isn't for everybody. I mean, I think they have a minimum cover of like 5,000 pounds or something. So I think this is interesting for people who are maybe not the most technically savvy, but to have relatively substantial amount of money to invest in Bitcoin and, you know, who want to do kind of long-term investment.

This is, you know, this is certainly interesting. Would this be interesting for, say, a company, or who accepts Bitcoin as payment and accepts the largest amount of Bitcoin or somebody who's investing in a Bitcoin startup that has a lot of Bitcoin. I don't know. I'm not so sure about that.

I think the 2% then are a bit much and also most companies, you know, I think they need to kind of own that process Right. Okay. Yeah, I don't think it's, it really sounds like cold storage where it's there and you don't touch it. Because if a startup or a company that holds Bitcoin funds, let's say Coinbase, they will still have to move it out of cold storage at times. And I think they kind of need to be in control of that process.

But perhaps, maybe. What you're saying is this is more for long-term storage of Bitcoin. So somebody who wants to invest in the long-term and wants to make sure that that Bitcoin is secured and nobody's going to try it. Yeah, it sounds like what it's aimed for. But, you know, perhaps, perhaps for us, you know, I don't know. I think if a company is not able to, if a startup's not able to do this kind of cold storage themselves, really professionally, they probably shouldn't be holding large amounts of Bitcoin for customers anyway.

Can you just explain what cold storage is exactly for? Yeah, so cold storage. The idea is basically what controls. Bitcoin is the private key. You know, there's the public key and the private key. And if someone has your private key, he basically has your Bitcoin. And the idea of cold storage is that you take that private key and you move it offline and you move it to some device that's not controlled to the Internet.

So let's say I have a wallet on my desktop, also on my computer. But I use that computer to also check my emails, etc. That's not cold storage because I might download some malware that takes over my computer and steals my bitcoins. But if I buy a new computer and I'm never connecting to the internet with that, and I could, for example, create a Bitcoin wallet there and create a Bitcoin address there, and then I'm going to send my money to that Bitcoin address. But the private keys have only ever stayed on that computer that's never been connected to the internet. That's called storage.

Or you could, another thing is paper wallets. I think people are familiar with that. It's basically you print out public and private key. That public and private key shouldn't exist anymore on any internet connected device. And then you send the bitcoins to that address. So that's also cool storage. So the keys are generated. on a device or computer that has never been connected to the internet and the funds are sent to the Bitcoin address to that bitse address, right?

That's right. That's like the proper way to do cold storage, and that's what they're doing. Of course, that's not so trivial because let's say now you have this paper wallet and let's say you lose it. you know, there's still risks there. And to do it really securely so that, one, it can't be stolen easily, but also it can be lost easily or accidentally destroyed. You know, it's not easy. So, yeah, I think it's good. You know, if someone, if you have someone who does that very professionally and, you know, they also have insurance, I think, you know, I think it's good.

It's a very good offer. It's a very good service. I don't think the offer is so good if they're too good. percent a fee day charge but it's a it's a good service well that's really interesting uh and uh you know maybe we'll see more companies get into this kind of bitcoin insurance space um i think so at least for the for the regular bitcoin user maybe who's got maybe a few thousand dollars in bitcoin and and wants to secure secure those bitcoins um better than just having it on his computer or Maybe not to the level where they do it.

Maybe not to the level where they charge a monthly fee or a yearly fee, but maybe some more consumer-oriented services will appear within the next year. Yeah, I have no doubt that there's going to be more services like that. And you will also have hardware wallets. We also talked about that. So you can do some of the things they do yourself fairly easily. without having to have a lot of expertise. So we'll see a lot in this area. And I'm sure their fees will come down too.

Because you just have to think about scale too. The more people use their service, their costs don't go up that much. And their costs, once they're set up and everything, the infrastructure is there, their costs are absolutely minimal. So I think it makes sense for these fees. they should be, you know, half a percent or something like that.

And I think they will get there. And once it's there, of course, you know, if it's half a percent, well, you know, maybe you maybe you want to do that because, you know, getting your Bitcoin stolen is not so attractive. Yeah, that's true. You may want to talk about local Bitcoins. Yes. Local Bitcoins is a really fantastic company. I bought my first Bitcoin from the founder of local Bitcoins, and I've used it extensively.

And it's a really great company. You can buy Bitcoin's person to person, so you basically go on their site. You type in where you live and you see someone near you, where you can buy Bitcoin's, from. Or you can do the same thing through bank transfer, and they have an escrow service for that. So it's very secure and you know you're not getting robbed. So I highly recommend local bitcoins. You can use it virtually anywhere. You know, you can go to Nigeria and, well, you can lose local bitcoins there.

So it's really very resistant against all this regulation stuff. So it's a fantastic service they provide and it's very valuable in kind of bringing bitcoins everywhere. And it's great to buy your first Bitcoin too. So if you're interested in that, then please go to. to Epicenterbitcoin.com slash local bitcoins. And, you know, you'll help the show and you can buy your your bitcoins or also sell you bitcoins that way.

All right. So that's all the topics that we have to be covered for today. We want to thank our listeners for tuning in for our second episode. We're really excited about this. And we're looking forward to 2014 and everything that we can bring you in terms of Bitcoin news through the podcast, through the. through the blog, which we're working on right now, and also through the newsletter. So please go to epigenerbidcoin.com for that, and we'll be keeping you up to date on all those

developments. Also, if you want to subscribe to the newsletter, you can go to epicenter.com slash newsletter, and Brian sends that out every week. When do you send it out, Brian? It was episcenterbidcoin.com slash newsletter. What did I say? No, Ebysenner.com. No, no, no, no, every Friday. Okay. So, yeah, it's just basically what's been going on in Bitcoin world, comments,

kind of analysis of the main stories. And it's an easy way to stay up to date and know what's going on. And you can also send us a tip. Please send us a tip. You can go to epicenterbidcom. Slash tips, and you can tip either the podcast or the newsletter there. We use a Coinbase widget and you can just click on it and easily send us a tip. We've also got a Facebook and Twitter page that we've set up and we're going to be posting some content there more and more.

So it's Facebook.com slash epicenter Bitcoin. You can just use the search. And our Twitter handle is Twitter.com slash epicenter BTC. Epicenter BTC is our Twitter name. Yeah. Thanks much for listening in and look forward to next week. Have a great weekend. you next week.