A Quantum Immortal

This is obvious to anyone who understands web, but a lot of browser extensions can read all the data on all the websites you visit. If you use any Bitcoin web wallets, exchanges, or anything financial in a browser – please for your own good, make sure to do it in a browser that’s completely clean.

You can use an alternate browser (Firefox if your default is Chrome), use an anonymous/incognito browser tab, or setup a unique profile for that … what is important is that the browser you use for financials does not have any extensions.

Extensions do declare their requested permissions … but these change over time and it’s hard to keep track – the safest approach is to make sure no extensions are installed on that browser.

This has been exploited already in the wild by some Bitcoin-specific extensions, but a Bitcoin-stealing module can be added to other unrelated extensions – better safe than sorry.

Disclaimer – I assume the information in this article is correct. There has been talk about it for some time … let me TL;DR and translate it for you:

The head of the Prime Minister’s Office, Harel Locker (not the PM!), is expected to publish in the coming weeks reforms to limit the use of cash, which will ban cash transactions in payment of more than NIS 5,000 (~1500 USD)…

Reform was born after officials from Visa Europe arrived in Israel and presented to a member of the governmentm Knesset members and officials from the tax authority a study research that estimate the volume of the black economy in Israel.

The obvious thing that SHOUTS OUT here is that there is a strong business interest and complete lack of transparency here, not to mention … how is it even possible that such a ruling can be made without an orderly law-making process.

What’s less obvious, and for me is painfully clear, is just how wrong this is – the only “competition” (other than Bitcoin) to banks and credit companies will now be banned. Over the past year, we witnessed firsthand the degree of power banks have. For almost an entire year, it was very hard or impossible for individuals to buy bitcoins in Israel … because of the sheer whim of bankers.

When you went to your local bank, and asked them to take your money, and send it to a Bitcoin exchange … the answer was almost always “No”. Not because any rules or laws were broken, but because the bank management and compliance officers decided it was “too risky for them” to allow their customers to do these transactions. The same can happen with other legitimate businesses, not just Bitcoin. In fact in the U.S it has happened with the sale of Cannabis, which is legal in some states. WikiLeaks is another such example. True, these examples are “controversial”, but what’s considered controversy today is clear cut tomorrow … banks should not be given the sole power to control the flow of funds, because their decisions and interests aren’t necessarily aligned with the good of the public.

This is too much power that banks already … forbidding cash transactions over a certain sum is giving them absolute power.

I honestly hope that the article I quoted is mistaken, and that the resolution hasn’t been made yet. Luckily, Bitcoin users aren’t expected to be affected in any way … it’s highly unlikely any regulation they draw here will include Bitcoin in its prohibition, as it is my estimate that this will take the Israeli government some more time to properly understand Bitcoin.

To all my friends and loved ones who lost money at Mt. Gox (they are probablly insolvent) – my heart goes out to you.

I am sorry you are paying the price. This is a natural part of the evolution of this revolutionary industry, and there are many people in the chain of blame. I hope you recover and hang in there.

The lesson we should take from this is: We and we alone are responsible for ourselves, our fates, and our finances. Still – we should not gloat at those who lost money in the Gox incident or any other – many of my close friends are in this group, and I myself had money at Bitstamp up until recently (FYI – Bitstamp are perfectly fine, however they did temporarily shutdown withdrawals one day after I withdrew my funds).

Bitcoin is still hard to properly secure. This is why there is a big potential for upside, precisely because it is so hard. But it means investors really need to understand the different security parameters of their chosen solution. We knew 2014 was going to be an interesting year … “interesting” in this context is both good times and bad times.

I’m hoping that the rest of the year will be better for everyone.

All the buzz in the last few weeks in the crypto-currency space is about Ethereum, a “Turing complete crypto-currency”. Let me TL;DR wtf that is (and I’m by no means an Ethereum expert, so don’t quote me on this):

Ethereum is a “Minecraft for money”. It’s a new raw protocol that allows people to build arbitrarily complicated financial scripts and treat these scripts as first class citizens. In Bitcoin, you can send money to an address, that’s easy. A less-known fact about Bitcoin is that you can send money to a script, e.g. a 3-out-of-5 “multisig” script, that requires a signature from at least three people in order to spend.

Bitcoin scripts are deliberately not Turing complete – you want scripts to be very easy to compute and verify – the last thing you want would be someone spamming the network with high fee transactions to a script that is a hidden infinite loop, causing miners and users to overwork their CPU.

I’m not going to go into the details (see the spec, I’ve asked them to prepare a TL;DR and an FAQ). After the last year, in which we saw interesting launches of “Second generation crypto-currencies” such as Mastercoin, ProtoShares, Nxt and others”, everybody’s looking for “the next best thing”. Ethereum is an innovative project with very high ambitions – think of it as a commercial attempt to develop javascript 20 years ago. If it works, the ecosystem this will create can be huge. However, they do face tremendous risk as far as execution and complexity of the project. Add to it an extreme hype that’s generated right now, and it adds to a very risky investment (they are IPO-ing on Feb 1st).

So my TL;DR – I don’t know. When Mastercoin came out August 1st 2013, it was the first second generation crypto-currency, and this is why I posted a buy recommendation that turned out to give a more than X10 profit. Ethereum’s timing is different, for good and bad – they’re getting a lot of attention which is great for them, but it might also mean an over-priced IPO.

Go do your own homework! Follow these links, engage the community, and make up your own mind. I wish them a successful IPO.

• Whitepaper
• Reddit
• TL;DR Ethereum / live updates
• IPO Details
• Launch thread on bitcointalk

So, I have this nasty habit of predicting Bitcoin price increases (and Litecoin, and Mastercoin).

As 2013 draws to a close and 2014 soon begins, I’ll make another prediction – I think that Bitcoin will appreciate by at least another X10 factor in 2014. So to make it concrete, I’ll predict that the closing price at end of 2014 by bitcoinaverage.com will be at least $10,000.

A more caution prediction would predict an increase in “digital decentralized currencies” AKA crypto-currencies because it’s possible another coin will overtake Bitcoin as the lead … but I don’t see this happening in 2014, I think Bitcoin’s network effect is still working wonders for it. Some coins like Mastercoin, Ripple and others might have a better chance to literally overthrow Bitcoin long term, but I think 2014 is still too early for that to happen.

So for simplicity, I will ignore any other coins and predict a X10 increase in pure Bitcoin price.

Why do I make this prediction now? My logic is this: Bitcoin has had an intrinsic advantage over Fiat currencies ever since its inception, and so my prediction was always “there’s a good chance that ‘one day’ Bitcoin will win”. I was always a bit hesitant to put a specific timeline on this, but rather preferred to talk about “some time in the far future when Bitcoin kills Fiat”. Well, my personal experience in the last three years, and including the prior two years of data, has shown that Bitcoin outperforms these conservative estimates, and actually continues year after year on its exponential growth path.

Bitcoin is viral, and its virality isn’t showing any signs whatsoever of slowing down. Sure, a price increase from $1,000 to $10,000 has more real world impact than a mere increase from $1 to $10 a few years ago … but the impact makes sense due to all the real world attention Bitcoin is getting (The first Round B in a Bitcoin company was just announced today … we’ll see more of these in 2014). All the indicators I’m seeing are positive. 2014 will be a rocky year, for sure, and we’ll see the usual price flucuations … but my money remains betting on the UP direction.

Disclaimer – obviously, I’m super biased as I have a large Bitcoin position. I’m also not advising anyone to invest – you’re grown ups, do you own investment analysis … I am just sharing my personal opinions and crossing my personal fingers.

I was asked how I use a Yubikey. This is how I do it:

1. I ordered a Yubikey from Yubico. An Mt. Gox Yubikey is only good on Mt. Gox, you need a generic Yubikey.
2. Actually, I ordered two. If one of them is lost the other can’t be used to access it, but I don’t want to waste time ordering another one … I want to have a backup.
3. On blockchain.info I attach my Yubikey to one of our more secure wallets.
4. Then, whenever I log in to blockchain.info, my Yubikey is required.
5. I still retain the complete encrypted backup of my wallet, which of course does not require a Yubikey to decrypt.
   This is why Yubikey only semi-protects you … against a specific type of attack (for further security, use a cold wallet).

If my primary Yubikey will ever be lost or destroyed, I will decrypt my backup, open a new blockchain.info account, import my previous wallet, and secure that with my new Yubikey.

Someone (Mr. X) just posted on our Facebook group:

“This is a gentlemen’s agreement between me and Mr. Y that I owe him this amount of bitcoins, and he owes me that amount of ILS.”

Mr. Y then answered to this post by saying he agree.

This simple protocol is based on the concept of social credit. People care what people think about them, and wouldn’t want anyone to claim they are cheaters. This sort of protocol could easily be automated into a distributed exchange like Localbitcoins. All it requires is Facebook/Twitter integration, and thus the ability to prove that a certain real person is committing to an exchange with certain terms.

You can often validate in Facebook that a profile you’re trading with is indeed a real person, simply by checking your mutual connections. This is not a 100% guarantee of course, but it’s a good way to set the price in advance for a short while, until a proper meeting where the different currencies can be exchanged.

The simple answer – do dollar cost averaging.

Decide on an amount you wish the purchase, and just split the amount on a per-week or per-month basis. This way you’re protected from strong fluctuations – you buy more currency when it’s cheaper, and buy less of it when it’s expensive.