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Title: Exclusive: Murdered DNC staffer's family, friends set record straight
Source: crimewatchdaily.com
URL Source: https://crimewatchdaily.com/2016/09 ... -set-record-straight/#comments
Published: May 21, 2017
Author: Michelle Sigona
Post Date: 2017-05-21 08:58:06 by sneakypete
Ping List: *Crime and Corruption*     Subscribe to *Crime and Corruption*
Keywords: Clinton, Murder, Corruption
Views: 23302
Comments: 62

Seth Rich, a 27-year-old staffer for the Democratic National Committee, was shot in the back in the early morning hours of July 10, 2016.

"It appears he was targeted," said D.C. Police Captain Anthony Haythe. "He was shot multiple times."

Seth was shot at 4:19 in the morning, just two minutes after hanging up with his girlfriend, Kelsey Mulka.

"We were on the phone just wrapping up our conversation, he had kind of told me that he was getting close to his house," said Mulka.

Seth's grieving girlfriend is speaking out for the very first time since his murder. They had dated for two years.

"There really aren't -- no words -- that can accurately express how devastating and horrific it is to bury someone that you love," said Mulka.

Although there are pockets of darkness, for the most part this neighborhood is pretty well-lit. Investigators tell Crime Watch Daily in the early morning hours of July 10, Seth was walking home. He was only about a block and a half away from home when he was gunned down, shot in the back.

"The officers who were there and they said 'Yeah, he was quite talkative, he did not realize he had been shot,'" said Joel Rich, Seth's father.

But an hour and a half later at a nearby hospital, Seth was pronounced dead.

Heartbreaking news to Kelsey Mulka. She was just on the phone with him, and in a split-second he was gone. Now Mulka is breaking news in our exclusive interview, revealing details, telling Crime Watch Daily there was no sign of trouble in his voice that terrible morning.

"I wasn't alarmed," said Mulka.

"He's kind of known as a goofball, but to me it was very clear to me that there was so much more," said Mulka. "It didn't matter who you were, where you came from or where you were going. If he thought you were in trouble, he wanted to help. If you were sad he was going to make you happy, he was going to make you laugh."

Still reeling from Seth's death, Kelsey is horrified to discover that the story of a conspiracy theory is swirling around his death. It all began on Dutch television. The founder of Wikileaks, Julian Assange, made a shocking assertion.

ASSANGE: There's a 27-year-old that works for the DNC who was shot in the back, murdered.

ANCHOR: That was just a robbery, I believe wasn't it?

ASSANGE: No, there's no finding.

ANCHOR: What are you suggesting?

Assange suggested Seth Rich may have become a target after being accused of leaking DNC emails, which led to the resignation of its chairwoman Debbie Wasserman Schultz.

Seth's best friend, Michael Cass-Antony, is also breaking his silence in this exclusive interview, telling Crime Watch Daily he's disgusted by the reports.

"All those lies that are being bandied about in the news are just that, and the reason that nobody close to him has refuted them is because there's no reason to," said Cass-Antony. "Because he spoke for himself. Because anybody who knows him knows how good of a person he was, knows how much he cared for the DNC and for where he worked and how much he believed in his cause."

But it's not just those close to Seth who adamantly deny those shocking claims. The police department in D.C. doesn't buy it either. The Metropolitan Police Department of the District of Columbia released an official statement which reads, in part:

"At this time, there is no indication that Seth Rich's death is connected to his employment at the DNC." -- Metro DC Police

And just the suggestion of Seth's shooting being a political hit has his parents outraged.

Seth's mom and dad want to set the record straight about the character of their beloved son, and disclose details of this case only to Crime Watch Daily.

"He had just found out he was going to go to work for the Clinton campaign doing data analysis and helping getting people out to vote," said

Seth's parents say he got the offer but tragically never had the chance to accept. They found the beginnings of his letter of acceptance in a draft email on his computer. Seth had only typed two lines, and his parents are sharing it with us.

"'All my life I wanted to be in a position that I can make a difference.' That resonates with me because that is the heart of what my son would have said, and working on Hillary's campaign, he would be making a difference," said Mary Rich, Seth's mother.

Police suspect Seth's murder is connected to a recent rash of robberies.

"There were a few robberies that we have investigated that we're looking into to see if those parties involved in those robberies could be the parties involved in our murder," said D.C. Police Captain Anthony Haythe.

But investigators go on record to confirm that Seth still had his wallet, watch and phone when he was discovered shot in the street.

continued at link......

Click for Full Text!


Poster Comment:

Yeah,he was murdered during a robbery. That's why he wasn't robbed.

I am convinced that his murder had nothing to do with him informing on Clinton/DNC "irregularities" .

Ok,ok,reasonably certain.

OK,OK,OK,I hear they have been making a honest effort to order the murders of fewer people this year than last year because they have mellowed out now that they are geezers. Happy now?

C'mon,people! How many times do we have to read news reports of informers or suspected informers close to the Clintons being murdered before it begins to dawn on people that all these murdered people had ONE thing in common?Subscribe to *Crime and Corruption*

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Begin Trace Mode for Comment # 45.

#1. To: sneakypete (#0)

There's a claim that his computer had evidence of communications with Wikileaks. Is there no follow up on that, or was it not true?

But even if Seth did not leak the emails to Wikileaks, that doesn't mean he was not killed because of them. He could have been falsely accused as the leak source, and killed because of it.

Pinguinite  posted on  2017-05-21   10:36:38 ET  Reply   Untrace   Trace   Private Reply  


#10. To: Pinguinite (#1) (Edited)

There's a claim that his computer had evidence of communications with Wikileaks. Is there no follow up on that, or was it not true?

I don't know. I don't follow this stuff as closely as I used to. I am burnt out at all the lies and all the partisan politics and Party Animal Games being played by both branches of the Ruling Party.

I am convinced that America,as she stands today,is destined to fall by design of the ruling classes. What sort of government replaces the non-working nightmare we have now all depends on if the globalists or the nationalists win the dust up that follows.

sneakypete  posted on  2017-05-23   11:22:27 ET  Reply   Untrace   Trace   Private Reply  


#12. To: sneakypete (#10)

What sort of government replaces the non-working nightmare we have now all depends on if the globalists or the nationalists win the dust up that follows.

I don't know that history shows us any example at all of an oppressive, native government being overthrown and replaced with one that truly cherishes rights and liberties. In the case of the US revolution, what was deposed was a foreign monarchy over a land that was largely untamed where self sufficiency was a requirement of survival.

Maybe there have been a few cases of oppressive dictatorships being brought down, but whether they were cases where general freedoms were restored, taxes repealed, and government bureaucracy was significantly scaled back, I don't know. People just have a natural tendency to take control of all that is around them, and even when revolutions occur, it's usually not for the purpose of giving, but of taking.

Pinguinite  posted on  2017-05-23   11:48:18 ET  Reply   Untrace   Trace   Private Reply  


#13. To: Pinguinite (#12)

Maybe there have been a few cases of oppressive dictatorships being brought down, but whether they were cases where general freedoms were restored, taxes repealed, and government bureaucracy was significantly scaled back, I don't know. People just have a natural tendency to take control of all that is around them, and even when revolutions occur, it's usually not for the purpose of giving, but of taking.

History is full of examples. Kicking the Catholic Church out of ruling authority all over Europe is one prime example.

Removing monarchies from power all over Europe is another.

The nation created by the America Revolution is another.

Then there are examples due to losing wars,like when Japan lost WW-2 and we forced the Japanese to form another type of government with the Emperor only being a figurehead,and forcing the Nazi's out of power in Germany.

Then there is the example of the west,primarily America,forcing the communists into bankruptcy that resulted in the total collapse and replacement of the communist system there.

Right at this moment the whole west seems to be going through a reverse phase as we are not only allowing medieval jihadists to come in to destroy our nations,we are even paying them for doing so,

sneakypete  posted on  2017-05-23   12:27:37 ET  Reply   Untrace   Trace   Private Reply  


#14. To: sneakypete (#13)

I did mention the US revolution being an exception as it throws off not a native government but a foreign one, and any colonial revolution would qualify. The US was still mostly frontier, even in the east by today's standards, and people were acclimated to self-sufficiency (unlike today) which factored into their politics.

The French revolution deposing it's monarchy was a disaster for the French, and monarchies are not necessarily bad in any event, though it depends entirely on the monarch. I know England had, I think it was one of the King James's for about 3 years but he did such a poor job the English basically fired him and he accepted peaceful and not uncomfortable exile, though maybe my facts aren't quite right on that. Certainly people living under a monarch in the past have had, in sum, more rights and less taxation than present day USA.

But the problem with revolutions is that the rebels that take control invariably do just that, imposing their values on the population just freed from the values of the previous government. And if the kingpin rebel doesn't take control, then some underling more ambitious will cut him down and replace him. But even well meaning people will cause harm by trying to do good. It's a One Ring to Rule Them All type thing. Power corrupts.

So if/when the US fed apparatus collapses, it would create a vacuum of power that any new government would quickly fill. It's one of the reasons I see the proper future of the USA being a breakup into perhaps 6-8 different countries. It's the only way to dissolve the huge black hole in DC sucking up all that's good in the country. Decentralization/outsourcing is already a corporate reality and I think it needs to become a political reality, and I think technology will help make that happen, in time.

Pinguinite  posted on  2017-05-23   13:22:20 ET  Reply   Untrace   Trace   Private Reply  


#15. To: Pinguinite (#14)

Decentralization/outsourcing is already a corporate reality and I think it needs to become a political reality, and I think technology will help make that happen, in time.

Politically it is all about centralizing,and thanks to today's ability to handle data,it will be virtually impossible for a revolution to happen again,ever.

The first,and most important thing they are going to do is eliminate cash and create a digital debit and credit system that contains ALL of every individual on Earth's entire history.

Piss off some government flunky or just be known to run your mouth about "nonsense" like individual liberties,and you are toast. There will be no running and hiding from the authorities because there will be no cash and all of your digital assets will have disappeared the instant some minimum wage government flunkie was ordered to delete your personal ID number.

You won't even be able to buy a cup of coffee at the convenience store where you dialed the toll-free number to tell the authorities where to come and pick you up to take you to the salt mines because people that don't exist don't have bank accounts or ID numbers. The ONLY thing you can do for free is call to turn yourself in.

Beware the cashless society.

sneakypete  posted on  2017-05-23   18:35:46 ET  Reply   Untrace   Trace   Private Reply  


#17. To: sneakypete (#15)

There will be no running and hiding from the authorities because there will be no cash and all of your digital assets will have disappeared the instant some minimum wage government flunkie was ordered to delete your personal ID number.

Even with digital money, control will not necessarily reside with the government. Bitcoin is a decentralized currency that no government, central bank or other entity, governmental or non-governmental, can control. It's not possible to delete a bitcoin wallet. At least not until quantum computing becomes a reality, and then someone will make a quantum currency.

Of course govs will create their own digital currency which would/could be as you describe. But Bitcoin has real market worth that would compete with any electronic debit currency.

Pinguinite  posted on  2017-05-23   21:37:28 ET  Reply   Untrace   Trace   Private Reply  


#22. To: Pinguinite (#17)

But Bitcoin has real market worth that would compete with any electronic debit currency.

No it won't and can't because there won't be anywhere you can legally spend it. What good is money to you that you can't use?

sneakypete  posted on  2017-05-23   22:48:42 ET  Reply   Untrace   Trace   Private Reply  


#27. To: sneakypete (#22)

No it won't and can't because there won't be anywhere you can legally spend it. What good is money to you that you can't use?

Bitcoin is information, and "spending" consists of trading information. You can legally "spend" bitcoin anywhere Freedom of Speech exists.

Pinguinite  posted on  2017-05-23   23:52:51 ET  Reply   Untrace   Trace   Private Reply  


#31. To: Pinguinite, sneakypete (#27)

Bitcoin is information, and "spending" consists of trading information. You can legally "spend" bitcoin anywhere Freedom of Speech exists.

As for U.S. law and your creative interpretations of it, remind me again about why you emigrated to Ecuador.

Only the U.S. government has authority to issue legal currency within the United States. Make any phony crap and issue it as currency and you get prosecuted.

Bitcoin is considered property and not legal tender in any U.S. jurisdiction.

https://en.wikipedia.org/wiki/Virtual_currency

In 2013, Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury, in contrast to its regulations defining currency as "the coin and paper money of the United States or of any other country that [i] is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance", also called "real currency" by FinCEN, defined virtual currency as "a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency". In particular, virtual currency does not have legal tender status in any jurisdiction.[2]

[...]

The IRS decided in March 2014, to treat bitcoin and other virtual currencies as property for tax purposes, not currency.[11][12]

[...]

A cryptocurrency is a digital currency using cryptography to secure transactions and to control the creation of new currency units.[21] Since not all virtual currencies use cryptography, not all virtual currencies are cryptocurrencies. Cryptocurrencies are generally not legal tender. Ecuador is the first country attempting a government run digital currency -no cryptocurrency; during the introductory phase from Christmas Eve 2014 until mid February 2015 people can open accounts and change passwords. At the end of February 2015 transactions of electronic money will be possible.[22][23]

https://www.cryptocoinsnews.com/ecuador-bans-bitcoin-favor-own-national-cryptocurrency/

Ecuador Bans Bitcoin In Favor Of Own National Cryptocurrency

Venzen Khaosan on 27/07/2014

On the 23rd of July, the government of Ecuador effectively banned bitcoin, along with all other cryptocurrencies, reports the PanAm Post. The legislation forms part of a reform of the country’s monetary and financial laws. The bill was approved by 91 members of parliament, with 22 votes against and 3 abstentions. President Rafael Correa, who introduced the reform bill, will sign it into law.

[...]

nolu chan  posted on  2017-05-24   16:51:10 ET  Reply   Untrace   Trace   Private Reply  


#34. To: nolu chan (#31)

As for U.S. law and your creative interpretations of it, remind me again about why you emigrated to Ecuador.

Because I like it better. I'll also remind you that a common tactic employed by those losing a debate is to resort to insults. You should be above that.

Only the U.S. government has authority to issue legal currency within the United States. Make any phony crap and issue it as currency and you get prosecuted.

Prosecution is only for imitating US legal tender currency, otherwise known as counterfeiting. Any community wanting to use poker chips as money is free to do so, so long as no representation made about the poker chips being US issued currency.

Bitcoin is considered property and not legal tender in any U.S. jurisdiction.

In particular, virtual currency does not have legal tender status in any jurisdiction.[2]

You bolded the part about currency having "legal tender status". But what is "legal tender"? Correct me if I'm wrong, but currency that is "legal tender" means (at least in the USA) that if you offer payment having that status and the receiver refuses to accept it, the debt is considered paid. In other words, legal tender laws force people to accept crap money as something of real value. Currency is given such status when it has no intrinsic value on its own, as currency with intrinsic value, such as gold and silver does not require legal tender status.

So quite naturally, bitcoin will never, ever, ever have legal tender status. Ever. If someone doesn't want it, they suffer no penalty for refusing it. But even so, bitcoin still is a marketable commodity, albeit a virtual one.

And, by the way, FINCEN doesn't make federal law anyway. And neither does the IRS.

Ecuador Bans Bitcoin In Favor Of Own National Cryptocurrency

Meaning what, exactly? That I could go to jail because I have access to bitcoin which exists solely as data in redundant databases worldwide, And I happen to be walking down the street in Ecuador? Do you think Ecuador law calls for imprisoning anyone who has *access* to bitcoin?

Did you know that you can get a bitcoin debit card? What you do is open an account at an international vendor. They send you a plastic debit card. You deposit bitcoin in your debit card account. And then when you use your card at any point of sale worldwide, or an ATM, the transaction goes through and your account is deducted the equivalent amount of bitcoin, including service fees, of course. So in this case, bitcoin doesn't even enter Ecuador jurisdiction. The exchange between bitcoin and the national currency (US Dollars) takes place in the country having the bitcoin debit card service. So Ecuador cannot do squat (it's not unusual for stupid laws to be passed in Latin America). Did you hear that President Maduro in Venezuela wants to ban lines of people that extend out of bakeries? Apparently the country's food shortage is embarrassing so this is his way of making people not hungry.

But this is what I meant about technology trumping law. This is reality today. Check out wirex: https://wirexapp.com/

Pinguinite  posted on  2017-05-25   1:45:51 ET  Reply   Untrace   Trace   Private Reply  


#37. To: Pinguinite (#34)

As for U.S. law and your creative interpretations of it, remind me again about why you emigrated to Ecuador.

Because I like it better. I'll also remind you that a common tactic employed by those losing a debate is to resort to insults. You should be above that.

Give up with that crap already. You documented it all online and I have copies of your posts and you know it.

Your stated legal arguments were legal nonsense, just as your current legal arguments are delusional.

- - - - - - - - - - - - - - - - - - - -

http://www.cjmciver.org/cgi-bin/lwanread.cgi?2004-09-19 [can no longer access at link]

In your article on The Trial, you stated:

* If I proceed, I've got a 50/50 chance of winning, but I'm being handed a sure 'win' of sorts -- in the form of no criminal record -- on a silver platter.

At that moment the expatriation argument seemed to weigh heaviest of all things. This whole 'justice' system is a joke and I had the opportunity to make it all go away.

I looked at the judge and in what might be my most infamous moment, said 'I'll take it'.

[...]

I'm intrigued, and plan to visit this place -- I'll call it Oz -- and see for myself what it's like, because in my personal situation, with no wife, no kids, and a skill where geography means nothing, I actually have little practical need to stay in America. If learning a new language is the biggest obstical, I can overcome it. I have family that I love and very good friends that are very dear to me here, but beyond that, it seems all the land of the free has to offer me is continued second rate citizenship which culminated with criminal charges on May 17th. Is that actually going to change? The famed retort 'If you don't like America, why don't you leave' isn't just a sarcastic comment anymore. Beyond being a suggestion, it might be a good idea.

When you present your wackaloon views of the law to police or courts, it does not end well. You presumed you can present your nutbaggery to the police and act like a jerk and not face consequences.

What you proved is that you have a right to express your views on the law, and when you act on your misguided views, the police have the right to put your butt in jail. When the rubber met the road, you pleaded guilty, and you had no case to proceed with other than fringe tax protester gobbledygook.

As for your LWAN (Living Without A Number) delusion, you had a Social Security Number all the time, just as you have one now. Once you have one, it stays with you, delusional tax protester gobbledygook notwithstanding. Nor do your delusions entitle you to drive without a valid license, or with a suspended license, without consequences.

Regarding the law, you have a penchant to state things as fact which are directly contrary to actual law or opinions of the U.S. Supreme Court. You are entitled to your opinion even if it is delusional and has no basis in law. Others are entitled to state actual law.

As you discovered, acting on your delusions may entitle you to a jail cell.

And you made clear that you decided to leave the U.S. because you felt all the country had to offer you was continued second rate citizenship, and the best way to make the U.S. justice system leave your life would be for you to leave the country.

nolu chan  posted on  2017-05-25   17:55:03 ET  Reply   Untrace   Trace   Private Reply  


#38. To: nolu chan (#37)

You seem to have forgotten the discussion was about digital current, not me. You should learn to lose with at least a little bit of grace instead of resorting to insults and attacking with issues not raised.

Lawyer strategy: When the law is on your side, pound on the law. When the facts are on your side pound on the facts. When neither is on your side, pound on the table.

Pinguinite  posted on  2017-05-25   23:26:52 ET  Reply   Untrace   Trace   Private Reply  


#44. To: Pinguinite (#38)

You seem to have forgotten the discussion was about digital current, not me. You should learn to lose with at least a little bit of grace instead of resorting to insults and attacking with issues not raised.

Lawyer strategy: When the law is on your side, pound on the law. When the facts are on your side pound on the facts. When neither is on your side, pound on the table.

No, it was about the power of the government.

You were babbling your sovereign citizen nonsense about how the government lacks power to enforce its laws against your sovereign citizen observations. I will not waste my time with your legal babble. The Federal government has enough power to regulate currency.

You pushed the babble of a tax fraudster. He was sent for a second stretch at Club Fed for fraud, and his son followed. The business was shut down by the Federal government and barred by permanent injunction from selling its bogus products regarding the law.

You decided you had the right to drive without a valid license. You tried your sovereign citizen nonsense with the local cops on a traffic stop for driving at night without headlights, was arrested for no valid license, and criminally convicted upon your plea of guilty.

You decided that the way for you to get out from under the sheer power of the local fuzz of Maryland was to retreat to Ecuador. But you still want to tell me that the Federal government is powerless to do much of anything in the face of your proclamations of bogus law.

As for your load of crap that you tried to unload on me that you went to Ecuador "because [you] like it better," that is contradicted by your own contemporary writings.

When the law is on your side, argue actual laws. When the facts are on your side, argue the facts. And when you have no real argument, make up sovereign citizen nonsense and proclaim the lack of power of the Federal government. Or the lack of power of the state of Maryland. But do it from Ecuador, and not in a U.S. courtroom, or to a cop. That ends predictably.

https://www.youtube.com/watch?v=VnSd-E3Hb3Y

Judge Hysterically Owns a Sovereign Citizen

https://www.youtube.com/watch?v=aptvDqvt5M4

Sovereign Citizen in Court on Trial for No Valid Registration -- GUILTY

https://www.youtube.com/watch?v=0Dvcd4Yzqjs

Sovereign Citizen: The Sitcom - Gettin' Tazed

nolu chan  posted on  2017-05-31   17:28:54 ET  Reply   Untrace   Trace   Private Reply  


#45. To: nolu chan (#44)

No, it was about the power of the government.

It was at the point of discussion about bitcoin where you suddenly decided to issue a personal attack instead of discussing the issue of the legality of bitcoin. If you think I said something about cryptocurrency that wasn't accurate, then the proper response, assuming you choose to respond at all, which is, of course optional on your part, would be to refute it, not issue a personal attack.

I am not the one that turned the discussion from bitcoin to me. That was you who did that. I suppose I should be flattered that you consider me so important.

Since you didn't post any legal material refuting my statement about it being legal for a community to use poker chips as money instead of US legal tender, and given that is your practice to do so, I think it's safe to assume you searched but found no such material.

Legal Tender laws create an obligation only on the receiver of legal tender, not the person who tenders. If two people make an exchange of maple leaves for real goods or services, it's not a violation of legal tender law. Counterfeit laws prohibit creating something that purports to be legal tender US currency. It is not against the law to make rounds of metal of whatever sort so long as no representation is made that they are legal US currency.

Now on the issue of cryptocurrency, I am a software professional and I have studied cryptocurrency and blockchain technology. So while you likely know more about so-called case law and such than me, I likely know more about Information Technology issues than you do, including bitcoin and cryptocurrency. That you despise me as greatly as you do doesn't change that. I suggest you grow up and get used to that fact. Once you do, you'll be amazed at what it's like to carry on objective discussions like an adult.

Pinguinite  posted on  2017-06-01   2:02:12 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 45.

#46. To: Pinguinite (#45)

[nc #44] No, it was about the power of the government.

[Pinguinite #45] It was at the point of discussion about bitcoin where you suddenly decided to issue a personal attack instead of discussing the issue of the legality of bitcoin.

No, I maintained the sheer power of the government to extinguish bitcoin.

[Pinguinite #17] Even with digital money, control will not necessarily reside with the government. Bitcoin is a decentralized currency that no government, central bank or other entity, governmental or non-governmental, can control. It's not possible to delete a bitcoin wallet. At least not until quantum computing becomes a reality, and then someone will make a quantum currency.

[nc #18] Government can quite easily prohibit any and all corporate entities from engaging in any bitcoin transaction. You can be a bitcoin millionaire and not be able to buy a cup of coffee.

[Pinguinite #20] I'm sure if it was logistically possible to outlaw bitcoin, it would have been done so by now.

[nc #25] If the government is challenged by bitcoin, the response can be to make the penalty for any infringing corporation to be dissolved. The corporate entity would cease to exist. WalMart could not do business on a mass scale in illegal digital currency on a down low basis where they would not be caught. Corporations would not touch the crap. The NSA could shut down such a currency at will. The corporate world cannot depend on a currency that could be drained dry like Mt. Gox.

[Pinguinite #27] Bitcoin is information, and "spending" consists of trading information. You can legally "spend" bitcoin anywhere Freedom of Speech exists.

[Pinguinite #29]

Since bitcoin is decentralized, that would be quite a task. Bitcoin is based on BlockChain technology, which is a redundant database distributed throughout the net. The authority for who has how much bitcoin is essentially by popular consensus among all nodes (databases) in the blockchain as a whole. So if you managed to fool one node or even several nodes into saying you were a bitcoin billionaire, once other nodes failed to agree, the errant nodes would correct the error, and you'd be poor again.

Nuclear war could take out the entire western hemisphere, and blockchain nodes in the eastern hemisphere would carry on registering bitcoin transactions. Or vice versa.

I suppose the only conceivable way to kill bitcoin would be with a virus that would be tuned only to attack blockchain nodes, the virus scheduled to wipe out nodes at a universally set time. But even with that, it's only a hope that all nodes would be infected by the appointed hour, and even then, there's the potential for backup nodes.

In the real world, millions were siphoned off Mt. Gox, the whole thing went bust, nothing was recovered. Crypto currency offers no protection whatever if a seller is a fraud, or your Mt. Gox goes bust.

You fail to acknowledge the forks that have occurred by accident, or address the capability of the NSA to intentionally create more forks.

As the SHA1 hash has been broken, you do not address your full faith and confidence in SHA256. The list goes on. I will humor you with some seperate posts addressing Bitcoin issues and deficiencies.

[nc #31]

As for U.S. law and your creative interpretations of it, remind me again about why you emigrated to Ecuador.

Only the U.S. government has authority to issue legal currency within the United States. Make any phony crap and issue it as currency and you get prosecuted.

Bitcoin is considered property and not legal tender in any U.S. jurisdiction.

[Pinguinite #34]

[nc] As for U.S. law and your creative interpretations of it, remind me again about why you emigrated to Ecuador.

Because I like it better. I'll also remind you that a common tactic employed by those losing a debate is to resort to insults. You should be above that.

[nc #37] you made clear that you decided to leave the U.S. because you felt all the country had to offer you was continued second rate citizenship, and the best way to make the U.S. justice system leave your life would be for you to leave the country.

[Pinguinite #38] You seem to have forgotten the discussion was about digital current, not me.

[nc #44] No, it was about the power of the government. You were babbling your sovereign citizen nonsense about how the government lacks power to enforce its laws against your sovereign citizen observations. I will not waste my time with your legal babble. The Federal government has enough power to regulate currency.

[Pinguinite #45] It was at the point of discussion about bitcoin where you suddenly decided to issue a personal attack instead of discussing the issue of the legality of bitcoin. If you think I said something about cryptocurrency that wasn't accurate, then the proper response, assuming you choose to respond at all, which is, of course optional on your part, would be to refute it, not issue a personal attack.

You were making yet another of your delusional sovereign citizen claims that the government lacks the power to do whatever it is that you feel impinges upon your freedom to do whatever you please. The government has no such lack of power. When the government demonstrated such power to you personally, you published at length about your infantile, self-destructive actions, stated your only alternative was to leave the country, published your intent to go on a shopping tour of South or Central America for a place to go, and that was before you had seen Ecuador.

There is no current issue of the legality of bitcoin. It is legal as property. If the price of your bitcoin (investment property) appreciates at all, and you buy a cup of coffee and exchange your bitcoin property for the coffee, you have a capital gain which is required to be reported to the IRS at tax time (under U.S. law). That is true for each and every such transaction, however small the gain.

If the value of your bitcoin (investment property) depreciates drasticly, say 50%, and your 100K becomes 50K, you run up against a $3,000 limit on property losses for single and married filers. If it were money your loss claim would be bigger... but Bitcoin is not money.

[Pinguinite #45] I am not the one that turned the discussion from bitcoin to me. That was you who did that. I suppose I should be flattered that you consider me so important.

You turned the discussion from Bitcoin to your delusional sovereign citizen observations about the law and the power of the government.

[Pinguinite #45]Since you didn't post any legal material refuting my statement about it being legal for a community to use poker chips as money instead of US legal tender, and given that is your practice to do so, I think it's safe to assume you searched but found no such material.

Legal Tender laws create an obligation only on the receiver of legal tender, not the person who tenders. If two people make an exchange of maple leaves for real goods or services, it's not a violation of legal tender law. Counterfeit laws prohibit creating something that purports to be legal tender US currency. It is not against the law to make rounds of metal of whatever sort so long as no representation is made that they are legal US currency.

It appears you do not understand the meaning of the word money. Personal property is not money.

Black's Law Dictionary, 6th Ed.

Money. In usual and ordinary acceptation it means coins and paper currency used as circulating medium of exchange, and does not embrace notes, bonds, evidence of debt, or other personal or real estate.

No, since I did not entertain another discussion of one of your delusional sovereign citizen infantile excursions into fantasy land, it is not safe to assume that I have neither found or already abundantly knew of such material. Your opinions on U.S. law are so delusional that any exposition would be embarrassing and humiliating to a normal person. I did not want to waste my time, knowing that nothing that can be said would make any difference. It would be like an attempt to educate a doorknob.

Your claim about money is precisely analagous to your prior delusional crap about not needing a valid license to drive, and your detailed publishing of your presumed, but hopelessly skewed, knowledge of the law.

Rounds of metal and poker chips are not money. If you create rounds of metal, with a likeness of Ron Paul on them, and circulate them as money in competition with real money, you may get a criminal conviction.

https://en.wikipedia.org/wiki/Bernard_von_NotHaus

Bernard von NotHaus is the creator of the Liberty Dollar and co-founder of the Royal Hawaiian Mint Company, in Hawaii, U.S.A. He created the Free Marijuana Church of Honolulu. Von NotHaus was convicted of counterfeiting in 2011, allegedly for the purpose of domestic terrorism.

According to the evidence introduced during his 2011 federal criminal trial in connection with his involvement with the Liberty Dollar, von NotHaus was the founder of an organization called the National Organization for the Repeal of the Federal Reserve and Internal Revenue Code, commonly known as NORFED and also known as Liberty Services. The FBI claimed that NORFED's purpose was to mix Liberty Dollars into the current money of the United States and that NORFED intended for the Liberty Dollar to be used as current money in order to limit reliance on, and to compete with, United States currency

[...]

In connection with the Liberty Dollar business, a federal grand jury brought an indictment against von NotHaus and three others in May 2009 accusing him of counterfeiting U.S. currency. Von NotHaus was arrested on June 6, 2009 and entered a plea of not guilty on July 28.

In at least one interview, von NotHaus had been quoted as saying: "We never refer to the American Liberty as a coin.... The word ‘coin’ is a government-controlled term. This is currency that is free from government control.”

On March 18, 2011, after a 90-minute jury deliberation, von NotHaus was found guilty on various counts, including the making of "counterfeit coins" (resembling legal tender coins). Attorney for the Western District of [North Carolina], Anne M. Tompkins, described Bernard von NotHaus and the Liberty dollar as "a unique form of domestic terrorism" that is trying "to undermine the legitimate currency of this country." The Justice Department press release quotes her as saying: “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country".

According to the Associated Press:

Federal prosecutors successfully argued that von NotHaus was, in fact, trying to pass off the silver coins as U.S. currency. Coming in denominations of 5, 10, 20, and 50, the Liberty Dollars also featured a dollar sign, the word "dollar" and the motto "Trust in God," similar to the "In God We Trust" that appears on U.S. coins.

Von NotHaus appealed his conviction. Reemphasizing his contempt for the U.S. dollar, the appeal stated:

...if anything is clear from the evidence presented at trial, it is that the last thing Mr. von NotHaus wanted was for Liberty Dollars [to] be confused with coins issued by the United States government...His intention – to protest the Federal Reserve system – has always been plain. The jury's verdict conflates a program created to function as an alternative to the Federal Reserve system with one designed to [deceive] people into believing it was the very thing Mr. von NotHaus was protesting in the first place...the Liberty Dollars was not a counterfeit and was not intended to function as such. The verdict is a perversion of the counterfeiting statutes and should be set aside.

When asked about the government's motive for accusing him of terrorism, von NotHaus scoffed, "This is the United States government. It's got all the guns, all the surveillance, all the tanks, it has nuclear weapons, and it's worried about some ex-surfer guy making his own money? Give me a break!"

On Nov 11th, 2014 Judge Voorhees denied von NotHaus' Motion for Acquittal. On December 2, 2014 he was sentenced to 6 months house arrest, with 3 years probation. In an email he stated that his probation has been terminated early and he is now truly free. Termination of probation was formally granted December 9, 2015 by U.S. District Judge Richard L. Voorhees:

It took the jury all of 90 minutes to reach a unanimous verdict of guilty.

Your knowledge of the actual law is abysmal, or you just like to say make believe nonsense, knowing it is make believe nonsense.

nolu chan  posted on  2017-06-02 17:42:52 ET  Reply   Untrace   Trace   Private Reply  


#47. To: Pinguinite (#45)

[Pinguinite #45] Now on the issue of cryptocurrency, I am a software professional and I have studied cryptocurrency and blockchain technology. So while you likely know more about so-called case law and such than me, I likely know more about Information Technology issues than you do, including bitcoin and cryptocurrency.

Yeah, yeah. I spent some years doing absolutely nothing but software design and coding myself. It was so far back, Windows did not exist, but MS-DOS and Z-DOS did.

I am glad you have studied cryptocurrency and blockchain technology. I have been familiar with hashing and asynchronous encryption for about 30 years. I worked with online and offline encryption systems 50 years ago.

Your claims that the government is powerless against the anonymity of Bitcoin merely demonstrates your infantile naivete. It ranks up there with others' belief that the Swiss would never give up the identities behind numbered accounts. When it comes to raw power, the U.S. government has plenty. You can make believe it does not until you become the focus of its attention. Then you can take your standup act to Ecuador.

Your lack of imagination about Bitcoin is breathtaking.

The U.S. Government can overtly, or covertly, create thousands of competing crypto-currencies.

The Government can create its own cryptocurrency and create it's own Mt. Gox. It can make Bitcoin less attractive than its own product by restrictive regulations not applicable to its own product.

The U.S. Government has an extraordinary ability to print money. It could pump and dump Bitcoins driving the value up and down. If you can do that, and know in advance when the value will go up and down, there's some Bitcoin to be made in them thar hills. It is unregulated. A source with enough resources can destroy Bitcoin.

The tax regulations make its use extremely onerous, at least for those who care about the law. At a tax audit, some poor bastard will experience little success with sovereign citizen excuses.

That's like the nutbags in the videos telling cops they do not need a valid license and they know the law, and I'm not getting out of the car, and don't you break my window, ... and don't tase me bro. Then they get tased and become a howling Youtube sensation.

nolu chan  posted on  2017-06-02 17:44:26 ET  Reply   Untrace   Trace   Private Reply  


#48. To: Pinguinite (#45)

[Pinguinite #17] Bitcoin is a decentralized currency that no government, central bank or other entity, governmental or non-governmental, can control.

And on June 1, 2017 it was reported that "China's three largest bitcoin exchanges are allowing customers to withdraw bitcoins from their accounts," and "OKCoin China resumed withdrawals for traders."

When they can stop and resume withdrawals at will, I would consider that a modicum of control. If all my Bitcoin property is in there, that's awful. And there is nowhere to file a complaint but a rant on Youtube or on a blog.

http://www.zerohedge.com/news/2017-06-01/bitcoin-surges-back-above-2450-after-china-eases-exchange-controls

Bitcoin Surges Back Above $2450 After China Eases Exchange Controls

by Tyler Durden
Jun 1, 2017 8:37 AM

Bitcoin has retraced over half its losses from last week's tumble, rallying back above $2450 overnight after news that China's three largest bitcoin exchanges are allowing customers to withdraw bitcoins from their accounts.

As CoinTelegraph reports, on May 31, local Chinese Bitcoin and cryptocurrency news source cnLedger reported that OKCoin China resumed withdrawals for traders.

[...]

nolu chan  posted on  2017-06-02 17:47:16 ET  Reply   Untrace   Trace   Private Reply  


#49. To: Pinguinite (#45)

https://coincenter.org/entry/bitcoin-taxation-is-broken-here-s-how-to-fix-it

Bitcoin taxation is broken. Here’s how to fix it.

An exemption for small gains would take most of the headache out of using digital currencies like Bitcoin.

By Jerry Brito / April 12, 2017

We recently described what a bill creating a federal safe harbor for non-custodial uses of cryptocurrency should look like, and we’re now advocating for just such a bill in Congress. And now that it’s tax-filing season, today we’re proposing a simple legislation to create an exemption from taxation small personal gain on digital currency transactions. Here’s how we’d write such a cryptocurrency tax bill.

First, let’s define the narrow problem we want to address. While there are several things that could be improved with how the IRS treats cryptocurrency taxation and reporting, probably the simplest issue to focus on is the tax treatment itself.

In its March 2014 guidance, the IRS announced that cryptocurrencies like Bitcoin are treated as property, which means gains from sale or exchange are taxed as capital gains rather than ordinary income. This is good because capital gains rates are generally lower than tax rates on ordinary income. However, unlike traditional government-issued currencies, property does not enjoy a de minimis exemption.

This is in contrast to how foreign currencies are treated, which do enjoy an exemption. Say you buy 100 euros for 100 dollars because you’re spending the week in France. Before you get to France, the exchange rate of the Euro rises so that the €100 you bought are now worth $105. When you buy a baguette with your euros, you experience a gain, but the tax code has an de minimis exemption for personal foreign currency transactions, so you don’t have to report this gain on your taxes. As long as your gains per transaction are $200 or less, you’re good to go.

Such an exemption does not exist for non-currency property transactions. This means that every time you buy a cup of coffee, or an MP3 download, or anything else with bitcoin, it counts as a taxable event. If you’ve experienced a gain because the price of Bitcoin has appreciated between the time you acquired the bitcoin and the time you used it, you have to report it to the IRS at the end of the year, no matter how small the gain. Obviously this creates a lot of friction and discourages the use of Bitcoin or any cryptocurrency as an everyday payment method.

[...]

nolu chan  posted on  2017-06-02 17:48:41 ET  Reply   Untrace   Trace   Private Reply  


#50. To: Pinguinite (#45)

http://www.investopedia.com/university/definitive-bitcoin-tax-guide-dont-let-irs-snow-you/

Bitcoin IRS Tax Guide For Individual Filers

By Ryan Selkis
Updated March 24, 2017 — 10:10 AM EDT

This tutorial takes an in-depth look at the coming tax consequences of IRS Notice 2014-21 for the U.S. Bitcoin industry.

While much has been written about the IRS tax guidance (first introduced March 2014) on virtual currencies, few have done comprehensive analyses of the plethora of record-keeping and enforcement challenges that will arise as a result of the agency's decision to treat Bitcoin as property rather than currency. Diverse stakeholders ranging from consumers, merchants, miners and Bitcoin service providers (all of whom may also be considered "investors" at various times) must now grapple with complex and unclear tax reporting requirements in the coming months - even though more clarifications and changes from the agency seem inevitable following the "public comment" period this spring.

We'll kick things off by outlining what Joe Consumer should discuss with his tax adviser in advance of filing his personal tax returns on April 15. For the sake of our article (and round numbers), we will assume that Joe is married and that he and his wife made a combined $100,000 of taxable income in 2016.

With that in mind, how should Joe report trading gains and losses for Bitcoin and any of his other alt-coin investments? How about purchases he made with Bitcoin?

What about the funds he lost in his trading account at the now-defunct Mt. Gox exchange - can those be written off? And how about that gift he gave to Dorian Nakamoto's fundraiser or the tips he received for his blog posts?

We'll attempt to tackle the basics for Joe Consumer, but the best synopsis may be this: Talk to a tax expert as soon as possible, even if you are one yourself.

Trading Gains & Losses

Property, Not Currency

The most widely reported aspect of the IRS ruling on Bitcoin has to do with its treatment as property. This is a favorable ruling for most investors given Bitcoin's stellar performance to date, as accrued long-term gains and losses will be taxed at the taxpayer's applicable capital gains rate (15% in Joe's case) rather than ordinary income rates (25% for Joe). For many early Bitcoin "miners" and investors, this constitutes a massive difference in marginal rates. That said, active traders who have racked up short-term capital gains may still be taxed at ordinary income rates.

Investors with trading losses, on the other hand, might not be so happy with the ruling. It will be much more difficult to write off bad Bitcoin bets now that they are considered property rather than currency. The IRS limits the amount of property losses (net capital losses, to be specific) that can be claimed on personal tax returns to $3,000 per year for both married and single filers, a limit that hasn't been raised since 1978. For these unfortunate folks, large short-term trading losses will need to be carried forward, in some cases for many years. Trading losers would have been much better off if they could have written off "foreign currency" losses against their ordinary income.

And this is the most basic application of the IRS guidance. Buckle up folks, because the rest of this article may blow your minds, not to mention demonstrate the dire need for the IRS to conform certain areas of the tax code to the new world's peer-to-peer structure. The full nuance of Bitcoin's property tax treatment is complex, but let's try to break it down piece by piece.

nolu chan  posted on  2017-06-02 17:50:44 ET  Reply   Untrace   Trace   Private Reply  


#51. To: Pinguinite (#45)

http://www.investopedia.com/university/definitive-bitcoin-tax-guide-dont-let-irs-snow-you/definitive-bitcoin-tax-guide-chapter-2-bitcoin-commerce-taxable-events-ecommerce-taxation.asp

Bitcoin Tax Guide: E-commerce Taxation

By Ryan Selkis

Under Notice 2014-21, the IRS claims capital gains and losses will depend on whether a "virtual currency is a capital asset in the hands of a taxpayer." Yet since there is no way for consumers to earmark their Bitcoin wallets as "non-capital" accounts, this really means that if Bitcoin is held in a wallet for any time period, it can be viewed as an investment like a stock or bond. This would mean that almost every time Joe used Bitcoin to purchase something as small as a cup of coffee at his trendy urban coffee shop, he would realize a gain or loss. For long-term holders like Joe, who had experienced a 10- or 100-fold increase in their bitcoins' value, they might incur a 30-cent capital-gain tax on their daily $2 cup of coffee.

This is the real tax-reporting boondoggle, which could threaten widespread consumer adoption of Bitcoin. There is no exemption for "de minimis" property gains or losses as there is with foreign currencies. So while Joe can buy euros for a trip to Paris, and then cash them out at a 5% gain during his return voyage, he doesn't need to worry about reporting a dime of that gain until he's hit $200 in total gains. On the other hand, according to IRS property rules, Joe should be ready to record a 30-cent capital gain and aggregate his records (via Form 1099-B) for every single cup of coffee he buys.

The complexity quickly begins to spiral out of control from there. What happens when he is settling up with his friends to pay the bar tab? Is Joe able to select which specific wallets he uses for his coffee purchases so that it's easier for him to separate his trading gains and his consumption? Would it be considered a wash sale if Joe bought more bitcoins after spending all of his assets on patio furniture at Overstock (Nasdaq:OSTK) and stocking stuffers at Gyft (both of which accept Bitcoin as payment)?

Some have suggested it is unlikely that the IRS has the resources to enforce these new policies, and that the guidelines are not intended to penalize "consumers." Indeed, even Keith Aqui, author of the IRS notice, suggested to the Wall Street Journal that the agency merely meant to discourage tax evasion on large purchases. Exempting de minimis Bitcoin transactions from reporting would limit onerous and unnecessary tax-reporting requirements, while still preserving the IRS's ability to collect taxes from larger Bitcoin investors who have been buying cars and condos with their investment gains. But that would also take an act of Congress, not an IRS clarification. So don't hold your breath.

Still, the fact remains that anyone who holds Bitcoin for any length of time can be considered an investor under the IRS guidelines. Consequently, the guidance appears to promote Bitcoin's use by consumers who use "instant conversion" tools that buy bitcoins at the moment they are needed for a transaction (e.g. international remittance) rather than those who hold Bitcoin in a checking-account style wallet. These "instant buy" tools might be the consumer complement to widely available merchant solutions, which allow businesses to instantly convert Bitcoin purchases to U.S. dollars.

Many consumer advocates, including the Tax Foundation, have called the guidance "inappropriate" with respect to reporting requirements, and some believe that this will dissuade many from using virtual currency altogether. But if there is a chance that the purchasing power in Joe's Bitcoin "checking account" doubles next year, will he really mind paying taxes on those gains? If reporting (and perhaps withholding) software materializes to seamlessly track his spending and transactions, maybe not.

nolu chan  posted on  2017-06-02 17:51:40 ET  Reply   Untrace   Trace   Private Reply  


#52. To: Pinguinite (#45)

http://www.zerohedge.com/news/2017-03-02/bitcoin-reaches-parity-gold

Bitcoin Reaches Parity With Gold

by Tyler Durden
Mar 2, 2017 10:02 AM

[...]

The volatility – or to be precise, the downside risk – makes it difficult for Bitcoin to be more widely adopted as money. What speaks for Bitcoin is that it has shown stellar performance over its short lifespan, but this stellar performance comes with considerable downside risk. A merchant accepting Bitcoin as payment is exposed to this downside risk unless he instantly exchanges Bitcoins back to currency following the transaction. Even though a cycle takes about 6 minutes in theory, exchanging Bitcoin to currency actually takes about one hour to confirm the transaction and another hour to confirm the price, during which at the very least the merchant is exposed to the downside volatility. Holding Bitcoins permanently might hold huge upside, but that also comes with intolerable downside risk for a merchant. After all, merchants should spend their time and energy with what they are best at (selling goods) rather than trading currencies and Bitcoin.

Another claim we don’t agree with is that Bitcoin is as free of counter-party risk as gold. What we have seen with Ethereum, another nascent cryptocurrency, is that these virtual currencies ultimately have a master key. With Ethereum, that key is controlled by a council that decides its future inflation rate; with Bitcoin, that key is controlled by Gavin Andresen, an engineer based in Massachusetts. There’s no guarantee that they won’t change the source code for the Bitcoin blockchain in the future, and when you “own” a Bitcoin you simply refer to the blockchain - a distributed ledger that tells you what and how much you own. In this regard, we don’t agree that Bitcoin does not have custodial or counter-party risk; the blockchain itself is the fat tail.

This means that for now, gold remains the only global currency in which individuals and corporations can transact with no time delay, with price volatility comparable to that of major currencies yet without counter-party risk, and one that has been proven as a store of value for thousands of years.

nolu chan  posted on  2017-06-02 17:52:34 ET  Reply   Untrace   Trace   Private Reply  


#53. To: Pinguinite (#45)

SECURITIES AND EXCHANGE COMMISSION (Release No. 34-80206; File No. SR-BatsBZX-2016-30)

March 10, 2017

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Disapproving a Proposed Rule Change, as Modified by Amendments No. 1 and 2, to BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, to List and Trade Shares Issued by the Winklevoss Bitcoin Trust

- - - - - - - - - - - - - - - - - - - -

http://www.zerohedge.com/news/2017-03-10/bitcoin-crashes-below-1000-after-sec-rejects-etf

Bitcoin Crashes Below $1000 After SEC Rejects ETF

by Tyler Durden
Mar 10, 2017 5:09 PM

After much anticipation (and a spike to record highs earlier today), The SEC has decided to reject the Winklevoss application for a Bitcoin ETF.

The SEC premise appears to be the unregulated nature of the underlying:

Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated.

Therefore, as the Exchange has not entered into, and would currently be unable to enter into, the type of surveillance-sharing agreement that has been in place with respect to all previously approved commodity-trust ETPs—agreements that help address concerns about the potential for fraudulent or manipulative acts and practices in this market - the Commission does not find the proposed rule change to be consistent with the Exchange Act.

nolu chan  posted on  2017-06-02 17:54:43 ET  Reply   Untrace   Trace   Private Reply  


#54. To: Pinguinite (#45)

https://www.scribd.com/document/182863849/Chicago-Fed-Bitcoin-A-Primer-pdf#from_embed

Chicago Fed Letter

Bitcoin: A primer

by François R. Velde, senior economist

[...]

Bitcoin is a fiduciary currency

Fiduciary currencies—in contrast with commodity-based currencies (such as gold coins or bank notes redeemable in gold)—have no intrinsic value, and derive their value in exchange either from government fiat or from the belief that they may be accepted by someone else. They are inherently fragile; government orders can be ignored or doubted, and a currency that has value only because of the belief that it will have value may have no value at all (for instance, if I believe that no one will accept it, I will not accept it either).

The term “mining” may lead one to think that bitcoin is not fiduciary. Producing one bitcoin per day at current levels of difficulty requires a machine worth about $3,000 and about a dollar’s worth of electricity per day. If the machine is depreciated over five years, the cost of producing one bitcoin is about $2.50. But once created, the bitcoin has no value other than in exchange, contrary to a gold coin.

Bitcoin’s viability as currency

Can bitcoin truly rival or even replace existing currencies—particularly in the form of cash? A dollar bill in my hand cannot be anywhere else at the same time, my ownership of it is undoubted, and it can be exchanged immediately and finally. The many ingenious features of bitcoin try to emulate these properties of cash, but do so at some costs. One prominent cost is the loss of anonymity. Possession of the virtual currency must be linked to the unique identifier of the wallet. Admittedly, there is no limit on the number of wallets one can own and there are ways to make the wallet hard to trace back to its owner, but these require additional efforts. Another cost of using bitcoin is in the speed of the transaction. At a minimum, one must wait ten minutes for the proposed transaction to be included in the block chain, and for large amounts it is customary to wait for six blocks, or one hour. These times are much slower than those to complete electronic retail transactions in most other currencies (e.g., a few seconds to charge a credit card either online or at a physical retail location), not to mention the times to make large financial transactions on standard networks.

Why this delay to complete bitcoin transactions? It is rooted in the decentralized nature of the bitcoin network (and its reliance on a sort of majority voting), which is both its most ambitious feature and its main vulnerability. The confirmation that the bitcoin is not being spent twice must await validation by the network, requiring at least ten minutes (although confirmation might be skipped for small transactions). Moreover, there have been a few instances of “forks,” moments when part of the network accepted one new block as valid while another part rejected it and accepted a different block. These incidents happened for accidental reasons, but a fork could someday be the result of malicious action. It is generally thought that it would be too expensive for a single malicious user (or group of malicious users) to take over more than half of the network; but if bitcoin were to grow significantly in value, this calculation could change.

One well-known fork that emerged in March 2013 was due to nodes using two different versions of the bitcoin protocol.4 This incident reminds us that the bitcoin protocol is based on open-source software. Bitcoin is what bitcoin users use. The general principles of bitcoin and its early versions are attributed to an otherwise unknown Satoshi Nakamoto;5 improvements, bug fixes, and repairs have since been carried out by the community of bitcoin users, dominated by a small set of programmers. Although some of the enthusiasm for bitcoin is driven by a distrust of state-issued currency, it is hard to imagine a world where the main currency is based on an extremely complex code understood by only a few and controlled by even fewer, without accountability, arbitration, or recourse.

The role of the state

A fiduciary currency like bitcoin is useful only insofar as others accept it broadly. As a matter of theory, this broad acceptance need not rely on the state, and history certainly offers several examples of currencies used without state support, oftentimes because the state-sponsored currency was proving deficient. But throughout most of Western history, the state has involved itself in money. At a minimum, the state has used money as a coordinating device, usually supporting its value by accepting it in the payment of taxes. The state has also concerned itself with money because one main function of money is to free a debtor from his or her obligations, tying money to an essential state function, the administration of justice. That is why the U.S. Constitution gives Congress the power “to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.” Bitcoin is free of the power of the state, but it is also outside the protection of the state. How likely is bitcoin to remain so if it gains wide acceptance and the incentives to hijack it grow accordingly?

Fraud concerns

[...]

Bitcoin is indeed free from government (so far) but has turned out unlike anything Hayek imagined. It is not issued by a private enterprise operating in a competitive environment, disciplined by the market to maintain the stable value of its currency. The bitcoin network is an automaton, issuing currency at a predictable rate, perfectly incapable of providing “good money” in Hayek’s sense, i.e., a currency of stable value.

[...]

Conclusion

So far, the uses of bitcoin as a medium of exchange appear limited, particularly if one excludes illegal activities. It has been used as a means to transfer funds outside of traditional and regulated channels and, presumably, as a speculative investment opportunity. People bet on bitcoin because it may develop into a full-fledged currency. Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place. Nor does it truly embody what Hayek and others in the “Austrian School of Economics” proposed. Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable. That said, it represents a remarkable conceptual and technical achievement, which may well be used by existing financial institutions (which could issue their own bitcoins) or even by governments themselves.

nolu chan  posted on  2017-06-02 17:56:14 ET  Reply   Untrace   Trace   Private Reply  


#55. To: Pinguinite (#45)

Protecting one's privacy for a criminal enterprise using the Tor (The Onion Router) network (created by DARPA and the NRL and since federally funded) and the Onion browser (created by DARPA and NRL and since federally funded) and Bitcoin (created anonymously) and the SHA256 hash (created by the NSA) — it's foolproof, what could possibly go wrong?

https://en.wikipedia.org/wiki/Ross_Ulbricht

[excerpt]

Ross Ulbricht

Ross William Ulbricht (born March 27, 1984) is a former darknet market operator, best known for being convicted of creating and running the Silk Road website until his arrest. He was known under the pseudonym "Dread Pirate Roberts".

Ulbricht was convicted of money laundering, computer hacking, conspiracy to traffic fraudulent identity documents, and conspiracy to traffic narcotics in February 2015. He is currently serving a life sentence without the possibility of parole. The conviction and sentence went to appellate court, but the appeal was denied on May 31, 2017.

[...]

Silk Road, arrest and trial

Main article: Silk Road (marketplace) § Arrest and trial of Ross Ulbricht

"The Dread Pirate Roberts" attributed his inspiration for creating the Silk Road marketplace as "Alongside Night and the works of Samuel Edward Konkin III." As early as 2009 Ulbricht had been contemplating the idea of building an online black market that would use Tor and bitcoin to evade law enforcement. Tor is a protocol which encrypts data and routes internet traffic through intermediary servers which anonymize IP addresses before reaching a final destination. By hosting his market as a Tor site, Ulbricht could conceal its IP address. Bitcoin is a cryptocurrency; while all bitcoin transactions are recorded in a log, the blockchain, if users can avoid linking their identities to their online "wallets" they can conduct transactions with considerable anonymity.

Ulbricht began work on developing his online marketplace in 2010 as a side project to Good Wagon Books. He also sporadically kept a diary during the operating history of Silk Road; in his first entry he outlined his situation prior to launch, and predicted he would make 2011 "a year of prosperity" through his ventures. Ulbricht may also have included a reference to Silk Road on his LinkedIn page, where he discussed his wish to "use economic theory as a means to abolish the use of coercion and aggression amongst mankind" and claimed "I am creating an economic simulation to give people a first-hand experience of what it would be like to live in a world without the systemic use of force." To author Nathaniel Popper, the creation of Silk Road was an act of "sheer desperation" after Ulbricht exhausted most of the nest egg he had out of college on his failed businesses. Ulbricht moved to San Francisco prior to his arrest.

Ulbricht was first connected to "Dread Pirate Roberts" by Gary Alford, an IRS investigator working with the DEA on the Silk Road case, in mid-2013. In October 2013, Ulbricht was arrested and accused by the Federal Bureau of Investigation (FBI) of being the "mastermind" behind the site. Ulbricht was taken into custody at the Glen Park branch of the San Francisco Public Library.

To prevent Ulbricht from encrypting or deleting data on the laptop he was using to run the site as he was arrested, two agents pretended to be quarreling lovers. When they had sufficiently distracted him, one of the agents took his computer away and inserted a USB flash drive that cloned all the data on the hard drive. Agent Chris Tarbell presented Ulbricht the warrant for his arrest.

Ulbricht was charged with money laundering, computer hacking, conspiracy to traffic narcotics, and procuring murder. The charge of procuring murder was removed from the indictment although the evidence was factored into Ulbricht's sentence. Ulbricht was convicted of all the remaining charges after a jury trial that concluded in February 2015. He was sentenced to life imprisonment without the possibility of parole on 29 May 2015. His lawyers submitted an appeal on 12 January 2016, centered on claims that the prosecution illegally withheld evidence of DEA agents' malfeasance in the investigation of Silk Road, for which they were convicted. The oral hearing for the appeal was 6 October 2016.. On May 31, 2017, the United States Court of Appeals for the Second Circuit denied Ulbricht's appeal, and affirmed the judgment of conviction and life sentence, in a written opinion authored by the Honorable Gerard E. Lynch, United States Circuit Judge.

- - - - - - - - - - - - - - - - - - - -

https://en.wikipedia.org/wiki/Silk_Road_(marketplace)#Arrest_and_trial_of_Ross_Ulbricht

Silk Road (marketplace)

Silk Road was an online black market and the first modern darknet market, best known as a platform for selling illegal drugs. As part of the dark web, it was operated as a Tor hidden service, such that online users were able to browse it anonymously and securely without potential traffic monitoring. The website was launched in February 2011; development had begun six months prior. Initially there were a limited number of new seller accounts available; new sellers had to purchase an account in an auction. Later, a fixed fee was charged for each new seller account.

In October 2013, the Federal Bureau of Investigation (FBI) shut down the website and arrested Ross William Ulbricht under charges of being the site's pseudonymous founder "Dread Pirate Roberts". On 6 November 2013, Silk Road 2.0 came online, run by former administrators of Silk Road. It too was shut down, and the alleged operator was arrested on 6 November 2014 as part of the so-called "Operation Onymous”.

Ulbricht was convicted of eight charges related to Silk Road in U.S. Federal Court in Manhattan and was sentenced to life in prison without possibility of parole.

The prosecutor believed that none of the six contracted murders-for-hire occurred. One charge of procuring murder is to be dealt with in a separate pending trial in Maryland; the other five were never filed.

He is currently serving his life sentence at the Metropolitan Correctional Center, New York.

[...]

Arrest and trial of Ross Ulbricht

Ulbricht was indicted on charges of money laundering, computer hacking, conspiracy to traffic narcotics, and attempting to have six people killed. Prosecutors alleged that Ulbricht paid $730,000 to others to commit the murders, although none of the murders actually occurred. Ulbricht ultimately was not prosecuted for any of the alleged murder attempts.

The FBI initially seized 26,000 bitcoins from accounts on Silk Road, worth approximately $3.6 million at the time. An FBI spokesperson said that the agency would hold the bitcoins until Ulbricht's trial finished, after which the bitcoins would be liquidated. In October 2013, the FBI reported that it had seized 144,000 bitcoins, worth $28.5 million, and that the bitcoins belonged to Ulbricht. On 27 June 2014, the U.S. Marshals Service sold 29,657 bitcoins in 10 blocks in an online auction, estimated to be worth $18 million at current rates and only about a quarter of the seized bitcoins. Another 144,342 bitcoins were kept which had been found on Ulbricht's computer, roughly $87 million. Tim Draper bought the bitcoins at the auction with an estimated worth of $17 million, to lend them to a bitcoin start-up called Vaurum which is working in developing economies of emerging markets.

[...]

On March 15, 2015, director/screenwriter Alex Winter debuted at the South by Southwest Film Festival a movie based on Silk Road. Deep Web gives the inside story of the arrest of Ross Ulbricht.

In a letter to Judge Forrest before his sentencing, Ulbricht stated that his actions through Silk Road were committed through libertarian idealism and that "Silk Road was supposed to be about giving people the freedom to make their own choices" and admitted that he made a "terrible mistake" that "ruined his life".

On May 29, 2015, Ulbricht was given five sentences to be served concurrently, including two for life imprisonment without the possibility of parole. He was also ordered to forfeit $183 million. Ulbricht’s lawyer Joshua Dratel said that he would appeal the sentencing and the original guilty verdict. On May 31, 2017, the United States Court of Appeals for the Second Circuit denied Ulbricht's appeal, and affirmed the judgment of conviction and life sentence, in a written opinion authored by the Honorable Gerard E. Lynch, United States Circuit Judge.

- - - - - - - - - - - - - - - - - - - -

https://en.wikipedia.org/wiki/Tor_(anonymity_network)

Tor (anonymity network)

Tor is free software for enabling anonymous communication. The name is derived from an acronym for the original software project name "The Onion Router". Tor directs Internet traffic through a free, worldwide, volunteer network consisting of more than seven thousand relays to conceal a user's location and usage from anyone conducting network surveillance or traffic analysis. Using Tor makes it more difficult for Internet activity to be traced back to the user: this includes "visits to Web sites, online posts, instant messages, and other communication forms". Tor's use is intended to protect the personal privacy of users, as well as their freedom and ability to conduct confidential communication by keeping their Internet activities from being monitored.

Onion routing is implemented by encryption in the application layer of a communication protocol stack, nested like the layers of an onion. Tor encrypts the data, including the next node destination IP address, multiple times and sends it through a virtual circuit comprising successive, randomly selected Tor relays. Each relay decrypts a layer of encryption to reveal only the next relay in the circuit in order to pass the remaining encrypted data on to it. The final relay decrypts the innermost layer of encryption and sends the original data to its destination without revealing, or even knowing, the source IP address. Because the routing of the communication is partly concealed at every hop in the Tor circuit, this method eliminates any single point at which the communicating peers can be determined through network surveillance that relies upon knowing its source and destination.

An adversary might try to de-anonymize the user by some means. One way this may be achieved is by exploiting vulnerable software on the user's computer. The NSA had a technique that targets a vulnerability – which they codenamed "EgotisticalGiraffe" – in an outdated Firefox browser version at one time bundled with the Tor package, and in general, targets Tor users for close monitoring under its XKeyscore program. Attacks against Tor are an active area of academic research, and are welcomed by the Tor Project itself. However, Tor was not only developed for a time in the early 2000s by individuals who "were on contract from DARPA and the U.S. Naval Research Laboratory", but since its inception the bulk of its funding has come from the federal government of the United States.

History

The core principle of Tor, "onion routing", was developed in the mid-1990s by United States Naval Research Laboratory employees, mathematician Paul Syverson and computer scientists Michael G. Reed and David Goldschlag, with the purpose of protecting U.S. intelligence communications online. Onion routing was further developed by DARPA in 1997.

The alpha version of Tor, developed by Syverson and computer scientists Roger Dingledine and Nick Mathewson and then called The Onion Routing project, or TOR project, launched on 20 September 2002. The first public release occurred a year later. On 13 August 2004, Syverson, Dingledine and Mathewson presented "Tor: The Second-Generation Onion Router" at the 13th USENIX Security Symposium. In 2004, the Naval Research Laboratory released the code for Tor under a free license, and the Electronic Frontier Foundation (EFF) began funding Dingledine and Mathewson to continue its development.

In December 2006, Dingledine, Mathewson and five others founded The Tor Project, a Massachusetts-based 501(c)(3) research-education nonprofit organization responsible for maintaining Tor. The EFF acted as The Tor Project's fiscal sponsor in its early years, and early financial supporters of The Tor Project included the U.S. International Broadcasting Bureau, Internews, Human Rights Watch, the University of Cambridge, Google, and Netherlands-based Stichting NLnet.

From this period onwards, the majority of funding sources came from the U.S. government.

In November 2014 there was speculation in the aftermath of Operation Onymous that a Tor weakness had been exploited. A representative of Europol was secretive about the method used, saying: "This is something we want to keep for ourselves. The way we do this, we can’t share with the whole world, because we want to do it again and again and again." A BBC source cited a "technical breakthrough" that allowed the tracking of the physical location of servers, and the number of sites that police initially claimed to have infiltrated led to speculation that a weakness in the Tor network had been exploited. This possibility was downplayed by Andrew Lewman, a representative of the not-for-profit Tor project, suggesting that execution of more traditional police work was more likely. However, in November 2015 court documents on the matter generated serious ethical security research as well as Fourth Amendment concerns.

- - - - - - - - - - - - - - - - - - - -

https://theintercept.com/2015/07/01/nsas-google-worlds-private-communications/

XKEYSCORE

NSA's Google for the World's Private Communications

Morgan Marquis-Boire, Glenn Greenwald, Micah Lee
The Intercept
July 1 2015, 9:49 a.m.

[excerpt]

One of the National Security Agency’s most powerful tools of mass surveillance makes tracking someone’s Internet usage as easy as entering an email address, and provides no built-in technology to prevent abuse. Today, The Intercept is publishing 48 top-secret and other classified documents about XKEYSCORE dated up to 2013, which shed new light on the breadth, depth and functionality of this critical spy system — one of the largest releases yet of documents provided by NSA whistleblower Edward Snowden.

[...]

XKEYSCORE for hacking: Easily collecting user names, passwords and much more

XKEYSCORE plays a central role in how the U.S. government and its surveillance allies hack computer networks around the world. One top-secret 2009 NSA document describes how the system is used by the NSA to gather information for the Office of Tailored Access Operations, an NSA division responsible for Computer Network Exploitation (CNE) — i.e., targeted hacking.

Particularly in 2009, the hacking tactics enabled by XKEYSCORE would have yielded significant returns as use of encryption was less widespread than today. Jonathan Brossard, a security researcher and the CEO of Toucan Systems, told The Intercept: “Anyone could be trained to do this in less than one day: they simply enter the name of the server they want to hack into XKEYSCORE, type enter, and are presented login and password pairs to connect to this machine. Done. Finito.” Previous reporting by The Intercept revealed that systems administrators are a popular target of the NSA. “Who better to target than the person that already has the ‘keys to the kingdom?’” read a 2012 post on an internal NSA discussion board.

This system enables analysts to access web mail servers with remarkable ease.

The same methods are used to steal the credentials — user names and passwords — of individual users of message boards.

Hacker forums are also monitored for people selling or using exploits and other hacking tools. While the NSA is clearly monitoring to understand the capabilities developed by its adversaries, it is also monitoring locations where such capabilities can be purchased.

Other information gained via XKEYSCORE facilitates the remote exploitation of target computers. By extracting browser fingerprint and operating system versions from Internet traffic, the system allows analysts to quickly assess the exploitability of a target. Brossard, the security researcher, said that “NSA has built an impressively complete set of automated hacking tools for their analysts to use.”

Given the breadth of information collected by XKEYSCORE, accessing and exploiting a target’s online activity is a matter of a few mouse clicks. Brossard explains: “The amount of work an analyst has to perform to actually break into remote computers over the Internet seems ridiculously reduced — we are talking minutes, if not seconds. Simple. As easy as typing a few words in Google.”

These facts bolster one of Snowden’s most controversial statements, made in his first video interview published by The Guardian on June 9, 2013. “I, sitting at my desk,” said Snowden, could “wiretap anyone, from you or your accountant, to a federal judge to even the president, if I had a personal email.”

[...]

- - - - - - - - - - - - - - - - - - - -

https://en.wikipedia.org/wiki/Tailored_Access_Operations

Tailored Access Operations

The Office of Tailored Access Operations (TAO) is a cyber-warfare intelligence-gathering unit of the National Security Agency (NSA). It has been active since at least circa 1998. TAO identifies, monitors, infiltrates, and gathers intelligence on computer systems being used by entities foreign to the United States. The NSA terms these activities "computer network exploitation".

TAO is reportedly "now the largest and arguably the most important component of the NSA's huge Signals Intelligence Directorate (SID)[7] (SIGINT), consisting of more than 1,000 military and civilian computer hackers, intelligence analysts, targeting specialists, computer hardware and software designers, and electrical engineers."

A document leaked by former NSA contractor Edward Snowden describing the unit's work says[not in citation given] TAO has software templates allowing it to break into commonly used hardware, including “routers, switches, and firewalls from multiple product vendor lines". According to The Washington Post, TAO engineers prefer to tap networks rather than isolated computers, because there are typically many devices on a single network.

[...]

Organization

TAO's headquarters are termed the Remote Operations Center (ROC) and are based at the NSA headquarters at Fort Meade, Maryland. TAO also has expanded to NSA Hawaii (Wahiawa, Oahu), NSA Georgia (Fort Gordon, Georgia), NSA Texas (San Antonio, Texas), and NSA Colorado (Buckley Air Force Base, Denver).

Since 2013, the head of TAO is Rob Joyce, a 25-plus year employee who previously worked in the NSA's Information Assurance Directorate (IAD). In January 2016, Joyce had a rare public appearance when he gave a presentation at the Usenix’s Enigma conference.

In the Remote Operations Center, 600 employees gather information from around the world. Their motto is "Your data is our data, your equipment is our equipment - anytime, any place, by any legal means."[citation needed]

Data Network Technologies Branch: develops automated spyware

Telecommunications Network Technologies Branch: improve network and computer hacking methods

Mission Infrastructure Technologies Branch: operates the software provided above

Access Technologies Operations Branch: Reportedly includes personnel seconded by the CIA and the FBI, who perform what are described as "off-net operations," which means they arrange for CIA agents to surreptitiously plant eavesdropping devices on computers and telecommunications systems overseas so that TAO's hackers may remotely access them from Fort Meade. Specially equipped submarines, currently USS Jimmy Carter, are used to wiretap fibre optic cables around the globe.

Virtual locations

Details [citation needed] on a program titled QUANTUMSQUIRREL indicate NSA ability to masquerade as any routable IPv4 or IPv6 host. This enables an NSA computer to generate false geographical location and personal identification credentials when accessing the Internet utilizing QUANTUMSQUIRREL.

nolu chan  posted on  2017-06-02 18:03:57 ET  Reply   Untrace   Trace   Private Reply  


#56. To: Pinguinite (#45)

http://www.coindesk.com/who-broke-the-sha1-algorithm-and-what-does-it-mean-for-bitcoin/

Who Broke the SHA1 Algorithm (And What Does It Mean for Bitcoin)?

Feb 25, 2017 by Corin Faife

The cryptography world has been buzzing with the news that researchers at Google and CWI Amsterdam have succeeded in successfully generating a 'hash collision' for two different documents using the SHA1 encryption algorithm, rendering the algorithm 'broken' according to cryptographic standards.

But what does this mean in plain language, and what are the implications for the bitcoin network?

Hash collisions

As laid out in a recent CoinDesk explainer, a hash function (of which SHA1 is an example) is used to take a piece of data of any length, process it, and return another piece of data – the 'hash digest' – with a fixed length.

One way that hash functions are used in computing is to check whether the contents of files are identical: as long as a hash function is secure, then two files which hash to the same value will always have the same contents.

However, a hash collision occurs when two different files hash to the same value.

Given the mathematical laws that govern hash functions, it is inevitable that hash collisions will occur for some values of input data (because the range of data you could put into the hash function is potentially infinite, but the output length is fixed).

For a secure hash function, the probability of this should be so small that, in practice, it is not possible to make a sufficient number of calculations to find it.

The significance of the Google/CWI team's results is in the fact that they were able to create a hash collision by finding a much more efficient method – 100,000 times more efficient in fact – than simply guessing every possible value of data.

It's the efficiency of this method that means SHA1 is now officially broken. (These results are outlined in more depth on SHAttered.io, with an explanation of systems affected.)

The SHA1 bounty

On 23rd February, a sharp-eyed Redditor on the /r/bitcoin page made a post pointing out that a long-standing bounty for discovering just such a SHA1 collision has now been claimed.

The bounty – aimed to discover vulnerabilities in the algorithm – was originally announced by cryptography researcher Peter Todd in a post on the Bitcoin Talk forum in September 2013, but remained unclaimed until this week.

The challenge consisted of a script, written by Todd, which would allow anyone to move the bitcoins from the bounty address to an address of their choice if they could submit two messages which were not equal in value, but resulted in the same digest when hashed.

In addition to Todd, other contributors also donated to the bounty fund, raising a total of 2.5 bitcoins.

According to the researcher, the timing of the claim – slightly after publication of the collision attack – suggests that it was a third party who had read the Google team's research and made use of the results, rather than one of the original researchers, that took the reward.

Todd said:

"If it was the authors themselves, we would have expected the bounty to be claimed just prior to the announcement being published. As it happened, that wasn't the case."

Ramifications for bitcoin

It's important to stress that the cryptography underpinning the bitcoin network, which makes use of the more secure SHA256 algorithm, is not directly affected by the discovery.

But, besides enriching the mystery bounty recipient, the SHA1 collision vulnerability does pose a concern for the bitcoin development community, since its Git version control system uses SHA1 to generate the hash digest for commits.

"The consequences aren't that we have to stop using Git immediately," Todd said, "but it will make it more important to review other people's work, because a third party could try to push a malicious commit in."

The vulnerability here is that an attacker could theoretically create two different versions of a code commit that would appear to be the same when hash values were compared – though for now, given the vast number of computations still needed to find a collision, it's highly unlikely that could happen.

As well as SHA1, Todd has placed similar bounties on the RIPE MD160 and SHA256 hash functions – both of which are necessary for the integrity of the bitcoin standard, and would therefore be calamitous for the network if compromised.

Todd concluded:

"If you claim that bounty, you better go spend your bitcoins pretty quick."

nolu chan  posted on  2017-06-02 18:05:53 ET  Reply   Untrace   Trace   Private Reply  


#57. To: Pinguinite (#45)

https://www.theatlantic.com/business/archive/2014/02/bitcoin-is-broken-heres-a-simple-plan-to-fix-it/283624/

Bitcoin Is Broken—Here's a Simple Plan to Fix It

It doesn't work as a currency, but it could help build the financial architecture of web payments. Here's how.

Matthew O'Brien Feb 5, 2014

Reuters

Nerds love Bitcoin, and they think you should too.

Actually, they think you will. They think it's the payments system, if not the currency, of the future. Something that will end Paypal, not the Fed. A way to send anything to anyone online for little to no fees. But mostly, they think Bitcoin is a technical marvel—because it is. Though that doesn't make it an economic marvel. At least not yet.

Netscape founder and venture capitalist Marc Andreessen is one of those nerds. He thinks Bitcoin is a game-changing technology on the scale of the PC and the Internet. In his telling, all were discounted as techie playthings, and all went on—or will go—to so fundamentally change how we live that we can't imagine life without them. There's something to that, but it's not enough on it's own. As I put it before, every big idea starts out sounding crazy, but not every crazy-sounding idea ends up being big. Some of them end up being ... Segway. That said, Bitcoin does hold a lot of promise, and it could change how we pay for things. But it's not there yet.

Here's why it could be big, why it isn't, and how it could in seven steps.

1. It's called the double-spending problem. Say I send you money online. You can't tell whether I've sent the exact same money to somebody else too. It's just too easy for me to copy the money's digital information, and use it more than once. Maybe I'm honest. But maybe I'm not, and I'm "paying" you with a dollar that's already been spent.

2. That's where financial institutions come in. They sit in the middle of every online transaction, and confirm that, yes, this money hasn't been spent before. These intermediaries add trust to the system, but this trust doesn't come cheap: They typically charge 2.5 percent per transaction.

3. Bitcoin's genius is it confirms transactions with a decentralized network of people who don't charge fees instead of financial institutions that do. Who are these people doing something for nothing? Well, they're Bitcoin miners, and they're not actually working for free—they're getting paid with new bitcoins.

For the uninitiated, Bitcoin is a virtual currency with a strictly limited supply that only grows at a slow, preset rate. Basically digital gold. And like actual gold, the only way to get new bitcoins is to "mine" them—but by solving computationally-taxing math problems, not with a pick and pan. In this case, though, the invisible hand is plenty easy to see. Solving these math problems doesn't just win new bitcoins for individual miners. It verifies all Bitcoin transactions for the entire network.

4. So why do people bother mining for bitcoins? Well, the question answers itself: because it's profitable, and they expect it to be even more so if Bitcoin keeps going up in value. This last point is critical. Bitcoin mining has become incredibly competitive the last few years—just look at the supercomputer fortresses in Iceland that use geothermal power and Arctic air for cooling—and that competition drives down margins. That means miners are really counting on Bitcoin to continue its journey to infinity and beyond, to keep rising forever.

5. When the price of money goes up, the price of everything else goes down. It's called deflation, and it's death for an economy. People put off buying things when they'll cost less tomorrow than today. Companies put off investing when their customers put off buying. And people who borrowed money are stuck trying to pay debts that don't change with wages that do—and have fallen.

But Bitcoin's deflationary bias is a feature, not a bug. It's why miners want to mine, and why there are no transaction fees. In other words, Bitcoin can't work as a technology without deflation. The question is whether Bitcoin can work as a currency with it.

Probably not. At least not when there's this much deflation. You can just how much there's been in the chart below from Peter Coy. It shows how much prices would have had to fall in 2013 if they'd been set in bitcoins instead of dollars.

[chart omitted]

https://cdn.theatlantic.com/assets/media/img/posts/BitcoinCPI.png

Now, to be fair, prices aren't set in bitcoins, and never will be. As Joe Weisenthal points out, it doesn't matter how much prices fall in bitcoins as long as prices are set in dollars—it won't hurt the real economy. But what about the Bitcoin economy? Will Bitcoin deflation hurt it? Almost certainly.

6. It's called Gresham's Law, and it's a simple idea: Bad money drives out the good. It dates back to when rulers would literally debase their currencies by reducing the amount of precious metals in coins, but kept the face values the same. (That's how inflation used to work). The government, of course, would try to collect all the old coins to burn them down, and make new ones. But it couldn't always, and this would create a two-tiered money system. There were old coins with more silver and gold, and new coins with less. So people would hoard the old, more valuable coins, and spend the new, less valuable ones.

It's the same with bitcoins and dollars. Why spend a currency that might go up in value ten or a hundred times—or more!—when you can spend one that won't? People don't. The only time people do use bitcoins is when they can't use dollars (or euros or yuan)—when they want to do something illegal. Things like buying drugs, gambling online, and evading capital controls. Indeed, 60 percent of all Bitcoin activity happens on the gambling site Satoshi Dice.

Other than that, people just hold on to their bitcoins; 64 percent are in accounts that have never been used. Which makes sense, if you think of Bitcoin as a dotcom stock instead of as a currency. It's not like people would use Facebook stock to buy things if they could do that instead of using dollars.

7. Bitcoin would be a clear step forward as a payments system if people actually used it to pay for things. But they don't. The people who have bitcoins don't use them, and the people who don't have them don't want them. Indeed, a new survey from The Street finds that 79 percent of people have never used a cryptocurrency, and never want to.

But there's an easy fix. Just ask yourself why sellers are so happy to accept Bitcoin. It's not just that there are no fees. It's that merchants can instantly turn their bitcoins into dollars thanks to startups like Bitpay. Sure, that means paying a fee, but it's lower than what they'd have to pay the credit card companies—and it means they don't have to worry about Bitcoin's incredibly volatile value.

Bitcoin needs the same thing for buyers. It needs a company that can immediately turn a buyer's dollars into bitcoins and then immediately turn a seller's bitcoins back into dollars—all for a lower fee than traditional intermediaries charge. You wouldn't have to worry about buyers not being willing to spend their bitcoins, because it wouldn't be their bitcoins. Nobody would even realize they were using bitcoins: buyers would pay with dollars and sellers would get dollars back. In other words, Bitcoin would stop trying to be a currency and start being a financial architecture. Of course, it would take a lot of bitcoins to make this work, but it would work if you had them.

Bitcon's killer app is a Bitcoin monopoly.

nolu chan  posted on  2017-06-02 18:10:23 ET  Reply   Untrace   Trace   Private Reply  


End Trace Mode for Comment # 45.

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