Seeking to Solve Bitcoin's Banking Dilemma

When Fidor Bank's Michael Maier spoke to CoinDesk in June, the Internet bank COO framed his industry as one that bitcoin would grow to challenge directly, suggesting at the time that its partnership with Kraken demonstrated its intent to accept this future and even cooperate with it.
However passive these statements may have seemed at the time, they came into sharper focus on 31st October, when Fidor announced it would team with its San Francisco-based bitcoin exchange partner to launch "the world's first cryptocurrency bank".
The unnamed project seeks to build a regulated financial institution that would help bitcoin startups that have struggled to secure and maintain accounts even for day-to-day business.
Given this backdrop, Kraken CEO Jesse Powell sees his company's most prominent collaboration with Fidor as more than an exercise in bringing another first to the ecosystem. In a new interview, Powell positioned the specialized bank for cryptocurrencies as a necessity should the ecosystem succeed at delivering on bitcoin's full technological potential.
Powell said:

"For Kraken to be a viable business long term, for most players to be viable, we need to see the pie grow. That’s what we want to do with Fidor, is create a bank with the specific mandate to bank bitcoin companies and provide reliable banking to end-users of bitcoin."

By providing stable banking partnerships to companies in the ecosystem, Powell aims to, in turn, return lost time and energy to the community. In the process, he will also expand his business beyond one that targets market makers and bitcoin companies with a VC-backed order-book exchange.
However, Powell contends that Kraken has the experience it will take to rise to the challenge and deliver on its goal.
"We’ve talked to more than 200 banks in the last year-and-a-half about banking bitcoin companies, and the successes are the ones you’ve seen so far, the 1% success rate," he said. "[The bitcoin community] can’t go on wasting time. How many man hours is the industry wasting talking to banks? It’s just insanity."

A 'bitcoinized' financial institution

Though Powell was clear on the goals the project is set out to achieve, his statements suggest that Fidor and Kraken are far from solidifying any concrete plans on the types of services they will provide. As the original release relayed, even the name of the bank – BICONDO, BYSE Bank or Cryptocurrency Bank – remains a matter of debate.
However, Powell indicated that the bank does intend to offer certain services to clients, like the ability to borrow against bitcoin assets and invest in lending products.
"We hope to leverage blockchain technology to offer some additional services and 'bitcoinized' traditional financial services," Powell added.

Read more:
http://www.coindesk.com/kraken-seeking-solve-bitcoins-banking-dilemma/

New Altcoin Promotes Fitness

Mining bitcoins chews up a lot of computing power for no other purpose than to sustain the network. Wouldn’t it be useful to mine cryptocurrency in some other, more productive way?

Now a team of Serbian developers has tried to crack the problem with a proof-of-concept altcoin that lets you mine coins simply by exercising.

Mangocoinz was launched as a computer science project by three students at Belgrade’s School of Computing, with a simple concept: instead of using computational work to generate coins, miners have to do some actual, physical work.

For example, repeatedly moving a smartphone (typically by walking or jogging) will result in ‘proof of work‘, which the client software will turn into a portion of a coin.

While the coin is still in its very early days and problems remain to be ironed out, the concept may hold promise as a tool for institutions promoting fitness or as a way to lower health insurance premiums.

Useful proof of work

Mangocoinz is the latest idea in a long-running quest to make proof-of-work models that do more than simply crank out coins. Some have been frankly bizarre: bumbacoin, for example, bafflingly enables people to ‘mine’ coins by trolling newsgroups with Jamaican expletives.

Some attempts have stuck with computation, but have tried to make the computations scientifically useful. Primecoin solves prime numbers while mining coins, for example.

Peercoin, by the same developer, uses proof of stake, at least in part, which mines coins based on how many a person already owns, in an attempt to cut computing cycles and experiment with economics.

Another alternative, gridcoin, rewards people for useful research. Its users still crank out compute cycles, but they use them for crowdsourced scientific computing projects such as SETI@home. Gridcoins are tokens proving that their computers did that work.

All of these projects, even ridiculous ones like bumbacoin, have one thing in common: they involve some kind of effort on the miner’s part.

“There are many kinds of proofs-of-work. All have their trade-offs. We discover more new ideas/avenues every day,” said core bitcoin protocol developer Jeff Garzik. “The general idea is that copying digital data is trivial and frictionless. You must discover a method to make that process slower, more difficult.”

If a proof of work is simply about effort, then a physical proof should theoretically be possible. Running entails a measurable effort, which has a positive fitness effect.

The ‘washing machine attack’

There are problems with the idea, though. It would seem trivially easy to game this system so that you didn’t have to work at it – and the cost of attack is very low. Putting the phone on a washing machine during the spin cycle might do it. Theoretically, you could make yourself a mangocoinz millionaire and get a nice, fresh-smelling pair of socks at the same time, for a double win.

The trio’s answer for that involves a daily mining limit of 10 mangocoinz (MCZ) per day, verified using a centralized, cloud-based service.

Read more:

http://www.coindesk.com/new-altcoin-promotes-fitness-proof-sweat/

CFPB warns of Bitcoin dangers

It’s a bit too early to trust Bitcoin, the Consumer Financial Protection Bureau said Monday, in an announcement sure to be unpopular with fans of the digital currency.

Bitcoin users face “unclear costs, volatile exchange rates, the threat of hacking and scams,” and lack of clear refund paths, the CFPB said in a pretty sternly-issued warning.

“Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market,” said CFPB director Richard Cordray. The announcement was meant as a warning about other virtual currencies, too, such as XRP or Dogecoin.

“Because virtual currency accounts are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, if a virtual currency company fails – and many have – the government will not cover the loss,” the CFPB said in its statement.

The announcement comes after the CFPB was urged in May to get more involved in regulating virtual currencies. A report issued by Congress’ Government Accountability Office then found that government banking regulators had so far focused only on law enforcement actions related to virtual currencies, and “not focused on emerging consumer protection issues.”

In its announcement, the CFPB said it would be accepting consumer complaints about virtual currencies. It also offered more details on why virtual currencies can cause consumer headaches:

• Exchange rates are volatile and costs unclear: The exchange rate of Bitcoins to U.S. dollars in 2013 fell as much as 61% in a single day. In 2014, the value of Bitcoins has dropped by as much as 80% in a single day. The advisory explains that consumers who buy virtual currencies should be prepared to weather this kind of volatility. Consumers should also consider whether there are mark-ups or other fees when using an exchange or digital wallet provider. Companies may be charging consumers to buy, spend or accept virtual currencies.

• Hackers and scammers pose serious security threats: Virtual currencies are targets for highly sophisticated hackers and scammers. Individuals, digital wallet providers, and exchanges are all at risk. For example, if a hacker gains access to a consumer’s Bitcoin “private keys,” which are 64-character codes that unlock the consumer’s funds, the consumer can lose all their virtual currency. Fraudsters are also taking advantage of the hype surrounding virtual currencies to pose as Bitcoin exchanges, Bitcoin intermediaries and Bitcoin traders in an effort to lure consumers to send money, which is then stolen.

• Companies may not offer help or refunds for lost or stolen funds: Some virtual currency companies do not identify their owners, provide phone numbers and addresses, or even specify the country in which they are located. Before using a company’s products or services, consumers should carefully consider if they know how to contact the company in question, and if they know their contractual rights. If a consumer trusts a company to hold their virtual currencies and something goes wrong, the company may not offer the kind of help the consumer would expect from a bank, debit card or credit card provider. In fact, some virtual currency companies disclaim responsibility for consumer losses if funds are lost or stolen.

Not all the voices of consumer protection are critical of virtual currencies, however. Former CFPB deputy director Raj Date is now a supporter, and sits on the board of a bitcoin startup.

“The thing I like about innovation in consumer finance, like bitcoin, like digital currency, is exactly the same reason I went to the CFPB. How is it that you can take new ideas and make the system work better for people?” Date said in April, according to CoinDesk.com.

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