Bitcoin must not in your retirement financial planning portfolio

Bitcoin investments have undeniably become a trend among savvy investors in search of the golden goose, but one financial planner is against the use of it as part of the financial planning portfolio for retirement.

Max Growth Wealth Education Sdn Bhd managing director Nicholas Chu said one should not use bitcoin as part of the retirement portfolio and the public must be well aware of the risk in bitcoin trading before getting in.

“It is not asset-backed, it is very unsecure. It is, basically, you want to participate in the future changes. It’s not a proper financial planning way. It is just an experimental thing that you want to go through in this era, but it is not a proper investment product,” he told SunBiz.

“I definitely don’t agree if they use this for their financial planning. But for those who are able to try new ventures, they can go ahead provided they have extra money. If this doesn’t affect their existing financial planning, then I’ll leave it to them. We need to tell them the pros and cons of this investment. It’s up to the clients to do the final decision,” he said.

Chu cautioned on the uncertainties of bitcoin trading, which is driven by market forces. “It is beyond anybody’s control, all the participants contribute to the bitcoin value. From that, I can say that there are a lot of uncertainties in the future,” he said.

Nonetheless, with the setting up of a few bitcoin exchanges, Chu noted that there will be demand and supply with tradeable markets available.

Bitcoin was the best-performing currency in 2015 and 2016, with a rise of 35.8% and 126.2% respectively.

Year to date, bitcoin prices have leaped more than three times. It stood at US$2,840 (RM12,140) as at 5pm last Friday.

Bitcoins are by the far the most popular cryptocurrency, which exists almost wholly in the digital realm and has no asset backing it. Bitcoin generation, known as mining, while open to anyone with a “mining application” on their computer, needs a great deal of computing power to solve complex algorithms which are later verified with the entire bitcoin network.

Colbert Low, founder of bitcoinmalaysia.com, said the recent spike in bitcoin prices could be partly due to the legalisation of bitcoin by the Japanese government.

He is unsure if the sharp rise in bitcoin prices will create a price bubble, but stressed that one cannot judge its price movement based on the “old economic theory”.

“This is a new economy based on a different model. It’s very hard to say,” Low opined, noting that there has been a growing number of retail outlets that accept bitcoin.

He foresees the usage of bitcoin propagating, especially in different types of payment methods.

However, Low opined that there will not be any “big movement” in the local market if the regulators do not regulate bitcoin.

“Our new Bank Negara governor is forward thinking and he is very much into fintech, technology and innovation. So there would definitely be improvement,” Low said.

The positive development of blockchain will be a catalyst for the growth of bitcoin, he added.

“Blockchain is a real thing that will change the way the IP system is architectured. We need to go down to a deeper level to see how blockchain can change the current problem and solve it.

“There are a lot of projects right now, over 500 companies are looking at this (blockchain) right now. Even IBM, HP and Microsoft are looking at it.”

Blockchain refers to distributed database that maintains a continuously growing list of records, called blocks, secure from tampering and revision. Bitcoin is just an application or software that runs on blockchain technology.

“If you look at blockchain technology, government agencies like the United Nations, the World Bank and the International Monetary Fund are looking at it. This is the best way to secure your data,” Low said, noting that the usage of bitcoin will help reduce operating cost.

Currently, there are about 16 million bitcoins in the market and the number is capped at 21 million.

Bank Negara has said that it does not regulate the cryptocurrency and advised the public to be cautious of the risks associated with the usage of such digital currency.

Source: By Lee Weng Khuen sunbiz@thesundaily.com

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Never-ending money games - from fixed return to split schemes

The Cryptocurrencies—Regulation, Taxation, and Consumer Protection

The allure of money game schemes (or money games) seems not to have diminished despite the collapse of many recently.

Instead, there has been a switch in investors’ focus from fixed-return games to split games, which are deemed “more sustainable”.

Fixed-return schemes generally refer to those that give a consistent percentage of return every month or week. However, most of them have collapsed lately.

Investors’ attention is now centred on split games, even though this means they have to wait for a longer period in order to get back their capital.

Mcoin, which is undertaken through MBI International Sdn Bhd and MFace International Sdn Bhd, is an example of a split game based on units of which the value keeps increasing and then split after a certain time.

However, with the raid of MBI’s flagship mall – M Mall in Penang – by the regulators recently, its days look to be numbered, and the sustainability of such schemes is now a big question.

Another prominent split game – Mama Captain, which has a similar business model to that of Mcoin – has also been red-flagged by Bank Negara last Thursday under the Financial Consumer Alert List. An additional 14 companies have been added to the list, bringing the total number of unapproved and unlicensed companies/schemes to 334 as at June 29.

Besides the local ones, there are several foreign schemes in the market, which investors expect to have more staying power than the fixed-return schemes. Two such schemes from China – Smart Traders Ltd and Centennial Coin of Prosperity – have been in operation in Malaysia since last year. However, it is understood that they have stopped distributing returns to their investors.

This, however, appears not to have deterred those who are lured by the promise of fast money. This is evidenced by the huge crowd seen at an event organised by a split game company a few weeks ago in Shah Alam. It was estimated that over 2,000 participants were present and most of them were Chinese investors.

A number of booths were set up at the venue, and investors were able to redeem a variety of stuff, including vouchers, health products, apparels and many more.

An investor whom SunBiz spoke to at the event said he is unfazed by the collapse of money games and is optimistic about the prospects of the split game that he is involved in.

The investor said he has been in the scheme for more than nine months and now it has started to bear fruit.

“Generally, it takes about two months to split once and we can start generating money after it splits for four times. Now I start to get money from the scheme. While you’ve to wait for some time before getting any return, I think it is still worth to join,” he opined. It is understood that the scheme has tied up with a few product operators to increase its attractiveness. Another investor, Alan Mu, said he was amazed by the event. “The gala dinner is so grand and there are so many products that I can redeem by participating in this scheme,” he said.

Another scheme that has caught the market’s attention is SV International (SVI), a company that Yong Tai Bhd has denied having links to. Yong Tai alleged that SVI circulated photos taken during a signing ceremony on SVI’s website as well as the social media, for which there was no official agreement entered into between the two parties thereafter.

Yong Tai also refuted speculation that SVI has a stake in its Impression City and Impression Melaka projects.

By Lee Weng Khuen sunbiz@thesundaily.com

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On Mcoin, Bitcoin and points of investment

How to Invest in Bitcoin: 14 Steps (with P

MCOIN is still very much a talking point, especially in Penang. To the uninitiated, it is the “digital currency” of MBI International, a company involved in a myriad of activities and hogging the limelight for the wrong reasons after being flagged as one of the entities not recognised by Bank Negara.

Since Bank Negara’s warning two weeks ago, the company’s accounts amounting to some RM177mil have been frozen. The cash in question is significantly much more than the previous major scheme that came under probe by Bank Negara and other agencies.

In 2012, the authorities froze RM99.8mil in bank accounts of Genneva Malaysia Sdn Bhd. Also, 126kg of gold were carted away from the office. It has been five years and the investors, most of them ordinary wage earners looking to earn an extra buck from their savings, have yet to receive their money.

One of the reasons is likely that the liabilities of Genneva Malaysia are 10 times more than the assets recovered.

MBI International, which is primarily based in Penang, has a network stretching up to China. According to reports, it has come under pressure from some investors wanting a return of their money.

However, outlets in M Mall in Penang are still accepting Mcoin for the purchase of goods and services. There is no rush to cash out, as one would have expected, considering that the accounts of MBI International have been frozen.

Nonetheless, it is only a matter of time before the value of Mcoin and the ability of MBI International to return money to its investors is put to the test.

Based on previous events that led to companies having their bank accounts seized by the central bank, it would be a long time before the investors are able to retrieve their cash.

There are some who are completely ignorant of the new global order of currencies and money, making comparisons between Mcoin and the rise of cryptocurrencies such as Bitcoin.

If anybody is harbouring any hope that the value of Mcoin would rise just like the phenomenal bull run seen in the world of cryptocurrency, they had better stop dreaming.

There are fundamental differences between instruments such as Mcoin, which in essence is a token to redeem goods at a few outlets, compared to cryptocurrency that is fast gaining traction as an alternative currency around the world.

Mcoin has unlimited supply and its value is controlled by one entity. How the value is derived is not clear.

In contrast, cryptocurrencies such as Bitcoin have a limited supply. And the supply is decentralised – meaning no one entity controls the supply. There is a ledger that tracks all transactions and measures the amount of supply and how much more is available.

The objective of the people behind cryptocurrency is to come up with a currency that is not controlled by central banks. New supply can only come about after hours of a process called `mining’.

The mining process is a complicated one. It involves many hours of programming and utilising high computing skills to predict the next chain in the block of coins. The data used is based on historical transactions and it is said that one block is created every 10 minutes.

Only one successful miner is rewarded with a slice of the cryptocurrency at any one time. He or she can then transact it in an exchange.

The first cryptocurrency is Bitcoin, which began operating in January 2009.

Bitcoin is only one of the hundreds of cryptocurrencies in existence. There are many more new coins coming up, improving on the technology pioneered by Satoshi Nakamoto.

Nobody knows who is Satoshi or if he really exists. However, the legend is that he wanted a currency that is not under the control of central banks, hence the birth of Bitcoin, the first decentralised currency.

The market capitalisation of all cryptocurrency was US$27bil as of April this year – four times more than what the value was in January this year.

Much of the rise is attributed to the volatile US dollar. A few years ago, if anybody had said that cryptocurrency such as Bitcoin would be used to hedge against the US dollar, many would have laughed it off.

Today, however, it is the reality.

The cryptocurrency fever has picked up in China, which has the largest number of “miners” in the world. One reason is said to be because some see it as one way to take capital out of the country.

In India, when the government decided to demonetise the popular 1,000 and 500 rupee notes, there was a 50% increase in the trading of Bitcoin, as people saw it as one way to legalise their black money.

Bitcoin soared past the US$2,500 mark last week, which is a four-fold increase since January this year. There are many other cryptocurrencies, such as Ethereum, that are all seeing a bull run.

The world of cryptocurrency has taken a life of its own. Computer geeks with “blockchain” expertise, the technology that drives the decentralisation settlements of cryptocurrency, are commanding more than US$250,000 per annum.

It is said to be more than what a consultant or a software engineer can earn.

Those who have put their money into cryptocurrency would be laughing all the way to the bank now. But dynamics and fundamentals are complicated. The strength of the cryptocurrency is not based on historical numbers. It does not have an asset backing it.

It is based on future expectations of what the designer of the cryptocurrency offers. It is a complicated investment not meant for the unsophisticated investor.

Only fools will go for investment schemes that are unregulated and offer promises of returns that are unsustainable. They will lose all the time.

The smart investor will rely on traditional stocks and shares with earnings that are visible. Those who are not greedy will surely gain.

The super-smart geeks are banking on the world of cryptocurrency that has a volatile history. Their fate is uncertain.

Source: The Star by M. Shanmugam

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Bitcoin creator mystery, who is the Face Behind the Bitcoin? 

 

Who created Bitcoin? How? Why? The long search may not be over 

 

 Bitcoin: cryptocurrency rising, money talks, mining boom sputters

Who created Bitcoin? How? Why? The long search may not be over

SAN FRANCISCO  — Who is Satoshi Nakamoto? For many in the tech world, the identity of bitcoin's elusive creator has been a long-running parlor game. And the speculation might not be over.

Australian entrepreneur Craig Steven Wright, who announced Monday that he founded the digital currency , convinced at least one longtime bitcoin contributor that he's the real deal. He managed that feat via a technical demonstration involving Nakamoto's secret bitcoin keys. But Wright's public documentation, which he posted online Monday , underwhelmed others and left the question of Nakamoto's true identity far from settled.

"There's no way you can conclusively prove that you are the creator of bitcoin," said Jerry Brito, executive director of Coin Center, a Washington, D.C.-based crypto-currency think tank, who is skeptical of Wright's claims.

Tracking a pseudonymous cryptographic genius would be challenging under the best circumstances. And here we're talking someone who invented a way for people to send money around the world anonymously, without banks or national currencies. Someone who apparently disappeared five years ago for unknown reasons.

None of that has stopped people from trying. Journalists, researchers and amateur detectives have scoured Nakamoto's emails and online posts, plus the original bitcoin code, for unusual phrases, cultural references and other potential clues to their author.

One of the most celebrated candidates — to his own dismay — was an unassuming Japanese-American engineer who found himself in the cross-hairs of Newsweek magazine in 2014.

Dorian Satoshi Nakamoto was wrongly identified as the inventor of Bitcoin in 2014

A Newsweek cover story fingered Dorian Satoshi Nakamoto, a retired resident of suburban Los Angeles County, after citing circumstantial clues and a vague comment that Nakamoto made when confronted briefly on his front doorstep. The article sparked a media frenzy and a car chase with reporters that ended at the Los Angeles offices of The Associated Press — where Dorian Nakamoto emphatically denied any involvement with bitcoin.

An earlier contender named in a 2011 New Yorker magazine piece was Michael Clear, then a graduate student in cryptography at Trinity College in Dublin. The New Yorker cited some of Nakamoto's writings, which used British slang such as "maths" for mathematics and "flat" for an apartment. It also noted that Clear had worked on currency-trading software for an Irish bank and co-authored a paper on "peer-to-peer" technology similar to that used in bitcoin.

At first, according to the New Yorker, Clear was evasive when asked at a cryptography conference if he had created bitcoin. But he later denied it repeatedly. He also suggested another candidate to the New Yorker reporter, naming Finnish researcher Vili Lehdonvirta, who studied virtual currencies and created video games.

"I would love to say that I'm Satoshi, because bitcoin is very clever," Lehdonvirta told the New Yorker, after laughing for several seconds. "But it's not me."

Speculation has also focused on a Hungarian-American computer scientist named Nick Szabo, who was called a likely candidate by linguistic experts who conducted their own "reverse textual analysis" — essentially, looking for distinctive phrases or word patterns — on an early white paper by the bitcoin creator.

The only problem? Szabo, who has worked on other digital currencies, has repeatedly denied creating bitcoin.

Other scientists' names have surfaced over the years; some theories pose the notion of two or three working together. But denials have usually followed each new mention.

At one point, two Israeli mathematicians floated, and later retracted, the notion that bitcoin was created by the founder of Silk Road, an online bazaar known for trade in various illicit goods.

Conspiracy theorists have even speculated it could have been the work of some shadowy government agency — no one's saying which government — to undermine established currencies or somehow monitor online transactions. (That theory depends on the unproved notion that the creator retained the ability to decode bitcoin's encryption.)

Vice magazine once suggested Nakamoto might be Gavin Andresen, an American software expert and early bitcoin enthusiast who has helped push bitcoin forward in Nakamoto's absence. Andresen has denied it — and on Monday declared that he believes Wright is Nakamoto.

But other cryptocurrency enthusiasts aren't convinced it's Wright. The truth, they say, is still out there. - AP

http://blog.thomsonreuters.com/index.php/bitcoin-economy-graphic-day/

AP EXPLAINS: What Is Bitcoin? A Look at the Digital Currency How it work, security, vulnerability and why? 

Comments:

Indeed, the way Wright has stage-managed the latest revelations about himself seem inconsistent with what we know about Nakamoto. Wright chose to give his scoop to the BBC, the Economist, and GQ. These are all excellent publications, but none of them are known for their in-depth coverage of computer security. The real Satoshi Nakamoto should have anticipated that no one would give much weight to a GQ scoop about his identity.

Bitcoin was Nakamoto's attempt to create a financial system that didn't require trusting the fallible human beings that run the banking system. Yet when Wright decided to reveal his identity as Nakamoto, he chose to do it via face-to-face meetings with a handful of journalists and Bitcoin insiders instead of providing mathematically rigorous proof that anyone could verify. It's hard to believe that's what Nakamoto would have done.

Bitcoin, explained

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Bitcoin: cryptocurrency rising, money talks, mining boom sputters

The Internet has spawned a new form of currency that’s purely digital called Bitcoin. 

Picture this — a high speed car chase with a slew of journalists trying to keep up with a celebrity as they hound him around Los Angeles, California.

The only problem is that inside the lead car isn’t Brad Pitt or even Christian Bale, but a rather unassuming 64-year-old man of Japanese descent named Dorian Nakamoto.

The car chase started when Newsweek claimed in an article that he was the mysterious ­creator of Bitcoin who goes under the ­pseudonym Satoshi Nakamoto, after which a slew of journalists flocked to his home for comment.

Whether he is indeed the fabled founder is still unclear but the media storm revolving around Bitcoin’s creator is a sign of how much interest it’s generating in technology circles.

In this article we take a look at the concept of Bitcoin and how this so-called cryptocurrency works.

Real world, virtual ­currency 

Today, currency or money is produced by the national banks of each country and is accepted as legal tender to be exchanged for goods or services. While we take it for granted, currency is a pretty abstract concept made real by a few pieces of paper and metal which we can exchange for products that have value to us.

It used to be that countries like the United States backed up its ­currency with gold reserves but since 1971 this is no longer the case and now its value is determined by governmental regulation or law. This form of money is also known as fiat currency.

CRYPTOCURRENCY:  A strange revolution on the Net has started a form of currency known as Bitcoin.

Then we have credit cards and online payment gateways like Paypal which make it possible to conduct a transaction without ­actually exchanging hard cash.

However, when you drill down to it, the system is always based on currency produced by the national banks.

Over the past few years, though, a strange revolution on the Net has started a form of currency known as Bitcoin, ­created by private ­individuals ­without national bank or ­government involvement.

In fact, the actual creator of Bitcoin itself has been shrouded in mystery — although credited to Satoshi Nakamoto, the name is believed to be a pseudonym and while a few individuals have been identified, none have been definitively proven to be the elusive ­creator.

V for volatility 

Being digital, Bitcoin itself has no built-in intrinsic value, except what its users assign to it. As such, the price of Bitcoin can vary quite a bit.

As a sign perhaps that the ­currency is gaining more ­acceptance, the value of Bitcoin has gone up in the last few years — today, the price of a single Bitcoin hovers at around RM1,300, although it has gone up as high as RM5,000.

VALUABLE: Today, the price of a single Bitcoin hovers at around RM1,300, although it has gone up as high as RM5,000. — AFP

When it first started, a single Bitcoin was worth very little, and slowly rose to US$1 (about RM3.10) and finally to its current value.

However, if you’re thinking of buying Bitcoin as a form of investment, do be aware that the sheer volatility of Bitcoin does mean that your virtual currency could be worth nothing in the future, or it could be worth a lot.

Is it legal?

This is perhaps the crux of the matter — is Bitcoin legal or illegal?

So far, Bitcoin itself is not illegal and in most countries, there are no restrictions to its use amongst ­parties who accept it as currency.

However, some countries have moved to limit the use of Bitcoin. China, for example, does not allow financial institutions to deal with Bitcoin.

LEGAL TENDER?: A shop in Hong Kong. Some countries have moved to limit the use of Bitcoin. China, for example, does not allow financial institutions to deal with Bitcoin. — AFP

The situation is similar here and Bank Negara has released a short official statement on Bitcoin in January, stating that “... Bitcoin is not recognised as legal tender in Malaysia. The Central Bank does not regulate the operations of Bitcoin. The public is therefore advised to be cautious of the risks associated with the usage of such digital currency.”

Be wary of virtual money! First Bitcoin launched in Malaysia

Last month, The Star ran a story on the dangers of Bitcoin (Be wary of virtual money, M’sians told) but the currency is still widely used in ­technology circles. According to Nook Malaysia chief executive Daniel Yap, the fact that it is not “legal tender” does not make its use a crime. It simply means that Bitcoin is not regulated by Bank Negara and thus will not be recognised by any bank or financial institution in this country as legal tender.

However, it is not illegal for ­private businesses and users to deal in Bitcoin and Nook Malaysia is one of the local companies that accepts Bitcoin.

According to Yap, even if the government moved to ban Bitcoin use, it would be difficult to stop private individuals from dealing in it.

What is Bitcoin?

Bitcoin as a concept is simple — it’s essentially digital currency. Dig deeper into the concept, however, and it gets fairly complicated.

Bitcoin (or BTC which is also the symbol used for the currency) is defined as a form of ­cryptocurrency that utilises peer-to-peer ­transactions, a decentralised system where users across the Internet handle the payment network ­without a central authority or any kind of middlemen.

Users can make transactions and get paid in Bitcoin almost immediately, much like how it works with more conventional systems like PayPal.

However, where it differs is that because Bitcoin transactions are managed by a peer-to-peer system without various companies (such as your credit card company or PayPal) taking a “cut” of the money, the transaction charge for dealing in Bitcoin is either nil or a lot lower.

As the transactions are processed by machines on the peer-to-peer network, the “peers” within the network actually receive the ­transaction fee if there is one. This means that transaction fees are received by the community itself instead of a third party.

As for security, users on peer-to-peer network who run the full Bitcoin client have a copy of a virtual ledger called the “block chain” — this contains a list of every Bitcoin transaction ever processed.

The authenticity of each ­transaction in this ledger is ­authenticated by digital signatures and as every person running the full Bitcoin client has a copy of it, the transactions are also checked against others in the network.

As you may well imagine, the block chain is quite large and ­getting larger every day — last we checked, it was about 14GB in size.

Get started

Using Bitcoin to pay for goods and services is actually easier than trying to explain it. To get started, all a user needs is to install the ­wallet application, which is ­available for Windows, Mac OS X, Linux and even Android.

At its most basic, the wallet app allows users to send and receive Bitcoin currency. While you can run a dedicated application on your PC to send and receive Bitcoins, some sites like Blockchain.info also allow you to perform transactions using a simple web browser.

[VIRTUAL MONEY: A digital wallet used to store Bitcoins is displayed at a Bitcoin conference on at the Javits Center in New York City. — AFP

To be clear, sites like Blockchain.info are not “online banks” and do not actually keep your Bitcoin ­currency — they simply make ­transactions more convenient.

Android smartphone users can download the Blockchain app for sending and receiving Bitcoin ­currency, but due to Apple’s ­restrictions, there is no such app on iOS.

To receive money, every person gets a public address, which is a long string of letters and numbers. For convenience, this string of ­letters and numbers can also be represented by a QR code, which can be scanned by smartphones with a Bitcoin app.

This public address allows other users to deposit money into your account but not take money out from it.

The current value of a ­single Bitcoin is hovering at about RM1,300, which is probably too large to pay for most goods or ­services. However, it is possible to send a fraction of a Bitcoin — ­currently, a single Bitcoin can be split up into a fraction of up to a million, so you can send it in much smaller denominations.

A Numoni Bitcoin Automatic Vending Machine

Once you install the wallet application, you can actually get bitcoins either by receiving it from other users, or buying it from an “exchange” or simply mining for it.

An exchange is an online ­company that will sell you Bitcoins for real money. A relatively new development in this country is the so-called Bictoin AVM (automatic vending machines), where you trade real cash for Bitcoin.

When we first started writing this story, there were two Bitcoin AVMs — one in Bangsar Shopping Complex in Kuala Lumpur and another in Gurney Plaza, Penang. There is also a local website at ­cryptomarket.my which sells Bitcoin Scratch Cards of various denominations similar to mobile phone credit top ups.

Private address

Every Bitcoin wallet app has what is called a private address which is similar to your public address in that it’s also represented by a long string of letters and numbers. This private address is essentially the key to unlocking your wallet and allows you to send out Bitcoin currency to others.

Most Bitcoin wallet apps hide your private address from you since it’s not necessary to know it to send or receive Bitcoin.

However, most wallet apps allow you to “backup” this private address by printing it out or writing it down to be stored in a safe place.

It’s important to never reveal your private address, as this ­represents your actual wallet. Anybody who knows your private address can effectively take control of your ­wallet and transfer all your Bitcoin out of it into their own ­wallet.

Mining for more

Mining is the term used to refer to machines that run special software to “mine” for bitcoins. Although the term mining is used, what a machine that runs the ­mining ­software ­actually does is process ­transactions and secure the network, as well as keep everyone in the Bitcoin ­network ­synchronised.

Processing of transactions and securing the network involves a ­highly secure and complicated encryption system and as such requires pretty hefty computing power.

In the early days of Bitcoin, ­individual users could easily use a PC to mine for Bitcoins. But as more Bitcoins have surfaced, the system, by design, has become more ­complicated and requires specialised machines running powerful ASIC (Application Specific Integrated Circuit) chips.

As such, a number of companies have sprung up around the world that run specialised machines ­dedicated to mining for Bitcoins.

As an incentive for contributing to the system, Bitcoin miners get a twofold reward — first, in the form of transaction fees, and second, the system itself can reward miners by producing new Bitcoins.

NOT EASY TO MINE: Bitcoin mining hardware — each specialised ASIC-based mining machine is equivalent to 180 PCs! — AFP

Don’t expect to be able to easily mine for Bitcoins using a regular PC — each specialised ASIC-based ­mining machine is equivalent to 180 PCs with powerful graphic chips installed and as such, using a regular PC for mining could take years to yield any Bitcoins.

Regular users who still want to try mining for Bitcoins can band together to share computing power over a network by joining what’s called a “mining pool”. If you’re interested in mining for Bitcoins check out www.bitcoinmining.com.

Future of Bitcoin

In many ways, Bitcoin is still in its infancy with many countries ­taking a wait-and-see approach as to whether to accept as legal tender.

This lack of regulation also means that there is effectively no enforcement when there is theft — while there are ways to trace the perpetrators, there is no way to force Bitcoin thieves to return what they’ve stolen.

Money Talks

 

There are hundreds of ­vendors across the world that accept Bitcoin as a valid form of ­currency in exchange for goods and services.

While Bitcoin acceptance has grown in many neighbouring countries, including Singapore and Thailand, according to coinmap.org, which keeps a list of worldwide businesses that accept Bitcoin, only three businesses in Malaysia currently accept Bitcoin as a form of payment. The three are The Nook Bangsar (nook.my), Ked.ai (ked.ai) and Footsteps (www.footsteps.com.my).

Daniel Yap started accepting Bitcoins as a "social experiment" since November, to help encourage its use in this country.

The chief executive officer of Nook Malaysia, Daniel Yap, says he started accepting Bitcoins as a “social experiment” since November. Yap, who operates a co-working space in Bangsar, started to accept Bitcoin to help encourage its use in this country.

“If you don’t encourage people to use it, then it will never be adopted,” he said

“Bitcoin may not be the ­ultimate form of ­cryptocurrency or decentralised currency, but it’s certainly the most well known. But the whole ­movement is beyond Bitcoin, as it’s about going towards unregulated ­currency,” he said.

Right now, though, the ­percentage of customers who pay via Bitcoin for Nook’s co-working space is very small, according to Yap, and it’s mostly foreigners.

Muaaz Mohamad Nor, owner of Footsteps who operates kayak tours and sells outdoor gear, says that the number of customers who pay via Bitcoin are similarly small, although in his case, they’re mostly Malaysians.

“My opinion is that there are three factors that affect Bitcoin adoption — education, Internet access and desperation,” said Muaaz.

Muaaz Mohamad Nor says that accepting Bitcoin is better for a 'mom-and-pop' style shop like his.

Muaaz explains that in countries where the first two criteria are met, weak currency will usually push people to start adopting Bitcoin as a form of currency.

“The practical reason for me to start accepting Bitcoin is that it’s relatively low-cost for mom and pop shops like mine, and in the wider view, I like the idea of an alternative to fiat currency,” he said.

Unlike fiat currency, which derives its value from goverment regulation or law, Bitcoin’s value is determined by its users and the value they place on the ­currency.

“If you look at the value of Bitcoin, it suffered three major crashes over the years but its value has quickly risen again. You can’t say that about most other currency crashes,” he said.

According to Muaaz, he used to own some 5,000 Bitcoins which he bought for just five euros in 2007 when he was studying and living in Germany.

“Back then it was hip to pay for stuff using Bitcoin,” he said. When asked about how much of those 5,000 Bitcoins he still holds, Muaaz laughs and said, “None of it!” At current exchange rates, if he had held on it would be worth some RM6.35mil.

However, both Muaaz and Yap have opted to hold on to the Bitcoins they’ve obtained from their businesses rather than ­convert it to cash.

Arsyan Ismail says that he likes Bitcoin because of the decentralised, open and instantaneous nature of the cryptocurrency.

Arsyan Ismail, chief excutive officer of 1337 Tech Sdn Bhd and creator of. Ked.ai, an online ­marketplace that also accepts Bitcoin, says that he likes it because of the decentralised, open and instantaneous nature of the cryptocurrency.

Currently, Arsyan enables merchants who sell products on Ked.ai to accept Bitcoin and will convert it to cash for them automatically. However, like the other local online retailers, ­payments made with Bitcoin on Ked.ai still amounts to a very small ­percentage.

Arsyan says the biggest hurdle to Bitcoin acceptance is that most people find it very hard to understand the concept, and there are no local exchanges for buying and selling Bitcoin.

“What I’ve seen in Malaysia is that there are two sides — a community of miners who have Bitcoins but don’t know where to sell it, and on the other side, a group who wants to buy Bitcoin but don’t know where to get it,” he said.

The function of Bitcoin exchanges is to bring these two groups together but without an official one the flow of Bitcoins from miners to buyers is a little more complicated, he said.

Contributed by Tan Kit Hoong The Star/Asia News Network

Bitcoin Mining Boom Sputters as Prospectors Face Losses 

Portland: The bitcoin mining rush is sputtering.

Speculators, known as miners, use powerful computers to solve complex software problems and verify transactions to unlock new bitcoins. They’re finding that the enterprise isn’t as profitable as it once was.

Drawn by the virtual currency’s jump in value last year, digital prospectors have turned the mining industry into an arms race as they buy expensive computing equipment and gobble up electricity. While that worked well as long as bitcoin’s value kept rising, smaller players are now being crowded out by bigger competition, high utility bills and declining prices.

“If you mine at the moment, you have to be very lucky to get anything,” said Mehmet Vatansever, who bought $16,000 worth of mining computers in February to chase after new bitcoins. “It’s a very difficult business.”

Mining, a nod to the excavation of minerals and metal ore, is entirely digital and part of bitcoin’s design, so that the money self-regulates supply and prevents out-of-control inflation. The mining process gets increasingly complicated as more bitcoins are created, driving demand for computing power.

Bitcoins, which jumped to more than $1,200 last year from $12, were trading at about $420 apiece yesterday, according to the CoinDesk Bitcoin Price Index, an average of prices across major global exchanges. China’s tighter controls on alternative currencies, the implosion of the Mt.Gox exchange and a U.S. Internal Revenue Service ruling that bitcoins should be taxed as a property have all weighed on the virtual currency.

Used Equipment

While he has been able to create new bitcoins, Vatansever soon discovered that his equipment was on track to earn less than his monthly utility bill of $480. After selling his computers on EBay Inc. in April, Vatansever estimates that he lost a total of about $6,000 on his mining adventure.

In the past week, miners made $14.9 million in revenue, compared with a weekly average of $25.2 million in December, according to Blockchain.info, a bitcoin-data aggregator. The figures represent the number of bitcoins mined plus transaction fees, multiplied by the dollar-based market price.

EBay now features more than 1,600 listings for mining computers, many of them used.

“The mining market has evolved from being mostly isolated ventures to more organized entrepreneurial ventures that are still racing to get an edge with increasingly fast equipment and lower electricity costs,” Gil Luria, an analyst at Wedbush Securities Inc., said in an interview. “At this point, the opportunity for individual miners is very small.”

Big Miners

While individuals give up prospecting, at least two other larger mining companies, KnCMiner and Cloud Hashing, are still generating profits. By scaling up operations, they’ve been able to save costs on cooling and power, making their computers more efficient and cost-effective. KnCMiner also sells mining computers to other miners.

KnCMiner, based in Stockholm, operates about 7,000 machines. While the mining company’s electric bill in March came to $450,000, the computers mined 21,000 bitcoins, according to co-founder Sam Cole.

Cloud Hashing, which lets people buy computing capacity in its data center and share in profits, mines about $230,000 to $260,000 worth of bitcoins a day, according to Chief Executive Officer Emmanuel Abiodun.

“We are profitable whether we sell contracts or not -- through mining,” Abiodun said in an interview. “Our business model can handle volatility in pricing.”

Sales Shift

Mining-equipment suppliers are feeling the cool-down firsthand. CoinTerra Inc., a manufacturer of the powerful computers used to crunch numbers for new bitcoins, has seen new sales shrink by 30 percent in the past three weeks from the preceding period, according to CEO Ravi Iyengar.

Mining-equipment suppliers are also detecting early signs of a shift to new virtual currencies. Approximately 250 KnCMiner customers switched their orders from $10,000 computers to similarly priced alternative-currency mining machines in the past three weeks, according to Cole.

Because they are newer, designed differently and currently mined by fewer people, currencies such as Litecoin can be more profitable, according to CoinWarz, which tracks mining activity.

“The new rush right now is Litecoin,” Colin Lusk, a network engineer in Portland, Oregon, said in an interview.

While he once mined only bitcoins, Lusk now uses five of his eight machines to produce Litecoins and other virtual currencies. Created in 2011, Litecoin is similar in design to bitcoin yet requires less computing power.

A $3,500 computer can produce $25 worth of Litecoins a day for $3 in electricity, while producing $20 worth of bitcoins would cost $17, Lusk said.

Math Problem

Andrew Korb, another miner, said buying bitcoins outright is easier than participating in the mining arms race. While Korb and fellow investors have spent 900 bitcoins on mining equipment since last year, they have only generated 77 units of the virtual currency, he said.
“People do the math,” said CoinTerra’s Iyengar. “If the price goes down significantly, people realize they may be better off buying bitcoins directly from an exchange rather than buying machines.” 

Contributed by  Olga Kharif Bloomberg

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