Bitcoin origins, privacy, & derivatives.

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Greetings Bitwagers.

The price is on the up and up, and Bitwage is closely following. We have some very exciting partnerships to be announced in the following weeks, so keep your eyes peeled. Until then, our founder Jonathan Chester will be speaking at the Inside Bitcoins conference in New York on April 28th. Make sure to check out the panel to find out the latest in the Bitwage world.

Bitcoin Origins

Every Bitcoin user has their own story of how and why they started using the Bitcoin, but few are aware of the big picture of how and why Bitcoin got started with the Genesis Block in 2009 and the back and forth that went on during the network’s first, super-experimental year. Although most everyone has heard of Satoshi Nakamoto as the author of the original Bitcoin whitepaper, few are aware of the rest of Satoshi’s online forum posts and emails with Bitcoin core developers. Now a 300 page book has been been compiled from Satoshi’s posts, as well as some emails that have been publicized, all sorted by topic, ranging from technical challenges to Bitcoin’s network security, to economic theory or even philosophy, such as “what is money?”

For an even broader non-technical view on the cypherpunk origins of what we now know as Bitcoin, check out The Age of Cryptocurrency, by Paul Vigna and Michael Casey of WSJ Bit-MoneyBeat fame.

Although cypherpunks made great super-early adopters and contributors to the Bitcoin protocol, you need not be of any particular political leaning in order to benefit from using Bitcoin or the blockchain. The technical barrier is being lowered as well, with familiar user interfaces abstracting away the great features that Bitcoin uses in the background.

Making Privacy Mainstream

One such interface is the Airbitz, a mobile wallet, which includes a directory of local Bitcoin-accepting businesses. Behind an online-banking-like interface that allegedly passed the grandma usability test, is a mobile wallet done “the Bitcoin way” in terms of autonomy, privacy and security, as detailed by the lead developer, Paul Puey in a recent interview on Trace Mayer’s Bitcoin Knowledge podcast.

For example, although Airbitz does store a backup of your wallet, in case you lose your phone or want to access your wallet from a different phone, the backup is encrypted with a user-created username and password which Airbitz does not store on its servers.

Should Airbitz servers disappear, the Android or iPhone app will still be able to send/receive BTC by connecting directly to the Bitcoin network.

While offering handy usability features like invoicing and transaction annotations, Airbitz generates a new address for every transaction, and uses elaborate algorithms to make sure the private keys are as random as the device’s hardware will allow in reasonable time, which is why they decided against supporting a web-based wallet.

In stark contrast to legacy financial systems, which demand ever-more private information to verify your identity, only to get hacked or leaked a few years later, Airbitz does not ask or even let its users enter any personal information into their servers, such as a name or email.

Airbitz deals with wallet data on a need-to-know basis. All that needs to be known for a Bitcoin transaction is that there are sufficient (not previously spent) funds in a given address, not who the wallet belongs to. Since mobile wallets don’t store the entire blockchain but instead rely on Bitcoin full nodes to verify balances, a privacy hazard is created when a network traffic sniffer can associate your IP address with a query about a specific Bitcoin address. Hence, the Airbitz wallet prefers to work with Bitcoin nodes (more specifically, indexed super nodes) that support encrypted network traffic and will soon support prefix queries, which bury data about your address in a pile of network traffic for similar but unrelated addresses.

Although Airbitz does not recommend storing large amounts of bitcoin in their mobile wallet (it’s not a replacement for cold storage), you are less likely to get hacked or robbed if the would-be perpetrator cannot trace the hefty amount of Bitcoin to a specific device, person, or street address.

The Latest in Bitcoin

In other Bitcoin news over the past few weeks, the big banks and Wall Street are starting to pay close attention to Bitcoin, some to speculate on its price, others to create their own proprietary or task-specific network inspired by Bitcoin.

JP Morgan is now hiring “disruptors”, and at least two Wall Street firms are offering Bitcoin derivatives for institutional investors to hedge the price volatility.

Last but not least,, and you may soon be able to use your Coinbase account to prepay for a single-use MasterCard provided by an identity-masking company called Abine. The beta project is by invite only for now and has been dubbed Bitcoin Anywhere – anywhere MasterCard is accepted. Hey, until that merchant accepts Bitcoin directly, might as well use Bitcoin to make credit cards less of a target for fraud.

Until next time,
-Team Bitwage

Photo by Thought Catalog on Unsplash

Bitwage Blog

Jonathan Chester & John Lindsay

Founders of Bitwage