Bitcoin Bolt

This week we had the privilege of purchasing drinks with bitcoin and speaking to Alex Likhtenstein, owner of EVR – the first restaurant/bar in New York City to accept bitcoin. A full walkthrough of the transactional process and highlights from our conversation with Alex are below.

Overall the transaction experience showed immense promise as an alternative payment technology, but had some drawbacks that are difficult to overlook. 

The Transaction

After consuming a round of single malts, it was time to test the world’s favorite new currency as a true medium of exchange. We informed our bartenders we’d like to pay with bitcoin and they returned with both a physical check and a tablet where the total had to be manually entered into the BitPay app, as bitcoin is not currently integrated with their legacy POS (point of sale) system.

Brandon, one of the most pleasant bar employees we’ve met in NYC, enters our transaction amount into the BitPay app.

The next step was rather awkward: they had to ask me what I’d like to tip since, unlike credit cards, the amount cannot be simply added to the charge before batching. Theoretically, they could have let me overpay by a tip amount, so I have to imagine this will drop from the process as people become more familiar with the system.

The final check is ready	Scanning the check with our mobile wallet

From there the process was nearly seamless. I scanned the QR code on the tablet check using my mobile wallet app and entered the payment amount. Seconds later, the bartender’s tablet showed a green light indicating the payment went through and the transaction was complete.

Strengths

• Easy and fast – took us a minute to learn the system, but doing this a second or subsequent time would be simple.

• Fed our deep, burning desire to buy whiskey with bitcoin in the real world.

Weaknesses

• The payment amount had to be entered manually into the tablet, then entered manually into our mobile. Deeper integration of BitPay into the POS system will be a welcomed change here.

• The bartender had to wait with the tablet as we entered the payment info and the transaction processed. I could see that becoming a frustrating use of their time.

The Interview

After testing the system we caught up with EVR owner Alex Likhtenstein, who provided some unique insight. His responses below are paraphrased for the purpose of continuity of this article unless otherwise indicated. 

Why did you initially start accepting bitcoin?
I’ve been a bitcoin enthusiast for a while and have wanted to accept it since we opened in January. I’ve been bugging Charlie [Shrem, CEO of BitInstant] to help me figure out how to implement this since before he was invested in EVR, but until recently there wasn’t a good way to do so.

How many people have used bitcoin since you began accepting them on April 8?
We’ve done approximately $20,000 equivalent of sales, the majority from bottle service. It’s difficult to say the number of people since wallets are anonymous and there may be repeats, but I’d estimate 20-50 individuals, with many of them paying for a group.

Can you explain how the backend of this transaction works for our readers?
We use a BitPay app to facilitate the transaction. The BTC price reflects the current market-equivalent USD value at the time of purchase. Every day, BitPay automatically sends an ACH to our bank account in USD for the last 24 hours of transactions. The amount we receive reflects the USD value at the time of the transaction, rather than the time of the deposit.

So you don’t take any direct BTC exposure, it’s purely for transactional purposes?
That’s correct, we see the USD value we charge the customer hit our account just like if we were using any other payment method.

What fee do you pay to BitPay for this service?
It’s around 1%, far less than credit card fees.

Do you charge any sort of premium or offer a discount for using bitcoin?
Right now it’s the same as the USD price, but we haven’t ruled out discounts in the future. 

What was the reaction from your bartenders and servers?
They thought it was weird at first, but we do a few transactions per night on weekends, so they’re getting used to it quickly.

As a merchant, what do you see as bitcoin’s greatest strengths?
Lower fees and no chargebacks are great. We also see deposits in our account less than 24 hours after the sale; credit cards transactions that go through banks usually take about three days.

Standout weaknesses?
It would be difficult to do high volume in BTC given the current logistics with the tablet. We would need better integration with our POS system for this to be possible on a larger scale.

Do you think bitcoin is viable as an alternative currency? Total replacement?
“I don’t think it will replace government currency, but it could be a viable alternative. Right now it’s a commodity that can be implemented in everyday use.”

Do you have / trade / invest in bitcoin?
“Yes, but not a ton. I’m not an expert like Charlie.”

Apparently we aren’t the only fans of EVR. This is from our visit on a Tuesday night.

The post Buying Drinks With Bitcoin, Our Interview With EVR Owner Alex Likhtenstein appeared first on The Genesis Block.

The short answer you already know: everyone. But, when broken down into its constituent parts, the answer becomes far more intriguing.

This article is mainly a response to the many television and radio interviews I’ve watched where the host is perplexed that Bitcoin is not controlled by a central authority. Bitcoin may be the first truly democratic currency – one where decisions are made by consensus. When Satoshi Nakamoto open-sourced the bitcoin code so anyone curious enough could learn exactly how the system works, people used to looking to Ben Bernanke or Angela Merkel for guidance on currency were initially disoriented.  In this article we’ll address two monetary decisions that are currently being made by the bitcoin community instead of a central authority: creation and transfer.

Traditional Central Banks

An infamous face from the financial crisis

The Federal Reserve is the central banking system of the US. Ben Bernanke, Chairman of the Federal Reserve, is the first person people turn to for monetary leadership. Although not part of their original charter, the Fed’s current duties include managing the money supply and overseeing the banking system. Two roles within these are especially relevant to bitcoin:

     Deciding how much money is going to be created

     Securing inter-bank transfers

Sometimes there is considerable overlap between the central bank’s responsibilities and that of other banking authorities, but for now lets  focus on the central bank’s role.

The Consensus Alternative

Bitcoin is open-source software – meaning the source code is freely available for anyone to read.  Nakamoto’s decision to publish bitcoin has created an environment that will ensure the future stability of the bitcoin protocol due to the open scrutiny from security experts, and its ability to respond quickly to problems.

There is a detailed description of how bitcoin works on the wiki, and the code itself is currently hosted on github.  You can be secure in knowing exactly what bitcoin will do because everything is visible if you’re interested in looking. This has allowed the best security experts and cryptographers in the world to identify and refine any problems.  Famous security researches have endorsed bitcoin’s security after trying to hack it, even with all of the code freely available.

Millions of Bens

The Bitcoin Foundation is chartered with maintaining the main branch.  However, if a majority of users disagreed with their changes, the Bitcoin Foundation would have no power to stop people from using a different version of the Bitcoin software. Being open-source, the current version is based on consensus: decisions are made by the software version a majority of users are running.  We saw this play out in the March 2013 chain fork.  An issue was discovered where older versions of the bitcoin software were incompatible with newer versions, causing two separate block chains.  Within the hour, bitcoin miners had reverted back to the older version, negating the problem.  A similar situation would occur if malicious code was found – users would convert to a safe version, and life would go on.

Back to the question of who is charge, the answer is everyone. The software that bitcoin users chose to use will affect how the network responds. Lets take a closer look at how this consensus performs the decisions that are usually made by central banks.

• Money Creation

  In a central bank, the bank’s leadership decides how much money should be printed, and when that printing will occur.  Even with the best intentions, monetary systems are highly complex and the implications of decisions are difficult if not impossible to predict.

  The generation of bitcoins is highly predictable, with blocks containing 25 new bitcoins being generated every 10 minutes.  This completely removes policy decisions from impacting the value of a currency. Blocks are found by bitcoin miners running the bitcoin software.  There is no barrier stopping people from running mining software on their own hardware, and contributing to the network’s decision to generate new bitcoins.

• Transfers

  The Fed’s responsibilities include facilitating inter-bank transfers, as well as clearing retail and wholesale fund transfers through the automated clearinghouse system.  60% of all ACH transfers go through the Fed’s clearinghouse, the rest go through proprietary commercial systems.  These can take several days or more, and frequently are accompanied by $25+ fees.

  Bitcoin software has integrated this system into the block chain.  We no longer require a trusted 3rd party to confirm that funds are actually sent. The block chain is a ledger containing every bitcoin transaction since the genesis block was created.  Since every transaction is visible, it is trivial to audit bitcoin’s ledger and determine how many bitcoins reside at each address.  The block chain is transmitted peer-to-peer, meaning that each person hosting a copy of the block chain is directly sharing it with other users.  The balance sheet and transfers are verified by consensus of everyone sharing the block chain.

So the next time a friend or angry talk-show host asks who controls bitcoin the answer is obvious: everyone.

The post Who Controls Bitcoin? appeared first on The Genesis Block.

This is a follow-up to yesterday’s post: Head & Shoulders Forming, Look For 20 Point Drop If Neckline Breached

Yesterday we saw a 90% completed head and shoulders pattern, indicating a reversal of the recent runup was imminent. The retesting around 145 indicated the market was looking to blow off a lot of overbought pressure. We warned against yet another retest, after which a drop would be expected if breached.

That retest ultimately occurred, as did the drop in the amount predicted, but took longer to materialize than if the pattern had been completed. Rather than finishing the head and shoulders, the market trended sideways for nearly a day before the eventual retest at 145. The bearish crossover of the EMAs and repeated prints below both indicated the retest was coming.

We’re seeing a number of developing indicators at the moment. On a longer term basis, a hammer candlestick is forming nicely on the H4, a sign of bullish reversal – though it has weakened even since we began writing this update. We would like to see a hammer printed at close followed by a green candlestick before being confident in the related bullish outlook. At the moment we’re still trading below the EMAs on a medium term basis (H1), indicating continued downward pressure. We’ll continue to watch these indicators and remain relatively neutral until either the longstanding support at 125 is broken (bearish) or we see a few prints above the EMAs (bullish).

The post Bitcoin Trading – 24 Hour Update: H&S Pattern Dissolves, Expected Retest and Drop Realized appeared first on The Genesis Block.

The power to share our life experience is being exponentially amplified as Internet technology nurtures and expands our ability to communicate. A drastic side-effect of this heightened level of exposure in sharing elements of our humanity so viscerally with one another, around the world in an instant, is imminent, sickening heartbreak. Stories, images and video of unimaginable violence and suffering fill media news coverage globally driving the compassionate masses, at some point, to wish that there were a way to help. The bombing at the Boston Marathon spawned that horrific longing and helplessness in people across the United States and throughout the world.  Fortunately for the empathic and geographically remote there is now Bitcoin and, for this particular catastrophe, Trey Copeland, an American web developer created an emergency relief fund called Bitcoins for Boston.

“Aside from web development, I like hunting and fishing and write articles related to that at Outdoorzy.com. I’m also the previous owner of Featured Users, a twitter follower app, before selling it to Izea late last year.”  Copeland said.

Upon hearing the news of the explosions, Copeland was compelled to establish aid quickly and directly to the victims of the attack.  So, one thousand miles away from Boston, in Bowling Green, Kentucky, he created a two-page website with the singular purpose of raising money for Boston Medical Center, one of the hospitals that has been treating the wounded people and will certainly be in need of resources.  According to Copeland, “It’s simple, I’m trying to make the world suck less.  The people of Boston needed my help, so I’m doing what I have to do to give them what they need.  The attacks happened at 2:50pm EDT and I had the website up with an address by 10pm EDT the same day.”

Donations have been a mainstay of the Bitcoin economy since the very early days and it makes sense because of the ease at which bitcoins can be sent with virtually no transaction fees.  Many big organizations have received significant donations to public addresses including Wikileaks, I2P, TorServers, The Internet Archive and Bitcoin Foundation, the latter which has received nearly as much as the prior four combined amounting to around 5,600 BTC.  Contributions made in bitcoin add up quickly and pack as much bang-for-your-buck as cash donations made directly.

To raise awareness and credibility for the fundraising address, Copeland reached out to established groups in the world of Bitcoin and has received a supportive response from Coinbase, Trucoin and Bitcoin Foundation, as he explains, “I first contacted the Bitcoin Foundation and Charlie Schrem of Bitinstant about the project. I received a response from Patrick Murck with the Foundation and he kind of gave me some direction and his opinions on the project. Overall, the response of the project has been great and everyone likes the idea.”

Now, Copeland is asking the Bitcoin community to step up and help reach his goal of $10,000 by May 15, 2013, one month after the tragedy, when he will sell the contributions at market price and hand the US dollars over to the hospital.  After the donation is made, a receipt from Boston Medical Center will be posted online to be open and transparent on everything.  The monetary value of the actual donation will depend on the price that the bitcoins sell for when the time comes.

“One strength that I see about Bitcoin right now is that the last traded price keeps increasing, which gives the value of each coin donated a higher amount than when originally sent in. Another thing is that it’s easy, quick and simple for someone with bitcoins to send a donation.”  Copeland stated.

Emergency donation funds like Bitcoins for Boston have fantastic potential to move funds to areas in need around the world.  Bitcoin is the quickest, easiest and most effective means by which to send money and those are vital properties for emergency fundraising. There is the wrinkle in the fact that, at this point in time, the bitcoins will likely need to be exchanged for fiat before ultimately becoming extremely useful in relief efforts, but that is easily overcome when trustworthy individuals like Trey Copeland step in to make the exchange fluid.  As Bitcoin becomes more widely used and accepted, emergency donations will become more immediately effective, until then, in the meantime, we can all help to make the world suck less by following Copeland’s lead and harness the power of Bitcoin for good.

The post Bitcoins for Boston appeared first on Bitcoin Magazine.