Jan 14

Bitcoin mining difficulties set to create further price volatility.

Bitcoin has taken a real pounding recently – with the price dropping temporarily under $180 USD.

This is incredibly significant as it is a breach of the 1000 Chinese Yuan. This is a significant barrier as over 65% of all bitcoin trades are carried out in this currency.

This price has caused some real issues for mining operations – which quite simply are no longer profitable. The difficulty of mining will reduce in time to a level where it makes it more profitable, however, this will itself cause it’s own issues.

The bitcoin infrastructure is designed to release a new bitcoin mining block (25BTC) every 10 minutes – the mining process is what maintains and keeps the network functioning correctly.

As mining difficulty takes time to adjust the time between block creation briefly reached 12 minutes. As the difficulty hasn’t immediately adjusted this will probably cause two things to happen. Firstly many miners will choose to down tools rather than spend their valuable fiat currency on electricity and hardware maintenance costs. Secondly many miners are so heavily invested they will continue to produce unprofitable blocks – probably holding them until such a time as the price starts to improve or stabilize. There will probably then be a frenzied sell off as mining operations take profits.

What ever happens the immediate future does not look bright for the bitcoin community.

What are your thoughts regarding the recent price drop and how this will affect the future of bitcoin?

Jan 04

Is Coinbase spying on you?

Coinbase has a leading light in the world of Bitcoin for over the past two years. With their help several major mainstream corporations have been brought into the Bitcoin fold, with Mozilla (Firefox), Time Magazine and The United Way amongst some of the names now working with them. However, it seems they are bringing another well known feature to the consumer’s digital currency world: Spying.

Based in the United States of America and being located in the California’s Bay Area, brings both positive and negatives to a company such as Coinbase. They can take advantage of quick and easy integration with the US banking/financial systems and is a clearly a huge plus. Hhowever, potential for government over-regulation and data mining is a huge negative. One of bitcoins main selling point is it’s anonymity. Many corporations, much bigger and more powerful than Coinbase such as Google, Amazon, Yahoo and microsoft have been forced to succumb to the United States governments demand domestically. So is Coinbase becoming the next “chip off the old block?” Let’s see.

Coinbase has effectively banned all it’s Bitcoin account holders from using online gambling websites, even though online gambling is not in itself illegal. According to some Reddit users, when Coinbase customers removed their BTC from SatoshiBet.com, a popular online gambling site, they found their Coinbase account would later be closed due to breaches of the “Terms of Service” agreement violations clause.

According to another Reddit user, Coinbase has taken down the accounts of those who have allegedly bought cannabis products online with coins purchased from the service – even though the user in question themselves denies it.

“I have been a long time Coinbase customer, buying 1-3 times per month, I got an e-mail today saying they are banning me from using their services because of a ToS violation. I emailed them back to ask what the violations were and they told me that they had evidence that I used some of the BTC I bought for cannabis/cannabis seeds. They gave me a specific BTC transaction and said it was for drugs and wouldn’t listen to anything I had to say.”

ACcording to another Coinbase member if you purchased your BTC at  LocalBitCoins.com that was grounds for account closure.

“Because I buy a few bitcoins a week from Coinbase (although sometimes I will go months without buying any) I was flagged as having enough volume to potentially be a Money Services Business (MSB). The Coinbase ‘compliance team’ mounted an investigation against me. They determined ‘they had reason to believe’ I am selling Bitcoins on LocalBitcoins, even though they haven’t said what that reason is, and therefore are suspending my account.”

Coinbase has explained that they’re just trying to comply with the anti-money laundering and drug laws in the USA. So by partaking in online gambling, using LocalBitCoins.com, or even buying marijuana online is not illegal everywhereyou will be banned from the service. This is the cost of doing business in the United States of America.

So if you are going to use bitcoin, is this something you should just have to expect and accept? Does this open the door to corporations overseas to offer similar services with more privacy and consumer protections and not ever increasing “Terms of Service” agreements? Will this damage Coinbase in their market in the long run? Why has Coinbase competitor BitPay not micro-managed domestic regulatory and legal issues in the same invasive way?

Coinbase used to be a trusted Bitcoin account holder, and seems to be heading towards being just a mother hen owned by government interests and unethical domestic regulations.

What do you think of Coinbase now and in the future? What should Bitcoin corporate account holders expect when it comes to regulation and oversight? Share using the links above and comment in the box below.