This week on CCN, we learned about the massive Heartbleed bug, the potential future of Bitcoin with sidechains, SecondMarket's new bitcoin investment fund, exciting new Bitcoin services, and more. Check out some of our top stories this week (7 April - 13 April) on this CCN Week in Review.
Hacker Exploits Heartbleed Bug in BTCJam Heist
Heartbleed is a very serious vulnerability in the OpenSSL cryptographic library. OpenSSL is used practically everywhere on the web by major companies including Facebook, Google, twitter, and others. Due to a simple programming mistake in OpenSSL version 1.01 through 1.01f, a hacker can steal information that would usually be encrypted, such as login credentials, emails, instant messages, and more. Most big-name companies have patched the vulnerability by now, and recommend users to change passwords. However, the popular bitcoin lending network BTCJam was hacked before the company could patch the Heartbleed bug. Twelve accounts were compromised and had about 42 bitcoins stolen. According to BTCJam's official statement, Heartbleed was indeed used in this heist, and BTCJam has updated their SSL certificate to patch the exploit. Furthermore, all accounts have been compensated to their original states and no user has lost bitcoins as a result of this.
Sidechains Are the Future of Bitcoin
There are literally hundreds and hundreds of altcoins. Although some are quite innovative, such as Mastercoin and Zerocoin, most altcoins offer little to no benefit over Bitcoin (my personal opinion). Bitcoin developer Adam Back and entrepreneur Austin Hill believe that there's no reason to create new altcoins when we already have Bitcoin. Instead, they believe that all the cool features of altcoins can be combined into one ecosystem inside the Bitcoin network through the use of sidechains. Sidechains would allow more innovation within the Bitcoin network. Bitcoin doesn't get very many new features on a regular basis because one small bug can collapse the entire system. However, sidechains would allow for new features without putting the entire system at risk. As CCN writer Kyle Torpey states, "If something goes wrong on one of the sidechains, only the bitcoins in that sidechain are lost, and the entire Bitcoin network can continue to flourish." Sidechains would provide a solution more elegant than creating a new altcoin for every new innovation. Because of this, sidechains might just be the real Bitcoin 2.0.
SecondMarket Plans to Launch New Bitcoin Investment Fund
The New York-based trading platform SecondMarket already launched a bitcoin fund for wealthy investors last year. But now, SecondMarket has announced that it intends to launch another bitcoin investment fund this year for ordinary, less sophisticated investors. The new Bitcoin Investment Trust (BIT) will trade on OTCQX and OTC Markets. Some bitcoiners might ask the question, why invest in a fund when one can simply buy real bitcoins? CCN's PJ Delaney offers this response:
"Few reasons, (1) many people familiar with investments and shares have no knowledge of bitcoins and want to get on board the bitcoin express, This is a simple way to benefit from future growth without having to set up brokerage accounts, looking into mining, etc., People want in and they want that in to be simple.
(2) After Mt Gox, people don’t trust many of the exchanges, a mainline fund will give a greater level of security to new investors with the assurance given by ivesting in your own country rather than one in a different continent…. that you can’t sue."
Essentially, investing in bitcoins through a credible investment company would minimise quite a lot of risk for investors. And with the current low price,
"make no mistake, Wall Street is waiting to pounce, and they didn’t get to where they are by buying at too high price, so let’s not sell up just yet."
Bitinvest Launches Prepaid Bitcoin Debit Card
This week on CCN, we covered two very interesting new bitcoin services, the first of which is Coincard. Brazilian bitcoin exchange Bitinvest recently announced Coincard - a prepaid MasterCard debit card that can be loaded with BTC. Using Coincard is incredibly simple. Cardholders deposit bitcoins into a unique bitcoin address and Bitinvest converts the coins to Brazilian Reais. If users want to withdraw unused funds, Bitinvest can convert Reais back to BTC. The only catch is that Coincard is exclusively available in Brazil. However, that's still nearly 200 million people who can now use bitcoin practically anywhere in their country. Furthermore, Brazil will see an increase in tourism this summer with FIFA 2014, which will allow international bitcoin users to spend their coins in Brazil.
Bitcoin Insanity: Buy Bitcoins with Credit Card and PayPal
It's uncommon to see services letting users purchase bitcoins with credit card and/or PayPal. This is simply due to chargebacks. Buyers can claim some sort of breach of contract, and banks can reverse payments made to sellers' accounts as they typically side with the buyer. However, bitcoin transactions are inherently irreversible, which leaves sellers at risk for fraud since they have no way to disprove buyers' allegations. As a result, bitcoin-for-credit-card services are rare, and any company offering such a service might just seem...insane.
Yet a brand new company called Bitcoin Insanity is offering such a service. Bitcoin Insanity lets users easily and quickly purchase BTC with PayPal, credit card, bank wire, or cashier's check. To minimise on fraud,
"Bitcoin Insanity manually process payments after they pass through the PayPal or Mijirehcheckout, leveraging their fraud detection routines and financial partnerships to minimize their risk. At this time, purchases are also limited to one per customer per day. "
Bitcoin Insanity's convenience and fraud protection does come at a cost, however. Prices are higher than the current exchange rate. For instance, at the time of this post, 0.018 BTC = $7.32 USD, but on Bitcoin Insanity, 0.018 BTC costs $10.00. The markup isn't too bad, and it's necessary to offset the occasional loss to fraud.
Mark Karpeles Faces Immediate Arrest in the United States
It seems like we can't go a single week without more news about Mt. Gox. Last week, U.S. Judge Stacey Jernigan ordered Karpeles to travel to the United States for questioning, but it seems unlikely that Karpeles will be travelling to the States. His lawyers claim that he would likely be arrested as soon as he sets foot on U.S. soil.
"I assume he would be arrested as a person of interest...The FBI would likely want to question Karpeles about alleged fraud at MtGox, which collapsed in February, or about connections he may have to that other notorious online marketplace, Silk Road.”
-Roger Townsend of Breskin Johnson & Townsend PLLC
Mark Karpeles is remaining silent to the media while the Mt. Gox story continues to unravel. In related news, an investor group is offering 1 bitcoin for the defunct exchange. At this point, many bitcoiners are wondering when it'll all be over.
That's all for this CCN Week in Review, where we look back at our top stories of the week.