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Weekly News Update: Smart Contracts and Arrests and Bitcoin Hording

Bitcoin Smart Contracts Will Challenge Ethereum

Bitcoin has a new player emerge on the crypto currency scene, with ethereum passing $1 billion in market cap.  The rise of ether is in large part to smart contract technology.  Smart contracts work in a completely transparent way that could change the face of capitalism going forward.  Essentially, smart contracts are agreements between two or more individuals or business entities carried out by a non negotiable third party.  Smart contracts are completely visible on the ether block chain, so there can be no human interference and total transparency.  In short, they are a revolutionary technology.

Bitcoin developers are hard at work trying to catch up to ether, including Rootstock, or RSK Labs.  “We are convinced that smart contract platforms on top of public blockchains will play a key role in the next wave of disruptive innovation,” said RSK Labs co-founder Sergio Demian Lerner.  “Technologies such as bitcoin will facilitate the evolution of the internet of things and democratize the access to financial services and decentralized services.”

Key to the proposals by RSK Labs and others is security.  Ether may have the technological edge right now, but it has nothing like the tried and tested security system of bitcoin.  This gives bitcoin a huge edge when it comes to attracting big business mining operations, as well as assuaging the fears of multi national corporations that are interested in incorporating bitcoin into their business plans.

Developers are keen to include ether compatibility into their bitcoin smart contract innovations.  Think of this move by bitcoin developers as an attempt to buy out a small start up that is causing waves.  Ideally, bitcoin stake holders would much rather incorporate the best that ether has to offer into bitcoin than go to war with it.  RSK Labs is moving forward with their bitcoin smart contract work, hoping for a full launch of their innovations by the end of the year.  Time will tell if ether will continue to blaze it’s own path, or simply become enveloped by the gravity of bitcoin’s pull.

5 United States National Guard Members Arrested

Five United States National Guard members were accused of using bitcoin to illegally obtained credit card numbers so they could enact fraudulent purchases from different military bases.

Bitcoin Crime Scene

Derrick Shelton, Quentin Stewart, and James Stewart were indicted earlier in the month and arrested last week over the alleged fraud.  Those arrested were found in possession of magnetic strip re-encoding tools and software.  After purchasing stolen credit card numbers in bulk with bitcoin, the men then used those tools and software to apply the stolen numbers to actual credit card they possessed.

Charges for the men differ in penalties, ranging from seven and a half years to twenty years.  Obviously their military careers are over as well.

Bitcoin Hording Becoming the New Gold

Smart investors in previous generations knew that if they bought gold and held onto it, they were making one of the safest investments in the world.  Gold was the standard bearer of conscientious investors because it held it’s value so well.  Even today, when the world financial markets begin to experience any kind of turbulence or negative movement, gold value soars as people pour their money into the precious commodity.  There is a new trend however, with many people choosing to put their worth into bitcoin instead of gold.

A Wall Street Journal survey asked 3500 bitcoin users what made them use the currency.   The biggest reason people held bitcoin was as an investment.  Bitcoin has attracted so much traditional investment because there are so many applications for the block chain technology, and so many developers working feverishly on bitcoin projects.  Additionally, bitcoin is starting to show real strength in terms of stability.  In April, bitcoin’s price volatility was below gold’s for 28 straight days.  This marked the longest stability winning streak bitcoin has ever had over gold.  You cannot really blame investors for going with bitcoin, it has huge potential upside and it is starting to become impervious to large price fluctuations.

bitcoin piggybank

Security was the second biggest reason people chose to hold some or all of their wealth in bitcoin.  Hedge fund manager Michael Novogartz called bitcoin an “I don’t trust people” purchase.  Security concerns are paramount with bitcoin, which makes sense since there are incredibly large amounts of currency involved.  Bitcoin offers lightening quick transactions with virtual anonymity.  It takes a very talented and dedicated hacker to steal bitcoins, whereas traditional banking and cash are easily stolen.

Many traders are looking to take advantage of this movement to bitcoin in times of market turbulence by buying up bitcoin during bull markets and selling off for higher prices when it turns to a bear market.  This dynamic between traditional markets like the New York Stock Exchange and bitcoin is mirroring the dynamic between traditional markets and gold.

Russia Mulling Bitcoin Ban

Russia’s Finance Ministry put out a bill that looks to ban bitcoin and threatens criminal liabilities to anyone who is involved in bitcoin transactions or mining. Heads of banks that violate the proposed law will face up to seven years in jail, showing just how serious of a threat the Finance Ministry is deeming bitcoin.

German Gref, board chairman at Russia’s largest bank, Sberbank, argued that the ban would be very harmful to Russian advances in technology.  Gref called the block chain a “new web technology comparable to the internet that has yet to be born.”  Comparing any new technology to the internet is a strong statement, considering the world before and after the internet are vastly different.

There may be some truth to Gref’s statements however, as speculative and venture investment in bitcoin block chain technology has now surpassed investment in the crypto currency itself.

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