Outside Innovation

What You Should Know about the Bitcoin Revolution

What would you do if you feared that your bank was going to confiscate the bulk of your savings? You'd remove your funds from that bank, wouldn't you? That's what's happening all over Europe (and in other parts of the world), triggered by the “haircut”that customers of Cypriot banks received on March 29th, 2013. According to an article in the British Daily Mail:

• Nobody can remove more than 300 Euros a day from their account.

• Nobody can take more than €1,000 off the island in cash.

• 80% of deposits over €85K is gone! 37.5% of it has been converted into probably worthless shares of the bank's stock. And 40% will be repaid to you only if the bank “does well”in the future, while 22.5% will go into a contingency fund that could be subject to further write-offs.

Here’s one example from a British ex-pat, living in Cyprus, who didn’t move fast enough to remove his funds:

“Neil Hodgson, 48, who moved to Paphos, on the southwest coast of the island, six years ago, said he has lost nearly £200,000. The former farmer, who has two accounts with the Bank of Cyprus added:

‘I had more than £300,000 in my deposit account and £20,000 in my current account. When I went to the bank the other day I was told the total balance for both is £100,000.’

They were unable to explain how this had been worked out, but indicated I might get some back at a later stage. I checked online and confirmed that the 20,000 in my current account remains, but that I only have £80,000 in my savings account. It's robbery, plain and simple.’”

~ Quoted by Dan Atkinson and Ian Gallagher in
‘It’s Robbery!’ New Cyprus bombshell as Britons are told they may lose EVERYTHING over £85k

Surprising (?) Rise of a Non-Banking Payment Ecosystem: BitCoin

Even before the banking bailout in Cypress (why are they going after customers and not shareholders and bond holders?), our private Pioneers’ discussion list had been buzzing with postings about Bitcoin since October, 2011. At first, it seemed like an interesting “techie” phenomenon—an anonymous secure way to transfer and exchange digital currency (which can be converted into national currencies) in a peer-to-peer network that is distributed, does not use banks, is unregulated and not easily monitorable by government agencies. Perfect for laundering drug money, engaging in drug or gun trafficking, or just hedging your bets against bank runs and/or massive inflation that devalues your local currency. (Photo Credit: ZCopley@Flicker)

However, Bitcoin is a confusing, highly technical, and not very user-friendly alternative to the current financial system. It is also highly volatile. So the chances of its becoming mainstream seemed pretty slim. But notice what has been going on. The total value of the currency being traded in Bitcoins has now surpassed $1 billion.

Egyptian Revolutionaries Aided by the Anonymous Net

Even before the Mubarak government shut down Internet traffic to and from the country, many Egyptian dissidents were taking precautions by communicating via the "anonymous net." The anonymous Internet is a parallel network of peer-to-peer servers that relays your information (and your applications) anonymously. The purpose is to keep government officials and commercial entities from being able to track who you are and what you're saying. This is particularly important if you are concerned about having your civil liberties infringed or being thrown in jail because you are speaking your mind in ways that are unpopular to the regime.

"There are many people wanting to record your Internet traffic and browsing patterns; from governments to commercial advertising networks. There are many ways to defeat the threat of traffic analysis; from simple proxy providers, virtual private networks, and distributed peer to peer solutions. Only some of these offer anonymity along with circumvention."

From the Tor blog: Circumvention and Anonymity

Many of Patty's Pioneers have been predicting an increase in the use of anonymous peer-to-peer networks for some time. These people aren’t political activists. But they are tech-savvy businesspeople who aren't excited about having Google or Microsoft, or any government or any commercial entity tap into their private communications.

The open source Tor program provides anonymity and circumvents wiretapping of your online information by relying on a network of volunteers who are willing to put up Tor servers. (This is not a trivial act of defiance—a few people running Tor servers have been arrested!)

During late January, as the Egyptian revolution began to unfold, it was fascinating to see the spike in anonymous peer-to-peer networking that occurred via Tor.