The American Original. For over the last ten seconds, the sharpest Satoshi's, the best bitcoins, the hardest cryptocurrency talk. We'd like to welcome Derek J. Freeman from Bitcoin Philadelphia. How's it going? Megan Lourdes from Bitcoin not bombs. Hello. And Will Pangman from Bitcoin Mill Wocky. Thanks for having me. The Bitcoin group is sponsored by Alpha Lion Technologies. Alpha Lion Technologies. They don't make the altcoins. They make the altcoins of the future. Learn how to make your own altcoin at AlphaLionTechnologies.com. 1. Overstock.com accepts Bitcoin. All it took was a few pizzas, some hotel rooms, and locking the coin base in overstock teams in a room for a week. But they got it done. Overstock.com is now the first major online retailer to accept Bitcoin directly. They made over $124,000 on the first day. The snowball has started rolling. Who's next? Derek J. It's got to be Walmart. They're the biggest. They're the baddest. Except for Amazon, which is dragging their feet for some unknown reason. I think Walmart would be the next obvious choice. Once they see overstock doing something, they've got a pretty similar business model. They could just go for it. Megan Lourdes. I think we're going to see someone like eBay. Maybe pick it up. Again, I would expect Amazon to really be considering it, though. I know you can still get you can use gift and get a gift card for Amazon with Bitcoin. But there's really no reason for them to not just accept it directly. Will Pangman. Well, I'm hearing rumors that it'll be new egg that seems to be coming up. But whenever Snoop Lyon or whatever he's calling himself releases his next CD, that's a little bump. When is that? That should be coming up pretty soon, right? But I also heard the CEO of RoboCoin. I forget which news outlet it was, but he was being interviewed. And he mentioned overstock and Starbucks as possibly being next. So I'd really like to see a real world retailer, especially one as ubiquitous as Starbucks. That would really kick the adoption into high gear. I like how it's become a race already. By overstock throwing in their hat so quickly, they've made it clear to everyone else that this doesn't take months and months. It's not a big plan. You put some guys together and you get it done. Amazon Walmart, especially Walmart with such a low amount of money with such a high overhead. You think they would get on board with Bitcoin and start saving probably hundreds of thousands, maybe millions of dollars in credit card fees. If you were a credit card company right now, would you be worried? I think so. How many more major retailers before we don't care anymore? It's not a big deal. What type of business would you like to see take Bitcoin? Derek J. I'm going to say it's about 50. That's not an entirely arbitrary number. But I think for most people, once there are 50 big businesses that have accepted it, they've heard of at least 10 of them. They're like household names and they say, okay, I can get on board with this Bitcoin thing because tied or craft or whatever accepts it. I accept it now too. What type of business is what I like to see except Bitcoin? For me, convenience stores. This is one of the no brainers. I want to be in and out and Bitcoin makes that possible. I don't need to make change. I don't need to talk to anybody. Just show me that QR code and let me get out of this store. Megan Lords. Let's see. I don't know that it's maybe I could put a number on it. I think it depends on who starts taking it. If someone like Walmart gets in, I mean, we're going to see I think massive adoption Bitcoin really quickly. I don't necessarily have a number. I think it depends on who's going to be adopting it first. As far as who I'd like to see start taking it, I really still want to see small local businesses taking it and like farmers markets, things like that. Getting the people in your local community involved. I don't have anything in Walmart taking Bitcoin. I think that's awesome. But I really got love for my small businesses here and I'd really like to see more of them taking it. Will Pangman. I think I want to bring everything back down to earth a little bit. I don't really see any of these really major players taking it. Patrick Burn, the CEO of Overstock, he's kind of a no brainer when it comes to being attracted to Bitcoin. He is involved with the Deepcapture investigation from the crash of 2008 and stuff. Check that out. It's interesting stuff. Deepcapture.com. But yeah, there are going to be a lot of these big players. We've seen everyone be cautious who shouldn't be like Western Union. Amazon and eBay have dipped their toes in the water. So there's been leaks of rumors of stuff like that. The big box stores are not coming very soon either. It's unfortunate. But what I'd really like to see, the businesses accepting Bitcoin are the vendors for the kinds of businesses that already accept Bitcoin. So we can kind of close the loop here. These retail outlets can accept their Bitcoin payments from their loyal customers. You mentioned Overstock success in just their first 24 hours. Overstock can then pay its suppliers, the vendors that it looks to, to source the materials for how they run their business. You could take Overstock and search whatever business that's already accepting Bitcoin, the Bitcoin store and all these places. Let's close the loop and then we'll see the dominoes fall. I think we've got some really good ideas here. I think Starbucks would be fantastic. New egg is definitely a candidate. I think the answer is five. Once we get about five major businesses that accept Bitcoin and really more than you can list off in a normal conversation when it becomes you have to choose between Walmart or Target or Overstock, which one you're going to mention. That's when it's going to be over and it's just going to flow like dominoes. The small businesses will come in line. Basically, if you think about Squares business model and the little thing that you're going to put on top of your phones, you could accept credit cards. All of those businesses, farmers, markets, individual small restaurants, any kind of entrepreneur, a tax man, any kind of service that you would offer, strength coaches, soccer teams, all of those people should just accept Bitcoin with their phone. You don't need a little attachment on top and you don't need to pay square their fees. But the next big company to accept Bitcoin will be Netflix.com. Issue 2. Miners ditch ghas.io over 51% attack fears. Mining network ghas.io, near the magic number of 51% this week, as Bitcoin miners took to Reddit and social media in droves, earning people to change pools. If they had reached 51%, they could have reversed transactions, double spent, or even prevented other miners from mining valid blocks. Could a 51% attack really happen? What would happen to Bitcoin? Megan Lords. I thought it was interesting. It kind of showed the voluntary nature of the Bitcoin community, realizing the threat that a 51% attack would pose and they self-regulated. I think there's more incentive in keeping Bitcoin preserved the way it is instead of breaking it down. Maybe there will be some short-term gains if they get past that threshold. But I still think there's more incentive to not go past it. If it does happen, if there is a 51% attack, I think the market's going to respond to that. I think we're going to see better coins come out or there will be a fairly quick fix because of how perceptive the community is, too. Will Pangzen. Yeah. I was kind of annoyed more than anything by this. I do think it's a question worth pondering and it's interesting the behavior of these miners. They're kind of entrepreneurs too. It's easy to glom on to the gorilla in the space at the moment or whatever. I know of a lot of solutions that are being worked on right now to decentralize mining pools and things like that. There are some options out there already. If this is a big concern to people, they should consider going to peer to peer pools and things like that. Certainly important questions for the health of this long term. It's interesting. I wonder there's certainly a lot of investment, a lot of big investments going into mining in the last several months. You wonder the rigs that are out there that are able to pull this off. I'm fascinated by the whole arms race with mining, but it's something I still have a lot to learn about. It's not something I'm very concerned about, a 51% attack. I'd like to not see one attempted for sure, but I think the survivability of Bitcoin is even good shape right now. There, Jay. It's possible I could have missed something, but yeah, I think a 51% attack is absolutely possible. However, what would happen to Bitcoin is people like me, if I see a 51% attack happening, I'm switching right over to some other altcoin. I'm not interested in Bitcoin anymore. Once I know that they could be double spans, reverse transactions. I am probably most miners and other people on the Bitcoin network who say, hey, wait a minute, I want this currency and payment network to stay useful and valuable. If a 51% ruins that, then me, even as a miner, I'm not going to be interested in doing that. Let's not forget an attack centralization. It's some bad thing on face because centralization, when voluntary, this has been a very good thing. When there was a fork in the blockchain, the centralized nature of these mining pools actually helped correct the problem sooner than would have been possible if they were totally decentralized. I think it's important to remember that centralization is not always a bad thing. It's not so bad to have an oligolopoli where only four or five companies control the entire market, which seems to be with the Bitcoin mining pools. I like to realize that Will's idea of the peer-to-peer mining, perhaps if the mining pools reached 30% or 40%, they'll just break into individual mining pools, 2A and 2B, just split into parts and then continue mining. It also seems like the mining pools should just be capped at 40%. If you get that level of control, it's dangerous for everyone involved. I don't really think that G-HASH.io profited by going above 40% and threatening the market. I think they're probably going to lose long-term. Exit question, why not just capped the mining pools at 40%, Will Penguin? I don't know. I'd rather see more of a consensus on protocol improvements or something. We know these things are coming. Bitcoin has changed since its inception a number of times. I'm sure a fix at the core that could be agreed upon by the majority would be perhaps a better solution than mining pools, capping things. I don't know how easy it is to change mining pools. I'm an inexperienced, aspiring miner. If it's costly or time-consuming, then that could be a concern. Derek J. No. It's anti-freedom to put a cap. Let the market decide. Megan Lords. Yeah, I was going to say that. I think we should let the market decide. The network wants Bitcoin to succeed more than it wants, what it can gain out of a 50% attack or something. We already shown the miners can self-regulate. We'll see. This episode was sponsored by Let's Talk Bitcoin. Let's talk Bitcoin. Check out their exciting new podcast contest and vote for your favorite. Find out more at Let'sTalkBitcoin.com. Issue 3. IRS Reviews Bitcoin. If the IRS believes Bitcoin to be a currency, they get to tax it at 40%. If Bitcoin is simply a capital asset, it's only taxed at 24%. What will the IRS do? Will they leave all that money on the table or will they give Bitcoin a bump by calling it a currency? I ask you, will payment. Yes, yes, they're going to, yes. But I don't know if it's a top priority at all. The IRS has a much bigger job lately than Bitcoin regulation if you will or Bitcoin taxation pursuit of all that. I'm sure there will be some concerted effort on their part and probably already is. But I think they're more focused on some other newer laws that have expanded their payroll quite a bit and their workload quite a bit. They'll be consumed with the issues that precipitate from the health care law. I don't think Bitcoin is really a concern of the IRS to the point where every single one of us has a lot to fear because this is a gray area, a complete gray area. Typically, the way the IRS treats gray areas is you're a criminal, retroactively. We'll see. Sometimes that's not the case. Sometimes in the case of the internet, Congress passed laws to allow it to flourish first, if you will. There are some proposals in the forthcoming for legislation for Bitcoin for the same respect. I believe it alone law or whatever. They're going to be all over it. Raise your start, Jay. What will the IRS do? If the IRS is smart, they'll tax it at 40% and call it a currency. Of course, you mentioned that's going to give Bitcoin a bump. But as all Bitcoin users know, as we think about even preparing to fill out a 1040 or some sort of self-reporting about Bitcoin earnings or holdings, it's impossible. We all know it's impossible to give accurate information about this. Even if we wanted to give perfectly accurate information about Bitcoin holdings, appreciations, it would be impossible for any person to be accurate about that and to know that he's accurate. Thus, it would be impossible for an IRS agent to know if this is accurate. It's a big problem. What I encourage Bitcoin users to do is not report. They want the money that they think is theirs. Of course, I think they're going to want a tax at 40%. But there's a huge enforcement problem. If Bitcoin users can't fill out the information, they're not going to be able to track people out. They'd have to hire a giant team to track down this information, to look at the blockchain, to link everything up. But they actually have to get the NSA involved. I don't know if the IRS has the capacity to do something like that. Even though they may attempt to, I'm sure, because again, they see that there's a lot of money to be stolen. But I don't know that Bitcoin is used by enough people for them to make it a priority. Like Will said, they have bigger things to focus on. I think they're kind of testing the waters at this point and trying to figure out how they can get their hands on the money. But it's going to be a struggle. I agree. There are so many issues like lost wallets or stolen Bitcoin's, or fake stolen Bitcoin's, or fake lost wallets. I mean, there's so many issues. And so many people did lose their wallet. They don't know how to move their Bitcoin around. They legitimately have made horrible mistakes. And it's gone. And I presume you're probably going to have to pay taxes on those lost Bitcoins or not. I don't know. We'll have to see. Exit question. If the IRS doesn't call Bitcoin a currency, how many years before they change their mind will Pagman? It seems to be frozen. Go to me. Go to me. There's Jay. I don't see that happening. There's Jay. It doesn't matter what the IRS does or says. Screw them. Megan Lord. I was going to say it doesn't matter if the IRS says it's a currency or not. It is a currency. It doesn't matter if they declared a currency this year or 10 years from now. There's nothing. They don't legitimize Bitcoin. The users do. The answer is three. Three years. Issue four. Bitcoin bought swana. One woman in Africa has named herself the Bitcoin rep for bought swana and is attempting to bring Bitcoin to her small African nation. Is this the future of Bitcoin? Individual adopters leading entire countries to Bitcoin freedom? Will Bitcoin bought swana be a successful model for others to mimic? I ask you Derek Jay. Gee, I hope so. She really made a splash. We were talking about it at last night's Bitcoin Philadelphia meeting. So obviously the news is making the rounds. And if more people can follow her lead, the whole world will be a freer place very soon. Megan Lord. It really shows how Bitcoin can help people all around the world who are suffering from poverty or other problems that are often caused by their own governments. So I mean, it's a great story. And one of the things that she said in the article that I thought was very interesting is it gives people the sense of self-control over their money. And that's very empowering because people don't care. Don't put all of their money into banks in third world countries. Oftentimes these banks are hours and hours away. And Bitcoin eliminates that problem. Let's see. Another thing. And also I did read a criticism of it. People were like, oh, why should she be concerned about getting Bitcoin's to people in bought swana? These are people who were illiterate. Well, in 2012, this group called One Laptop One Child distributed tablets to these children in Ethiopia. With no instructions given, they just gave them the tablets and they taught themselves how to use the tablets. Within a week, they were using them fully functionally. Within five weeks, they had hacked the tablets to enable the cameras to work on them that had been disabled. So this whole kind of paternalistic idea that the third world isn't maybe ready for some of these technologies because of these reasons. It's really ridiculous. People understand how they can teach themselves. I do think you're going to see a trend in this happening. That was one of my favorite stories. It's my favorite story of the year so far, I think, for 2014. I completely agree with Megan. When news of that little experiment came out that you referred to Megan, that was really thrilling for me to read to. I love hearing stuff like that. The creative power and the real true intelligence of human beings and any human being can actualize a full-est potential. That's exciting. This is apparently what this woman is doing too. I think what's important to look at though is how many of the buttswannans know of her. That's the thing I want to know. We all in the West certainly thanks to Reddit and many other outlets and we're talking about her on the Bitcoin group. I think to encourage people like this and nurture them and maybe there can be some like emissary effort. I think there already is with all the conferences around the world to recruit more of these ambassadors. The most important thing to me is how many of their people know of her and can she serve them directly. I think she can. It's great that we all know about her but I'm sure if she posted up a QR code she could get a lot of resources to make it build the awareness of what her project is for the people in Botswana. I think we need to see this in all kinds of developing nations. A lot of places we are. I'm interested to see what 2014 has to bring for Argentina. If you remember my prediction a few weeks ago that Argentina would be the big story, not Russia, not China. This is a good point and it seeks into the exit question of how should people spread Bitcoins? Should the same tactics be used in the developing world as in the developed? Do you think that she's going to have maybe a local meetup at a pizza place or an African equivalent of a pizza place? Get everyone together. Give them very small amounts of Bitcoins, set up wallets on their phones. I'm not sure. I mean that sounds reasonable. If it works here it's going to work there. Derek, Jay? No. As much as I regret my answer, the same tactics should not be used in the developing world as the developed. I think that they're totally different economies and they require different setups. Besides there's the benefit of once Bitcoin gets adopted, next year we've got a variety. We've got big box stores that accept Bitcoin and we've got developing countries where you can get fresh milk from a goat. It's a wide range of acceptances. How should people spread Bitcoins? Look within yourself. See what you're doing in your life. Where are your dollars going? Try and change that to Bitcoins. If you're doing that and everyone's doing that, the world will be Bitcoin friendly tomorrow. Megan Lawrence. We're going to be really surprised by the different creative methods that people come up with to spread the idea of Bitcoin. In all other countries, what works for us isn't going to work for them. We don't need to be sending white nights over there, spreading the salvation of Bitcoin to these people. They understand what's going on in their own economies better than we understand what's going on in their economies. I think we're going to see a lot of different approaches coming in. I don't think there is one best approach to spreading Bitcoin. Will Penguin. How should people spread Bitcoins? I think you're looking at it. Bitcoin, Botswana, that's a great model. Everything we're doing here, the media that's coming out. I really love all the new podcasts. I love seeing the mainstream media cover local meetups and stories about Bitcoin. The billboard thing I know I bashed it a little last week, but that's great. All that stuff is great. You're watching it in action. Should the same tactics be used? Yes and no. I certainly think live in-person networking like meetups can work in the developing world. I mean, why not? What's the problem with Bitcoin adoption in the developing world? They're not wired up. There's not enough Wi-Fi. That's a huge problem. Connectivity in the developing world. There are some countries that are probably more developed than certain African nations that have 4G wireless throughout their entire country and things like that. That's good. If we could see that in some of these other countries, I think with the technology available today, a little bit of entrepreneurial spirit and maybe some fundraising can get that done. That's the key to adoption in the developing world as connectivity. I'm excited to see what kind of non-Bitcoin-related ISP solutions, open source ISP type of projects that are out there. I've got one in mind myself, but that's an exciting space to keep an eye on to spur Bitcoin adoption in the developing world, the other 6 billion need internet. It's interesting right now to think about it from a technology perspective. All they really probably need is a mesh network where they could form a local Wi-Fi group and then having Bitcoin while it's pre-installed on their phone or easy to install through the mesh network. Technically, it's not very far, but then culturally understanding Bitcoin. There's probably a lot of layers there. Moving on, Google's hiding my menu. Special issue 5. Breaking news from PR Newswire. Veritell launches Bitcoin with BitPay. Veritell is a registered payment institute for high-risk merchants, including adult entertainment webmasters. Bitcoin can now be used to buy adult entertainment online anonymously, servicing more than 50,000 online businesses, aka porn sites. Veritell now accepts Bitcoin. How about that, Megan Lourdes? I was surprised this happened. This hasn't happened sooner. I mean, porn and Bitcoin, that seems like, yeah, this is like perfect. I mean, I think it's great news and yet it fits perfectly with what I think Bitcoin is about. It's about freedom. Will, Penguin. Yeah, Megan's right. This is one of the best present UK's cases for Bitcoin. I mean, it's not a crime to enjoy some of these indulgences. A lot of people would like to preserve their privacy from friends, family, their job, their coworkers, their bosses, their future employers. With all of the surveillance options out there, even to the layperson, Bitcoin is a huge advantage for preserving privacy in what even the most fat bureaucrat would call legal ways. What was the number of websites that they manage? That's huge. I hope it catches on. 50,000. My goodness. Yeah, the adult entertainment industry in the US is about $13 billion of which about 5 billion are legal according to Wikipedia. There's a lot more around the world. This is going to be big. I mean, this is the GDP of the US is about 15 trillion. It's so compared to that, it's a drop in the bucket, but this is still pretty big. I disagree with Will's point that this is going to help improve privacy. I'm sure as well as well aware, Bitcoin can be tracked if people aren't being extra careful to take steps to improve their anonymity. They're going to leave a marker that is permanent, attaching them to whatever sort of porn they enjoy. They better be careful when they decide to send their Bitcoin across the wire. Just sort of about Derek's point real quick. Of course, you need to take some additional steps, but I was presuming that the folks who would conceal this from their future employers, their current employers, their family members and friends would be sending this from maybe a new wallet every time, or at least a new address within a new wallet. The forensic effort for examining the blockchain is a huge undertaking and most employers wouldn't invest in such a thing or even know to do so. Certainly, friends and family can't do that. It's really easy to be completely private from those types of folks. The powers that shouldn't be on the other hand, that's another story. I also think this is an opportunity for the porn industry. They've led the internet in so many other ways from online passwords, encryption, streaming video that may be adding remixing services to the Bitcoin chain so that when you send your Bitcoins to the porn company, they automatically remix it for you as a service to offer you additional privacy. And maybe this becomes invoked and the rest of the Bitcoin companies start remixing automatically because it just seems like a no-brainer. Once we really get this money mixed up like cash, it's going to be much, much harder to track. And while not totally anonymous, pseudo-anonymous, if you get enough layers in there, it's generally good enough. We don't have that many questions. We do have one question about Litecoin as a more efficient payment for merchants. Derek J, I'm for it. Megan? Yeah, I'm for it. I don't see that it would be that hard to implement as a payment system. Will? Yeah, I'm all for altcoins. I just don't see at least for the commenter's question, a greater use case for Litecoin than Bitcoin for merchants. That's confirmation time. Yeah, it's actually purely in some kind of confirmations with Bitpay all the time. If you think about gas stations, the Litecoin block time, I believe it's about four and a half minutes. If you were at a gas pump and you didn't want to go inside the store and you scanned the QR code on the pump, money went in, pump starts running right away. Litecoin might be more efficient for that. One of the Bitcoin problems seems to be the transaction time, the requirements for confirmations. I think zero should be fine, but a lot of people are still set to six, three is a little more fair. But if we're talking instantaneous gas station convenience store type transactions like Derek was talking about, Litecoin or one of the smaller faster coins might have a major advantage. Let's see, any more questions? It's worth mentioning while we're talking about small business adoption that this week Philadelphia Brewing Company became the first brewery in the world to accept Bitcoin. That's a very exciting thing. I'll be celebrating. I encourage everyone in the Philadelphia area to come down February 1st. We'll be celebrating at the brewery. It's likely there'll even be a Bitcoin accepting food truck across the street. February 1st, mark your calendars to those of you in the Philadelphia area. That sounds great, Derek. Congratulations. Derek, I'm embarrassed that Philadelphia beat Milwaukee to the punch on this one. But I'm going preempt my prediction that we'll have three breweries. Micro breweries in the state of Wisconsin accepting Bitcoin by the end of the year. Oh, that's a competition I can get down with. We do have another question from Spludda. Since becoming a Bitcoin or I'm paranoid when installing new software that it will contain some sort of key log or malware designed to steal my Bitcoin, how paranoid should we be about this and what precautions are reasonable? Derek, be paranoid. Use Tails Linux. Study security. This is important. This is your money and your future that we're talking about. This is not a game. Megan Lords. Yeah, I think you should be as careful as you possibly can be. You use paper wallets as much as possible. Distort your Bitcoin. Don't store large amounts on your computer. Will Pangman. Yeah, one of the things I saw in Need for right early on in my Bitcoin exploration is a need for mainstream adoption that people learn a little bit of what I guess I'm calling hacker sense. I agree with Derek 100% learn security. Well, and it's funny that all the Windows users who have been allowing these wide open machines, these unpatched machines for years, it's now coming home to Bruce. If you're going to keep your money on a computer where it can be sent away like an email in a single keystroke, no matter how much money it is almost instantly and it's gone, it might be time to get a Mac or to run Linux. There are other options for you as well as sticking to the normal softwares, non-installing, strange software. It's a whole new world and yeah, you should store your Bitcoins and paper wallets. You should have two factor authentication. Most of the websites like BTC-E or Coinbase have two factor authentication especially for withdrawals. It's time to be more secure. You know we have another comment or question. Go ahead. Yeah, I was going to say the thing about Bitcoin for mainstream adoption and even just for those of us who have an appetite for such a thing as Bitcoin already and come to it, there's definitely a need to increase our knowledge of these kinds of things and take responsibility. It's a totally new way to think about money so we need to get out of the habit of this comfortability with counterparty risk and trusting a third party. That's a hard thing to do. If you dive in with both feet, you can do. We seem to have lost will there. It's also worth mentioning on the topic of Bitcoin security. That Kristoff Atlas gave a presentation for Bitcoin Philadelphia on how you can use cold storage, which is in a way that's safer than a paper wallet. You can see the full video presentation if you want to learn how at bitcoinphl.com. Excellent. We have another comment from forest. He writes that like coin confirmations are not equal to Bitcoin confirmations. If you think three Bitcoin confirmations or fairies should be requiring hundreds of like coin confirmations. It's not it's just not an advantage for like coin. So it disagrees with the earlier statement about the confirmations. I do think the block time on like coin is faster. That's one of their large claims to fame. So we'll have to go to the info sheets about that. We'll have to look at it. I don't understand his reasoning. He's just asserting that they're not equal. Why? I'm believing that it might be something to do with a like coin network that just more confirmations are needed. Why? I'm not sure. We'll have to look it up. But we'll move on now to predictions. This is the part of the show where I ask you to predict the future. Are you ready? Derek J. No, let's skip pass Megan Lors. I'm ready this week. We're going to see medical marijuana dispensaries taking Bitcoin. Will penguins still frozen? Seems to be frozen and we're moving back to you Derek J. Bitcoin charities will be back in the news this time next week. And now everyone knows about the altcoins that are already on BTC-E but what about the altcoins that aren't on BTC-E yet? Which will be the next altcoin added to the major exchange? Megacoin, Worldcoin, Francocoin, why not all three? We're out of time. Until next time. Bye bye.