Microsoft Now Accepts Bitcoin for Digital Purchases (U.S. Only)

In a surprise move, Microsoft has quietly started accepting Bitcoin as a way to add funds to your account which can be used to purchase digital content like apps, movies, TV shows, games, etc. from Windows, Windows Phone, Xbox Games, Xbox Music and Xbox Video stores.

In a FAQ on the Microsoft billing site, one can see how Bitcoin can be used to add money to your Microsoft account:

To add money to your Microsoft account with Bitcoin:

  1. Sign in to Microsoft account – Billing with your Microsoft account
  2. Select Payment options > Microsoft account > redeem bitcoin
  3. Select the amount you want to add, then click Next
  4. Review the amount of Bitcoin needed and use your digital wallet to complete the transaction within 15 minutes:
    • On your computer – select Pay with Bitcoin and then pay from your Bitcoin wallet on the same device.
    • On your smartphone – scan the QR code displayed on the page to pay from your mobile wallet app.
    • If your wallet is on another device, you can copy the receiving address and BTC amount to the wallet on your device or the Web and then make your purchase.

 

Of course, this feature has caveats besides the fact that this form of payment is supported only in the United States version of the various stores:

  • Bitcoin funding is non-refundable.
  • While the Bitcoin-funded account can be used to purchase digital goods, it cannot be used to purchase Microsoft products and services directly.

This move is another big endorsement for Bitcoin. Per Coindesk, this funding option is enabled by the integration between Microsoft and BitPay, a Georgia-based Bitcoin processor.

Are you excited about this move? Will you be funding your Microsoft account with Bitcoin? Let us know in the comments below.

 

BitInstant is Taking Bitcoin to the Next Level with Credit and Debit Cards

The Bitcoin currency system is going through an identity crisis right now. The Bitcoin vs. dollar value is not stable, their flagship trading-platform Bitcoinica is under investigation for lax security and there have been two major hacking attempts targeted at the Bitcoin currency system. In the midst of all the chaos, BitInstant, a Bitcoin transfer service has announced its plans for releasing Bitcoin powered debit and credit cards.

BitcoinBitInstant is extremely popular for its speed of fund transfer between Bitcoin exchanges. It can shave hours off the transfer time, but the real prize with BitInstant is the speed with which they realize cash deposits. With BitInstant, you can buy Bitcoins in under an hour.

Recently, the co-founder and CEO of BitInstant, Charlie Shrem announced on their IRC channel that they have plans to release Credit Cards and Debit Cards based on the Bitcoin economy. These cards will be launched in 6-8 weeks and will be valid internationally at all merchant establishments that accepts MasterCard.

BitInstant plans to give away the first 1000 cards for free and charge a fee of $10 for issuing further cards. Funding the cards will be charged at 1%, and they will bear a QR code. However, the biggest surprise comes from the announcement that says that these cards will be issued by a major international bank. Some people might see this as unwelcome, as Bitcoins primary motive was to move away from traditional currency and currency systems. But perhaps, it is the only way to reach a worldwide audience for now.

(Via: Hacker News)

Bitcoinica Sued for $460,457.70 over Lost Bitcoins Due to Lax Security

Bitcoin grew to be extremely popular over the last year, though the value of a Bitcoin fell from a whopping $15 to $3. Although it seems to have stabilized at $9 after a recent rise, the Bitcoin ecosystem is not free of troubles yet. Recently, the flagship Bitcoin trading platform, Bitcoinica has attracted a lot of hackers, and there have been two major security breaches at Bitcoinica.

Bitcoin

Bitcoinica started as a one-man show by Zhou Tong, and soon thereafter, he put together a team to manage this prospective business. However, the Bitcoinica platform has been upset by hack attempts, and the response from the people at Bitcoinica is not very promising either. In a disturbing statement made in May, Bitcoinica admits to have ignored user security, saying,

The recent security breach was not beyond our team’s skills to prevent. We know better. But we did not address relevant issues as quickly as was needed.

Now, the users of the Bitcoinica platform are suing Bitcoinica for $460,457.70 over lost Bitcoins. This includes the price of lost Bitcoins and other damages. Bitcoinica lost Bitcoins worth $87,000 in the first hack (43,554 Bitcoins), and $90,000 (18,547 Bitcoins) in the second hack.

The charge does not come out of the blue, as Bitcoinica promised to cover the losses of its users on two instances, once by promising to pay the entire Bitcoins lost due to hacking, and another time by promising to pay 50% of the lost Bitcoins. However, it has failed to live up to its promises on both instances, and the discontent towards Bitcoinica does not end here. The plaintiffs have also accused Bitcoinica of following corrupt processes.

For a currency system that emerged with a global outlook and a dream of government-intervention-free trading, the Bitcoin ecosystem just fell flat on its face with hack attacks and this recent court case.

Bitcoinica Gets Hacked, Bitcoins Worth $90,000 Stolen

Bitcoinica, a Bitcoin exchange started by a 17-year old teenager Zhou Tong, has been shut down for security investigations. Posting on BitCoin Talk forums, Zhou posted a message stating the exchange has been taken down for security investigations after noticing a suspicious transaction in which 18547.66 bitcoins(worth about $91,000) were transferred from the exchange.

This is the transaction in question:

 {
“account” : “”,
“address” : “182tGyiczhXSSCTciVujNRkkMw1zQxUVhp”,
“category” : “send”,
“amount” : -18547.66867623,
“fee” : 0.00000000,
“blockhash” : “00000000000003f6bfd3e2fcbf76091853b28be234b5473a67f89b9d5bee019c”,
“blockindex” : 1,
“txid” : “7a22917744aa9ed740faf3068a2f895424ed816ed1a04012b47df7a493f056e8″,
“time” : 1336738723
}

Bitcoinica transaction

Zhou maintains that apart from the Bitcoins, the database was also stolen but the passwords were salted and encrypted using bcrypt. Zhou mentions that the stolen bitcoins are likely to be reimbursed by Bitcoinica in USD. This isn’t the first time Bitcoinica’s been broken into; few months ago Bitcoinica’s bitcoin wallet which stored the funds were stolen due to a breach in Bitcoinica’s then webhost — Linode. Bitcoinica has been criticized for not making use of offline transactions which would’ve prevented both the break-ins.

 

Ambitious Decentralized Projects That Aim to Create a Better Internet

The Internet is an interesting place. It started out as a network intended for file-sharing and has turned into a storehouse of information. It is a dynamic and  profit making industry, and generates enormous revenue. While providing an open platform for free expression, it gives everyone a chance to reach out to thousands of people, at an extremely low cost. This makes the Internet the most powerful media of this age.
network
The Internet is governed by a set of standards, that bind it and prevent it from falling apart. Furthermore, there are services that have an expertise in certain domains (Google in search, Facebook in social networking). These direct and indirect controls limit the capabilities of the Internet and can be a cause of discontent at times. There are a lot of variables in an ideal Internet, but when we rely on these services solely, most of those variables are locked. Once a user gets on the Internet and puts his personal data, everyone wants a piece of the pie.  Both Facebook and Google use out browsing behavior and personal data to serve personalized ads, and it is extremely hard to make oneself tracking-free.  Governments ask for private user data all the time and demand user-generated content to be censored.

This, has brought the need for services that are not under the control of a central authority. Currently, there are three such ongoing projects, and if they succeed, they have a chance of changing the Internet and the world.

Some Thoughts On Bitcoin And Why I’m Staying Away

Over the past few weeks I’ve been hearing a lot about a new virtual currency called Bitcoin. It is considered to be the future of money, if not now, sometime in the foreseeable future. Stephen Chapman has done an excellent introductory article explaining what Bitcoin is. I’ll try to do a summary:

  • Bitcoin is virtual, no hard cash
  • There is no central authority
  • Total amount of Bitcoin currency is $21Million
  • Bitcoin has a stock exchange like conversion where the worth of a Bitcoin in terms of $ keeps fluctuating
  • Users can buy goods (from the offline world) with Bitcoins and also use it as a barter system commodity
  • Bitcoin is open source and has a sophisticated algorithm
  • Users install the Bitcoin software on powerful computers to mine Bitcoins (compute the algo)
  • A laptop can take upto 5 years or more to complete one cycle of mining – that’s 20 Bitcoins

That’s a brief overview of Bitcoin, to get a better grasp you should read the article I’ve linked above. As an enthusiast and early adopter I find Bitcoin intriguing and as someone who liked PayPal before the governments decided to limit the service, Bitcoin sounds interesting. Unfortunately, as I read more about Bitcoin I’ve become more  sceptical  about the service. Here’s why:

  • You lose control of your PC, you lose your Bitcoins
  • People with powerful PCs will have more Bitcoins and the service has a huge first-mover advantage
  • Bitcoin index is volatile

My biggest concern is the first point. One of the engineers associated with Bitcoin says you can lose money from a bank too, but here’s the thing… if I keep my money in a bank, the bank is liable for security. Not me. Even if you don’t lose physical access to the PC, for a trojan to access your Bitcoin wallet and take your Bitcoins, it’s possible. Strong passwords is a practice but in a service like Bitcoin who do you go to since there is no central authority? I can call my banks if I realize someone hacked into my account or stole my credit card.

If I have multiple PCs with multiple GPUs to mine for Bitcoins, I’ll have to be rich with real cash to buy such computing power. This probably the only light at the end of the tunnel, even if Bitcoin tanks and you lose your Bitcoins, you still have your hardware. I believe this nerd excitement is getting Bitcoin the attention it has right now.

Like any currency conversion, Bitcoin’s value keeps fluctuating but my hesitation is due to Bitcoin being a secondary index. In case the dollar sees major fluctuation due to any reason, Bitcoin is affected. In a way, there’s a new scale added that can impact my wealth. This volatility was evident when Bitcoin’s value tanked on reports of Mt.Gox – a Bitcoin exchange, being hacked.

From what I understand, the number of Bitcoins will remain the same after a point which in turn increases their exclusivity. This exclusivity bothers me. It reminds me of the Tulip Mania of 1600 where the prices of Tulip bulbs  sky-rocketed  due to people’s craze for Tulips and then suddenly crashed for a variety of reason. This is regarded as among the first economic bubbles.

A thread on the Bitcoin forums highlights some more flaws in Bitcoin’s model.

I am probably a little more sceptical when it comes to money, I don’t have a lot. Bitcoin’s model as of now does not make me comfortable and I believe it is not ready to be used widely. PayPal offered money transaction with banks not being involved, it was easier and simpler for me as a user. I had more control over my money and there were transaction flexibilities. I’d rather have governments giving PayPal a break over Bitcoin.

Bitcoin Faces Government Crackdown for Illegal Drug Purchase

This was to happen sooner or later. How can any government allow a currency that claims to be decentralized, is totally unregulated and is not under its direct control? On top of that, the EFF started accepting donations in Bitcoin a few days ago and the crackdown was going to come sooner or later once Bitcoin started gaining credibility like this.

bitcoin

Two US senators are encouraging federal authorities to crack down on Bitcoin, the reason being its use in illegal and anonymous drug purchase. Reuters reports,

Democratic Senators Charles Schumer of New York and Joe Manchin of West Virginia wrote to Attorney General Eric Holder and Drug Enforcement Administration head Michele Leonhart in a letter that expressed concerns about the underground website “Silk Road” and the use of Bitcoins to make purchases there.

The nature of Bitcoin makes it extremely hard for authorities to track down these drug abusers and this can prove to be a fatal blow to the currency system that could have shaken things up in the online world.

In further investigations, it has been found that a majority of the bank accounts being used in this drug abuse are based outside of the US. The decentralized nature combined with offshore bank accounts leaves very little in the hand of federal authorities to act upon. Decentralize ideas are hard to track, but they are equally hard to manage and operate. Bitcoin is facing the same problem of rogue users that any decentralized body without a central control will face sooner or later.

FSF Embraces Bitcoin for Donations

Bitcoin is a decentralized digital currency. It is free of any centralized issuer and uses a decentralized distributed database to manage itself. I find Bitcoin pretty interesting because of the anonymity involved in fund ownership and transfers.

bitcoin-image

Bitcoin can be saved on a PC in a wallet and if you were wondering how big this crazy idea is, there are around 6 million Bitcoin currencies in the world right now. All you need to send or receive a Bitcoin is a bitcoin address and there is no transfer fees involved from a central authority because of the decentralized nature.

The FSF has embraced Bitcoin for donations and this will help Bitcoin achieve more value in a world of government regulated currencies. Their announcement says,

Our setup right now is very basic, so we are providing just a single address at which to direct contributions: “1PC9aZC4hNX2rmmrt7uHTfYAS3hRbph4UN”. Because of the way the system works, contributions to this address will not be fully anonymous.

If you’d like us to know who the contribution came from, and be able to acknowledge receipt of your donation, then please email [email protected] with your name and address, and contribution info.

The Bitcoin economy is worth 22 million USD and this is pretty small as compared to the well-established currency system we have otherwise. But the fact that people see it as a freedom from the government regulated currencies can pose a threat to it as it grows. Right now, the project is just out of its incubator and only time will tell where it goes.

Visit the Bitcoin project here.