Cleveland Bitcoin Meetup – February 13, 2014

I attended my first Bitcoin Meetup here in Cleveland, Ohio. The meeting took place at David’s Grill and Bar, a very nice place located in Northpoint Tower, a commercial office building on the northeast corner of West 9th and Lakeside. David’s started accepting Bitcoin in 2013. David’s has a bar and restaurant, and this may be one of those hidden watering holes I may have to frequent during my future jaunts downtown.

There were about 20 people who attended throughout the evening, representing hobbyists, business owners, bitcoin miners, and both experienced and new digital currency enthusiasts.

Photo Credit: Rebecca E. Groynom

The conversations were lively.  We discussed consumer bitcoin technology, regulatory affairs, legal affairs, public opinion, and many other areas of interest. The owner of The Wine Spot, a Cleveland Heights business which recently implemented Bitcoin payment technology, presented his business experience learning about and implementing Bitcoin at his store.

Looking forward to the next Cleveland Bitcoin Meetup:

When: March 5th, 6:15pm

Where: The Wine Spot

Registration: Just stop by, or register officially at http://www.meetup.com/Cleveland-Bitcoin/

Uppercase “B” is for Bitcoin (proper noun) – the payment network technology in its entirety.

Lowercase “b” is for bitcoin(s) (common noun) – the currency unit(s) traded over the Bitcoin network.

“BTC” is the abbreviation for the bitcoin currency. An analogy is USD, for United States dollar.

2-Factor Authentication (2FA) is becoming a prevalent, and easy to use technology for securing your most precious online belongings. 2FA requires just as the name suggestions, 2 methods of login to access your online resources. In the case of most online websites, this usually means a combination of:

– A username and password

Plus

– A random, numerical authentication code sent to phone, email, or synced with a Smartphone app.

Without both of these, access will not be granted.

Usernames and Passwords

We are all familiar with usernames and passwords. This has been the de-facto standard authentication mechanism since, well, probably forever. But, this method alone has a variety of security related problems, including:

– Usernames and passwords can be shared, and thus distributed without the original owners consent.

– Usernames and passwords can be hacked. Unauthorized users accessing secured resources can block authorized users, or even be viewed indefinitely by prying eyes so long as the password does not change.

– Usernames and passwords provide authorization to secure resources, but do not prove that the person accessing these resources is the correct person – just that this person happens to have the correct username and password.

Where 2-Factor Authentication Fits In

What if, whenever a login attempt was made to one of your secure resources, a text message was sent to your phone with an additional, random code which would also need to be entered? This now ties a username and password to an actual device owned by the account holder. If a hacker has the correct username and password, but not access to the physical device, their attempt to access this secured resource would be denied.

Two common and widely supported Smartphone apps that manage 2-Factor Authentication are called Google Authenticator, and Authy. With these apps, instead of the website sending a text message, the user opens one of these apps to gain access to the randomly generated code. An example of this would be a typical 2FA enabled Coinbase login:

1. Enter username and password at coinbase.com.

2. Open Google Authenticator or Authy app, chose the Coinbase entry.

3. Enter the numerical code from the app at the Coinbase login screen (this code changes every 20 seconds).

4. Gain access to your Coinbase account.

As you can see, without the physical device, access to Coinbase would not be available.

Many financial institutions, email platforms (Gmail included), social media sites, and other secure web services offer 2-Factor Authentication. It is often an optional component, disabled by default, and can be configured in your user profile settings for said service.

CoinNEO’s Recommendation

CoinNEO recommends the Authy app for 2FA. While Google Authenticator works just fine, Authy seems to provide better backup and restore functions in case your phone is lost or stolen.

CoinNEO also recommends enabling 2-Factor Authentication for any website you use where personal information, especially financial information, is stored. If your financial institution’s website does not currently support this technology, send them an email expressing your interest in seeing this as as feature in the future.

Here is a video Authy provides that describes 2-Factor Authentication:

 

There are various methods to acquiring bitcoins. Among the most popular are 1) selling merchandise for Bitcoins, 2) Buying bitcoins from a brokerage, and 3) Trading other currencies for bitcoins on a currency exchange.

Selling Merchandise

Anyone can sell merchandise for bitcoins. For many, this can be an easy and low cost method for acquiring bitcoins, although it requires quite a bit of care determining how Bitcoin transaction processing can safely and securely fit into the billing structure. Contact CoinNEO for help with these determinations.

Brokerage vs Exchange

Brokerages, such as Coinbase, are a fast and convenient way to buy and sell bitcoins. Brokerages act as a middleman, buying bitcoins in bulk and selling them to customers. Brokerages charge fees for this service, just as any currency broker would.

Exchanges, such as CampBX, MtGox, and BTC-E, offer direct buying and selling between currencies. Once an account is funded, Exchanges allow for quick buying and selling of currencies within the platform, without the need to first withdraw to cash in order to realize gains and losses in local currency. Trading fees are lower than brokerage fees, but funding and withdrawing from an exchange to local currencies may take considerably more time and may be far more expensive.

Funding A Brokerage

Brokerages offer the smallest barrier to entry into the Bitcoin marketplace. Coinbase, a leading US brokerage, accepts these forms of funding methods:

1. Automated Clearing House (ACH): This is the most common funding system for brokerages. This links a US checking account and routing number, allowing users to buy BTC with their USD.

– Transactions typically take 2-5 business days to complete.

– A small ACH fee may be included with each transaction.

2. Credit Card: Credit cards can be used as an additional verification method, allowing for same day bitcoin purchases while using ACH.

Withdrawing From A Brokerage

To transfer BTC back to USD, the BTC is sold at current market value in USD, and deposited as USD into a US checking account via ACH.

– ACH withdrawal process may take 2-5 business days.

– A small ACH fee may be included with each transaction. Coinbase charges a 1% brokerage fee on the total amount, plus $0.15 fixed fee for the ACH deposit.

Depositing to An Exchange

Exchanges are far more expensive to deposit and withdraw money from, but offer lower trading fees than a brokerage. Exchanges would be more useful for those looking to conduct a large volume of trades (day trading, for instance), and to trade bitcoins between other physical and digital currencies. CampBX, a leading US Exchange, offers the following funding methods for US users:

1. Money Orders: Money orders can be mailed to Exchanges in order to fund an account.

2. Personal Checks: Personal checks can be mailed to Exchanges in order to fund an account.

Withdrawing From An Exchange

Withdrawing from Exchanges are considerably more time consuming and expensive than using a brokerage. CampBX offers the following withdraw methods:

– ACH: While not available for deposits, CampBX make ACH available for withdrawal for a $2 fee.

– Domestic and International Wire Transfer: Wire transfer may be initiated for a fee of $20 domestic, and $35 international.

– USPS Money Order: Money orders may be issued for a $20 fee for up to $1,000 withdrawal.

 Source

Summary:

CoinNEO recommends Coinbase for buying and selling bitcoins for regular, every day use. They allow for a minimum purchase of $0.10 worth of bitcoins (remember, bitcoins can be purchased in fractions). Coinbase is very easy to sign up for and use, and even offer $100 in instant currency for new users. Once verified with a bank account and credit card, Coinbase offers immediate buys, and users can have access to and use their bitcoins right away. The fees are reasonable, and their tools are becoming more and more sophisticated as time goes on.

For selling merchandise, Contact CoinNEO to discuss your organization in greater detail.

The European Banking Authority released a document on December 12, 2013, issuing a warning about virtual currencies. The document, “Warning To Consumers On Virtual Currencies”, drew many sensationalistic media headlines.

To me, this EBA release is a very important document, stating the importance of personal responsibility when endeavoring in virtual currencies like Bitcoin. This was sensible, friendly advice from the EBA and it is a good, short read for everyone involved in or considering to be involved in virtual currencies.