Bitcoin FAQ / Starter Guide

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What Is Bitcoin?

Bitcoin is two things. It is a currency and a secure payment system. Read on.

Why Use Bitcoin?

Bitcoin is decentralized and peer-to-peer, which makes it beyond the control of any government, central authority, or middle man. It has great implications for financial liberty. The security benefits are also significant. Bitcoin uses public key encryption which means that a Bitcoin wallet address (the public key) is useless to a bad actor without the corresponding secret key. As a result, your payment information can’t be stolen from merchants because they are never in possession of the secret key. In addition, Bitcoin transaction fees (when charged at all) are significantly smaller than typical credit card transaction fees. This means smaller costs that the merchant must pass on to the consumer. These are just a few of the reasons why Bitcoin offers great advantages over any traditional fiat currency.

Where Can I Get a Bitcoin Wallet?

Among other benefits, Coinbase offers free Bitcoin wallets, two-factor authentication for greater account security, smartphone apps, and you can link a bank account in order to buy and sell Bitcoin via ACH transactions.  Quick aside: Coinbase filed for nine patents relating to Bitcoin, which sparked some concern in the Bitcoin community.  I’m somewhat reassured that they will do the right thing based on this response from co-founder and CEO, Brian Armstrong.  Now back to the point.  If you don’t trust a third party to handle your wallet, there are other options to choose from. As with any financial decision, it pays to do your homework.

What’s Next?

You can easily earn small amounts of free Bitcoin in various ways. There are web sites supported by advertising called faucets that give it away. Simply prove that you’re human by solving a Captcha and they’ll deposit some Satoshi (a very small fraction of a Bitcoin) into the wallet of your choice. You can also earn Bitcoin by watching videos, playing web based games, Android games, iOS games, or get a job that pays in Bitcoin.

A Few Words On Mining Bitcoin

Once upon a time, bitcoin mining could yield a decent return. Unfortunately, this is no longer the case. There is a finite supply of Bitcoin by design. New coins are mined by the performance of cryptographic calculations. As more coins are mined, they become harder to find. The rise of Bitcoin’s price and popularity have brought a massive surge in the number of Bitcoin miners and advances in mining hardware. As a result, the level difficulty associated with Bitcoin mining has increased to the point that the required quantities of time, computing power, and electricity to be successful are so great as to render Bitcoin mining a losing proposition for all but the most efficient miners. In short, it is not recommended to attempt Bitcoin mining at the time of this writing. This could change, however. It is supposed that eventually transaction fees paid to miners could cumulatively be valued higher than the value of the new coins discovered my mining as the number of undiscovered coins continues to approach zero. This is because Bitcoin miners are not just looking for undiscovered Bitcoin. They’re also validating the transactions taking place on the Bitcoin peer-to-peer network. Senders of transactions can optionally set a transaction fee for their transactions (typically 0.0001 or 0.0002 BTC). This creates an incentive for transactions with higher fees to be validated faster than transactions with smaller or zero fees.

This post originally appeared as a page on Liberty Compass News before the addition of the Liberty Compass Blog.

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Android Widget for Liberty Compass News!

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Get all the headlines from Liberty Compass News on your Android device home screen with the new Android widget!

Customize your look:

Screenshot_2015-09-24-18-53-50 Screenshot_2015-09-24-18-52-27 Screenshot_2015-09-24-18-51-57

New version 1.0.0 is available as a direct download from Liberty Compass News!

You will have to allow installation from unknown sources as this widget is not yet available from the Google Play store.

Settings > General > Security > Unknown sources

This project is open source.  Source is on github.

Change Log:

  • 1.0.0: Bug fixes.  Ready for prime time!  Please report any bugs/crashes.
  • 0.9.0: More improvements to save battery and data.  Added option to change your colors and reset other options on widgets that have already been added.  Added option to choose your double click speed.  Other general improvements and bug fixes.
  • 0.8.6: Improved performance, decreased data use, and decreased battery consumption.  Bug fixes.
  • 0.8.5: Added choice of how frequently widget downloads news when adding new widget. Added tap right side of widget to check for updated news.  Layout improvements.  Bug fixes.
  • 0.8.4: Added tap left side of widget to view previous headline.
  • 0.8.3: Added check for update option in main menu.  Bug fix.
  • 0.8.0: Added clear widget background option.  Bug fixes: update notification when at latest version and screen rotation in main activity returning to home page.
  •  0.7.4: receive notification when new version is available.
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Mises’ Human Action For Dummies

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I’m excited to read the latest book by economist and author, Robert P. Murphy: Choice: Cooperation, Enterprise, and Human Action.  In a brilliant move, Murphy has written a book which conveys the wisdom contained in Human Action by Ludwig von Mises to the layman. I’m constantly hearing references to Human Action in Austrian circles, so I’ve had a strong desire to work my way through it.  In my first attempt to read Mises’ landmark work, I quickly realized that I had bitten off more than I could chew.  It was simply over my head.  I fell back to Man, Economy, and State by Murray Rothbard, which proved to be much more readable for me.  Still, the desire remained to learn the teachings of Mises.  I believe that Bob Murphy’s book will provide an easier road to that goal.

From Amazon:

Human Action—a treatise on laissez-faire capitalism by Ludwig von Mises—is a historically important and classic publication on economics, and yet it can be an intimidating work due to its length and formal style. Choice: Cooperation, Enterprise, and Human Action, however, skillfully relays the main insights from Human Action in a style that will resonate with modern readers. The book assumes no prior knowledge in economics or other fields, and, when necessary, it provides the historical and scholarly context necessary to explain the contribution Mises makes on a particular issue. To faithfully reproduce the material in Human Action, this work mirrors its basic structure, providing readers with an enjoyable and educational introduction to the life’s work of one of history’s most important economists.

Choice: Cooperation, Enterprise, and Human Action by Robert P. Murphy is available in hardcover, paperback, and kindle format.

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Boom Bust History Repeating

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The Austrian theory of the business cycle describes how booms and busts are caused by central bank manipulation of money and credit.  We’re currently at the point in the cycle where the boom is ending and bust is beginning.  It is feared that this bust has the potential to be much worse than those in recent memory due to the extent to which the US central bank has distorted markets, and because many countries around the world have been engaging in similarly reckless central bank interference.

Looking at the S&P 500 from 1975 to the present, it is readily apparent that, starting in 1995, there have been quite pronounced booms and busts occurring. S&P 500 1975-2015

Naturally, the curious mind wonders what changed in 1995.  The Austrian theory of the business cycle points us to the Federal Reserve.  In a 2006 article, Dr. Ron Paul described M3, an empirical measure of the money supply in the US, as “the most helpful statistic to track Fed activity.”

M3

You’ll note that there is a marked increase in the rate of growth of the money supply beginning in 1995, especially when compared to the period up to 1990, or the 1990-1995 plateau.  The difference is more pronounced if the slopes are viewed side by side as below.

1995 Slopes

This data is all relatively recent.  FRED unemployment data goes back all the way to 1948.

civilian unemployment 1950-2015

This data shows the same boom/bust pattern over and over.  At present, we find ourselves in a deep trough of low unemployment, a condition which historically precedes recession.

August and September have seen the US stock market, which has been hovering at record heights for nearly all of 2015, enter correction territory.  As past performance is the best predictor of future results, it is certainly plausible to think that the stock market levels will be cut in half and unemployment levels will double by the time we reach the bottom of the coming bust.  Further, the multinational scope of the central bank interference, coupled with the unprecedented severity of that interference, could spell even worse conditions by the time the bottom is reached.

So long as policy-makers continue down the same path of central bank manipulation that has brought us here, we can expect boom/bust history to repeat itself.  The upshot is that because we know what is coming, we can take steps to avoid personal losses or even profit from the coming collapse.

Investors concerned over a collapse of the financial house of cards may be interested in an investment strategy designed with theses concerns in mind, such as that described in Crash Proof 2.0: How to Profit From the Economic Collapse by Peter Schiff.

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New Murray Rothbard Book Released: Science, Technology, and Government

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Murray Rothbard, the iconic Austrian school author, professor, and philosopher, continues to amaze.  The author of the landmark libertarian treatise, Man, Economy, and State, now tackles the subject of government interference with science and technology.  From Amazon.com:

In this previously unpublished manuscript, found in the Rothbard Archives, Rothbard deftly turns the tables on the supporters of big government and their mandate for control of research and development in all areas of the hard sciences. What R&D should be encouraged and funded, what inventions should be supported, and what areas should be given research grants, etc.? These decisions can only be decided by markets unburdened by government meddling and intervention. Rothbard shows that science best advances under the free market: the claims to the contrary of the centralizers are spurious. The best course of action for government is to get out of the way …

Science, Technology, and Government by Murray Rothbard is available in Kindle and paperback format.

Be sure to check out the Austrian / Libertarian Reading List.

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Libertarian Web Admin: Property Rights vs. Privacy Rights

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Like many websites, Liberty Compass collects user data in the form of usage statistics and such.  Naturally, being a liberty-oriented website, the question of user privacy weighed heavily on the mind of the creator.

Initially, the method of choice for the collection of these statistics was the Google Analytics suite.  A recent email from a user offered up an alternative to the internet behemoth in the form of an open-source project called Piwik.  Delighted at the opportunity to do away with potentially privacy-compromising Google Analytics, I happily made the switch to Piwik.  In the ensuing email exchange, the more general topic of user tracking and privacy emerged.

As the reader is most likely aware, there are web browser add-ons designed to detect and block potentially privacy-compromising elements of web pages.  As it turns out, defeating most, if not all, of these add-ons from a web admin perspective is a trivial matter.  In other words, with a few simple changes, the admin can continue to track users even if they are using such privacy add-ons.  This came as quite a surprise to me, as I’m an intermediate web designer at best and a novice in the arena of privacy-conscious web design.  The revelation led me to the following dilemma: Whose rights prevail?  My property rights, as the website owner, or the user’s right to privacy?

My initial reaction was to err on the side of privacy.  After all, this whole question arose from the quest to protect the privacy of the users.  It felt unethical to circumvent the efforts of users who had gone to the trouble to protect their online privacy by using these browser add-ons.  I was already crafting a reply email explaining this gut reaction when it occurred to me that this is my website.  It is my property.  I have the best, most legitimate claim to its use and configuration.  It turns out that I want to have accurate statistical data pertaining to my website.

By way of an analogy, albeit a somewhat silly one, let us suppose that I were running a bakery on main street which was open to the public.  Suppose further that a subset of my customer base came in to the bakery wearing wide-brimmed hats in order to provide anonymity from my security cameras.  If I made an adjustment to my security cameras that enabled hat-penetrating x-ray mode, have I done anything unethical?  There is a sign on the front door clearly stating that I conduct video surveillance.  Perhaps it doesn’t say that I’m really good at it, but the sign is there nonetheless.  I would maintain that, as the property owner, it is my natural right to conduct my affairs on my property in the manner in which I see fit.

In the end, I made the changes to the website tracker and updated the privacy policy.  This is not to say that I don’t care about user privacy.  I only collect anonymous data, I don’t share, sell, or rent the data to third parties, and I’ve taken steps to eliminate third party content which may be tracking users, where feasible.  Just know that the reassuring little zero displayed on your privacy add-on may not be telling you the whole story, as I am.

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Privacy for the Wary Patriot

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In the age of warrantless mass surveillance, I feel that I not only have a right, but also a duty to defend my privacy against warrantless search and seizure.  I believe that a right that is not exercised is a right which has been lost.  Further, I reject the notion that one who has nothing to hide has nothing to fear.  When I read the text of the the fourth amendment to the United States Constitution, it is abundantly clear that no law, court decision, or insubstantial threat of terror justifies such surveillance.  Leaving aside the fact that the federal government claims monopoly power over decisions of Constitutionality, the unbiased mind must surely concede that such surveillance is a violation of the Constitution.  It is with great self-control that I resist a tenth amendment rant at this juncture.

Given that this warrantless surveillance is being perpetrated upon the people and that the protections afforded by the Constitution have heretofore proven inadequate to stem the tide of unconstitutional search and seizure, the duty to defend this fundamental human right has fallen upon the citizenry.  There are a few subsets of the American people who have sworn an oath to defend the Constitution: chiefly, the military and the political class.  It pains me to admit that it is from these oath-bound Americans that these egregious violations have originated, the latter more so than the former.  I regard it as my duty to make it as difficult as reasonably possible to become a victim of this violation of my fourth amendment rights.  This is why I regularly employ the free and platform independent methods that follow.

Web Browsing: Assume that all of your web browsing is being monitored.

The TOR Project offers a powerful browser bundle which allows users to browse the web anonymously from any platform.  It is a wonderful resource for individuals, journalists, activists, and more.  Just download and go.

The Electronic Frontier Foundation (EFF) has released Privacy Badger, a browser add-on that “stops advertisers and other third-party trackers from secretly tracking where you go and what pages you look at on the web.”  There is really no reason not to add this to your favorite everyday web browser.

Dynamic content in webpages can add depth and functionality previously unheard of, however there are security risks.  Flash and Java are notoriously vulnerable.  I strongly advise using browser settings or addons in order to make flash and java plugin content “click to play.”

Email: Assume that all of your email is being monitored.

I recently began using ProtonMail, a free, encrypted, web-based email provider based in Switzerland.  It has been built from the ground up with privacy and security as its top priorities.  ProtonMail is relatively new and doesn’t offer all of the convenience of major free email providers.  Even so, I’m attracted to it because of the vision of the project and the unique privacy features that it offers.  But at least they are unable to read your email, unlike those convenient competitors.  Nearly any platform which supports web browsing can support ProtonMail.  Smartphone apps are available for iOS and Android.

Another alternative is Pretty Good Privacy (PGP).  Specifically, GNU Privacy Guard (GPG) is the PGP implementation that I use.  PGP can not only be used to encrypt data and communications so that they are secure from prying eyes, but it also provides a mechanism to sign data and communications so that you can be sure that a file or an email really came from the party from which it appears to have come.  Like the above, free PGP implementations can be found for nearly any platform.

File and Cloud Storage: Assume that everything stored in the cloud is being monitored.

Anything that I store in the cloud that I don’t consider public is encrypted.  My current favorite file encryption platform is VeraCrypt, the successor to the now defunct TrueCrypt.  It offers up to three different layered encryption schemes and a selection of different hashing algorithms.  Sensitive data that I want to keep backed up in the cloud (on multiple cloud providers) is encrypted with this free, cross-platform tool.

Passwords and User Names: Assume that any of them can be compromised.

A critical mistake that many people make is to use the same user name and password combination for everything that they use.  A chain being only as strong as its weakest link, if one password is compromised, then they all are.  Always use a different user name and password combination for everything.

A password manager provides the convenience of needing to remember only one password while granting the security benefit of having unique user names and passwords for everything else.  I employ KeePass Password Safe to store all of my unique user names and passwords.  KeePass saves all of your user names and passwords in an encrypted database.  Save this database inside of a VeraCrypt container for extra protection.

Additionally, KeePass offers a password generator that can generate customizable random combinations of characters.  If a web site allows a 20 character password comprised of upper and lower case letters, numbers, and special characters, KeePass can generate random passwords for that.  12 character max length alpha numeric?  KeePass has you covered.  I set the password generator to the maximum allowable length and whatever character set is supported.  This feature-rich password manager provides expiration timers to help to remind you to change your passwords regularly, folders to organize passwords, and more.

Text and Instant Messaging: Assume that all of your text and instant messages are being monitored.

I like Telegram Messenger.  It requires practically no setup and provides secure, end-to-end encryption.  Telegram is free and available for all mobile devices and computer operating systems.  It supports both individual and group chats and has a beautifully simple user interface.  It has come to my attention that Telegram “rolls their own encryption,” which is a terrible idea.  I switched to WhatsApp until Facebook, their parent company, decided to share WhatsApp user data with the Facebook family of companies.  See the last paragraph of this official WhatsApp FAQ page.  I’ve since switched to Signal.  Endorsed by Edward Snowden and others, it seems to be the gold standard of private, encrypted instant messaging.

In Conclusion: We all have a Constitutionally protected right to privacy.  It is the individual’s choice whether this right is exercised and protected or forgotten and lost.  Of course, it doesn’t hurt that these practices also help make you a harder target for credit and identity theft.  A few small changes to your online routine can yield big dividends in terms of online security and privacy.

Further Reading: I recommend looking through EFF’s Surveillance Self-Defense pages for additional guides and information.

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When Will the US Overthrow the Iranian Regime?

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Iran is threatening the US dollar’s supremacy.  How could Iran possibly threaten the dollar?  Simply by not using it in oil transactions.  If US foreign policy since the turn of the century is any indication, it is not a question of if the US will instigate a regime change in Iran, but when.

If you’re familiar with the history of the petrodollar, you know that in the early 1970s, President Nixon negotiated an agreement with the OPEC nations to sell their oil exclusively for US dollars; not gold nor any other currency, dollars.  The OPEC nations were granted access to US treasury bonds in which to put their excess dollar reserves.  In return, the US agreed to provide OPEC arms and military protection.  This arrangement is known today as the petrodollar arrangement.  It has and continues to benefit the US in a few significant ways.  First, all petroleum importing nations need dollars to purchase their oil.  Thus, global demand for the US dollar is virtually guaranteed and artificially inflated.  A stronger dollar grants the US greater purchasing power abroad.  Additionally, all of those US treasuries being sold provide the US easy access to cheap credit.  This essentially means that the US is able to purchase oil at a huge discount, practically free, using green pieces of paper that it prints feverishly.  Pretty sweet deal, right?

It was pretty sweet up until the point when global demand for the dollar began to slip.  When global demand for the dollar slips far enough, the US can expect massive increases in inflation, interest rates, and unemployment as all those excess dollars come flooding back.  The middle class will be decimated and the stock and bond markets will come tumbling down, as repeatedly predicted by Ron Paul.  Consider the growth of the monetary base since 2008.FRED Money

There have been a few cases in which threats to this arrangement have cropped up.  In 2000, Saddam Hussein began selling oil for competing currencies.  A few years later, after Iraq had been “liberated,” Iraqi oil was placed immediately back on the US dollar.  Libya, Venezuela, Iran, and others have all challenged the dollar’s place as the global reserve currency in one way or another.  As chairman of the African Union, Gaddafi proposed a single African currency.  Colonel Gaddafi was killed following a US led intervention in Libya.  President Chavez of Venezuela made a deal with Russia to sell oil for euros.  Chavez survived a coup attempt which was suspected of being instigated by the US.  Curiously, IMF Director Dominique Strauss-Kahn called for a new world currency.  Three months later he resigned his position amid allegations of sexual assault; allegations which were subsequently proven false.

Which brings us to Iran.  In 2007 Iran stopped selling oil for dollars.  The Iran situation has been handled somewhat reservedly, most likely due to Iran’s ties with Russia, China, and Turkey.  Nonetheless, for the better part of a decade since, the US has imposed sanctions upon and made accusations of nuclear weapons development against Iran.  All of this comes despite reports in which all 16 US intelligence agencies agree that Iran gave up their nuclear arms program years ago.  Now that the US has reached an agreement with Iran, I can’t help but wonder how the deal will fit in to the petrodollar puzzle.  Will the IAEA inspectors report that Iran is stonewalling nuclear inspectors, as they’ve done recently, thus providing Washington the justification to invade and install a new, US-friendly regime?  The US certainly has the motivation.  Time will tell if coming events will present the US with the opportunity to do something more about Iran’s threat to the dollar.

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Email Bitcoin as an Attachment

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While browsing /r/Bitcoin today, I saw a post describing a new service available at moneypacket.org that sounds like quite a cool concept.  The site allows users to create “money packets”. From the original post on Reddit:

A money packet is file on your computer which contains bitcoins, like a digital envelope. They can be shared over email or Dropbox or backed up to a hard drive, just like any other file.

Out of curiosity, I sent a family member a money packet as an email attachment encrypted with GPG.  We’ll see what happens.

Update

The transaction was a success.  This is a neat idea.  Its kind of like a Bitcoin check.  The recipient can cash it at their leisure and the sender can perform the equivalent of a stop-payment by reclaiming the funds at any point up until the recipient redeems them.  The site is still in its infancy and has definite need for some security upgrades but I’m going to be keeping my eye on it.

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FBI Wants Backdoor in Encryption Because ISIS? Nope.

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As we continue to hear that the FBI wants to sabotage encryption, the latest given reason being ISIS, we should keep sight of a few facts.  The terrorists don’t hate America for its freedom.  The hatred and terror attacks are blowback from Washington’s Middle East policy.  In order to mitigate this threat, might it not be prudent to begin with ceasing to make the problem worse?

In order to mitigate the ISIS threat, we should look not at weakening encryption, but at the toxic foreign policy being perpetrated around the world.  As the US and its allies continue to rack up civilian casualties from airstrikes, (see this, this, and this just in the past few days) continue to maintain troop presence, and continue economic sanctions in the region, it is no wonder that Washington is the object of so much Middle Eastern animosity.  As the younger generation grows under hardship and heartache, their attitudes toward the West are all but assured.  Stopping all of this would prove to be a great first step in mending the widening rift.

Should FBI Director James Comey be successful in getting his wish for an encryption backdoor, that would pose an enormous risk to companies and individuals who would then be using flawed encryption products.  Not only must we guard against the run of the mill hacker, let’s not forget that we live in a time of state-sponsored hacking.  As the recent OPM data breach reminds us, we’ve got our hands plenty full without intentionally poking holes in the security products that we use.  Regardless, should the backdoor come to pass, what’s to stop our adversaries from using an encryption scheme that hasn’t been compromised?  Washington would have a hard time convincing the likes of Russia and China to go along with Comey’s scheme.

Startlingly, it has been suggested that encryption be banned in the United States as a possible solution to the “problem” of use of encryption by ISIS.  I’m shocked that anyone would even suggest such a thing.  We already know that big brother is watching.  Frankly, what we know is probably only the tip of the iceberg.  Pile on top of that risks of credit and identity theft and a host of others and the result is a pretty bleak picture in terms of protecting sensitive information.  Let’s not forget the daunting task of enforcing such a measure, which would fall on the people, be it in the form of taxes or in the form of higher consumer prices as technology companies are forced to carry out the fool’s errand.

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