More – hangletonweblogs

Blockchain released an interesting infographic this afternoon that we’d like to draw some attention over to.

2,300,000 bitcoin wallets and climbing. $2 billion transacted monthly. 900,000 monthly transactions.

The infographic shows just how many monthly transactions the company recently processed in a single month and shows that the number of wallets the company hosts to be even larger than previously suspected.

We’ve received word that Butterfly Labs will be resuming operations and reopening tomorrow morning after the company has been engaged in a legal battle with the FTC.

District Judge Brian C. Wimes issued his ruling to allow the company the ability to resume partial operations tomorrow morning much to the disappointment of many in the bitcoin community.

The company provided hangletonweblogs the following statement:

“Although Butterfly Labs is still disturbed with the Federal Trade Commission’s rush to judgment and labeling of the company as bogus and scammers, Butterfly Labs is pleased by the Court’s entry of a Stipulated Interim Order, which allows the company to reopen its doors for limited operations. While the Order does not allow Butterfly Labs to fully serve our customers as desired, it is a step in the right direction and will allow for limited order fulfillment. During the period of the Court’s Order, Butterfly Labs will continue to cooperate closely with the Court-appointed Temporary Receiver.

Butterfly Labs views the Order as a promising sign for the future of our company, our customers, and our employees. This lawsuit has severely damaged our reputation and it is up to Butterfly Labs to attempt to repair that damage.

There are a number of unsubstantiated claims circulating about Butterfly Labs. We intend to address all inaccuracies in due course, including the false claims around burn-in testing and Butterfly Labs inappropriately mining bitcoins with customer equipment.

Butterfly Labs thanks its many customers, employees, and business partners for staying with us during this challenging time.”

The Bitcoin Foundation today announced the addition of Bitcoin France, the tenth chapter affiliate to join the foundation’s growing international network of leaders providing education to local media, merchants, consumers, policy-makers and regulatory agencies. Philippe Rodriguez serves as President, Thomas France as Treasurer, Pierre Noizat as Secretary General and board members Thomas Voegtlin, Gonzague Grandval, David François and Eric Larchevêque.

“France is a country where liberty ranks high as a top value, making the country fertile ground for innovative services and companies using the Bitcoin protocol,” said Jon Matonis, Executive Director.

“We are delighted to join forces with the Bitcoin Foundation to promote the Bitcoin protocol and educate policy-makers in France. We deeply believe that bitcoin has the potential to disrupt not only part of the financial system as we know it, but, down the road, other markets where trust in a central organization is the current status quo,” said Philippe Rodriguez, President of Bitcoin France.

France currently ranks fourth worldwide in global active bitcoin nodes and recently, Minister of Finance Michel Spain stated, “We believe that France should let people try, invest and develop business with bitcoin before we tax it.” He also noted that when it comes to regulation, they prefer to take the middle road, “halfway between the strictest regulations [from] China, Japan or Russia or the lightest regulations adopted by countries such as the United States, Canada or Israel.”

Gems is a new and exciting mobile messaging application for iOS and Android that brings cryptocurrencies to the masses, with no need for knowledge about Bitcoin, cryptography or encryption.

This is the kind of exciting innovation I have waited for. The Gems app puts the power of cryptocurrency in the hands of the users, without the usual complications that surround cryptocurrency technology today. Gems is a social-messenger app that comes integrated with next-generation bitcoin technology. Gems offers a WhatsApp-style mobile experience, but with fully encrypted private messaging and a built-in wallet.

The application is both a messenger and a wallet. Every Gems user automatically receives a wallet, protected by a passphrase chosen at registration. A chosen Gems username also acts as alias to a linked Counterwallet address, making it simple and easy for users to send and receive either gems or bitcoins (and later other assets).

The Gems app looks flashy and is easy to use. The user simply downloads the app, sets up an account, and then can immediately start sharing messages with friends and, by being active in the network, earning gems. Introducing new users to Gems is just one example of a way that a user can be rewarded with gems, the value of which is directly tied to the value of the network, since there will always be a fixed and limited supply of gems.

While many point to the option of Gliph for a new crypto-messaging platform, Gliph’s interface is not as attractive or as user-friendly as Gems. Gliph currently lacks the features that many mainstream messenger users would like to see for a daily messaging application.

The promotional video gives a simple overview of how Gems works:

We sat down with Daniel Peled from the Gems team to talk about Gems.

Mike: Why would users switch from regular messaging apps to Gems?

Daniel: Due to recent incidents where private information was leaked, technology users have become much more concerned about the security of their data. WhatsApp, for example, stores and does not encrypt its users’ communications, messages, pictures or videos. In comparison, user data is not stored by Gems, which has no way to access messages, and therefore messages and data are truly private.

Gems has other key features that differentiate it from other messaging apps, including the way it approaches its users. WhatsApp was recently bought by Facebook for $19 billion. Thanks primarily to its users, it has become an extremely valuable company. WhatsApp charges users $1 per year to use the app. Gems, on the other hand, is free—and even more, it actually pays users.

This works thanks to our unique in-app currency-reward model. Those who wish to advertise on the Gems network must purchase gems tokens in order to do so. Gems pays the tokens directly to the users to whom they advertise. If users do not want to receive advertisements, they can easily opt out. This creates a market where users can profit directly from their gems. We are the first to bring this brand new sharing-economy model to the market.

Mike: Can you tell us a bit more about the encryption used by Gems?

Daniel: The Gems app assumes zero trust and even protects user data from Gems’s own cloud servers. Every secure outgoing message is encrypted with a key that is unknown to the server, making the message recipient the only one who can decrypt it. This privacy model prevents any possibility of eavesdropping by third parties, including government agencies and corporations.

Gems offers a mixture of RSA 2048 and AES with 256-bit keys. Encryption is performed client to client, making secure messages indecipherable by the Gems infrastructure. This is the only real way to achieve 100% privacy because it does not entrust any third parties.

Mike: From a technical standpoint, it is our understanding that Gems usernames are essentially aliases of addresses on the Counterparty system. Will we be able to have lots of different currencies in our Gems wallets?

Daniel: Our goal is to develop a really easy and simple user experience; therefore, even though it possible to have lots of different currencies in the Gems wallet, we believe it is better to launch the app initially with support for Gems and Bitcoin only.

It is important to note that since this is the first time users will control the core value of the social network, it is too early to predict what other novel ideas will come into existence. We will take Gems holders’ input into consideration for future features.

Mike: How anonymous can I be on this application?

Daniel: Most social networks do not encourage or support true anonymity of their users. Consider WhatsApp: every account must be tied to a working phone number, enforced by a requirement to send an SMS during registration. You cannot open a WhatsApp account without identifying yourself. The same goes for Facebook, which by definition contains your real name, rather than an anonymous alias.

Gems, unlike other networks, allows you, the user, to choose the level of anonymity and privacy with which you feel comfortable. Your data is never shared with third parties, unless you consent. By default, a Gems account only contains an anonymous alias—your chosen username. This username does not have to reflect your real identity in any way.

Users who feel comfortable sharing their real phone number may choose to connect a phone number to their Gems account. Users will be able to find each other more easily if they do not have to know a username and they can instead rely on a phone number they may already know. The phone number is always kept confidential, however, and only those chosen by a user will have access to it. It is always possible to maintain complete anonymity, if desired. Gems does not require any real-world identification in order to operate.

The same level of anonymity applies to your gems wallet. Since every Gems account is also a gems wallet, your wallet address will be as anonymous as your account.

Mike: Right now you’ve got an iOS application and Android application in the pipe. Any plans on doing a web-based messenger, OS X application, Windows Phone app, and other varieties? We’ve seen that Telegram has been working on expanding to several other spaces quickly. Do you intend on doing the same?

Daniel: We have other platform versions planned on our long-term roadmap; however, at this initial stage we are focusing only on mobile Android and iOS, since they account for a majority percentage of our target market.

Mike: What elements of Gems will be open source, if any?

Daniel: During the beta development phases, the source code will not be available to the public. The client-side application will be open source once we have performed the necessary quality assurance and security analysis to ensure the process will not put our users at risk.

This will enable third-party developers to audit and improve upon the functionality of the Gems application. We see much value in the participation of the open-source community. It is important to emphasize that all currency-related transactions in Gems are currently based on open-source code (Counterparty), and that the core of our IM technology is based on open-source software as well (SignalR).

Further information about Gems can be found on the Gems website, Bitcoin Talk thread, or via @getgemsorg Twitter account.

hangletonweblogs will stay abreast of the latest developments with Gems and will be sure to share them with our readers!

Images courtesy of Gems.

The Chamber of Digital Commerce has received approval from the Internal Revenue Service as a Tax-Exempt Non-Profit organization under section 501(c)(6) of the Internal Revenue Code. The Digital Chamber is now federally recognized as a business league that promotes the digital currency and digital asset industries.

“To have the IRS recognize our organization is a big step for the digital currency industry because this brings an added level of credibility to our efforts in Washington,” said Perianne Boring, President of the Digital Chamber. “This recognition adds legitimacy to our efforts to guide policy makers in sensitively and intelligently addressing blockchain technology.”

This announcement comes just one day before the Digital Chamber’s joint event with the influential Heritage Foundation to hold its first Congressional Bitcoin panel. On Wednesday, October 1st in the Lehrman Auditorium, with Perianne Boring, President and Founder of the Chamber of Digital Commerce; Carol Van Cleef, Partner at Manatt, Phillips and Phillips; George Gilder, of The Discovery Institute moderated by Norbert J. Michel, of the Heritage Foundation, will hold a public discussion on Bitcoin and the regulatory environment.

Participants and the media can attend in person or watch online. Please visit ( for more information and to RSVP.

Determined to demystify bitcoin, a technology company called Startup Inventors is set to pre-sell a boxed bitcoin solution so easy your grandma could use it. Its goal is simple; give consumers an approachable way to cash in on the digital currency. Today, the company introduces the BitPiggy, a piggy bank for your bitcoin and “the” piggy bank for the 21st Century. Forget stashing away pennies, this electronic bank allows you to store and save the burgeoning virtual currency, bitcoin.

Bringing bitcoin to the masses via Kickstarter for the holidays, the forward-thinking company will use crowdfunding support to complete their manufacturing run. Startup Inventors wants to make industry history by producing the market’s first series of fun, novelty consumer devices for bitcoin. They consider it “bitcoin for everyone, not just techie’s.”

BitPiggy comes equipped with a re-loadable bitcoin coin already pre-loaded with Bitcoin. And, BitPiggy is not just a bitcoin-based savings bank, but a hardware wallet as well, so consumers can save, receive and send the digital currency right from the device.

The ‘pseudo-anonymous pig’ also comes with its own alarm. A squealing “oink” will sound and send a MMS message to the owner if anyone approaches their high-tech coins and breaches the bank’s security.

BitPiggy has features like the ability to set savings goals for bitcoin funds. It also has an inbuilt docking station that allows users to re-load bitcoin right from their bank. Advanced users can still enjoy the anonymity of bitcoin with BitPiggy’s Wi-Fi and Ethernet ports.

L. Nicole Moore, Founder of Startup Inventors said of the launch, “We think there’s a future for bitcoin consumer devices as big as the future of Bitcoin itself. Look at the 3D print revolution. 3D printers were mostly commercial devices and now we’re seeing consumer 3D printers in stores like Staples. We think bitcoin will have the same shift. One day you’ll see bitcoin products at big box retailers.”

To sign up to be one of the first to pre-order BitPiggy, visit the site at

On April 4, 2014, consumers filed a class action complaint against Defendant BF Labs Inc. (“BFL”) in the United States District Court for the District of Kansas on behalf of Kyle Alexander and Dylan Symington.

In their Complaint, consumers alleged BFL violated the Kansas Consumer Protection Act (“KCPA”), were unjustly enriched, made negligent misrepresentations, and committed conversion. Specifically, consumers alleged BFL collected pre-payments for non-existent Bitcoin mining equipment, failed to ship Bitcoin mining equipment orders for which consumers have pre-paid, misrepresented the date such equipment would ship to customers, and profited from Bitcoin mining for BFL’s own benefit by using customers’ equipment without permission or authorization from customers. Consumers seek damages and a constructive trust to recover the purchase price, the value of bitcoins paid to BFL, the loss of use of bitcoins, the loss of use of mining equipment that was never received or not received in a timely manner, the loss of bitcoins mined by BFL using consumers’ equipment, the diminution in value of mining equipment, costs of suit, attorney’s fees, and punitive damages.

Between April and September of 2014, consumers engaged in significant discovery and were in the process of negotiating a class settlement on behalf of a putative class consisting of “all persons who pre-paid Defendant for Bitcoin mining equipment.” Consumers and BFL engaged in settlement negotiations and agreed to mediate on November 5, 2014. Trial is scheduled for January 4, 2016.

On September 15, 2014, the FTC filed a complaint in this Court against BFL and other individuals seeking temporary, preliminary, and permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief.

The attorneys have presented an argument to the court stating that the FTC action will cause damage to the separate actions of a class-action suit. The attorneys argument states:

The remedies sought by the FTC conflict with, frustrate, and deny remedies available to consumers, the FTC cannot adequately represent consumers’ interests. The FTC action, on its face, does not even purport to adequately represent consumers’ interests. The FTC is a civil enforcement agency that has no attorney-client relationship with consumers and has no fiduciary duty to act in any particular consumer’s best interests.

Here, consumers and the consumer class action provide the best mechanism to protect the interests of the consumer class. Consumers have already engaged in months of investigation and substantial progress in their suit. Procedurally, consumers already have survived the motion to dismiss stage, obtained a discovery framework (including a comprehensive protocol for the exchange of electronically stored information and a protective order), issued multiple subpoenas to non-parties (many of which are still pending), collected and reviewed hundreds of thousands of pages of relevant documents, engaged in meaningful settlement discussions, modeled complex scenarios that may involve cash and non-cash benefits for class members (cash, bitcoin, hardware, hashing), selected and retained a mediator, scheduled a mediation date with BFL, and obtained a trial setting.

It is virtually without question the consumer class has a strong interest relating to the property and transaction that is the subject of this action and the disposition of this action will likely both impair and impede the consumer class’s ability to protect its interest. The FTC’s desire to exclude the consumer class from having a voice in this action is at best, puzzling and demonstrates the existing parties to this action, will not adequately represent the interest of the consumer class. This Court should grant consumers’ Motion to Intervene and hear from people who actually paid for mining equipment, who actually engage in Bitcoin mining, and whose legal rights and property are actually at issue.

The attorneys state they are hoping to be heard and that they believe the FTC is not acting in the best interest of consumers in this case.

Counsel for the FTC indicated the FTC objects to the motion. Counsel for the receiver indicated he was not able to take a place until consulting with the receiver and the FTC. Butterfly Labs does not object to this motion as it could result in the FTC case taking a backseat to the already pending consumer class-action under which Butterfly Labs is most likely to come out more favorably versus the FTC actions.

This case continues to grow and become further complex as more parties seeking to protect themselves are likely to file more motions with the court.

Image from Butterfly Labs Management Portfolio

In a strange twist of events the General Manager of Butterfly Labs is claiming that due to personal asset freezes by the court order from the FTC she is now unable to even buy groceries.

Butterfly Labs requested the court allow what it calls five key witnesses to give live testimonial to the court.

Those witnesses now include a Representative of the Johnson County District Attorney’s Office; Mr. Bruce Bourne, Consultant to Company and Acting CFO;  Mr. Jeff Ownby, Vice President of Marketing and E-Commerce and Co-Founder of Company;  Ms. Jody Drake, General Manager;  and Ms. Linda M. Freeman, MarksNelson LLC.

All five are expected to give testimonial in support of Butterfly Labs if allowed to give testimonial.

Rep from District Attorney’s Office

This witness, who is expected to be either an attorney or investigator from the DA’s office, will address aspects of its investigation into BF Labs, explain how the company has been cooperative during the investigation, has met all deadlines, and has been involved in ongoing negotiations toward settlement of the dispute over the application of the Kansas Consumer Protection Act, Kansas Consumer Protection Act.

Mr. Bruce Bourne

Mr. Bourne will tell the Court about why he was attracted to the opportunities presented by BF Labs, and his views on the former and current management team. He will address the allegations and claims made by the FTC and tackle head on the issues in the past and the future of the company if not already destroyed by the FTC’s heavy-handed tactics. Mr. Bourne will tell the Court why BF Labs is not a fraud, and why he put his talents to work at the company and made a personal investment of his time and energy in the opportunity.

Mr. Jeff Ownby

He will testify about the history of BF Labs and the early days of this start-up technology company. He will describe his role as one of three founders of BF Labs, the initial goals of the company, its operating history, and its future. Mr. Ownby also has helpful knowledge to share with the Court about bitcoin and the bitcoin mining industry. He will explain to the Court the opportunity he saw in the industry, how he helped breathe life into it, the criticisms of the company, and his hopes for the future of the company.

Ms. Jody Drake

Ms. Drake will describe her role at BF Labs. While she has been involved in customer service, shipping, human resources, and general office purchasing, she has never made policy at the company or been actively involved in management decision making. She will describe for the Court the shock and horror of being served with the FTC Complaint, facing a personal asset freeze, filling out financial forms that are totally unnecessary for someone in her role, and her meager assets. She will also describe her request that she be allowed to buy groceries and gas after being personally sued by the FTC.

Ms. Linda M. Freeman

She will testify about start-up companies, accounting, reporting, tax and other financial issues related to BF Labs. She can answer questions the Court may have about BF Labs finances. She will also testify and inform the Court about improvements made at BF Labs over time and the internal controls that have been implemented, along with efforts made (with supervision provided by Bruce Bourne) by the company to better itself and comply with all accounting and tax obligations under the laws of the United States of America.

The community has been ablaze about the news of Butterfly Labs and the FTC lawsuit against the embattled company and this morning hangletonweblogs has learned of more details before the hearing set to take place today.

Josh Zerlan the VP of Product Development has given his testimony in a deposition performed with the FTC and we’d like to take a few minutes to highlight a few key elements of that testimony that our readers might find interesting.

hangletonweblogs will be working throughout the case to get further information and will be posting new entries as further information is obtained.

Josh Zerlan gave testimony that he received a set of 10 Butterfly Lab Singles from the company as part of his compensation package.

We later would learn in the deposition that Mr. Zerlan personally generated about 15 BTC before returning the hardware to the company. He did not give a reason specifically why he had returned the hardware.

He was also promised by the company a Monarch but it has yet to be received.

Mr. Zerlan also used a company credit card to purchase guns for his own protection after receiving threats from the community.

After repeated denials from the company and Mr. Zerlan himself in the past on the Butterfly Labs website, the BFL website and other locations on the Internet that the company DOES NOT mine on customer purchased hardware before sending it out he gave new testimony indicating that those statements were false and that the company was mining using hardware that had already been purchased by customers.

The following pictures taken from Butterfly Labs shows customer equipment that was being actively used to mine bitcoins for the direct benefit of the company.

Elizabeth T. Han, an investigator with the Federal Trade Commission also gave the following statement regarding the user of customer miners for mining internally.

Butterfly Labs also purchased EMC Mining Pool and has failed to provide that wallet to the FTC and this has been noted later in the deposition.

hangletonweblogs is highly suggesting anyone currently mining on EMC please begin moving your miners as it is likely after today’s hearing these wallets will be taken over by the receiver based on later information in the deposition.

Chat transcripts internally show that the company was also actively working to defraud customers and find reasons to cancel orders.

They also show the company’s internal panic as other companies cropped up with better systems and the subsequent debates if they should lie about the progress they are making to deflate some of the announcements.

It also appears the company actively worked to defraud Dwoalla with transfers to personal accounts even suggesting they claim they were “customer accounts” in internal chat transcripts to make transfers immediate and in violation of Dwoalla’s TOS.

We also learn that the company knew how behind it was and began debating what lies to tell the public to manage shipping expectations.

The company was also aware internally they would not make the shipping times promised but continued to lie publicly.

It now appears we are just barely scratching the surface on what remains to be an even larger story. More information will be coming in the near future.

This post is a meta post about hangletonweblogs. It should not be considered “news”. This is the opening of a dialog…

Adam B. Levine has been doing some really amazing things over on the Let’s Talk Bitcoin Network and I have been super impressed with these various ideas of using a token based economy to really empower others.

For the past several nights I have brainstormed a bit and just throwing out ideas on some of the cool things that can be done with these new technologies such as Counterparty.

What if democratize hangletonweblogs a bit? What if you personally be involved in how we are doing things on the site? What if you could potentially earn from our success as well? Would you like to have a hand in the major decision-making process?

I’ve been seeing a lot of commentary from others that talks about how they would do things differently. What if you had a chance to actually have an impact on how things are done? What if the token you control actually affords you rights and votes in how things go?

These are some of the ideas that I have toyed with when it comes to tokens and hangletonweblogs.

It would allow the site to capitalize a bit, offer an incentive to everyone and just try something new.

Those interested could buy some of the tokens and get some skin in the game and potentially have a major impact on the direction that the company is taking.

What if a site like hangletonweblogs implemented something like this? What are your thoughts?

If everyone hates the idea we will just keep doing exactly what we are doing now. We aren’t jumping the shark, we are just throwing out ideas here and spit-balling possibilities. I will keep putting my ass in flight seats every week and chasing down the stories as we are now… we just might let you have a more hands-on role in how we do it.

What are your thoughts? Join us over on Let’s Talk Bitcoin and join the discussion or leave your comments here.