8 January 2014, 14:24

Bitcoin banned by China’s Alibaba

Bitcoin banned by China’s Alibaba

China's biggest online marketplace, Alibaba Group Holding Ltd's Taobao, will ban the sale of bitcoins on the heels of a government crackdown against the virtual currency to plug a potential gap in its tight controls on capital flows. The move comes as Alibaba, China's biggest e-commerce company, seeks the smoothest of rides toward a giant initial public offering of stock expected later this year. In a statement posted on its website late on Tuesday, Taobao said the ban is effective from Jan. 14.

Taobao's move to fall in line with the government's wishes also comes as Alibaba presses on with efforts to stamp out the sale of fake goods on the online marketplace ahead of the IPO. Alibaba has been conservatively estimated to be worth over $100 billion.

"The central bank clearly has required third-party payment services to close bitcoin...trading channels," Taobao said in its statement, without disclosing any details on bitcoin sales through its platform up to now. Backed by neither a government nor a bank, bitcoin has attracted currency speculators in recent months.

Alibaba spokeswoman Florence Shih said, "In the interest of consumer protection, Taobao has banned the sale of bitcoins on the platform."

Taobao uses Alibaba's online payment affiliate Alipay to process transactions across the world's second-biggest economy, handling over 1 trillion yuan ($165 billion) in annual sales volume together with its sister shopping portal T-Mall.

The Taobao ban, which covers other virtual currencies, also includes the sale of any guides, computer hardware or software related to bitcoin "mining". In the mining process users can mint new bitcoins of their own by having a computer solve complex mathematical problems.

Most bitcoin sales take place on specialized electronic platforms, rather than online marketplaces like Taobao, that are designed to trade the virtual currency for various physical currencies.

In December, the People's Bank of China (PBOC) banned financial institutions from trading in bitcoins, saying the government would act to prevent money laundering risks from bitcoin, which is not backed by a government or central bank. It did not ban individual trading.

Later the same month, the Chinese Business News reported that the government had asked third-party payment services to stop handling bitcoin transactions, forcing Shanghai-based BTC China, the world's largest bitcoin exchange platform by volume, to stop taking Chinese yuan deposits.

"I think it's overreaching," said Bobby Lee, Chief Executive Officer of BTC China, referring to Taobao's ban on bitcoin-related accessories. "I think they're trying to just win favours from the government."

The PBOC stance reflects the fact that the bitcoin trade represents a potential hole in the country's capital controls. They are minted anonymously, untraceable, and can be carried on memory sticks or transmitted electronically.

However, analysts say that given the total value of bitcoins in circulation remains tiny relative to other currencies, the trade is unlikely to have much impact on the wider economy for now.

The price of bitcoins on BTC China fell 15 percent on Tuesday to 4718.51 yuan, but had bounced back 4.5 percent by late afternoon on Wednesday.

Bitcoin: digital currency - making manual

Bitcoin, the recent center of the media attention has celebrated its fifth anniversary this month marking its value around $1,000 per coin.Bitcoin was never meant to monopolze the crypto-currency niche. What is more, the code was released under an open-source license, which allows anyone use it or alter its aspects to cretae better version or a new currency altogether. As a result, an entire «family» of bitcoin-based crypto-currencies have emerged in the past years.

The most promising of them, Litecoin, was created in 2011, as a response to bugs in the original Bitcoin protocol.For Litecoin, it is much harder to build specialized "mining" machines for, which fact, founders say, prevents it from being dominated by a few rich miners. Also, Litecoin processes payments faster and has a much higher cap of 84m coins. Though until November 2011, Litecoin has been stepping on Bitcoin's toes in terms of value, in December last year its value skyrocketed: just overnight a Litecoin was worth 10 times what it had been before, with its total market cap now standing at $623m, around 16% of that of its parent.If rated by the share of the press attention Litecoin is by far surpassed by the Dogecoin.

While Litecoin demands a profound knowledge of cryptocurrencies to understand its advantage over Bitcoin, in the meantime, Dogecoin has simpler selling point: it has a picture of a Shiba Inu dog on the front. Doge is a meme involving pictures of a confused-looking Shiba Inu with brightly coloured text surrounding it, spelling out animal's thoughts in broken English. The meme is widely known ad placing it on the currency was an ideal marketing move. Initially, Dogecoin was created as a joke, and it did find its target audience — raising the total value of all Dogecoins in circulation up to $7m, placing it 16th among most valuable alt coins in existence.

Creating alternative currencies appears harder than it may seem. Although the code behind the currency is open source, it requires a rather serious programming background. It took Dogecoin's technical co-founder, a software engineer from Portland, had to put in a couple of days of solid work to start the currency. Without konwledge of C programming in the C language, creating a new currency will be imppossible. Coingen.io resource offers a chance to create a version of Bitcoin for anyone with 0.01 BTC, that is around $10.

With a proper coding experience creating becomes very easy. To make your own altcoin, you'll need 0.01 BTC, but in case you have serious intentions, you might want to pay another 0.1 BTC to get the source code to your creation. Still, if you are really determined to make a new brand of altcoin, it might be wise to hire an actual professional coder.

Next step - coin needs to be customized. Coingen.io lets you pick a name and a logo, altering the the starting paramenters later. Also, it is the step where you are welcome to share your view, if you have one, on how many bitcoins should be given as a reward for mining.

Finally, it's time to download a freshly-made coin. Unfortunately, it will only work on Windows or Linux.The advocates of bitcoin claim, it is the democratic underpinning of the currency, and it is a lot fairer than the unaccountable central banks in charge of real-world currencies.

"Bitcoin enforces majority consensus," says Mike Hearn, a developer of the currency. "By taking part in the economy and running the software, or by choosing which alt coins you accept, you are effectively voting on how the currency should work… We'd like Bitcoin to be perfect, of course. If lots of people started switching to an alt coin, there'd be pressure to upgrade Bitcoin to match the alt's advantages. He also added that our existing currencies are controlled entirely by private banks.

Also, the existence of Litecoin as a competitor to bitcoin, allows people to literally vote for either of them with their wallets: should they rather go for Litecoin's benefits, they can start taking that currency. If it drags away too many potential customers, bitcoin will have to make concessions.However, the question for bitcoin is whether the possibility for alternatives like Litecoin reduces the responsibility on those who control the currency to stay pro-active managing the bitcoin economy, like that which we require of central bankers.

The sci-fi author Charlie Stross, in a piece titled "Why I want Bitcoin to die in a fire", argues that: "Bitcoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind."

For Mike Hearn, the bitcoin's inability to respond to economic events the way regular currencies do is a positive. The bitcoin model, according to him, "is not only more democratic but more robust. Although central banks are undemocratic and unaccountable, they are nonetheless run by people who can be put under lots of pressure. We saw this in recent years with the euro… Politicians made a lot of very public noise about how Mario Draghi was personally responsible for destroying the euro, and he eventually folded."

Voice of Russia, The Guardian, Reuters

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